BP 2010 Annual Report Download - page 217

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Notesonnancialstatements
Financial statements
41.Share-basedpaymentscontinued
BPShareMatchPlans
ThesearematchingshareplansunderwhichBPmatchesemployees’owncontributionsofsharesuptoapredeterminedlimit.TheplansarerunintheUK
andinmorethan60othercountries.TheUKplanisrunonamonthlybasiswithsharesbeingheldintrustforveyearsbeforetheycanbereleasedfreeof
anyincometaxandnationalinsuranceliability.Inothercountriestheplanisrunonanannualbasiswithsharesbeingheldintrustforthreeyears.Theplan
isoperatedonacashbasisinthosecountrieswherethereareregulatoryrestrictionspreventingtheholdingofBPshares.WhentheemployeeleavesBP
allsharesmustberemovedfromtrustandunitsundertheplanoperatedonacashbasismustbeencashed.
Localplans
InsomecountriesBPprovideslocalschemebenets,therulesandqualicationsforwhichvaryaccordingtolocalcircumstances.
Employee Share Ownership Plans (ESOPs)
ESOPshavebeenestablishedtoacquireBPsharestosatisfyanyawardsmadetoparticipantsundertheBPshareplansasrequired.TheESOPs
havewaivedtheirrightstodividendsonsharesheldforfutureawardsandarefundedbythegroup.Untilsuchtimeasthecompany’sownshares
heldbytheESOPtrustsvestunconditionallytoemployees,theamountpaidforthosesharesisdeductedinarrivingatshareholders’equity
(seeNote40).AssetsandliabilitiesoftheESOPsarerecognizedasassetsandliabilitiesofthegroup.
At31December2010theESOPsheld11,477,253shares(200918,062,246sharesand200829,051,082shares)forpotentialfutureawards,which
hadamarketvalueof$82million(2009$174millionand2008$220million).
Share option transactions
Detailsofshareoptiontransactionsfortheyearundertheshareoptionplansareasfollows:
     2010   2009     2008
Weighted Weighted     Weighted
Number average Number  average  Number   average
of exercise price of  exerciseprice  of  exerciseprice
 options $ options  $  options   $
Outstandingat1January    295,895,357 8.73 326,254,599 8.70 358,094,243  8.51
Granted     10,420,287 6.08 9,679,836 6.55  8,062,899  8.96
Forfeited     (9,499,661) 7.88 (5,954,325) 8.81  (2,502,784) 8.50
Exercised     (31,839,034) 7.97 (21,293,871) 7.53  (37,277,895) 6.97
Expired     (1,670,227) 8.71 (12,790,882) 8.01  (121,864) 7.00
Outstandingat31December    263,306,722 8.75 295,895,357 8.73 326,254,599 8.70
Exercisableat31December    242,530,635 8.90 274,685,068 8.80 260,178,938 8.22
 
Theweightedaveragesharepriceatthedateofexercisewas$9.54(2009$9.10and2008$10.87).Fortheoptionsoutstandingat31December2010,the
exercisepricerangesandweightedaverageremainingcontractuallivesareshownbelow.
     Options outstanding    Options exercisable
Weighted Weighted Weighted
Number average average Number average
of remaining life exercise price of exercise price
Rangeofexerciseprices shares Years $ shares $
$6.09–$7.53    54,821,144 2.68 6.36 39,231,453 6.40 
$7.54–$8.99    115,187,261 1.71 8.19 112,551,834 8.17
$9.00–$10.45    21,827,393 3.54 9.88 19,276,424 9.98
$10.46–$11.92    71,470,924 4.81 11.14 71,470,924 11.14 
    263,306,722 2.90 8.75 242,530,635 8.90
 
Fair values and associated details for options and shares granted
    2010   2009     2008
ShareSave ShareSave ShareSave ShareSave ShareSave ShareSave
3 year 5 year 3year 5year 3year 5year
Optionpricingmodelused   Binomial Binomial Binomial Binomial Binomial Binomial
Weightedaveragefairvalue   $0.06 $0.08 $1.07 $1.07 $1.82 $1.74
Weightedaverageshareprice   $4.58 $4.58 $7.87 $7.87 $11.26 $11.26
Weightedaverageexerciseprice   $5.90 $5.90 $6.92 $6.92 $9.70 $9.70
Expectedvolatility   22% 23% 32% 32% 23% 23%
Optionlife    3.5 years 5.5 years 3.5years 5.5years 3.5years 5.5years
Expecteddividends   8.40% 8.40% 7.40% 7.40% 4.60% 4.60%
Riskfreeinterestrate   1.25% 2.00% 3.00% 3.75% 5.00% 5.00%
Expectedexercisebehaviour   100% year 4 100% year 6 100%year4 100%year6 100%year4 100%year6

Thegroupusesavaluationmodeltodeterminethefairvalueofoptionsgranted.Themodelusestheimpliedvolatilityofordinarysharepriceforthequarter
withinwhichthegrantdateoftherelevantplanfalls.Thefairvalueisadjustedfortheexpectedratesofearlycancellation.Managementisresponsiblefor
allinputsandassumptionsinrelationtothemodel,includingthedeterminationofexpectedvolatility.
BPAnnualReportandForm20-F2010 215