BP 2009 Annual Report Download - page 129

BP Annual Report and Accounts 2009
Notes on financial statements
4. Segmental analysis continued
a
Financial statements
127
Other businesses and corporate comprises the Alternative Energy business, Shipping, the group’s aluminium asset, Treasury (which in the segmental
analysis includes all of the group’s cash, cash equivalents and associated interest income), and corporate activities worldwide. The Alternative Energy
business is an operating segment that has been aggregated with the other activities within Other businesses and corporate as it does not meet the
materiality thresholds for separate segment reporting.
The accounting policies of the operating segments are the same as the group’s accounting policies described in Note 1. However, IFRS
requires that the measure of profit or loss disclosed for each operating segment is the measure that is provided regularly to the chief operating
decision maker for the purposes of performance assessment and resource allocation. For BP, this measure of profit or loss is replacement cost profit
before interest and tax which reflects the replacement cost of supplies by excluding from profit inventory holding gains and lossesa. Replacement cost
profit for the group is not a recognized GAAP measure.
Sales between segments are made at prices that approximate market prices, taking into account the volumes involved. Segment revenues and
segment results include transactions between business segments. These transactions and any unrealized profits and losses are eliminated on
consolidation, unless unrealized losses provide evidence of an impairment of the asset transferred. Sales to external customers are based on the
location of the seller. The UK region includes the UK-based international activities of Refining and Marketing.
All surpluses and deficits recognized on the group balance sheet in respect of pension and other post-retirement benefit plans are allocated to
Other businesses and corporate. However, the periodic expense relating to these plans is allocated to the other operating segments based upon the
business in which the employees work.
Certain financial information is provided separately for the US as this is an individually material country for BP, and for the UK as this is BP’s
country of domicile.
$ million
2009
Other Consolidation
Exploration Refining businesses adjustment
and and and and Total
By business Production Marketing corporate eliminations group
Segment revenues
Sales and other operating revenues 57,626 213,050 2,843 (34,247) 239,272
Less: sales between businesses (32,540) (821) (886) 34,247 –
Third party sales and other operating revenues 25,086 212,229 1,957 – 239,272
Equity-accounted earnings 3,309 558 34 – 3,901
Interest revenues 98 32 95 – 225
Segment results
Replacement cost profit (loss) before interest and taxation 24,800 743 (2,322) (717) 22,504
Inventory holding gainsa142 3,774 6 – 3,922
Profit (loss) before interest and taxation 24,942 4,517 (2,316) (717) 26,426
Finance costs (1,110)
Net finance expense relating to pensions and other post-retirement benefits (192)
Profit before taxation 25,124
Other income statement items
Depreciation, depletion and amortization 9,557 2,236 313 – 12,106
Impairment losses 118 1,834 189 – 2,141
Impairment reversals 3 – 8 – 11
Fair value (gain) loss on embedded derivatives (664) 57 – – (607)
Charges for provisions, net of write-back of unused provisions,
including change in discount rate 307 756 488 – 1,551
Segment assets
Segment assets 140,149 82,224 17,954 (5,084) 235,243
Current tax receivable 209
Deferred tax assets 516
Total assets 235,968
Includes
Equity-accounted investments 20,289 6,882 1,088 – 28,259
Additions to non-current assets 15,855 4,083 1,297 – 21,235
Additions to other investments 19
Element of acquisitions not related to non-current assets (7)
Additions to decommissioning asset (938)
Capital expenditure and acquisitions 14,896 4,114 1,299 – 20,309
Inventory holding gains and losses represent the difference between the cost of sales calculated using the average cost to BP of supplies incurred during the period and the cost of sales calculated
on the first-in first-out (FIFO) method including any changes in provisions where the net realizable value of the inventory is lower than its cost. Under the FIFO method, which we use for IFRS reporting,
the cost of inventory charged to the income statement is based on the historic cost of acquisition or manufacture rather than the current replacement cost. In volatile energy markets, this can have a
significant distorting effect on reported income. The amounts disclosed represent the difference between the charge to the income statement on a FIFO basis (and any related movements in net
realizable value provisions) and the charge that would arise using average cost of supplies incurred during the period. For this purpose, average cost of supplies incurred during the period is calculated by
dividing the total cost of inventory purchased in the period by the number of barrels acquired. The amounts disclosed are not separately reflected in the financial statements as a gain or loss. No
adjustment is made in respect of the cost of inventories held as part of a trading position and certain other temporary inventory positions.