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This excerpt taken from the BP 6-K filed Nov 17, 2005. Fixed assets: FASB Statement of Financial Accounting Standards No. 19 ‘Financial Accounting and Reporting by Oil and Gas Producing Companies’ (SFAS 19) requires the cost of drilling an exploratory well (exploration or exploratory-type stratigraphic test wells) to be capitalized pending determination of whether the well has found proved reserves. If this determination cannot be made at the conclusion of drilling, SFAS No. 19 sets out additional requirements for continuing to carry the cost of the well as an asset. These requirements include firm plans for further drilling and a one-year time limitation on continued capitalization in certain situations. Subsequent to the issuance of SFAS 19, as a result of the increasing complexity of oil and gas projects due to drilling in remote and deepwater offshore locations, entities increasingly require more than one year to complete
all of the activities that permit recognition of proved reserves. In addition, because of new technologies, in certain situations additional exploratory wells may no longer be required before a project can commence.
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BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
This excerpt taken from the BP 6-K filed Sep 7, 2005. Fixed assets:
FASB Statement of Financial Accounting Standards No. 19 ‘Financial
Accounting and Reporting by Oil and Gas Producing Companies’ (SFAS 19) requires
the cost of drilling an exploratory well (exploration or exploratory-type
stratigraphic test wells) to be capitalized pending determination of whether
the well has found proved reserves. If this determination cannot be made at the
conclusion of drilling, SFAS No. 19 sets out additional requirements for
continuing to carry the cost of the well as an asset. These requirements
include firm plans for further drilling and a one-year time limitation on
continued capitalization in certain situations. Subsequent to the issuance of
SFAS 19, as a result of the increasing complexity of oil and gas projects due
to drilling in remote and deepwater offshore locations, entities increasingly
require more than one year to complete all of the activities that permit
recognition of proved reserves. In addition, because of new technologies, in
certain situations additional exploratory wells may no longer be required
before a project can commence.
52
In April 2005, the FASB issued Staff Position No. 19-1 ‘Accounting for Suspended Well Costs’ (FSP 19-1). FSP 19-1 amends SFAS 19 to permit the continued capitalization of exploratory well costs beyond one year if (a) the well found a sufficient quantity of reserves to justify its completion as a producing well and (b) the entity is making sufficient progress assessing the reserves and the economic and operating viability of the project. If either condition is not met, or if an entity obtains information that raises substantial doubt about the economic or operational viability of the project, the exploratory well is assumed to be impaired, and its costs, net of any salvage value, is charged to expense. FSP 19-1 provides a number of indicators that would be considered in order to demonstrate that sufficient progress was being made in assessing the reserves and the economic viability of the project. FSP 19-1 is effective for accounting periods beginning after April 4, 2005. Early application of the guidance is permitted in periods for which financial statements have not yet been issued.
BP’s accounting policy is that costs directly associated with an exploration well are capitalized as an intangible asset until the drilling of the well is complete and the results have been evaluated. If hydrocarbons are found, and, subject to further appraisal activity which may include the drilling of further wells (exploration or exploratory-type stratigraphic test wells), are likely to be capable of commercial development, the costs continue to be carried as an asset. All such carried costs are subject to technical, commercial and management review at least once a year to confirm the continued intent to develop or otherwise extract value from the discovery. When this is no longer the case, the costs are written off. When proved reserves of oil and natural gas are determined and development is sanctioned, the relevant expenditure is transferred to property, plant and equipment. BP has adopted the FSP with effect from January 1, 2004. No previously capitalized costs were expensed upon the adoption of the FSP.
This excerpt taken from the BP 6-K filed Sep 7, 2005. Fixed assets: FASB Statement of Financial Accounting
Standards No. 19 ‘Financial Accounting and Reporting by Oil and Gas
Producing Companies’ (SFAS 19) requires the cost of drilling an
exploratory well (exploration or exploratory-type stratigraphic test wells) to
be capitalized pending determination of whether the well has found proved
reserves. If this determination cannot be made at the conclusion of drilling,
SFAS 19 sets out additional requirements for continuing to carry the cost
of the well as an asset. These requirements include firm plans for further
drilling and a one-year time limitation on continued capitalization in certain
situations. Subsequent to the issuance of SFAS 19, as a result of the
increasing complexity of oil and gas projects due to drilling in remote and
deepwater offshore locations, entities increasingly require more than one year
to complete all of the activities that permit recognition of proved reserves.
