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This excerpt taken from the BP 20-F filed Mar 6, 2007. (b) Provisions Under IFRS, provisions for decommissioning and environmental liabilities are measured on a discounted basis if the effect of the time value of money is material. In accordance with IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’, the provisions for decommissioning and environmental liabilities are estimated using costs based on current prices and discounted using rates that take into consideration the time value of money and risks inherent in the liability. The periodic unwinding of the discount is included in other finance expense. Similarly, the effect of a change in the discount rate is included in other finance expense in connection with all provisions other than decommissioning liabilities. Upon initial recognition of a decommissioning provision, a corresponding amount is also recognized as an item of property, plant and equipment and is subsequently depreciated as part of the capital cost of the facilities. Adjustments to the decommissioning liabilities, associated with changes to the future cash flow assumptions or changes in the discount rate, are reflected as increases or decreases to the corresponding item of property, plant and equipment and depreciated prospectively over the asset’s remaining economic useful life. Under US GAAP, decommissioning liabilities are recognized in accordance with SFAS No. 143 ‘Accounting for Asset Retirement Obligations’. SFAS 143 is similar to IAS 37 and requires that when an asset retirement liability is recognized, a corresponding amount is capitalized and depreciated as an additional cost of the related asset. The liability is measured based on the risk-adjusted future cash outflows discounted using a credit-adjusted risk-free rate. The unwinding of the discount is included in operating profit for the period. Unlike IFRS, subsequent changes to the discount rate do not impact the carrying value of the asset or liability. Subsequent changes to the estimates of the timing or amount of future cash flows, resulting in an increase to the asset and liability, are remeasured using updated assumptions related to the credit-adjusted risk-free rate. In addition, the use of different oil and natural gas reserves volumes between US GAAP and IFRS until 1 October 2006 (see note (c) Oil and natural gas reserves differences) resulted in different field lives and hence differences in the manner in which the subsequent unwinding of the discount and the depreciation of the corresponding assets associated with decommissioning provisions were recognized.
53 US GAAP reconciliation continued Under US GAAP,
environmental liabilities are discounted only where the timing and amounts of
payments are fixed and reliably determinable.
The following data summarizes the movements in the asset retirement obligations, as adjusted to accord with US GAAP.
This excerpt taken from the BP 6-K filed Dec 13, 2006. (ii) Provisions Under IFRS, provisions for decommissioning and environmental liabilities are measured on a discounted basis if the effect of the time value of money is material. In accordance with IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’, the provisions for decommissioning and environmental liabilities are estimated using costs based on current prices and discounted using rates that take into consideration the time value of money and risks inherent in the liability. The periodic unwinding of the discount is included in other finance expense. Similarly, the effect of a change in the discount rate is included in other finance expense in connection with all provisions other than decommissioning liabilities. Upon initial recognition of a decommissioning provision, a corresponding amount is also recognized as an asset and is subsequently depreciated as part of the capital cost of the facilities. Adjustments to the decommissioning liabilities, associated with changes to the future cash flow assumptions or changes in the discount rate, are reflected as increases or decreases to the corresponding item of property, plant and equipment and depreciated prospectively over the asset’s remaining economic useful life. -36- BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 15 - US generally accepted accounting principles (continued) This excerpt taken from the BP 6-K filed Nov 17, 2006. (ii) Provisions Under IFRS, provisions for decommissioning and environmental liabilities are measured on a discounted basis if the effect of the time value of money is material. In accordance with IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’, the provisions for decommissioning and environmental liabilities are estimated using costs based on current prices and discounted using rates that take into consideration the time value of money and risks inherent in the liability. The periodic unwinding of the discount is included in other finance expense. Similarly, the effect of a change in the discount rate is included in other finance expense in connection with all provisions other than decommissioning liabilities. Upon initial recognition of a decommissioning provision, a corresponding amount is also recognized as an asset and is subsequently depreciated as part of the capital cost of the facilities. Adjustments to the decommissioning liabilities, associated with changes to the future cash flow assumptions or changes in the discount rate, are reflected as increases or decreases to the corresponding item of property, plant and equipment and depreciated prospectively over the asset’s remaining economic useful life. -36- BP p.l.c. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Note 15 - US generally accepted accounting principles (continued) This excerpt taken from the BP 6-K filed Mar 13, 2006. Provisions
Provisions are recognized when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Where the Group expects some or all of a provision to be reimbursed, for example, under an insurance contract, the reimbursement is recognized as a separate asset, but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement. If the effect of the time value of money is material, provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability. Where discounting is used, the increase in the provision due to the passage of time is recognized as other finance expense. Any change in the amount recognized for environmental and litigation and other provisions arising through changes in discount rates is included within other finance expense.
A contingent liability is disclosed where the existence of an obligation will only be confirmed by future events or where the amount of the obligation cannot be measured with reasonable reliability. Contingent assets are not recognized, but are disclosed where an inflow of economic benefits is probable.
