BP 2012 Annual Report Download - page 216

18. Taxation continued
$ million
Analysis of movements during the year in the net deferred tax liability 2012 2011
At 1 January 14,467 10,380
Exchange adjustments (33) 55
Charge for the year on profit 109 5,149
Credit for the year in other comprehensive income (448) (1,649)
Charge (credit) for the year in equity 4(7)
Acquisitions 11 692
Reclassified as assets/liabilities held for sale 48 (140)
Deletions 32 (13)
At 31 December 14,190 14,467
Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary
differences and the carry-forward of unused tax credits and unused tax losses can be utilized.
At 31 December 2012, the group had approximately $6.8 billion (2011 $4.6 billion) of carry-forward tax losses that would be available to offset against
future taxable profit. A deferred tax asset has been recognized in respect of $6.0 billion of these losses (2011 $3.8 billion). No deferred tax asset has
been recognized in respect of $0.8 billion of losses (2011 $0.8 billion). In 2012 no current tax benefit arose relating to losses utilized on which a deferred
tax asset had not previously been recognized (2011 $0.1 billion). Substantially all the tax losses have no fixed expiry date.
At 31 December 2012, the group had approximately $19.0 billion of unused tax credits, predominantly in the UK and US (2011 $18.2 billion). At
31 December 2012, a deferred tax asset of $0.7 billion has been recognized in respect of unused tax credits (2011 $2.5 billion). No deferred tax asset
has been recognized in respect of $18.3 billion of tax credits (2011 $15.7 billion). In 2012 a current tax benefit of $0.4 billion arose relating to tax credits
utilized on which a deferred tax asset had not previously been recognized (2011 $0.1 billion). Also in 2012, a deferred tax benefit of $0.1 billion arose
relating to the recognition of previously unrecognized tax credits (2011 nil). The UK tax credits, arising in overseas branches of UK entities, with no
associated deferred tax asset, amount to $16.0 billion (2011 $13.0 billion) and have no fixed expiry date. These credits arise in branches predominantly
based in high tax rate jurisdictions so are unlikely to have value in the future as UK taxes on these overseas branches are largely mitigated by the double
tax relief on the overseas tax. The US tax credits with no associated deferred tax asset, amounting to $2.3 billion (2011 $2.7 billion), expire 10 years after
generation and will all expire in the period 2014-2021.
The group had other unrecognized deferred tax assets at 31 December 2012 of $1.8 billion (2011 $1.1 billion), of which $1.3 billion arose in the UK (2011
$0.9 billion), which have not been recognized due to uncertainty over future recovery.
The group recognized significant costs in 2010 in relation to the Gulf of Mexico oil spill and in 2011 recognized certain recoveries relating to the incident
as well as further costs. In 2012, the group has recognized further costs, including costs relating to the settlement of all criminal and securities claims
with the US government which are not tax deductible. Tax has been calculated on the expenditures that are expected to qualify for tax relief, and on the
recoveries, at the US statutory tax rate. A deferred tax asset has been recognized in respect of provisions for future expenditure that are expected to
qualify for tax relief, included under the heading decommissioning, environmental and other provisions in the table above.
The other major components of temporary differences at the end of 2012 relate to tax depreciation, provisions, US inventory holding gains (classifiedas
other taxable temporary differences) and pension and other post-retirement benefit plan deficits.
During 2012, our method of accounting, for tax purposes, for oil and gas inventory in the US has changed from the last-in first-out (“LIFO”) basis to the first-
in first-out (“FIFO”) basis. This has accelerated the taxation of inventory holding gains and reduced the taxable temporary difference in respect of this item.
At 31 December 2012, the group had $0.5 billion (2011 $0.1 billion) of taxable temporary differences associated with investments in subsidiaries and
equity-accounted entities for which deferred tax liabilities have not been recognized on the basis that the group is able to control the timing of the
reversal of the temporary differences and it is not probable that the temporary differences will reverse in the foreseeable future.
In 2012, legislation to restrict relief for UK decommissioning expenditure in the North Sea from 62% to 50% was enacted and increased the deferred
tax charge in the income statement by $289 million, of which $256 million relates to the revaluation of the deferred tax balance at 1 January 2012. In
2011, the enactment of a 12% increase in the UK supplementary charge on oil and gas production activities in the North Sea raised the overall
corporation tax rate applicable to North Sea activities to 62%. This rate change increased the deferred tax charge in the 2011 income statement by
$713 million, of which $683 million related to the revaluation of the deferred tax balance at 1 January 2011.
Also in 2012, the enactment of a further 2% reduction in the rate of UK corporation tax to 23% with effect from 1 April 2013 on profits arising from
activities outside the North Sea reduced the deferred tax charge in the income statement by $165 million. In 2011, the enactment of a 2% reduction in
the rate of UK corporation tax to 25% with effect from 1 April 2011 similarly reduced the deferred tax charge in the income statement by $120 million.
19. Dividends
The quarterly dividend expected to be paid on 28 March 2013 in respect of the fourth quarter 2012 is 9 cents per ordinary share ($0.54 per American
Depositary Share (ADS)). The corresponding amount in sterling will be announced on 18 March 2013. A scrip dividend alternative is available, allowing
shareholders to elect to receive their dividend in the form of new ordinary shares and ADS holders in the form of new ADSs.
Pence per share Cents per share $ million
2012 2011 2010 2012 2011 2010 2012 2011 2010
Dividends announced and paid in cash
Preference shares 222
Ordinary shares
March 5.096 4.3372 8.679 87141,211 808 2,625
June 5.150 4.2809 – 87–1,448 794 –
September 5.017 4.3160 – 87–1,417 1,224 –
December 5.589 4.4694 – 97–1,216 1,244 –
20.852 17.4035 8.679 33 28 14 5,294 4,072 2,627
Dividend announced, payable in March 2013 9 1,724
214 Financial statements
BP Annual Report and Form 20-F 2012