BP 2008 Annual Report Download - page 207

BP Annual Report and Accounts 2008
Parent company financial statements of BP p.l.c.
11. Share-based payments continued
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Options granted in 2006 BPSOP 3 year 5 year
Option pricing model used Binomial Binomial Binomial
Weighted average fair value $2.46 $2.88 $3.08
Weighted average share price $11.07 $11.08 $11.08
Weighted average exercise price $11.17 $9.10 $9.10
Expected volatility 22% 24% 24%
Option life 10 years 3.5 years 5.5 years
Expected dividends 3.23% 3.40% 3.40%
Risk free interest rate 4.50% 5.00% 4.75%
Expected exercise behaviour 5% years 4-9, 100% year 4 100% year 6
70% year 10
The group uses an appropriate valuation model of expected volatility of US ADSs for the quarter within which the grant date of the relevant plan falls.
Management is responsible for all inputs and assumptions in relation to that model, including the determination of expected volatility.
MTPP- MTPP- EDIP- EDIP-
Shares granted in 2008 TSR FCF TSR RET RSP DAB PSP
Number of equity instruments granted (million) 9.1 9.1 2.6 0.5 7.7 5.8 16.7
Weighted average fair value $5.07 $10.34 $4.55 $11.13 $8.83 $10.34 $12.89
Fair value measurement basis Monte Market Monte Market Market Market Monte
Carlo value Carlo value value value Carlo
MTPP- MTPP- EDIP- EDIP-
Shares granted in 2007 TSR FCF TSR LTL RSP DAB PSP
Number of equity instruments granted (million) 9.4 8.5 4.5 0.5 7.7 4.4 14.8
Weighted average fair value $4.73 $10.02 $2.81 $9.92 $11.93 $10.02 $12.37
Fair value measurement basis Monte Market Monte Market Market Market Monte
Carlo value Carlo value value value Carlo
MTPP- MTPP- EDIP- EDIP-
Shares granted in 2006 TSR FCF TSR LTL RSP DAB
Number of equity instruments granted (million) 8.7 7.8 3.3 0.5 0.5 3.5
Weighted average fair value $7.28 $11.23 $4.87 $11.23 $11.07 $11.06
Fair value measurement basis Monte Market Monte Market Market Market
Carlo value Carlo value value value
The group used a Monte Carlo simulation to fair value the TSR element of the 2008, 2007 and 2006 PSP, MTPP and EDIP plans. In accordance with the
rules of the plans the model simulates BP’s TSR and compares it against our principal strategic competitors over the three-year period of the plans. The
model takes into account the historic dividends, share price volatilities and covariances of BP and each comparator company to produce a predicted
distribution of relative share performance. This is applied to the reward criteria to give an expected value of the TSR element.
Accounting expense does not necessarily represent the actual value of share-based payments made to recipients, which are determined by the
remuneration committee according to established criteria.
12. Auditor’s remuneration
Fees payable to the company’s auditors for the audit of the company’s accounts were $16 million (2007 $18 million and 2006 $15 million).
Remuneration receivable by the company’s auditors for the supply of other services to the company is not presented in the parent company
accounts as this information is provided in the group accounts.
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