BP 2012 Annual Report Download - page 39

Business review: BP in more depth
Business review: BP in more depth
BP Annual Report and Form 20-F 2012
37
Non-operating items
Non-operating items are charges and credits arising in consolidated entities
and in TNK-BP that are included in the financial statements and that BP
discloses separately because it considers such disclosures to be meaningful
and relevant to investors. They are items that management considers not to
be part of underlying business operations and are disclosed in order to enable
investors better to understand and evaluate the group’s reported financial
performance. An analysis of non-operating items is shown in the table below.
$ million
2012 2011 2010
Upstream
Impairment and gain (loss) on sale
of businesses and fixed assets 3,638 2,131 3,812
Environmental and other provisions (48) (27) (54)
Restructuring, integration and
rationalization costs ––(137)
Fair value gain (loss) on embedded
derivatives 347 191 (309)
Othera(748) (1,165) (113)
3,189 1,130 3,199
Downstream
Impairment and gain (loss) on sale
of businesses and fixed assets (2,935) (334) 877
Environmental and other provisions (172) (219) (98)
Restructuring, integration and
rationalization costs (32) (4) (97)
Fair value gain (loss) on embedded
derivatives –––
Other (35) (45) (52)
(3,174) (602) 630
TNK-BPb
Impairment and gain (loss) on sale
of businesses and fixed assets (55) ––
Environmental and other provisions (83) ––
Restructuring, integration and
rationalization costs –––
Fair value gain (loss) on embedded
derivatives –––
Other 384 ––
246 ––
Other businesses and corporate
Impairment and gain (loss) on sale
of businesses and fixed assets (282) 275 5
Environmental and other provisions (261) (220) (103)
Restructuring, integration and
rationalization costs (15) (39) (81)
Fair value gain (loss) on embedded
derivativesc–(123) –
Otherd(240) (715) (21)
(798) (822) (200)
Gulf of Mexico oil spill response (4,995) 3,800 (40,858)
Total before interest and taxation (5,532) 3,506 (37,229)
Finance costse(19) (58) (77)
Taxation credit (charge)f251 (1,253) 11,857
Total after taxation (5,300) 2,195 (25,449)
a 2012 included a charge of $370 million relating to onerous gas marketing and trading contracts
and $308 million relating to exploration expense associated with our US natural gas assets
(2011 $395 million). 2011 included a charge of $700 million associated with the termination of
the agreement to sell our 60% interest in Pan American Energy LLC to Bridas Corporation.
b Disclosure of non-operating items for TNK-BP began in 2012. Non-operating items for TNK-BP
were reported in the group income statement within earnings from associates until 22 October
2012 – after interest and tax. See TNK-BP on pages 80-81 for more information on non-
operating items.
c Relates to an embedded derivative arising from a financing arrangement.
d 2012 included charges of $244 million relating to our exit from the solar business
(2011 $717 million).
e Finance costs relate to the Gulf of Mexico oil spill. See Financial statements – Note 2 on
page 194 for further details.
f For the Gulf of Mexico oil spill and certain impairment losses and disposal gains in 2012, tax is
based on US statutory tax rates, except for non-deductible items. For dividends received from
TNK-BP in December 2012, there is no tax arising. For other items reported by consolidated
subsidiaries, tax is calculated using the group’s discrete quarterly effective tax rate (adjusted for
the items noted above, equity-accounted earnings from 2012 onwards and the deferred tax
adjustments relating to changes to the taxation of UK oil and gas production (2011 $683 million
and 2012 $256 million)). Non-operating items arising within the equity-accounted earnings of
TNK-BP are reported net of tax.
Non-GAAP information on fair value accounting effects
The impacts of fair value accounting effects, relative to management’s
internal measure of performance, and a reconciliation to GAAP
information is also set out below. Further information on fair value
accounting effects is provided on page 98.
$ million
2012 2011 2010
Upstream
Unrecognized gains (losses)
brought forward from previous
period (538) (527) (530)
Unrecognized (gains) losses carried
forward 404 538 527
Favourable (unfavourable) impact
relative to management’s
measure of performance (134) 11 (3)
Downstreama
Unrecognized gains (losses)
brought forward from previous
period 74 137 179
Unrecognized (gains) losses carried
forward (501) (74) (137)
Favourable (unfavourable) impact
relative to management’s
measure of performance (427) 63 42
(561) 74 39
Taxation credit (charge)b216 (27) (26)
(345) 47 13
By region
Upstream
US (67) 15 141
Non-US (67) (4) (144)
(134) 11 (3)
Downstreama
US (441) –19
Non-US 14 63 23
(427) 63 42
a Fair value accounting effects arise solely in the fuels business.
b Tax is calculated using the group’s discrete quarterly effective tax rate (adjusted for the Gulf of
Mexico oil spill, certain impairment losses and disposal gains in 2012, equity-accounted
earnings from 2012 onwards and the deferred tax adjustments relating to changes to the
taxation of UK oil and gas production (2011 $683 million, 2012 $256 million)).
Reconciliation of non-GAAP information
$ million
2012 2011 2010
Upstream
Replacement cost profit before
interest and tax adjusted for fair
value accounting effects 22,608 26,355 28,272
Impact of fair value accounting
effects (134) 11 (3)
Replacement cost profit before
interest and tax 22,474 26,366 28,269
Downstream
Replacement cost profit before
interest and tax adjusted for fair
value accounting effects 3,273 5,411 5,513
Impact of fair value accounting
effects (427) 63 42
Replacement cost profit before
interest and tax 2,846 5,474 5,555
Total group
Profit (loss) before interest and tax
adjusted for fair value accounting
effects 20,294 39,743 (3,741)
Impact of fair value accounting
effects (561) 74 39
Profit (loss) before interest and tax 19,733 39,817 (3,702)