BP 2010 Annual Report Download - page 157
Download and view the complete annual report
Please find page 157 of the 2010 BP annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.
Notesonnancialstatements
Financial statements
1.Signicantaccountingpoliciescontinued
Provisions, contingencies and reimbursement assets
Provisionsarerecognizedwhenthegrouphasapresentobligation(legalor
constructive)asaresultofapastevent,itisprobablethatanoutowof
resourcesembodyingeconomicbenetswillberequiredtosettlethe
obligationandareliableestimatecanbemadeoftheamountofthe
obligation.Whereappropriate,thefuturecashowestimatesareadjusted
toreectrisksspecictotheliability.
Iftheeffectofthetimevalueofmoneyismaterial,provisionsare
determinedbydiscountingtheexpectedfuturecashowsatapre-tax
risk-freeratethatreectscurrentmarketassessmentsofthetimevalueof
money.Wherediscountingisused,theincreaseintheprovisionduetothe
passageoftimeisrecognizedwithinnancecosts.Provisionsaresplit
betweenamountsexpectedtobesettledwithin12monthsofthebalance
sheetdate(current)andamountsexpectedtobesettledlater(non-current).
Contingentliabilitiesarepossibleobligationswhoseexistencewill
onlybeconrmedbyfutureeventsnotwhollywithinthecontrolofthe
group,orpresentobligationswhereitisnotprobablethatanoutowof
resourceswillberequiredortheamountoftheobligationcannotbe
measuredwithsufcientreliability.Contingentliabilitiesarenotrecognized
inthenancialstatementsbutaredisclosedunlessthepossibilityofan
outowofeconomicresourcesisconsideredremote.
Wherethegroupmakescontributionsintoaseparately
administeredfundforrestoration,environmentalorotherobligations,which
itdoesnotcontrol,andthegroup’srighttotheassetsinthefundis
restricted,theobligationtocontributetothefundisrecognizedasaliability
whereitisprobablethatsuchadditionalcontributionswillbemade.The
grouprecognizesareimbursementassetseparately,beingthelowerofthe
amountoftheassociatedrestoration,environmentalorotherprovisionand
thegroup’sshareofthefairvalueofthenetassetsofthefundavailable
tocontributors.
AmountsthatBPhasacontractualrighttorecoverfromthird
partiesarecontingentassets.Suchamountsarenotrecognizedinthe
accountsunlesstheyarevirtuallycertaintobereceived.
Decommissioning
Liabilitiesfordecommissioningcostsarerecognizedwhenthegrouphas
anobligationtodismantleandremoveafacilityoranitemofplantandto
restorethesiteonwhichitislocated,andwhenareliableestimateofthat
liabilitycanbemade.Whereanobligationexistsforanewfacility,suchas
oilandnaturalgasproductionortransportationfacilities,thiswillbeon
constructionorinstallation.Anobligationfordecommissioningmayalso
crystallizeduringtheperiodofoperationofafacilitythroughachangein
legislationorthroughadecisiontoterminateoperations.Theamount
recognizedisthepresentvalueoftheestimatedfutureexpenditure
determinedinaccordancewithlocalconditionsandrequirements.
Acorrespondingitemofproperty,plantandequipmentofan
amountequivalenttotheprovisionisalsorecognized.Thisissubsequently
depreciatedaspartoftheasset.
Otherthantheunwindingdiscountontheprovision,anychangein
thepresentvalueoftheestimatedexpenditureisreectedasan
adjustmenttotheprovisionandthecorrespondingitemofproperty,plant
andequipment.Suchchangesincludeforeignexchangegainsandlosses
arisingontheretranslationoftheliabilityintothefunctionalcurrencyof
thereportingentity,whenitisknownthattheliabilitywillbesettledina
foreigncurrency.
Environmental expenditures and liabilities
Environmentalexpendituresthatrelatetocurrentorfuturerevenuesare
expensedorcapitalizedasappropriate.Expendituresthatrelatetoan
existingconditioncausedbypastoperationsanddonotcontributeto
currentorfutureearningsareexpensed.
Liabilitiesforenvironmentalcostsarerecognizedwhenaclean-upis
probableandtheassociatedcostscanbereliablyestimated.Generally,the
timingofrecognitionoftheseprovisionscoincideswiththecommitment
toaformalplanofactionor,ifearlier,ondivestmentoronclosureof
inactivesites.
Theamountrecognizedisthebestestimateoftheexpenditure
required.Wheretheliabilitywillnotbesettledforanumberofyears,
theamountrecognizedisthepresentvalueoftheestimated
futureexpenditure.
Employee benets
Wages,salaries,bonuses,socialsecuritycontributions,paidannualleave
andsickleaveareaccruedintheperiodinwhichtheassociatedservices
arerenderedbyemployeesofthegroup.Deferredbonusarrangements
thathaveavestingdatemorethan12monthsaftertheperiodendare
valuedonanactuarialbasisusingtheprojectedunitcreditmethodand
amortizedonastraight-linebasisovertheserviceperioduntiltheaward
vests.Theaccountingpoliciesforshare-basedpaymentsandforpensions
andotherpost-retirementbenetsaredescribedbelow.
Share-based payments
Equity-settled transactions
Thecostofequity-settledtransactionswithemployeesismeasuredby
referencetothefairvalueatthedateatwhichequityinstrumentsare
grantedandisrecognizedasanexpenseoverthevestingperiod,which
endsonthedateonwhichtherelevantemployeesbecomefullyentitledto
theaward.Fairvalueisdeterminedbyusinganappropriatevaluation
model.Invaluingequity-settledtransactions,noaccountistakenofany
vestingconditions,otherthanconditionslinkedtothepriceofthesharesof
thecompany(marketconditions).Non-vestingconditions,suchasthe
conditionthatemployeescontributetoasavings-relatedplan,aretakeninto
accountinthegrant-datefairvalue,andfailuretomeetanon-vesting
conditionistreatedasacancellation,wherethisiswithinthecontrolof
theemployee.
Noexpenseisrecognizedforawardsthatdonotultimatelyvest,
exceptforawardswherevestingisconditionaluponamarketcondition,
whicharetreatedasvestingirrespectiveofwhetherornotthemarket
conditionissatised,providedthatallotherperformanceconditionsare
satised.
Ateachbalancesheetdatebeforevesting,thecumulativeexpense
iscalculated,representingtheextenttowhichthevestingperiodhas
expiredandmanagement’sbestestimateoftheachievementorotherwise
ofnon-marketconditionsandthenumberofequityinstrumentsthatwill
ultimatelyvestor,inthecaseofaninstrumentsubjecttoamarket
condition,betreatedasvestingasdescribedabove.Themovementin
cumulativeexpensesincethepreviousbalancesheetdateisrecognizedin
theincomestatement,withacorrespondingentryinequity.
Whenthetermsofanequity-settledawardaremodiedoranew
awardisdesignatedasreplacingacancelledorsettledaward,thecost
basedontheoriginalawardtermscontinuestoberecognizedoverthe
originalvestingperiod.Inaddition,anexpenseisrecognizedoverthe
remainderofthenewvestingperiodfortheincrementalfairvalueofany
modication,basedonthedifferencebetweenthefairvalueofthe
originalawardandthefairvalueofthemodiedaward,bothasmeasured
onthedateofthemodication.Noreductionisrecognizedifthisdifference
isnegative.
Whenanequity-settledawardiscancelled,itistreatedasifithad
vestedonthedateofcancellationandanycostnotyetrecognizedinthe
incomestatementfortheawardisexpensedimmediately.
BPAnnualReportandForm20-F2010 155