BP 2015 Annual Report Download - page 155

28. Financial instruments and financial risk factors – continued
The amounts shown for finance debt in the table below include future minimum lease payments with respect to finance leases. The table also shows
the timing of cash outflows relating to trade and other payables and accruals.
$ million
2015 2014
Trade and
other
payables Accruals
Finance
debt
Interest
relating to
finance debt
Trade and
other
payables Accruals
Finance
debt
Interest
relating to
finance debt
Within one year 29,743 6,261 6,944 928 37,342 7,102 6,877 892
1 to 2 years 971 380 5,796 812 708 493 6,311 776
2 to 3 years 1,231 138 6,208 704 757 119 5,652 672
3 to 4 years 56 98 6,103 592 1,446 76 5,226 578
4 to 5 years 17 74 6,354 478 23 41 6,056 479
5 to 10 years 38 167 17,651 1,068 24 95 19,504 1,111
Over 10 years 38 33 4,112 402 27 37 3,228 521
32,094 7,151 53,168 4,984 40,327 7,963 52,854 5,029
The group manages liquidity risk associated with derivative contracts, other than derivative hedging instruments, based on the expected maturitiesof
both derivative assets and liabilities as indicated in Note 29. Management does not currently anticipate any cash flows that could be of a significantly
different amount, or could occur earlier than the expected maturity analysis provided.
The table below shows the timing of cash outflows for derivative financial instruments entered into for the purpose of managing interest rate and
foreign currency exchange risk associated with net debt, whether or not hedge accounting is applied, based upon contractual payment dates. The
amounts reflect the gross settlement amount where the pay leg of a derivative will be settled separately from the receive leg, as in the case of cross-
currency swaps hedging non-US dollar finance debt. The swaps are with high investment-grade counterparties and therefore the settlement-day risk
exposure is considered to be negligible. Not shown in the table are the gross settlement amounts (inflows) for the receive leg of derivatives that are
settled separately from the pay leg, which amount to $15,706 million at 31 December 2015 (2014 $14,615 million) to be received on the same day as
the related cash outflows. For further information on our derivative financial instruments, see Note 29.
$ million
2015 2014
Within one year 2,959 293
1 to 2 years 2,685 2,959
2 to 3 years 1,505 2,690
3 to 4 years 1,700 1,505
4 to 5 years 1,678 1,700
5 to 10 years 5,500 5,764
Over 10 years 2,739 1,325
18,766 16,236
29. Derivative financial instruments
In the normal course of business the group enters into derivative financial instruments (derivatives) to manage its normal business exposures in relation
to commodity prices, foreign currency exchange rates and interest rates, including management of the balance between floating rate and fixed rate
debt, consistent with risk management policies and objectives. An outline of the group’s financial risks and the objectives and policies pursued in
relation to those risks is set out in Note 28. Additionally, the group has a well-established entrepreneurial trading operation that is undertaken in
conjunction with these activities using a similar range of contracts.
For information on significant estimates and judgements made in relation to the application of hedge accounting and the valuation of derivatives see
Derivative financial instruments within Note 1.
The fair values of derivative financial instruments at 31 December are set out below.
Exchange traded derivatives are valued using closing prices provided by the exchange as at the balance sheet date. These derivatives are categorized
within level 1 of the fair value hierarchy. Over-the-counter (OTC) financial swaps and physical commodity sale and purchase contracts are generally
valued using readily available information in the public markets and quotations provided by brokers and price index developers. These quotes are
corroborated with market data and are categorized within level 2 of the fair value hierarchy.
In certain less liquid markets, or for longer-term contracts, forward prices are not as readily available. In these circumstances, OTC financial swaps and
physical commodity sale and purchase contracts are valued using internally developed methodologies that consider historical relationships between
various commodities, and that result in management’s best estimate of fair value. These contracts are categorized within level 3 of the fair value
hierarchy.
BP Annual Report and Form 20-F 2015 151
Financial statements