BP 2012 Annual Report Download - page 197

2. Significant event – Gulf of Mexico oil spill continued
Under the terms of the Trust agreement, BP has no right to access the funds once they have been contributed to the trust fund and BP has no decision-
making role in connection with the payment by the trust fund of individual and business claims resolved by the GCCF and the new court-supervised
claims processes referred to below. BP will receive funds from the trust fund only upon its expiration, if there are any funds remaining at that point. Any
amount remaining in the trust fund when the trustees determine that all claims have been settled would be returned to BP. However, it is not possible
to reliably estimate the number or total amount of the claims that will be settled from the trust fund, and therefore it is not possible to reliably measure
the fair value of BP’s residual interest in it. The carrying amount of BP’s residual interest is, consequently, nil. BP has the authority under the Trust
agreement to present certain resolved claims, including natural resource damages claims and state and local response claims, to the Trust for payment,
by providing the trustees with all the required documents establishing that such claims are valid under the Trust agreement. However, any such
payments can only be made on the authority of the trustees and any funds distributed are paid directly to the claimants, not to BP. BP will not settle any
such items directly or receive reimbursement from the trust fund for such items.
BP’s obligation to make contributions to the trust fund was recognized in full in 2010, amounting to $20 billion on an undiscounted basis. On initial
recognition the discounted amount recognized was $19,580 million. The funding of the Trust has now been completed.
The table below shows movements in the funding obligation during the period to 31 December 2012. The remaining liability of $22 million at
31 December 2012 represents amounts reimbursable to the Trust for administrative costs incurred.
$ million
2012 2011 2010
At 1 January 4,872 14,901 –
Trust fund liability initially recognized – discounted –– 19,580
Unwinding of discount 12 52 73
Change in discounting –43 240
Contributions (4,860) (10,140) (5,000)
Other (2) 16 8
At 31 December 22 4,872 14,901
An asset has been recognized representing BP’s right to receive reimbursement from the trust fund. This is the portion of the estimated future
expenditure provided for that will be settled by payments from the trust fund. We use the term ‘reimbursement asset’ to describe this asset. BP will not
actually receive any reimbursements from the trust fund, instead payments will be made directly to claimants from the trust fund, and BP will be
released from its corresponding obligation.
The provision was increased during the year for items that will be covered by the trust fund by $1,985 million (2011 $4,038 million) and payments of
$4,624 million (2011 $3,707 million) were made during the year from the trust fund. This includes payments from the trust fund to the seafood
compensation fund and payments from QSFs other than the seafood compensation fund to claimants. In addition, a provision of $794 million was
derecognized relating to items that will be covered by the trust fund but which can no longer be reliably estimated. The remaining reimbursement asset
as at 31 December 2012 was $6,442 million and is recorded within other receivables on the balance sheet. The amount of the reimbursement asset is
equal to the amount of provisions as at 31 December 2012 that will be covered by the trust fund – see Note 36 in the table under Provisions relating to
the Gulf of Mexico oil spill.
Movements in the reimbursement asset are presented in the table below.
$ million
2012 2011 2010
At 1 January 9,875 9,544 –
Increase in provision for items covered by the trust fund 1,985 4,038 12,567
Derecognition of provision for items that cannot be reliably estimated (794) ––
Amounts paid directly by the trust fund (4,624) (3,707) (3,023)
At 31 December 6,442 9,875 9,544
Of which – current 4,178 8,233 5,943
– non-current 2,264 1,642 3,601
The amount charged or credited in the income statement, before finance costs, related to the trust fund comprises:
$ million
2012 2011 2010
Trust fund liability – discounted –– 19,580
Change in discounting relating to trust fund liability –43 240
Recognition of reimbursement asset, net (1,191) (4,038) (12,567)
Other ––8
Total (credit) charge relating to the trust fund (1,191) (3,995) 7,261
As noted above, the obligation to fund the $20-billion trust fund was recognized in full in 2010, on a discounted basis. In addition, a reimbursement asset
was recognized, reflecting the portion of provisions recognized that will be covered by the trust fund. Any new provisions, or increases in provisionsthatare
covered by the trust fund (up to the amount of $20 billion) have no net income statement effect as a reimbursement asset is also recognized, as described
above. During 2012, a further net charge of $1,191 million (2011 $4,038 million) was recognized for new, increased and derecognized provisions for items
covered by the trust fund with a corresponding increase in the reimbursement asset, resulting in no net income statement effect. The cumulative net
charges for provisions, and the associated reimbursement asset, recognized from 2010 to 2012 amounted to $17,796 million. Thus, a further $2,204 million
could be provided in subsequent periods for items covered by the trust fund with no net impact on the income statement. Such future increases in amounts
provided could arise from adjustments to existing provisions, or from the initial recognition of provisions for items that currently cannot be estimated reliably,
namely natural resource damages claims under Oil Pollution Act of 1990 (OPA 90) (other than the estimated costs of the assessment phase and the costs of
early restoration agreements referred to below), the cost of business economic loss claims under the PSC settlement not yet received or processed by the
DHCSSP, or any other potential litigation (including through excluded parties from the PSC settlement and any obligation in relation to other potential private
or governmental litigation). Further information on those items that currently cannot be reliably estimated is provided under Provisions and contingencies
below and in Note 43.
Financial statements 195
BP Annual Report and Form 20-F 2012
Financial statements