BP 2013 Annual Report Download - page 130

Notes on financial statements
Changes to the 2013 financial statements
BP aims for the highest standard of financial reporting and supports the initiatives of the UK Financial Reporting Council and the US Securities and
Exchange Commission to improve understandability and transparency by cutting immaterial ‘clutter’ from financial statements. We continually
review the structure and content of our financial reports. For the 2013 financial statements, to increase their understandability and navigability,we
have changed the grouping of certain notes, and have also sought to remove immaterial disclosures. In applying materiality to the financial
statement disclosures, we consider both the amount and the nature of each item. The main changes compared with the financial statements
included in the BP Annual Report and Form 20-F 2012 are as follows:
• Note 1 Significant accounting policies, judgements, estimates and assumptions – this note includes the critical accounting estimates and
judgements in boxed text following the relevant accounting policy. Last year this information was shown under Critical accounting policies in the
Additional disclosures section of the Directors’ Report.
• Note 2 Significant event – Gulf of Mexico oil spill now contains all of our financial statement note disclosures in respect of the 2010 oil spill. Last
year we also included information in the Provisions and Contingent liabilities notes to the financial statements.
• Note 7 Segmental analysis now includes analysis of depreciation, depletion and amortization and production and similar taxes, previously provided
in separate notes.
• Note 8 Income statement analysis now combines a number of notes previously provided separately, simplifying the presentation while retaining
materially the same content.
• Note 15 Goodwill and impairment review of goodwill now contains the disclosures related to impairment testing of goodwill, which were provided
in a separate note last year.
• Note 19 Financial instruments and financial risk factors and Note 26 Derivative financial instruments have been rationalized to focus only on the
material matters.
• Note 38 Subsidiaries, joint arrangements and associates now lists only the most significant entities.
• A separate share-based payment note is no longer presented. The share-based payment expense for the year is included in Note 33 Employee
costs and numbers and information on the dilutive impact of employee share plans is included in Note 13 Earnings per ordinary share.
1. Significant accounting policies, judgements, estimates and assumptions
Authorization of financial statements and statement of compliance with International Financial Reporting Standards
The consolidated financial statements of the BP group for the year ended 31 December 2013 were approved and signed by the group chief executive
and chairman on 6 March 2014 having been duly authorized to do so by the board of directors. BP p.l.c. is a public limited company incorporated and
domiciled in England and Wales. The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (IFRS) as issued by the International Accounting Standards Board (IASB), IFRS as adopted by the European Union (EU) and in accordance
with the provisions of the UK Companies Act 2006. IFRS as adopted by the EU differs in certain respects from IFRS as issued by the IASB, however,
the differences have no impact on the group’s consolidated financial statements for the years presented. The significant accounting policies and critical
accounting judgements, estimates and assumptions of the group are set out below.
Basis of preparation
The consolidated financial statements have been prepared in accordance with IFRS and IFRS Interpretations Committee (IFRIC) interpretations issued
and effective for the year ended 31 December 2013. The standards and interpretations adopted in the year, and the corresponding impact on the
financial statements, are described further on page 137.
The accounting policies that follow have been consistently applied to all years presented. Where retrospective restatements were required as a result
of the implementation of new accounting standards or changes to existing accounting standards, these have been applied to all comparative years
presented.
Subsequent to releasing our unaudited fourth quarter and full year 2013 results announcement dated 4 February 2014, a minor amendment has been
made to the split of the Upstream replacement cost profit before interest and tax between US and non-US. The amount reported for US for the year
has been reduced by $0.2 billion to $3.1 billion and the amount reported for non-US has been increased by $0.2 billion to $28.9 billion. Similarly,
amendments have also been made to the geographical analysis for revenues and capital expenditure and acquisitions. There was no impact on the
group’s profit or loss, net assets or cash flows for the year.
The consolidated financial statements are presented in US dollars and all values are rounded to the nearest million dollars ($ million), except where
otherwise indicated.
Critical accounting policies: use of judgements, estimates and assumptions
Inherent in the application of many of the accounting policies used in preparing the financial statements is the need for BP management to make
judgements, estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual outcomes could differ from the
estimates and assumptions used. The critical accounting judgements and estimates that could have a significant impact on the results of the group are
set out in boxed text below, and should be read in conjunction with the information provided in the Notes on financial statements. The areas requiring
the most significant judgement and estimation in the preparation of the consolidated financial statements are in relation to acquisitions of interests in
other entities, oil and natural gas accounting, including the estimation of reserves, the recoverability of asset carrying values, derivative financial
instruments, including the application of hedge accounting, provisions and contingencies, in particular provisions and contingencies related to the Gulf
of Mexico oil spill, pensions and other post-retirement benefits and taxation.
Basis of consolidation
The group financial statements consolidate the financial statements of BP p.l.c. and the entities it controls (its subsidiaries) drawn up to 31 December
each year. Control of an investee exists when the investor is exposed, or has rights, to variable returns from its involvement with the investee and has
the ability to affect those returns through its power over the investee. To have power over an investee, the investor must have existing rights that give
it the current ability to direct the relevant activities of the investee. Subsidiaries are consolidated from the date of their acquisition, being the date on
which the group obtains control, and continue to be consolidated until the date that such control ceases. The financial statements of subsidiaries are
prepared for the same reporting year as the parent company, using consistent accounting policies. Intercompany balances and transactions, including
unrealized profits arising from intragroup transactions, have been eliminated. Unrealized losses are eliminated unless the transaction provides evidence
of an impairment of the asset transferred. Non-controlling interests represent the equity in subsidiaries that is not attributable, directly or indirectly, to
the group.
126 BP Annual Report and Form 20-F 2013