This excerpt taken from the BP 6-K filed Mar 13, 2006.
Embedded derivatives Derivatives embedded in other financial instruments or other host contracts are treated as separate derivatives when their risks and characteristics are not closely related to those of host contracts and the host contracts are not carried at fair value. Contracts are assessed for embedded derivatives when the Group becomes a party to them, including at the date of a business combination. These embedded derivatives are measured at fair value at each period end. Any gains or losses arising from changes in fair value are taken directly to net profit or loss for the period.
This excerpt taken from the BP 6-K filed Sep 7, 2005.
Embedded derivatives are required to be separated from their host contracts and separately recorded at fair value, with any resulting change in gain or loss in the period being recognized in the income statement.
Certain contracts have been determined to contain embedded derivatives. These embedded derivatives will be fair valued at each period end with the resulting gains or losses taken to the income statement.
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