BP 2011 Annual Report Download - page 192

190 BP Annual Report and Form 20-F 2011190 BP Annual Report and Form 20-F 2011
Notes on financial statements
2. Significant event – Gulf of Mexico oil spill
As a consequence of the Gulf of Mexico oil spill, as described on pages 76 to 79, BP continues to incur costs and has also recognized liabilities for future
costs. Liabilities of uncertain timing or amount and contingent liabilities have been accounted for and/or disclosed in accordance with IAS 37 ‘Provisions,
contingent liabilities and contingent assets’. These are discussed in further detail in Note 36 for provisions and Note 43 for contingent liabilities. BP’s rights
and obligations in relation to the $20-billion trust fund which was established in 2010 are accounted for in accordance with IFRIC 5 ‘Rights to interests
arising from decommissioning, restoration and environmental rehabilitation funds’. Key aspects of the accounting for the oil spill are summarized below.
The financial impacts of the Gulf of Mexico oil spill on the income statement, balance sheet and cash flow statement of the group are shown in
the table below. Amounts related to the trust fund are separately identified.
$ million
2011 2010
Total
Of which:
amount related
to the trust
fund Total
Of which:
amount related
to the trust
fund
Income statement
Production and manufacturing expenses (3,800) (3,995) 40,858 7,261
Profit (loss) before interest and taxation 3,800 3,995 (40,858) (7,261)
Finance costs 58 52 77 73
Profit (loss) before taxation 3,742 3,943 (40,935) (7,334)
Less: Taxation (1,387) –12,894 –
Profit (loss) for the period 2,355 3,943 (28,041) (7,334)
Balance sheet
Current assets
Trade and other receivables 8,487 8,233 5,943 5,943
Current liabilities
Trade and other payables (5,425) (4,872) (6,587) (5,002)
Provisions (9,437) –(7,938) –
Net current liabilities (6,375) 3,361 (8,582) 941
Non-current assets
Other receivables 1,642 1,642 3,601 3,601
Non-current liabilities
Other payables – – (9,899) (9,899)
Provisions (5,896) –(8,397) –
Deferred tax 7,775 –11,255 –
Net non-current liabilities 3,521 1,642 (3,440) (6,298)
Net assets (2,854) 5,003 (12,022) (5,357)
Cash flow statement
Profit (loss) before taxation 3,742 3,943 (40,935) (7,334)
Finance costs 58 52 77 73
Net charge for provisions, less payments 2,699 –19,354 –
(Increase) decrease in other current and non-current assets (4,292) (4,038) (12,567) (12,567)
Increase (decrease) in other current and non-current liabilities (11,113) (10,097) 16,413 14,828
Pre-tax cash flows (8,906) (10,140) (17,658) (5,000)
Adjusting event after the reporting period: Settlement with the Plaintiffs’ Steering Committee, subject to final written agreement and court
approvals, to resolve economic loss and medical claims
Subsequent to BP releasing its preliminary announcement of the fourth quarter 2011 results on 7 February 2012, BP announced on 3 March 2012 that it
had reached a proposed settlement with the Plaintiffs’ Steering Committee (PSC), subject to final written agreement and court approvals, to resolve the
substantial majority of legitimate economic loss and medical claims stemming from the Deepwater Horizon accident and oil spill. The PSC acts on behalf
of individual and business plaintiffs in the Multi-District Litigation proceedings pending in New Orleans (MDL 2179). Under the proposed settlement, class
members would release and dismiss their claims against BP. The proposed settlement is not an admission of liability by BP. The proposed settlement is
an adjusting event after the reporting period and therefore has been reflected in the financial statements for 2011 included in this report.
The proposed settlement has not resulted in any increase in the $37.2 billion net pre-tax charge previously recorded in the financial statements.
BP estimates that the cost of the proposed settlement, which covers Individual and Business Claims and associated costs that are expected to be paid
from the $20-billion trust fund, would be approximately $7.8 billion. This represents an increase of $2.1 billion in the provision compared to the amount
reflected in the fourth quarter 2011 preliminary results announcement, with no net impact to either the income statement or cash flow statement, since
it is expected to be payable from the trust fund – see below for information on accounting for the trust fund. The increase in provision of $2.1 billion has
been recognized along with a corresponding increase of $2.1 billion in the reimbursement asset. The amount that can further be provided with no net
impact to the income statement is therefore reduced from approximately $5.5 billion to approximately $3.4 billion. While this is BP’s reliable best estimate
of the cost of the proposed settlement, it is possible that the actual cost could be higher or lower than this estimate depending on the outcomes of
the court-supervised claims processes. It is not possible at this time to determine whether the $20-billion trust fund will be sufficient to cover the total
amounts payable under the proposed settlement and other claims covered by the trust fund.
The proposed settlement is comprised of two separate agreements; one to resolve economic loss claims and another to resolve medical
claims. Each proposed agreement provides that the class members would be compensated for their claims on a claims-made basis according to agreed
compensation protocols in separate court-supervised claims processes. The proposed settlement contains a commitment of $2.3 billion in respect of the
Gulf seafood industry.
http://www.bp.com/downloads/gom