BP Annual Report and Form 20-F 2011 - Company Reporting

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Notes on financial statementshttp://www.bp.com/downloads/taxation18. TaxationTax on profit$ million2011 2010 2009Current taxCharge for the year 7,477 6,766 6,045Adjustment in respect of prior years 111 (74) (300)7,588 6,692 5,745Deferred taxOrigination and reversal of temporary differences in the current year 5,664 (8,157) 2,131Adjustment in respect of prior years (515) (36) 4895,149 (8,193) 2,620Tax charge (credit) on profit (loss) 12,737 (1,501) 8,365Tax included in other comprehensive income a$ million2011 2010 2009Current tax (10) (107) –Deferred tax (1,649) 244 (525)(1,659) 137 (525)aSee Note 39 for further information.Tax included directly in equity$ million2011 2010 2009Current tax – (37) –Deferred tax (7) 64 (65)(7) 27 (65)Reconciliation of the effective tax rateThe following table provides a reconciliation of the UK statutory corporation tax rate to the effective tax rate of the group on profit or loss before taxation.With effect from 1 April 2011 the UK statutory corporation tax rate reduced from 28% to 26%.For 2010, the items presented in the reconciliation are distorted as a result of the overall tax credit for the year and the loss before taxation. Inorder to provide a more meaningful analysis of the effective tax rate for 2010, the table also presents separate reconciliations for the group excludingthe impacts of the Gulf of Mexico oil spill, and for the impacts of the Gulf of Mexico oil spill in isolation. For 2011, the effective tax rate is not impactedsignificantly by the Gulf of Mexico oil spill.2010excludingimpacts ofGulf ofMexico oilspill$ million2010impacts ofGulf ofMexico oilspill 2010 20092011Profit (loss) before taxation 38,834 36,110 (40,935) (4,825) 25,124Tax charge (credit) on profit (loss) 12,737 11,393 (12,894) (1,501) 8,365Effective tax rate 33% 32% 31% 31% 33%% of profit or loss before taxationUK statutory corporation tax rate 26 28 28 28 28Increase (decrease) resulting from:UK supplementary and overseas taxes at higher/lower rates 14 9 7 (4) 8Tax reported in equity-accounted entities (3) (3) – 23 (3)Adjustments in respect of prior years (1) – – 2 1Current year losses unrelieved – – – 1 –Goodwill impairment – – – – 2Tax incentives for investment (1) (1) – 9 (2)Gulf of Mexico oil spill non-deductible costs – – (4) (30) –Permanent differences relating to disposals (2) (1) – 5 –Other – – – (3) (1)Effective tax rate 33 32 31 31 33210 BP Annual Report and Form 20-F 2011
Notes on financial statementshttp://www.bp.com/downloads/taxation18. Taxation continuedDeferred tax$ millionIncome statementBalance sheet2011 2010 2009 2011 2010Deferred tax liabilityDepreciation 4,511 1,565 1,983 33,038 27,309Pension plan surpluses – 38 (6) – 469Other taxable temporary differences 129 1,178 978 5,683 5,5384,640 2,781 2,955 38,721 33,316Deferred tax assetPension plan and other post-retirement benefit plan deficits 388 179 180 (2,872) (2,155)Decommissioning, environmental and other provisions (1,324) (8,151) 86 (14,565) (13,296)Derivative financial instruments 24 (56) 80 (274) (298)Tax credits (401) (1,088) (516) (2,549) (2,118)Loss carry forward (218) 24 402 (1,295) (943)Other deductible temporary differences 2,040 (1,882) (567) (2,699) (4,126)509 (10,974) (335) (24,254) (22,936)Net deferred tax charge (credit) and net deferred tax liability 5,149 (8,193) 2,620 14,467 10,380Of which – deferred tax liabilities 15,078 10,908– deferred tax assets 611 528$ millionAnalysis of movements during the year 2011 2010At 1 January 10,380 18,146Exchange adjustments 55 3Charge (credit) for the year on profit 5,149 (8,193)Charge (credit) for the year in other comprehensive income (1,649) 244Charge (credit) for the year in equity (7) 64Acquisitions 692 187Reclassified as assets held for sale (140) (67)Deletions (13) (4)At 31 December 14,467 10,380Deferred tax assets are recognized to the extent that it is probable that taxable profit will be available against which the deductible temporary differencesand the carry-forward of unused tax credits and unused tax losses can be utilized.At 31 December 2011, the group had approximately $4.6 billion (2010 $3.9 billion) of carry-forward tax losses that would be available to offsetagainst future taxable profit. A deferred tax asset has been recognized in respect of $3.8 billion of losses (2010 $3.0 billion). No deferred tax asset hasbeen recognized in respect of $0.8 billion of losses (2010 $0.9 billion). In 2011, a current tax benefit of $0.1 billion arose relating to losses utilized on whicha deferred tax asset had not previously been recognized (2010 nil). Substantially all the tax losses have no fixed expiry date.At 31 December 2011, the group had approximately $18.2 billion of unused tax credits predominantly in the UK and US (2010 $13.9 billion).At 31 December 2011 there is a deferred tax asset of $2.5 billion in respect of unused tax credits (2010 $2.1 billion). No deferred tax asset has beenrecognized in respect of $15.7 billion of tax credits (2010 $11.8 billion). In 2011, a current tax benefit of $0.1 billion arose relating to tax credits utilized onwhich a deferred tax asset had not previously been recognized (2010 $0.3 billion).The UK tax credits, arising in UK branches overseas with no deferred tax asset, amounting to $13.0 billion (2010 $9.9 billion) do not have afixed expiry date. In addition there are also temporary differences in overseas branches of UK companies with no deferred tax asset recognized. At31 December 2011 the unrecognized deferred tax amounted to $0.9 billion (2010 $0.9 billion). These credits and temporary differences arise in UKbranches predominantly based in high tax rate jurisdictions and so are unlikely to have value in the future as UK taxes on these overseas branches arelargely mitigated by the double tax relief on the local foreign tax.The US tax credits with no deferred tax asset amounting to $2.7 billion (2010 $1.9 billion) expire 10 years after generation, and the majority expirein the period 2014-2021.The group recognized significant costs in 2010 in relation to the Gulf of Mexico oil spill and in 2011 has recognized certain recoveries relating to theincident as well as further costs. Tax has been calculated on the expenditures that are expected to qualify for tax relief, and on the recoveries, at the USstatutory tax rate. A deferred tax asset has been recognized in respect of provisions for future expenditure that are expected to qualify for tax relief. This isincluded under the heading decommissioning, environmental and other provisions.The other major components of temporary differences at the end of 2011 relate to tax depreciation, provisions, including items relating to the Gulfof Mexico oil spill, US inventory holding gains (classified as other taxable temporary differences) and pension plan and other post-retirement benefit plandeficits.At 31 December 2011, there were no material temporary differences associated with investments in subsidiaries and equity-accounted entities forwhich deferred tax liabilities have not been recognized.In 2011, the enactment of a 12% increase in the UK supplementary charge on oil and gas production activities in the North Sea increased thedeferred tax charge in the income statement by $713 million of which $683 million relates to the revaluation of the opening deferred tax balance.Also in 2011, the enactment of a 2% reduction in the rate of UK corporation tax to 25% with effect from 1 April 2012 on profits arising fromactivities outside the North Sea reduced the deferred tax charge in the income statement by $120 million. In 2010 the enactment of a 1% reduction in therate of UK corporation tax to 27% with effect from 1 April 2011 similarly reduced the deferred tax charge in the income statement by $86 million.In 2012, legislation to restrict relief for UK decommissioning expenditure from 62% to 50% is expected to be enacted. New legislation is also likelyto be introduced in Australia which would bring BP’s North West Shelf activities into the charge to Petroleum Resource Rent Tax (PRRT) from July 2012.The impacts of both of these changes are currently being assessed.BP Annual Report and Form 20-F 2011 211Financial statements
