BP 2006 Annual Report Download - page 196

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53 US GAAP reconciliation continued
Income taxes
In June 2006, the FASB issued FASB Interpretation No. 48 ‘Accounting for Uncertainty in Income Taxes an interpretation of FASB Statement No. 109’.
Interpretation 48 clarifies the accounting for uncertainty with regard to income taxes recognized in an entity’s financial statements in accordance with
SFAS 109 and prescribes a recognition threshold and measurement attribute for the recognition and measurement of a tax position taken or expected to
be taken in a tax return. Interpretation 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods,
disclosure and transition. The group will adopt Interpretation 48 with effect from 1 January 2007. Adoption of Interpretation 48 is not expected to have a
significant effect on the group’s profit as adjusted to accord with US GAAP, or on BP shareholders’ equity as adjusted to accord with US GAAP.
Fair value measurements
In September 2006, the FASB issued SFAS No. 157 ‘Fair Value Measurements’. SFAS 157 defines fair value, establishes a framework for measuring
fair value and expands disclosures about fair value measurements. SFAS 157 applies under other accounting pronouncements that require or permit fair
value measurements. SFAS 157 is effective for accounting periods beginning after 15 November 2007. The group has not yet completed its evaluation
of the impact of adopting SFAS 157 on the group’s profit as adjusted to accord with US GAAP, or on BP shareholders’ equity as adjusted to accord with
US GAAP.
Fair value option
In February 2007, the FASB issued SFAS No. 159 ‘The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB
Statement No. 115’. SFAS 159 permits an entity, at specified election dates, to choose to measure certain financial instruments and other items at fair
value. The objective of SFAS 159 is to provide entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets
and liabilities differently, without having to apply complex hedge accounting provisions. SFAS 159 is effective for accounting periods beginning after
15 November 2007. The group has not yet completed its evaluation of the impact of adopting SFAS 159 on the group’s profit as adjusted to accord with
US GAAP, or on BP shareholders’ equity as adjusted to accord with US GAAP.
54 Auditors’ remuneration for US reporting
$ million
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2006 2005 2004
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Audit fees – Ernst & Young UK Total UK Total UK Total
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Group audit 18 36 15 31 13 27
Audit-related regulatory reporting 793647
Statutory audit of subsidiaries 619 723 416
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31 64 25 60 21 50
Innovene operations ––(8) (8) (2) (2)
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Continuing operations 31 64 17 52 19 48
Fees for other services – Ernst & Young
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Further assurance services
Acquisition and disposal due diligence 232267
Pension plan audits –––1–1
Other further assurance services 3516 23 6 9
Tax services
Compliance services –1510 313
Advisory services –––––1
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5923 36 15 31
Innovene operations ––– (1) – (1)
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Continuing operations 5923 35 15 30
Audit fees for 2006 include $5 million of additional fees for 2005 (2005 $4 million of additional fees for 2004). Audit fees are included in the income
statement within distribution and administration expenses.
Other further assurance services include $nil (2005 $4 million and 2004 $3 million) in respect of advice on accounting, auditing and financial reporting
matters; $nil (2005 $16 million and 2004 $1 million) in respect of internal accounting and risk management control reviews; $5 million (2005 $3 million
and 2004 $3 million) in respect of non-statutory audits and $nil (2005 $nil and 2004 $2 million) in respect of project assurance and advice on business
and accounting process improvement.
The tax compliance services relate to income tax and indirect tax compliance and employee tax services.
The audit committee has established pre-approval policies and procedures for the engagement of Ernst & Young to render audit and certain
assurance and tax services. The audit fees payable to Ernst & Young are reviewed by the audit committee in the context of other global companies for
cost-effectiveness. Ernst & Young performed further assurance and tax services that were not prohibited by regulatory or other professional
requirements and were pre-approved by the committee. Ernst & Young is engaged for these services when its expertise and experience of BP are
important. Most of this work is of an audit nature. Tax services were awarded either through a full competitive tender process or following an
assessment of the expertise of Ernst & Young compared to that of other potential service providers. These services are for a fixed term.
Fees paid to major firms of accountants other than Ernst & Young for other services amount to $52 million (2005 $151 million and 2004 $82 million).