BP 2012 Annual Report Download - page 199

The total amount recognized as an increase in provisions during the year was $6,868 million, including $1,985 million for items covered by the trust fund
and $4,883 million for other items (2011 $5,183 million, including $4,038 million for items covered by the trust fund and $1,145 million for other items).
In addition, $794 million was derecognized relating to items that will be covered by the trust fund but which can no longer be reliably estimated. After
deducting amounts utilized during the year totalling $5,864 million, including payments from the trust fund of $4,624 million and payments made directly
by BP of $1,240 million (2011 $6,208 million, including payments from the trust fund of $3,707 million and payments made directly by BP of
$2,501 million), and after reclassifications and adjustments for discounting, the remaining provision as at 31 December 2012 was $15,200 million (2011
$15,333 million).
Movements in the provision are presented in the table below.
$ million
2012 2011 2010
At 1 January 15,333 16,335 –
Increase in provision – items not covered by the trust fund 4,883 1,145 17,694
– items covered by the trust fund 1,985 4,038 12,567
Derecognition of provision for items that cannot be reliably estimateda(794) ––
Unwinding of discount 764
Reclassified to other payables (350) ––
Change in discount rate –17 5
Utilization – paid by BP (1,240) (2,501) (10,912)
– paid by the trust fund (4,624) (3,707) (3,023)
At 31 December 15,200 15,333 16,335
Of which – current 5,449 9,437 7,938
– non-current 9,751 5,896 8,397
aRelates to items covered by the trust fund.
The total amounts that will ultimately be paid by BP in relation to all obligations relating to the incident are subject to significant uncertainty and the
ultimate exposure and cost to BP will be dependent on many factors. Furthermore, significant uncertainty exists in relation to the amount of claims that
will become payable by BP, the amount of fines that will ultimately be levied on BP (including any determination of BP’s culpability based on any
findings of negligence, gross negligence or wilful misconduct), the outcome of litigation and arbitration proceedings, and any costs arising from any
longer-term environmental consequences of the oil spill, which will also impact upon the ultimate cost for BP. The amount and timing of any amounts
payable could also be impacted by any further settlements which may or may not occur.
Although the provision recognized is the current best reliable estimate of expenditures required to settle certain present obligations at the end of the
reporting period, there are future expenditures for which it is not possible to measure the obligation reliably. See Note 43 for further information.
Impact upon the group income statement
The group income statement for 2012 includes a pre-tax charge of $5,014 million (2011 pre-tax credit of $3,742 million) in relation to the Gulf of Mexico
oil spill. The amount charged to date comprises costs incurred up to 31 December 2012, settlements agreed with the co-owners of the Macondo well
and other third parties, estimated obligations for future costs that can be estimated reliably at this time and rights and obligations relating to the trust
fund. Finance costs of $19 million (2011 $58 million) reflect the unwinding of the discount on the trust fund liability and provisions. The amount of the
provision recognized during the year can be reconciled to the income statement amount as follows:
$ million
2012 2011 2010
Net increase in provision 6,868 5,183 30,261
Derecognition of provision for items that cannot be reliably estimated (794) ––
Change in discount rate relating to provisions –17 5
Costs charged directly to the income statement 257 512 3,339
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)
Settlements credited to the income statement (145) (5,517) –
(Profit) loss before interest and taxation 4,995 (3,800) 40,858
Costs charged directly to the income statement relate to expenditure prior to the establishment of a provision at the end of the second quarter 2010 and
ongoing operating costs of the GCRO. The accounting associated with the recognition of the trust fund liability and the expenditure which will be settled
from the trust fund is described above.
Financial statements 197
BP Annual Report and Form 20-F 2012
Financial statements
2. Significant event – Gulf of Mexico oil spill continued