In addition, because of new technologies, in certain situations additional
exploratory wells may no longer be required before a project can commence.
47
In April 2005, the FASB issued Staff Position No. 19-1 ‘Accounting for Suspended Well Costs’ (FSP 19-1). FSP 19-1 amends SFAS 19 to permit the continued capitalization of exploratory well costs beyond one year if (a) the well found a sufficient quantity of reserves to justify its completion as a producing well and (b) the entity is making sufficient progress assessing the reserves and the economic and operating viability of the project. If either condition is not met, or if an entity obtains information that raises substantial doubt about the economic or operational viability of the project, the exploratory well is assumed to be impaired, and its costs, net of any salvage value, is charged to expense. FSP 19-1 provides a number of indicators that would be considered in order to demonstrate that sufficient progress was being made in assessing the reserves and the economic viability of the project. FSP 19-1 is effective for accounting periods beginning after April 4, 2005. Early application of the guidance is permitted in periods for which financial statements have not yet been issued.
BP’s accounting policy is that costs directly associated with an exploration well are capitalized as an intangible asset until the drilling of the well is complete and the results have been evaluated. If hydrocarbons are found, and, subject to further appraisal activity which may include the drilling of further wells (exploration or exploratory-type stratigraphic test wells), are likely to be capable of commercial development, the costs continue to be carried as an asset. All such carried costs are subject to technical, commercial and management review at least once a year to confirm the continued intent to develop or otherwise extract value from the discovery. When this is no longer the case, the costs are written off. When proved reserves of oil and natural gas are determined and development is sanctioned, the relevant expenditure is transferred to property, plant and equipment. BP has adopted the FSP with effect from January 1, 2004. No previously capitalized costs were expensed upon the adoption of the FSP.
This excerpt taken from the BP 6-K filed Apr 13, 2005. Fixed assets: FASB Statement of Financial Accounting Standards No. 19 ‘Financial Accounting and Reporting by Oil and Gas Producing Companies’ (SFAS 19) requires the cost of drilling an exploratory well to be capitalized pending determination of whether the well has found proved reserves. If this determination cannot be made at the conclusion of drilling, SFAS No. 19 sets out additional requirements for continuing to carry the cost of the well as an asset. These requirements include firm plans for further drilling and a one-year time limitation on continued capitalization in certain situations. Subsequent to the issuance of SFAS 19, as a result of the increasing complexity of oil and gas projects due to drilling in remote and deepwater offshore locations, entities increasingly require more than one year to complete all of the activities that permit recognition of proved
reserves. In addition, because of new technologies, in certain situations additional exploratory wells may no longer be required before a project can commence.
In April 2005, the FASB issued Staff Position No. 19-1 ‘Accounting for Suspended Well Costs’ (FSP 19-1). FSP 19-1 amends SFAS 19 to permit the continued capitalization of exploratory well costs beyond one year if (a) the well found a sufficient quantity of reserves to justify its completion as a producing well and (b) the entity is making sufficient progress assessing the reserves and the economic and operating viability of the project. If either condition is not met, or if an entity obtains information that raises substantial doubt about the economic or operational viability of the project, the exploratory well is assumed to be impaired, and its costs, net of any salvage value, is charged to expense. FSP 19-1 provides a number of indicators that would be considered in order to demonstrate that sufficient progress was being made in assessing the reserves and the economic viability of the project. FSP 19-1 is effective for accounting periods beginning after April 4, 2005.
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BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
Note 16 - US generally accepted accounting principles - continued
The Company capitalizes the cost of drilling exploration (exploratory) wells pending a determination of whether a sufficient quantity of potentially economic oil and gas reserves have been discovered. Costs of exploration wells determined to have found proved reserves remain capitalized. Costs of exploration wells that find commercially producible reserves that cannot be classified as proved continue to be capitalized pending the results of additional exploration wells that are under way or firmly planned in the near future, decisions on major capital expenditures or securing final regulatory and co-venturer development approvals. These costs remain capitalized as long as the Company continues to make sufficient progress toward the ultimate development of the reserves. Where sufficient progress is not being achieved, the exploration well costs are charged to expense. Capitalized exploration well costs are reviewed at least annually.
The Company has not yet completed its evaluation of the impact of adopting FSP 19-1 on the Group's profit, as adjusted to accord with US GAAP, or BP shareholders’ interest as adjusted to accord with US GAAP.
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