BP (BP)

Adoption of International Financial Reporting Standards (IFRS)

        An 'International Accounting Standards Regulation' was adopted by the Council of the European Union (EU) in June 2002. This regulation requires all EU companies listed on an EU stock exchange to use 'endorsed' International Financial Reporting Standards (IFRS), published by the International Accounting Standards Board (IASB), to report their consolidated results with effect from January 1, 2005. The IASB completed its development of IFRS to be adopted in 2005 during the first half of 2004, but has also published certain amendments and interpretations of IFRS which would be available for early adoption if endorsed by the EU.

        The process of endorsement of IFRS by the EU to allow adoption by companies in 2005 is well advanced but not yet complete.

        BP's project team includes a broadly based representation from across the Group designed to plan for and achieve a smooth transition to IFRS. The project team has examined all implementation aspects, including changes to accounting policies, the presentation of the Group's results, systems impacts and the wider business issues that may arise from such a fundamental change. The Group has reported its results from the first quarter of 2005 using IFRS. However, the implementation may still be affected by developments in the IASB's standard-setting process and the endorsement of standards and interpretations by the EU.

112

        The Group has decided that, for the purposes of the restatement of prior periods currently reported under UK GAAP, the date of transition to IFRS is January 1, 2003. However, in accordance with the provisions of IFRS 1, the date of adoption of International Accounting Standards Nos. 32 and 39, which deal with the recognition and presentation of financial instruments, is set at January 1, 2005, with no restatement of prior periods' results.

        The process of finalizing the restatements of the results and financial position for 2003 and 2004 under IFRS, was completed in March 2005. The major effects of changing from current accounting practice to IFRS are in the following areas: goodwill acquired in a business combination; deferred tax related to business combinations and in respect of the valuation of inventories; accounting for items falling within the scope of IAS Nos. 32 and 39, including embedded derivatives and hedge accounting; the treatment of major overhaul expenditure; exchanges of fixed assets; recognition of dividend liabilities; and share-based payments. Certain joint arrangements with third parties, where BP currently accounts for its share of individual assets, liabilities, income and expense, will be accounted for using the equity method, resulting in reclassifications within the income statement and balance sheet.

        The adoption of IFRS, subject to developments in the standard-setting process and the endorsement of standards and interpretations, resulted in a $1,344 million and $1,966 million increase in profit for the years ended December 31, 2004 and 2003, respectively, and a $236 million increase in BP shareholders' interest at December 31, 2004.

Adoption of International Financial Reporting Standards (IFRS)

        An 'International Accounting Standards Regulation' was adopted by the Council of the European Union (EU) in June 2002. This regulation requires all EU companies listed on an EU stock exchange to use 'endorsed' International Financial Reporting Standards (IFRS), published by the International Accounting Standards Board (IASB), to report their consolidated results with effect from January 1, 2005. The IASB completed its development of IFRS to be adopted in 2005 during the first half of 2004, but has also published certain amendments and interpretations of IFRS which would be available for early adoption if endorsed by the EU.

        The process of endorsement of IFRS by the EU to allow adoption by companies in 2005 is well advanced but not yet complete.

        BP's project team includes a broadly based representation from across the Group designed to plan for and achieve a smooth transition to IFRS. The project team has examined all implementation aspects, including changes to accounting policies, the presentation of the Group's results, systems impacts and the wider business issues that may arise from such a fundamental change. The Group has reported its results from the first quarter of 2005 using IFRS. However, the implementation may still be affected by developments in the IASB's standard-setting process and the endorsement of standards and interpretations by the EU.

106

        The Group has decided that, for the purposes of the restatement of prior periods currently reported under UK GAAP, the date of transition to IFRS is January 1, 2003. However, in accordance with the provisions of IFRS 1, the date of adoption of International Accounting Standards Nos. 32 and 39, which deal with the recognition and presentation of financial instruments, is set at January 1, 2005, with no restatement of prior periods' results.

        The process of finalizing the restatements of the results and financial position for 2003 and 2004 under IFRS, was completed in March 2005. The major effects of changing from current accounting practice to IFRS are in the following areas: goodwill acquired in a business combination; deferred tax related to business combinations and in respect of the valuation of inventories; accounting for items falling within the scope of IAS Nos. 32 and 39, including embedded derivatives and hedge accounting; the treatment of major overhaul expenditure; exchanges of fixed assets; recognition of dividend liabilities; and share-based payments. Certain joint arrangements with third parties, where BP currently accounts for its share of individual assets, liabilities, income and expense, will be accounted for using the equity method, resulting in reclassifications within the income statement and balance sheet.

        The adoption of IFRS, subject to developments in the standard-setting process and the endorsement of standards and interpretations, resulted in a $1,344 million and $1,966 million increase in profit for the years ended December 31, 2004 and 2003, respectively, and a $236 million increase in BP shareholders' interest at December 31, 2004.