BP 2015 Annual Report Download - page 139

13. Goodwill and impairment review of goodwill – continued
The sensitivities to different variables have been estimated using certain simplifying assumptions. For example, lower oil and gas prices sensitivities do
not reflect the specific impacts for each contractual arrangement and will not capture fully any favourable impacts that may arise from cost deflation.
Therefore a detailed calculation at any given price or production profile may produce a different result.
It is estimated that if the oil price assumption for all future years (the first five years, and the long-term assumption from 2021 onwards) was
approximately $6.50 per barrel lower in each year, this would cause the recoverable amount to be equal to the carrying amount of goodwill and related
net non-current assets of the segment. It is estimated that if the gas price assumption for all future years was approximately $0.60 per mmbtu lower in
each year, this would cause the recoverable amount to be equal to the carrying amount of goodwill and related net non-current assets of the segment.
Estimated production volumes are based on detailed data for each field and take into account development plans agreed by management as part of the
long-term planning process. The average production for the purposes of goodwill impairment testing over the next 15 years is 911mmboe per year
(2014 847mmboe per year). It is estimated that if production volume were to be reduced by approximately 3% for this period, this would cause the
recoverable amount to be equal to the carrying amount of goodwill and related non-current assets of the segment.
It is estimated that if the post-tax discount rate was approximately 9% for the entire portfolio, an increase of 2% for all countries not classified as
‘higher risk’, this would cause the recoverable amount to be equal to the carrying amount of goodwill and related non-current assets of the segment.
Downstream
$ million
2015 2014
Lubricants Other Total Lubricants Other Total
Goodwill 3,109 652 3,761 3,264 704 3,968
Cash flows for each cash-generating unit are derived from the business segment plans, which cover a period of two to five years. To determine the
value in use for each of the cash-generating units, cash flows for a period of 10 years are discounted and aggregated with a terminal value.
Lubricants
As permitted by IAS 36, the detailed calculations of Lubricants’ recoverable amount performed in the most recent detailed calculation in 2013 were
used for the 2015 impairment test as the criteria in that standard were considered satisfied: the headroom was substantial in 2013; there have been
no significant changes in the assets and liabilities; and the likelihood that the recoverable amount would be less than the carrying amount at the time
was remote.
The key assumptions to which the calculation of value in use for the Lubricants unit is most sensitive are operating unit margins, sales volumes, and
discount rate. The values assigned to these key assumptions reflect BP’s experience. No reasonably possible change in any of these key
assumptions would cause the unit’s carrying amount to exceed its recoverable amount. Cash flows beyond the two-year plan period were
extrapolated using a nominal 3% growth rate.
14. Intangible assets
$ million
2015 2014
Exploration
and appraisal
expenditurea
Other
intangibles Total
Exploration
and appraisal
expenditurea
Other
intangibles Total
Cost
At 1 January 21,723 4,268 25,991 21,742 3,936 25,678
Exchange adjustments – (187) (187) – (175) (175)
Acquisitions ––– – 455 455
Additions 1,197 234 1,431 2,871 394 3,265
Transfers (1,039) – (1,039) (993) – (993)
Reclassified as assets held for sale – (18) (18) –––
Deletions (2,025) (242) (2,267) (1,897) (342) (2,239)
At 31 December 19,856 4,055 23,911 21,723 4,268 25,991
Amortization
At 1 January 2,379 2,705 5,084 877 2,762 3,639
Exchange adjustments – (75) (75) – (72) (72)
Charge for the year 1,829 296 2,125 3,029 304 3,333
Impairment losses ––– –5050
Transfers (21) – (21) –––
Reclassified as assets held for sale – (15) (15) –––
Deletions (1,617) (230) (1,847) (1,527) (339) (1,866)
At 31 December 2,570 2,681 5,251 2,379 2,705 5,084
Net book amount at 31 December 17,286 1,374 18,660 19,344 1,563 20,907
Net book amount at 1 January 19,344 1,563 20,907 20,865 1,174 22,039
aFor further information see Intangible assets within Note 1 and Note 7.
BP Annual Report and Form 20-F 2015 135
Financial statements