BP 2011 Annual Report Download - page 210

208 BP Annual Report and Form 20-F 2011
Notes on financial statements
12. Currency exchange gains and losses
$ million
2011 2010 2009
Currency exchange (gains) losses (credited) charged to the income statementa(70) 218 193
a Excludes exchange gains and losses arising on financial instruments measured at fair value through profit or loss.
13. Research and development
$ million
2011 2010 2009
Expenditure on research and development 636 780 587
In addition to the expenditure on research and development presented in the table above, BP also made donations to external organizations for research
purposes, including the Gulf of Mexico Research Initiative as described on page 79. These donations are not included in the amounts reported above.
14. Operating leases
In the case of an operating lease entered into by BP as the operator of a jointly controlled asset, the amounts shown in the tables below represent the net
operating lease expense and net future minimum lease payments. These net amounts are after deducting amounts reimbursed, or to be reimbursed, by
joint venture partners, whether the joint venture partners have co-signed the lease or not. Where BP is not the operator of a jointly controlled asset, BP’s
share of the lease expense and future minimum lease payments is included in the amounts shown, whether BP has co-signed the lease or not.
The table below shows the expense for the year in respect of operating leases.
$ million
2011 2010 2009
Minimum lease payments 4,866 5,371 4,109
Contingent rentals (97) (60) (9)
Sub-lease rentals (153) (121) (133)
4,616 5,190 3,967
The future minimum lease payments at 31 December, before deducting related rental income from operating sub-leases of $566 million (2010 $365
million), are shown in the table below. This does not include future contingent rentals. Where the lease rentals are dependent on a variable factor, the
future minimum lease payments are based on the factor as at inception of the lease.
$ million
Future minimum lease payments 2011 2010
Payable within
1 year 4,182 3,521
2 to 5 years 8,346 6,798
Thereafter 3,544 3,654
16,072 13,973
The group enters into operating leases of ships, plant and machinery, commercial vehicles and land and buildings. Typical durations of the leases are
as follows:
Years
Ships up to 15
Plant and machinery up to 10
Commercial vehicles up to 15
Land and buildings up to 40
The group has entered into a number of structured operating leases for ships and in most cases the lease rental payments vary with market interest rates.
The variable portion of the lease payments above or below the amount based on the market interest rate prevailing at inception of the lease is treated as
contingent rental expense. The group also routinely enters into bareboat charters, time-charters and spot-charters for ships on standard industry terms.
The most significant items of plant and machinery hired under operating leases are drilling rigs used in the Exploration and Production segment. At
31 December 2011 the future minimum lease payments relating to drilling rigs amounted to $6,292 million (2010 $4,515 million). In some cases, drilling
rig lease rental rates are adjusted periodically to market rates that are influenced by oil prices and may be significantly different from the rates at the
inception of the lease. Differences between the rate paid and rate at inception of the lease are treated as contingent rental expense.
Commercial vehicles hired under operating leases are primarily railcars. Retail service station sites and office accommodation are the main items in
the land and buildings category.
The terms and conditions of these operating leases do not impose any significant financial restrictions on the group. Some of the leases of ships
and buildings allow for renewals at BP’s option, and some of the group’s operating leases contain escalation clauses.