BP 2010 Annual Report Download - page 187

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Notesonnancialstatements
Financial statements
27.Financialinstrumentsandnancialriskfactors
Theaccountingclassicationofeachcategoryofnancialinstruments,andtheircarryingamounts,aresetoutbelow.
 $million
At31December 2010
Financial
Available-for- At fair value Derivative liabilities Total
Loans and sale nancial through prot hedging measured at carrying
Note receivables assets and loss instruments amortized cost amount
Financialassets
 Otherinvestments–equityshares  28 – 1,191 – – – 1,191
   –other  28 – 1,532 – – – 1,532
 Loans    1,141 – – – – 1,141
 Tradeandotherreceivables  30 32,380 – – – – 32,380
 Derivativenancialinstruments  34 – – 7,222 1,344 – 8,566
 Cashandcashequivalents  31 13,462 5,094 – – – 18,556
Financialliabilities
 Tradeandotherpayables  33 – – – – (56,499) (56,499)
 Derivativenancialinstruments  34 – – (7,254) (279) – (7,533)
 Accruals  – – – – (6,249) (6,249)
 Financedebt  35 – – – – (39,139) (39,139)
      46,983 7,817 (32) 1,065 (101,887) (46,054)
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 $million
At31December 2009
            Financial
         Available-for- Atfairvalue Derivative liabilities Total
        Loansand salenancial throughprot hedging measuredat carrying
       Note receivables assets andloss instruments amortizedcost amount
Financialassets       
 Otherinvestments  28 – 1,567 – – – 1,567
 Loans    1,288 – – – – 1,288
 Tradeandotherreceivables  30 31,016 – – – – 31,016
 Derivativenancialinstruments  34 – – 7,960 972 – 8,932
 Cashandcashequivalents  31 6,570 1,769 – – – 8,339
Financialliabilities       
 Tradeandotherpayables  33 – – – – (34,325) (34,325)
 Derivativenancialinstruments  34 – – (7,389) (766) – (8,155)
 Accruals   – – – – (6,905) (6,905)
 Financedebt  35 – – – – (34,627) (34,627)
      38,874 3,336 571 206 (75,857) (32,870)
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ThefairvalueofnancedebtisshowninNote35.Forallothernancialinstruments,thecarryingamountiseitherthefairvalue,orapproximatesthefairvalue.
Financial risk factors
Thegroupisexposedtoanumberofdifferentnancialrisksarisingfromnaturalbusinessexposuresaswellasitsuseofnancialinstrumentsincluding:
marketrisksrelatingtocommodityprices,foreigncurrencyexchangerates,interestratesandequityprices;creditrisk;andliquidityrisk.
Thegroupnancialriskcommittee(GFRC)advisesthegroupchiefnancialofcer(CFO)whooverseesthemanagementoftheserisks.TheGFRC
ischairedbytheCFOandconsistsofagroupofseniormanagersincludingthegrouptreasurerandtheheadsofthenance,taxandtheintegratedsupply
andtradingfunctions.Thepurposeofthecommitteeistoadviseonnancialrisksandtheappropriatenancialriskgovernanceframeworkforthegroup.
ThecommitteeprovidesassurancetotheCFOandthegroupchiefexecutive(GCE),andviatheGCEtotheboard,thatthegroup’snancialrisk-taking
activityisgovernedbyappropriatepoliciesandproceduresandthatnancialrisksareidentied,measuredandmanagedinaccordancewithgrouppolicies
andgroupriskappetite.
Thegroup’stradingactivitiesintheoil,naturalgasandpowermarketsaremanagedwithintheintegratedsupplyandtradingfunction,while
theactivitiesinthenancialmarketsaremanagedbytheintegratedsupplyandtradingfunction,onbehalfofthetreasuryfunction.Allderivativeactivity
iscarriedoutbyspecialistteamsthathavetheappropriateskills,experienceandsupervision.Theseteamsaresubjecttoclosenancialand
managementcontrol.
Theintegratedsupplyandtradingfunctionmaintainsformalgovernanceprocessesthatprovideoversightofmarketriskassociatedwithtrading
activity.TheseprocessesmeetgenerallyacceptedindustrypracticeandreecttheprinciplesoftheGroupofThirtyGlobalDerivativesStudy
recommendations.Apolicyandriskcommitteemonitorsandvalidateslimitsandriskexposures,reviewsincidentsandvalidatesrisk-relatedpolicies,
methodologiesandprocedures.Acommitmentscommitteeapprovesvalue-at-riskdelegations,thetradingofnewproducts,instrumentsandstrategies
andmaterialcommitments.
Inaddition,theintegratedsupplyandtradingfunctionundertakesderivativeactivityforriskmanagementpurposesunderaseparatecontrol
frameworkasdescribedmorefullybelow.
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