BP 2011 Annual Report Download - page 191

BP Annual Report and Form 20-F 2011 189
Financial statements
Notes on financial statements
1. Significant accounting policies continued
Not yet adopted
The following pronouncements from the IASB will become effective for
future financial reporting periods and have not yet been adopted by the group.
• Interests in other entities and related disclosures
In May 2011, the IASB issued three new standards relating to interests
in other entities and related disclosures. The new standards are IFRS 10
‘Consolidated Financial Statements’, IFRS 11 ‘Joint Arrangements’ and
IFRS 12 ‘Disclosure of Interests in Other Entities’. In addition, the IASB
issued amendments to IAS 27 ‘Consolidated and Separate Financial
Statements’ (now renamed IAS 27 ‘Separate Financial Statements’) and
IAS 28 ‘Investments in Associates’ (now renamed IAS 28 ‘Investments in
Associates and Joint Ventures’).
IFRS 10 introduces a single consolidation model that identifies
control as the basis for consolidation. The new model applies to all types
of entities, including structured entities. Under the new model, an investor
controls an investee when it is exposed, or has rights, to variable returns
from its involvement with the investee and has the ability to affect those
returns through its power over the investee.
IFRS 11 establishes a principle that applies to the accounting
for all joint arrangements, whereby parties to the arrangement account
for their underlying contractual rights and obligations relating to the
joint arrangement. IFRS 11 identifies two types of joint arrangements.
A ‘joint venture’ is defined as a joint arrangement whereby the parties
that have joint control of the arrangement have rights to the net assets
of the arrangement. A ‘joint operation’ is defined as a joint arrangement
whereby the parties that have joint control of the arrangement have
rights to the assets, and obligations for the liabilities, relating to the
arrangement. Investments in joint ventures will be accounted for using the
equity method. Investments in joint operations will be accounted for by
recognizing the group’s assets, liabilities, revenue and expenses relating to
the joint operation.
IFRS 12 combines all the disclosure requirements for an entity’s
interests in subsidiaries, joint arrangements, associates and structured
entities into one comprehensive disclosure standard.
These new and amended standards are effective for annual periods
beginning on or after 1 January 2013 and BP intends to adopt them from
this date. The evaluation of the effect of adoption of these standards has
not yet been completed. It is expected that the main impact of this suite
of new standards is that certain of the group’s existing jointly controlled
entities, which are currently equity accounted, will fall under the definition
of a joint operation under IFRS 11 and thus we will be required to cease
equity accounting and instead recognize the group’s assets, liabilities,
revenue and expenses relating to these arrangements. This new suite of
standards has not yet been adopted by the EU.
• Other new standards not yet adopted
As part of the IASB’s project to replace IAS 39 ‘Financial Instruments:
Recognition and Measurement’, in November 2009 the IASB issued the
first phase of IFRS 9 ‘Financial Instruments’, dealing with the classification
and measurement of financial assets. In October 2010, the IASB updated
IFRS 9 by incorporating the requirements for the accounting for financial
liabilities. The remaining phases of IFRS 9 (covering impairment and hedge
accounting) are still to be completed. In December 2011, the IASB decided
that IFRS 9 will be effective for annual periods beginning on or after 1
January 2015, rather than 1 January 2013 as originally indicated. BP has not
yet decided the date of adoption for the group and has not yet completed
its evaluation of the effect of adoption. The new standard has not yet been
adopted by the EU.
In May 2011, the IASB issued a new standard, IFRS 13 ‘Fair value
measurement’. The new standard defines fair value, sets out a framework
for measuring fair value and the required disclosures about fair value
measurements. IFRS 13 does not require fair value measurements in
addition to those already required or permitted by other IFRSs, rather it
prescribes how fair value should be measured if another IFRS requires it.
Fair value is defined as the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between market
participants at the measurement date i.e. it is an exit price. IFRS 13 is
effective for annual periods beginning on or after 1 January 2013 and BP
intends to adopt it from this date. The evaluation of the effect of adoption of
IFRS 13 has not yet been completed.
In June 2011, the IASB issued an amended version of IAS
19 ‘Employee Benefits’, which brings in various changes relating to
the recognition and measurement of termination benefits and post-
employment defined benefit expense, and to the disclosures for all
employee benefits. The main impact for BP will be that the expense for
defined benefit pension and other post-retirement benefit plans will include
a net interest income or expense, which will be calculated by applying the
discount rate used for measuring the obligation and applying that to the net
defined benefit asset or liability. This means that the expected return on
assets credited to profit or loss (currently calculated based on the expected
long-term return on pension assets) will now be based on a lower corporate
bond rate, the same rate that is used to discount the pension liability. The
amended IAS 19 is effective for annual periods beginning on or after 1
January 2013 and BP intends to adopt this new standard with effect from
that date. The evaluation of the effect of adoption of the amended standard
has not yet been completed, however, based upon our analysis to date,
we expect the change to result in a significantly higher net charge to the
income statement once adopted.
In June 2011, the IASB issued amendments to IAS 1 ‘Presentation
of Financial Statements’ on the presentation of other comprehensive
income (OCI). The amendments require that those items of OCI that could
be reclassified to profit or loss at a future date be presented separately
from those items that will never be reclassified to profit or loss. These
amendments to IAS 1 are effective for annual periods beginning on or
after 1 July 2012. BP intends to adopt the amendments with effect from
1 January 2013. The adoption of the amended standard is expected to only
have a presentational impact on the group’s financial statements, with no
effect on the reported income or net assets of the group.
In December 2011, the IASB issued amendments to IFRS 7
‘Disclosures – Offsetting Financial Assets and Financial Liabilities’ and
amendments to IAS 32 ‘Offsetting Financial Assets and Financial Liabilities’.
These amendments introduce new disclosure requirements about the
effects of offsetting financial assets and financial liabilities and related
arrangements on an entity’s financial position. The amendments to IFRS 7
are effective for annual periods beginning on or after 1 January 2013, with
the amendments to IAS 32 effective for annual periods beginning on or
after 1 January 2014. BP intends to adopt these amendments with effect
from 1 January 2013 and 1 January 2014 respectively. The evaluation of the
effect of adoption of these amendments has not yet been completed.
In October 2010, the IASB issued amendments to IFRS 7 ‘Financial
Instruments: Disclosures – Transfers of Financial Assets’. The amendments
address the disclosures of transfers of financial assets. These amendments
to IFRS 7 are effective for periods beginning on or after 1 July 2011. BP
intends to adopt the amendments with effect from 1 January 2012. The
extent to which BP will be required to amend its disclosures in the light of
these new requirements is currently being evaluated.
With the exception of the amendments to IFRS 7 regarding the
disclosures of transfers of financial assets, the EU has not yet adopted any
of the above-mentioned other new standards that have been issued but not
yet adopted by the group.
There are no other standards and interpretations in issue but not
yet adopted that the directors anticipate will have a material effect on the
reported income or net assets of the group.