BP 2007 Annual Report Download - page 138

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28 Financial instruments and financial risk factors
The accounting classification of each category of financial instruments, and their carrying amounts, are set out below.
$ million
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2007
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Financial
Available-for- At fair value Derivative liabilities
Loans and sale financial through profit hedging measured at Total carrying
Note receivables assets and loss instruments amortized cost amount
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Financial assets
Other investments – listed 29 – 1,617 – – – 1,617
Other investments – unlisted 29 – 213 – – – 213
Loans 1,164––––1,
Trade and other receivables 3138,710––––38,
Derivative financial instruments 34 – – 9,155 907 – 10,062
Cash at bank and in hand 322,996––––2,
Cash equivalents – listed 32–3–––
Cash equivalents – unlisted 32 – 563 – – – 563
Financial liabilities
Trade and other payables 33––––(40,062)(40,
Derivative financial instruments 34 – – (11,284) (123) – (11,407)
Accruals ––––(7,599)(7,
Finance debt 35––––(31,045)(31,
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42,870 2,396 (2,129) 784 (78,706) (34,785)
$ million
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2006
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Financial
Available-for- At fair value Derivative liabilities
Loans and sale financial through profit hedging measured at Total carrying
Note receivables assets and loss instruments amortized cost amount
--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Financial assets
Other investments – listed 29 – 1,516 – – – 1,516
Other investments – unlisted 29 – 181 – – – 181
Loans 958––––9
Trade and other receivables 3138,474––––38,4
Derivative financial instruments 34 – – 12,811 587 – 13,398
Cash at bank and in hand 322,052––––2,0
Cash equivalents – listed 32 – 29 – – – 29
Cash equivalents – unlisted 32 – 509 – – – 509
Financial liabilities
Trade and other payables 33––––(38,227)(38,2
Derivative financial instruments 34 – – (13,490) (137) – (13,627)
Accruals ––––(7,108)(7,1
Finance debt 35––––(24,010)(24,0
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41,484 2,235 (679) 450 (69,345) (25,855)
The fair value of finance debt is shown in Note 35. For all other financial 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 financial risks arising from natural business exposures as well as its use of financial instruments
including market risks relating to commodity prices, foreign currency exchange rates, interest rates and equity prices, credit risk and liquidity risk.
The group financial risk committee (GFRC) advises the group chief financial officer (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 finance and the integrated supply
and trading functions. The purpose of the committee is to advise on financial risks and the appropriate financial 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 financial
risk-taking activity is governed by appropriate policies and procedures and that financial risks are identified, 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
activities in the financial markets are managed by the treasury function. All derivative activity, whether for risk management or entrepreneurial
purposes, is carried out by specialist teams that have the appropriate skills, experience and supervision. These teams are subject to close financial and
management control, meeting generally accepted industry practice and reflecting the principles of the Group of Thirty Global Derivatives Study
recommendations.
The integrated supply and trading function maintains formal governance processes that provide oversight of market risk. 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.
164
710
996
3
062)
599)
045)
58
74
52
27)
08)
10)