BP 2010 Annual Report Download - page 161

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Notesonnancialstatements
Financial statements
2.Signicantevent–GulfofMexicooilspillcontinued
BP’sobligationtomakecontributionstothetrustfundwasrecognizedinfull,amountingto$20billiononanundiscountedbasisasitiscommittedto
makingthesecontributions.Oninitialrecognitionthediscountedamountrecognizedwas$19,580million.AfterBP’scontributionsof$5billiontothetrust
fundduring2010,andadjustmentsfordiscounting,theremainingliabilityasat31December2010was$14,901million.Thisliabilityisrecordedwithin
otherpayablesonthebalancesheet,apportionedbetweencurrentandnon-currentelementsaccordingtotheagreedscheduleofcontributions.
Thetablebelowshowsmovementsinthefundingobligation,recognizedwithinotherpayablesonthebalancesheet,duringtheperiodto
31December2010.
$million
Trustfundliabilityinitiallyrecognized–discounted        19,580
Unwindingofdiscount        73
Changeindiscountrate        240
Contributions        (5,000)
Other 8
At31December2010        14,901
Ofwhich–current        5,002
  –non-current        9,899
 
AnassethasbeenrecognizedrepresentingBP’srighttoreceivereimbursementfromthetrustfund.Thisistheportionoftheestimatedfutureexpenditure
providedforthatwillbesettledbypaymentsfromthetrustfund.Weusetheterm”reimbursementasset”todescribethisasset.BPwillnotactually
receiveanyreimbursementsfromthetrustfund,insteadpaymentswillbemadedirectlytoclaimantsfromthetrustfund,andBPwillbereleasedfromits
correspondingobligation.
Theportionoftheprovisionrecognizedduringtheyearforitemsthatwillbecoveredbythetrustfundwas$12,567million.Ofthisamount,
paymentsof$3,023millionweremadeduringtheyearfromthetrustfund.Theremainingreimbursementassetasat31December2010was$9,544
millionandisrecordedwithinotherreceivablesonthebalancesheet.Theamountofthereimbursementassetisequaltotheamountofprovisionsasat
31December2010thatwillbecoveredbythetrustfund–seeNote37inthetableunderProvisions relating to the Gulf of Mexico oil spill.
Movementsinthereimbursementassetarepresentedinthetablebelow:
$million
Increaseinprovisionforitemscoveredbythetrustfund        12,567
Amountspaiddirectlybythetrustfund        (3,023)
At31December2010        9,544
Ofwhich–current        5,943
 –non-current        3,601
 
Theamountoftheincomestatementchargerelatedtothetrustfundcomprises:
$million
Trustfundliability–discounted        19,580
Changeindiscountraterelatingtotrustfundliability        240
Recognitionofreimbursementasset        (12,567)
Other          8
Totalchargerelatingtothetrustfund        7,261
 
Asnotedabove,theobligationtofundthe$20-billiontrustfundhasbeenrecognizedinfull.Anyincreasesintheprovisionthatwillbecoveredbythetrust
fund(uptotheamountof$20billion)havenonetincomestatementeffectasareimbursementassetisalsorecognized,asdescribedabove.These
chargesforprovisions,andtheassociatedreimbursementasset,recognizedduringtheyearamountedto$12,567million.Thus,afurther$7,433million
couldbeprovidedinsubsequentperiodsforitemscoveredbythetrustfundwithnonetimpactontheincomestatement.Suchfutureincreasesin
amountsprovidedcouldarisefromadjustmentstoexistingprovisions,orfromtheinitialrecognitionofprovisionsforitemsthatcurrentlycannotbe
estimatedreliably,namelynaljudgmentsandsettlementsandnaturalresourcedamagesandrelatedcosts.
Itisnotpossibleatthistimetoconcludeastowhetherthe$20-billionfundwillbesufcienttosatisfyallclaimsundertheOilPollutionActof1990
(OPA90)thatwillultimatelybepaid.FurtherinformationonthoseitemsthatcurrentlycannotbereliablyestimatedisprovidedunderProvisions and
contingenciesandinNote44.
TheTrustagreementdoesnotrequireBPtomakefurthercontributionstothetrustfundinexcessoftheagreed$20billionshouldthisbe
insufcienttocoverallclaimsadministeredbytheGCCF,ortosettleotheritemsthatarecoveredbythetrustfund,asdescribedabove.Shouldthe
$20-billiontrustfundnotbesufcient,BPwouldcommencesettlinglegitimateclaimsandothercostsbymakingpaymentsdirectlytoclaimants.Inthis
case,increasesinestimatedfutureexpenditureabove$20billionwouldberecognizedasprovisionswithacorrespondingchargeintheincomestatement.
TheprovisionswouldbeutilizedandderecognizedatthepointthatBPmadethepayments.
On30September2010,BPpledgedcertainGulfofMexicoassetsascollateralforthetrustfundfundingobligation.Thepledgedcollateralconsists
ofanoverridingroyaltyinterestinoilandgasproductionofBP’sThunderHorse,Atlantis,MadDog,GreatWhiteandMars,UrsaandNaKikaassetsinthe
GulfofMexico.Awholly-ownedcompanycalledVeranoCollateralHoldingsLLC(Verano)hasbeencreatedtoholdtheoverridingroyaltyinterest,whichis
cappedat$1.25billionperquarterand$17billionintotal.VeranohaspledgedtheoverridingroyaltyinteresttotheTrustascollateralforBP’sremaining
contributionobligationstotheTrust.BPcontributedafurther$2billiontothetrustfundsincethisarrangementwasestablished,therebyreducingthe
amountofthepledgeto$15billionattheendoftheyear.Thereisnochangeinoperatorshiporthemarketingoftheproductionfromtheassetsandthere
isnoeffectontheotherpartners’interestsintheassets.FornancialreportingpurposesVeranoisaconsolidatedentityofBPandthereisnoimpacton
theconsolidatednancialstatementsfromthepledgeoftheoverridingroyaltyinterest.
BPAnnualReportandForm20-F2010 159