This excerpt taken from the BP 6-K filed Nov 17, 2005. Provisions: In March 2005, the FASB issued FASB Interpretation No. 47 ‘Accounting for Conditional Asset Retirement Obligations an interpretation of FASB Statement No. 143’ (Interpretation 47). Under Interpretation 47, a conditional asset retirement obligation represents an unconditional obligation to perform an asset retirement activity where the timing or method of settlement is conditional on a future event that may or may not be within the control of the entity. Interpretation 47 clarifies that an entity is required to recognize a liability, when incurred, for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. Uncertainty about the timing or method of settlement of a conditional asset retirement obligation is factored into the measurement of the liability when sufficient information exists. SFAS 143
acknowledges that in some cases, sufficient information may not be available to reasonably estimate the fair value of an asset retirement obligation. Interpretation 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. Interpretation 47 is effective for fiscal years ending after December 15, 2005. While the Group has not yet completed its evaluation of the impact of adopting Interpretation 47 it is not expected to have a significant effect on the Group's profit, as adjusted to accord with US GAAP, or BP shareholders’ equity as adjusted to accord with US GAAP.
This excerpt taken from the BP 6-K filed Sep 7, 2005. Provisions: In March 2005,
the FASB issued FASB Interpretation No. 47 ‘Accounting for Conditional
Asset Retirement Obligations an interpretation of FASB Statement No. 143’
(Interpretation 47). Under Interpretation 47, a conditional asset retirement
obligation represents an unconditional obligation to perform an asset
retirement activity where the timing or method of settlement is conditional on
a future event that may or may not be within the control of the entity.
Interpretation 47 clarifies that an entity is required to recognize a
liability, when incurred, for the fair value of a conditional asset retirement
obligation if the fair value of the liability can be reasonably estimated.
Uncertainty about the timing or method of settlement of a conditional asset
retirement obligation is factored into the measurement of the liability when
sufficient information exists. SFAS 143 acknowledges that in some cases,
sufficient information may not be available to reasonably estimate the fair
value of an asset retirement obligation. Interpretation 47 also clarifies when
an entity would have sufficient information to reasonably estimate the fair
value of an asset retirement obligation. Interpretation 47 is effective for
fiscal years ending after December 15, 2005. While the Group has not yet
completed its evaluation of the impact of adopting Interpretation 47 on the
Group’s profit, as adjusted to accord with US GAAP, or BP shareholders’ equity
as adjusted to accord with US GAAP.
This excerpt taken from the BP 6-K filed Sep 7, 2005. Provisions: In March 2005, the FASB issued FASB
Interpretation No. 47 ‘Accounting for Conditional Asset Retirement
Obligations an interpretation of FASB Statement No. 143’ (Interpretation 47).
Under Interpretation 47, a conditional asset retirement obligation represents
an unconditional obligation to perform an asset retirement activity where the
timing or method of settlement is conditional on a future event that may or may
not be within the control of the entity. Interpretation 47 clarifies that an
entity is required to recognize a liability, when incurred, for the fair value
of a conditional asset retirement obligation if the fair value of the liability
can be reasonably estimated. Uncertainty about the timing or method of
settlement of a conditional asset retirement obligation is factored into the
measurement of the liability when sufficient information exists. SFAS 143
acknowledges that in some cases, sufficient information may not be available to
reasonably estimate the fair value of an asset retirement obligation.
Interpretation 47 also clarifies when an entity would have sufficient
information to reasonably estimate the fair value of an asset retirement
obligation. Interpretation 47 is effective for fiscal years ending after
December 15, 2005. While the Group has not yet completed its evaluation of
adopting Interpretation 47 it is not expected to have a significant effect on
the Group’s profit, as adjusted to accord with US GAAP, or BP shareholders’ equity,
as adjusted to accord with US GAAP.
This excerpt taken from the BP 6-K filed Apr 13, 2005. Provisions: In March 2005, the FASB issued FASB Interpretation No. 47 ‘Accounting for Conditional Asset Retirement Obligations an interpretation of FASB Statement No. 143’ (Interpretation 47). Under Interpretation 47, a conditional asset retirement obligation represents an unconditional obligation to perform an asset retirement activity where the timing or method of settlement are conditional on a future event that may or may not be within the control of the entity. Interpretation 47 clarifies that an entity is required to recognize a liability, when incurred, for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. Uncertainty about the timing or method of settlement of a conditional asset retirement obligation is factored into the measurement of the liability when sufficient information exists. SFAS
143 acknowledges that in some cases, sufficient information may not be available to reasonably estimate the fair value of an asset retirement obligation. Interpretation 47 also clarifies when an entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. Interpretation 47 is effective for fiscal years ending after December 15, 2005. The Company has not yet completed its evaluation of the impact of adopting Interpretation 47 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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