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Cover imagePhotograph of DeepseaSta
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Cross reference to Form 20-FPageIte
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Miscellaneous termsIn this document
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6 BP Annual Report and Form 20-F 20
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Chairman’s letterCarl-Henric Svan
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During the year, the remuneration c
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Business review: Group overviewBP A
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SafetyDuring the year, we reorganiz
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In Refining and Marketing, our worl
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Crude oil and gas prices,and refini
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In detailFor more information, seeR
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Our market: Longer-term outlookThe
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BP’s distinctive capabilities and
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Technology will continue to play a
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In detailFor more information,see C
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In detailFind out more online.bp.co
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BP Annual Report and Form 20-F 2011
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Below BP has asignificant presencei
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What you can measure6 Active portfo
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Business review: Group overview2012
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Our risk management systemOur enhan
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Our current strategic priorities ar
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Our performance2011 was a year of f
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Left BP employeesat work in Prudhoe
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We continued to sell non-core asset
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Reported recordableinjury frequency
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Business reviewBP in more depth56 F
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Business reviewThe primary addition
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Business reviewRisk factorsWe urge
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Business review2010. Similar action
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Business reviewBusiness continuity
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Business reviewSafetyOver the past
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Business reviewour review of all th
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Business reviewGreenhouse gas regul
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Business reviewresources such as dr
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Business reviewExploration and Prod
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Business reviewCompleting the respo
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Business reviewgrants, which were s
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Business reviewOur performanceKey s
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Business reviewwere in Russia (Oren
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Business reviewCanadaIn Canada, BP
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Business review• In March 2011, T
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Business reviewaccess advantageous
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Business reviewBP’s vice presiden
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Business reviewhttp://www.bp.com/do
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Business reviewbalance of participa
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Business reviewAcquisitions and dis
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Business reviewLPGOur global LPG ma
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Business reviewOther businesses and
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Business reviewLiquidity and capita
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Business reviewThe group expects it
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Business reviewFrequently, work (in
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Business reviewHazardous and Noxiou
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Business reviewpart of a larger por
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Directors andsenior management114 D
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Directors and senior managementDire
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Directors and senior managementH L
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Corporate governanceCorporate gover
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Corporate governanceAntony Burgmans
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Corporate governanceBoard oversight
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Corporate governanceBoard and commi
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Corporate governancefinancial repor
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Corporate governancechairs and secr
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Corporate governance• Oversee GCR
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Corporate governanceCommittee’s r
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Corporate governanceControls and pr
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Corporate governanceThe Act require
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Directors’ remuneration reportRem
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Directors’ remuneration reportSum
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Directors’ remuneration reportSaf
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Directors’ remuneration reportRem
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Directors’ remuneration reportThe
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Directors’ remuneration reportSha
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Directors’ remuneration reportNon
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Additional informationfor sharehold
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Additional information for sharehol
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Additional information for sharehol
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Supplementary information on oil an
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SignaturesThe registrant hereby cer
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Parent company financial statements
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