BP 2010 Annual Report Download - page 155

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Notesonnancialstatements
Financial statements
1.Signicantaccountingpoliciescontinued
Financial assets
Financialassetsareclassiedasloansandreceivables;available-for-sale
nancialassets;nancialassetsatfairvaluethroughprotorloss;oras
derivativesdesignatedashedginginstrumentsinaneffectivehedge,as
appropriate.Financialassetsincludecashandcashequivalents,trade
receivables,otherreceivables,loans,otherinvestments,andderivative
nancialinstruments.Thegroupdeterminestheclassicationofitsnancial
assetsatinitialrecognition.Financialassetsarerecognizedinitiallyatfair
value,normallybeingthetransactionpriceplus,inthecaseofnancial
assetsnotatfairvaluethroughprotorloss,directlyattributable
transactioncosts.
Thesubsequentmeasurementofnancialassetsdependsontheir
classication,asfollows:
Loans and receivables
Loansandreceivablesarenon-derivativenancialassetswithxedor
determinablepaymentsthatarenotquotedinanactivemarket.Such
assetsarecarriedatamortizedcostusingtheeffectiveinterestmethodif
thetimevalueofmoneyissignicant.Gainsandlossesarerecognizedin
incomewhentheloansandreceivablesarederecognizedorimpaired,as
wellasthroughtheamortizationprocess.Thiscategoryofnancialassets
includestradeandotherreceivables.
Available-for-sale nancial assets
Available-for-salenancialassetsarethosenon-derivativenancialassets
thatarenotclassiedasloansandreceivables.Afterinitialrecognition,
available-for-salenancialassetsaremeasuredatfairvalue,withgainsor
lossesrecognizedwithinothercomprehensiveincome.Accumulated
changesinfairvaluearerecordedasaseparatecomponentofequityuntil
theinvestmentisderecognizedorimpaired.
Thefairvalueofquotedinvestmentsisdeterminedbyreferenceto
bidpricesatthecloseofbusinessonthebalancesheetdate.Wherethere
isnoactivemarket,fairvalueisdeterminedusingvaluationtechniques.
Wherefairvaluecannotbereliablymeasured,assetsarecarriedatcost.
Financial assets at fair value through prot or loss
Derivatives,otherthanthosedesignatedaseffectivehedginginstruments,
areclassiedasheldfortradingandareincludedinthiscategory.These
assetsarecarriedonthebalancesheetatfairvaluewithgainsorlosses
recognizedintheincomestatement.
Derivatives designated as hedging instruments in an effective hedge
Suchderivativesarecarriedonthebalancesheetatfairvalue.The
treatmentofgainsandlossesarisingfromrevaluationisdescribed
belowintheaccountingpolicyforderivativenancialinstrumentsand
hedgingactivities.
Impairment of nancial assets
Thegroupassessesateachbalancesheetdatewhetheranancialassetor
groupofnancialassetsisimpaired.
Loans and receivables
Ifthereisobjectiveevidencethatanimpairmentlossonloansand
receivablescarriedatamortizedcosthasbeenincurred,theamountofthe
lossismeasuredasthedifferencebetweentheasset’scarryingamount
andthepresentvalueofestimatedfuturecashowsdiscountedatthe
nancialasset’soriginaleffectiveinterestrate.Thecarryingamountof
theassetisreduced,withtheamountofthelossrecognizedinthe
incomestatement.
Available-for-sale nancial assets
Ifanavailable-for-salenancialassetisimpaired,thecumulativeloss
previouslyrecognizedinequityistransferredtotheincomestatement.
Anysubsequentrecoveryinthefairvalueoftheassetisrecognizedwithin
othercomprehensiveincome.
Ifthereisobjectiveevidencethatanimpairmentlossonan
unquotedequityinstrumentthatiscarriedatcosthasbeenincurred,the
amountofthelossismeasuredasthedifferencebetweentheasset’s
carryingamountandthepresentvalueofestimatedfuturecashows
discountedatthecurrentmarketrateofreturnforasimilarnancialasset.
Inventories
Inventories,otherthaninventoryheldfortradingpurposes,arestatedat
thelowerofcostandnetrealizablevalue.Costisdeterminedbytherst-in
rst-outmethodandcomprisesdirectpurchasecosts,costofproduction,
transportationandmanufacturingexpenses.Netrealizablevalueis
determinedbyreferencetopricesexistingatthebalancesheetdate.
Inventoriesheldfortradingpurposesarestatedatfairvalueless
coststosellandanychangesinnetrealizablevaluearerecognizedinthe
incomestatement.
Suppliesarevaluedatcosttothegroupmainlyusingtheaverage
methodornetrealizablevalue,whicheveristhelower.
Financial liabilities
Financialliabilitiesareclassiedasnancialliabilitiesatfairvaluethrough
protorloss;derivativesdesignatedashedginginstrumentsinaneffective
hedge;orasnancialliabilitiesmeasuredatamortizedcost,asappropriate.
Financialliabilitiesincludetradeandotherpayables,accruals,mostitemsof
nancedebtandderivativenancialinstruments.Thegroupdeterminesthe
classicationofitsnancialliabilitiesatinitialrecognition.Themeasurement
ofnancialliabilitiesdependsontheirclassication,asfollows:
Financial liabilities at fair value through prot or loss
Derivatives,otherthanthosedesignatedaseffectivehedginginstruments,
areclassiedasheldfortradingandareincludedinthiscategory.These
liabilitiesarecarriedonthebalancesheetatfairvaluewithgainsorlosses
recognizedintheincomestatement.
Derivatives designated as hedging instruments in an effective hedge
Suchderivativesarecarriedonthebalancesheetatfairvalue.The
treatmentofgainsandlossesarisingfromrevaluationisdescribed
belowintheaccountingpolicyforderivativenancialinstrumentsand
hedgingactivities.
Financial liabilities measured at amortized cost
Allothernancialliabilitiesareinitiallyrecognizedatfairvalue.For
interest-bearingloansandborrowingsthisisthefairvalueoftheproceeds
receivednetofissuecostsassociatedwiththeborrowing.
Afterinitialrecognition,othernancialliabilitiesaresubsequently
measuredatamortizedcostusingtheeffectiveinterestmethod.Amortized
costiscalculatedbytakingintoaccountanyissuecosts,andanydiscount
orpremiumonsettlement.Gainsandlossesarisingontherepurchase,
settlementorcancellationofliabilitiesarerecognizedrespectivelyin
interestandotherrevenuesandnancecosts.
Thiscategoryofnancialliabilitiesincludestradeandotherpayables
andnancedebt.
BPAnnualReportandForm20-F2010 153