BP 2009 Annual Report Download - page 146

BP Annual Report and Accounts 2009
Notes on financial statements
24. Financial instruments and financial risk factors
144
The accounting classification of each category of financial instruments, and their carrying amounts, are set out below.
$ million
At 31 December 2009
Financial
Available-for- At fair value Derivative liabilities Total
Loans and sale financial through profit hedging measured at carrying
Note receivables assets and loss instruments amortized cost amount
Financial assets
Other investments 25 – 1,567 – – – 1,567
Loans 1,288 – – – – 1,288
Trade and other receivables 27 31,016 – – – – 31,016
Derivative financial instruments 31 – – 7,960 972 – 8,932
Cash and cash equivalents 28 6,570 1,769 – – – 8,339
Financial liabilities
Trade and other payables 30 – – – – (34,325) (34,325)
Derivative financial instruments 31 – – (7,389) (766) – (8,155)
Accruals – – – – (6,905) (6,905)
Finance debt 32 – – – – (34,627) (34,627)
38,874 3,336 571 206 (75,857) (32,870)
$ million
At 31 December 2008
Financial
Available-for- At fair value Derivative liabilities Total
Loans and sale financial through profit hedging measured at carrying
Note receivables assets and loss instruments amortized cost amount
Financial assets
Other investments 25 – 855 – – – 855
Loans 1,163 – – – – 1,163
Trade and other receivables 27 29,489 – – – – 29,489
Derivative financial instruments 31 – – 12,501 1,063 – 13,564
Cash and cash equivalents 28 5,609 2,588 – – – 8,197
Financial liabilities
Trade and other payables 30 – – – – (33,140) (33,140)
Derivative financial instruments 31 – – (13,173) (2,075) – (15,248)
Accruals – – – – (7,527) (7,527)
Finance debt 32 – – – – (33,204) (33,204)
36,261 3,443 (672) (1,012) (73,871) (35,851)
The fair value of finance debt is shown in Note 32. 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, tax 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 is carried out by specialist teams that have the
appropriate skills, experience and supervision. These teams are subject to close financial 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 reflect 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.