BP 2012 Annual Report Download - page 204

5. Disposals and impairment continued
Downstream
In 2012, gains on disposal resulted from the disposal of our interests in purified terephthalic acid production in Malaysia to Reliance Global Holdings Pte.
Ltd., retail churn in the US and a number of other assets in the segment. Losses resulted from the ongoing costs associated with our US refinery
divestments and the disposal of a number of assets in the segment portfolio.
In 2011, gains on disposal resulted from our disposal of the fuels marketing business in Namibia, Malawi, Zambia and Tanzania to Puma Energy, certain
non-strategic pipelines and terminals in the US and other assets in the segment. Losses resulted from the disposal of a number of assets in the
segment portfolio.
In 2010, gains resulted from our disposals of the French retail fuels and convenience business to Delek Europe, the fuels marketing business in
Botswana to Puma Energy, certain non-strategic pipelines and terminals in the US, our interests in ethylene and polyethylene production in Malaysia to
Petronas and our interest in a futures exchange. Losses resulted from the disposal of a number of assets in the segment portfolio.
Other businesses and corporate
In 2012, a gain arose on the additional cash consideration falling due on the contribution of assets in 2011 to the jointly controlled entity Flat Ridge 2
Wind Holdings LLC on meeting project milestones, whilst maintaining our 50% equity interests. In addition, disposal proceeds included a return of
capital of $190 million in the jointly controlled entities Flat Ridge 2 Wind Holdings LLC and Mehoopany Wind Holdings LLC following the drawdown of
project debt which did not change our percentage interest in either entity.
In 2011, we disposed of our aluminium business in the US which resulted in a gain. We also contributed assets in exchange for cash and 50% equity
interests in the jointly controlled entities Mehoopany Wind Holdings LLC and Flat Ridge 2 Wind Holdings LLC.
In 2010, we disposed of our 35% interest in K-Power, a gas-fired power asset in South Korea, and contributed assets in exchange for a 50% equity
interest in a jointly controlled entity, Cedar Creek II Holdings LLC and cash. In addition, there was a return of capital in the jointly controlled entities
Fowler II Holdings LLC and Cedar Creek II Holdings LLC which did not change our percentage interest in either entity.
Summarized financial information relating to the sale of businesses is shown in the table below. Information relating to sales of fixed assets which are
not related to businesses is excluded from the table.
$ million
2012 2011 2010
Non-current assets 610 2,085 2,319
Current assets 570 1,008 310
Non-current liabilities (263) (212) (303)
Current liabilities (232) (611) (124)
Total carrying amount of net assets disposed 685 2,270 2,202
Recycling of foreign exchange on disposal (15) 8 (52)
Costs on disposal 39 17 18
709 2,295 2,168
Profit (loss) on sale of businessesa675 2,232 1,968
Total consideration 1,384 4,527 4,136
Consideration received (receivable)b(75) 11 20
Proceeds from the sale of businesses related to completed transactions 1,309 4,538 4,156
Deposits received (repaid) related to assets classified as held for salec146 (3,530) 5,306
Disposals completed in relation to which deposits had been received in prior year –(1,776) –
Proceeds from the sale of businessesd1,455 (768) 9,462
aIn 2011, a $278 million gain was not recognized in the income statement as it represented an unrealized gain on the sale of business assets in Vietnam to our associate TNK-BP.
bConsideration received from prior year business disposals or not yet received from current year disposals.
c2010 included a deposit received in advance of $3,530 million in respect of the expected sale of our interest in Pan American Energy LLC; 2011 includes the repayment of the same amount following the
termination of the sale agreement.
dNet of cash and cash equivalents disposed of $4 million (2011 $14 million and 2010 $55 million).
Impairment
In assessing whether a write-down is required in the carrying value of a potentially impaired intangible asset, item of property, plant and equipment or an
equity-accounted investment, the asset’s carrying value is compared with its recoverable amount. The recoverable amount is the higher of the asset’s
fair value less costs to sell and value in use. Unless indicated otherwise, the recoverable amount used in assessing the impairment losses described
below is value in use. The group estimates value in use using a discounted cash flow model. The future cash flows are adjusted for risks specific to the
asset and are discounted using a pre-tax discount rate. This discount rate is derived from the group’s post-tax weighted average cost of capital and is
adjusted where applicable to take into account any specific risks relating to the country where the cash-generating unit is located, although other rates
may be used if appropriate to the specific circumstances. In 2012, the rates used ranged from 12-14% (2011 12-14%). The rate applied in each country
is reassessed each year. In certain circumstances an impairment assessment may be carried out using fair value less costs to sell as the recoverable
amount when, for example, a recent market transaction for a similar asset has taken place.
Upstream
During 2012, the Upstream segment recognized impairment losses of $3,046 million. The main elements were a $1,082-million write-down to fair value
less costs to sell based on recent market transactions of our interests in the Fayetteville and Woodford shale gas assets in the US, due to reserves
revisions; a $999-million impairment loss relating to the decision to suspend the Liberty project in Alaska; a $706-million aggregate write-down of a
number of assets, primarily in the Gulf of Mexico and North Sea, caused by increases in the decommissioning provision resulting from continued review
of the expected decommissioning costs; a $144-million write-down of certain gas storage assets in Europe due to changes to the European gas market;
and other impairment losses amounting to $116 million in total that were not individually significant. These impairment losses were partly offset by
reversals of impairment of certain of our interests in the Gulf of Mexico amounting to $222 million, triggered by a decision to divest assets; and other
reversals of impairment amounting to $67 million in total that were not individually significant.
202 Financial statements
BP Annual Report and Form 20-F 2012