BP 2010 Annual Report Download - page 257

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ParentcompanynancialstatementsofBPp.l.c.
Financial statements
Notesonnancialstatements
1.Accountingpolicies
Accounting standards
ThesenancialstatementsarepreparedinaccordancewithapplicableUKaccountingstandards.
Accounting convention
Thenancialstatementsarepreparedunderthehistoricalcostconvention.
Foreign currency transactions
Functionalcurrencyisthecurrencyoftheprimaryeconomicenvironmentinwhichanentityoperatesandisnormallythecurrencyinwhichtheentity
primarilygeneratesandexpendscash.Transactionsinforeigncurrenciesareinitiallyrecordedinthefunctionalcurrencybyapplyingtherateofexchange
rulingatthedateofthetransaction.Monetaryassetsandliabilitiesdenominatedinforeigncurrenciesareretranslatedintothefunctionalcurrencyatthe
rateofexchangerulingatthebalancesheetdate.Anyresultingexchangedifferencesareincludedinprotfortheyear.Exchangeadjustmentsarising
whentheopeningnetassetsandtheprotsfortheyearretainedbynon-USdollarfunctionalcurrencybranchesaretranslatedintoUSdollarsaretakento
aseparatecomponentofequityandreportedinthestatementoftotalrecognizedgainsandlosses.
Investments
Investmentsinsubsidiariesandassociatedundertakingsarerecordedatcost.Thecompanyassessesinvestmentsforimpairmentwhenevereventsor
changesincircumstancesindicatethatthecarryingvalueofaninvestmentmaynotberecoverable.Ifanysuchindicationofimpairmentexists,the
companymakesanestimateofitsrecoverableamount.Wherethecarryingamountofaninvestmentexceedsitsrecoverableamount,theinvestmentis
consideredimpairedandiswrittendowntoitsrecoverableamount.
Share-based payments
Equity-settledtransactions
Thecostofequity-settledtransactionswithemployeesismeasuredbyreferencetothefairvalueatthedateatwhichequityinstrumentsaregrantedand
isrecognizedasanexpenseoverthevestingperiod,whichendsonthedateonwhichtherelevantemployeesbecomefullyentitledtotheaward.Fair
valueisdeterminedbyusinganappropriatevaluationmodel.Invaluingequity-settledtransactions,noaccountistakenofanyvestingconditions,other
thanconditionslinkedtothepriceofthesharesofthecompany(marketconditions).Non-vestingconditions,suchastheconditionthatemployees
contributetoasavings-relatedplan,aretakenintoaccountinthegrant-datefairvalue,andfailuretomeetanon-vestingconditionistreatedasa
cancellation,wherethisiswithinthecontroloftheemployee.
Noexpenseisrecognizedforawardsthatdonotultimatelyvest,exceptforawardswherevestingisconditionaluponamarketcondition,whichare
treatedasvestingirrespectiveofwhetherornotthemarketconditionissatised,providedthatallotherperformanceconditionsaresatised.
Ateachbalancesheetdatebeforevesting,thecumulativeexpenseiscalculated,representingtheextenttowhichthevestingperiodhasexpired
andmanagement’sbestestimateoftheachievementorotherwiseofnon-marketconditionsandthenumberofequityinstrumentsthatwillultimately
vestor,inthecaseofaninstrumentsubjecttoamarketcondition,betreatedasvestingasdescribedabove.Themovementincumulativeexpensesince
thepreviousbalancesheetdateisrecognizedintheincomestatement,withacorrespondingentryinequity.
Whenthetermsofanequity-settledawardaremodiedoranewawardisdesignatedasreplacingacancelledorsettledaward,thecostbasedon
theoriginalawardtermscontinuestoberecognizedovertheoriginalvestingperiod.Inaddition,anexpenseisrecognizedovertheremainderofthenew
vestingperiodfortheincrementalfairvalueofanymodication,basedonthedifferencebetweenthefairvalueoftheoriginalawardandthefairvalueof
themodiedaward,bothasmeasuredonthedateofthemodication.Noreductionisrecognizedifthisdifferenceisnegative.
Whenanequity-settledawardiscancelled,itistreatedasifithadvestedonthedateofcancellationandanycostnotyetrecognizedintheincome
statementfortheawardisexpensedimmediately.
Cash-settledtransactions
Thecostofcash-settledtransactionsismeasuredatfairvalueandrecognizedasanexpenseoverthevestingperiod,withacorrespondingliability
recognizedonthebalancesheet.
Pensions
Thecostofprovidingbenetsunderthedenedbenetplansisdeterminedseparatelyforeachplanusingtheprojectedunitcreditmethod,which
attributesentitlementtobenetstothecurrentperiod(todeterminecurrentservicecost)andtothecurrentandpriorperiods(todeterminethepresent
valueofthedenedbenetobligation).Pastservicecostsarerecognizedimmediatelywhenthecompanybecomescommittedtoachangeinpensionplan
design.Whenasettlement(eliminatingallobligationsforbenetsalreadyaccrued)oracurtailment(reducingfutureobligationsasaresultofamaterial
reductionintheschememembershiporareductioninfutureentitlement)occurs,theobligationandrelatedplanassetsareremeasuredusingcurrent
actuarialassumptionsandtheresultantgainorlossisrecognizedintheincomestatementduringtheperiodinwhichthesettlementorcurtailmentoccurs.
Theinterestelementofthedenedbenetcostrepresentsthechangeinpresentvalueofschemeobligationsresultingfromthepassageoftime,
andisdeterminedbyapplyingthediscountratetotheopeningpresentvalueofthebenetobligation,takingintoaccountmaterialchangesinthe
obligationduringtheyear.Theexpectedreturnonplanassetsisbasedonanassessmentmadeatthebeginningoftheyearoflong-termmarketreturns
onplanassets,adjustedfortheeffectonthefairvalueofplanassetsofcontributionsreceivedandbenetspaidduringtheyear.Thedifferencebetween
theexpectedreturnonplanassetsandtheinterestcostisrecognizedintheincomestatementasothernanceincomeorexpense.
Actuarialgainsandlossesarerecognizedinfullwithinthestatementoftotalrecognizedgainsandlossesintheyearinwhichtheyoccur.
Thedenedbenetpensionplansurplusordecitinthebalancesheetcomprisesthetotalforeachplanofthepresentvalueofthedened
benetobligation(usingadiscountratebasedonhighqualitycorporatebonds),lessthefairvalueofplanassetsoutofwhichtheobligationsaretobe
settleddirectly.Fairvalueisbasedonmarketpriceinformationand,inthecaseofquotedsecurities,isthepublishedbidprice.Thesurplusordecit,netof
taxationthereon,ispresentedseparatelyabovethetotalfornetassetsonthefaceofthebalancesheet.
TheparentcompanynancialstatementsofBPp.l.c.onpagesPC1–PC16donotformpartofBP’sAnnualReportonForm20-FasledwiththeSEC.
BPAnnualReportandForm20-F2010 PC5