Notes on financial statementshttp://www.bp.com/downloads/investments25. Investments in associatesThe significant associates of the <strong>BP</strong> group are shown in Note 45. The principal associate is TNK-<strong>BP</strong>. Summarized financial information for the group’sshare of associates is set out below. Balance sheet information shown below excludes data relating to associates reclassified as assets held for sale as atthe end of the period. Income statement information shown below includes data relating to associates reclassified as assets held for sale for the periodup until their date of reclassification as held for sale.$ million<strong>20</strong>11 <strong>20</strong>10 <strong>20</strong>09TNK-<strong>BP</strong> Other Total TNK-<strong>BP</strong> Other Total TNK-<strong>BP</strong> Other TotalSales <strong>and</strong> other operating revenues 30,100 12,145 42,245 22,323 10,031 32,354 17,377 8,301 25,678Profit before interest <strong>and</strong> taxation 5,992 958 6,950 3,866 1,215 5,081 3,178 811 3,989Finance costs 132 13 145 128 22 150 2<strong>20</strong> 19 239Profit before taxation 5,860 945 6,805 3,738 1,193 4,931 2,958 792 3,750Taxation 1,333 214 1,547 913 228 1,141 871 125 996Minority interest 342 – 342 <strong>20</strong>8 – <strong>20</strong>8 139 – 139Profit for the year 4,185 731 4,916 2,617 965 3,582 1,948 667 2,615Non-current assets 16,172 3,865 <strong>20</strong>,037 14,686 4,024 18,710Current assets 4,210 2,273 6,483 4,500 1,989 6,489Total assets <strong>20</strong>,382 6,138 26,5<strong>20</strong> 19,186 6,013 25,199Current liabilities 3,086 2,149 5,235 3,284 1,888 5,172Non-current liabilities 6,416 1,744 8,160 5,283 1,914 7,197Total liabilities 9,502 3,893 13,395 8,567 3,802 12,369Minority interest 867 – 867 624 – 62410,013 2,245 12,258 9,995 2,211 12,<strong>20</strong>6Group investment in associatesGroup share of net assets (as above) 10,013 2,245 12,258 9,995 2,211 12,<strong>20</strong>6Loans made by group companies to associates – 1,033 1,033 – 1,129 1,12910,013 3,278 13,291 9,995 3,340 13,335Transactions between the group <strong>and</strong> its associates are summarized below.$ millionSales to associates <strong>20</strong>11 <strong>20</strong>10 <strong>20</strong>09ProductSalesAmountreceivable at31 December SalesAmountreceivable at31 December SalesAmountreceivable at31 DecemberLNG, crude oil <strong>and</strong> oil products, natural gas, employee services 3,855 393 3,561 330 2,801 3<strong>20</strong>$ millionPurchases from associates <strong>20</strong>11 <strong>20</strong>10 <strong>20</strong>09ProductPurchasesAmountpayable at31 December PurchasesAmountpayable at31 December PurchasesAmountpayable at31 DecemberCrude oil <strong>and</strong> oil products, natural gas, transportation tariff 8,159 815 4,889 633 5,110 614The terms of the outst<strong>and</strong>ing balances receivable from associates are typically 30 to 45 days. The balances are unsecured <strong>and</strong> will be settled in cash.There are no significant provisions for doubtful debts relating to these balances <strong>and</strong> no significant expense recognized in the income statement in respectof bad or doubtful debts.The amounts receivable <strong>and</strong> payable at 31 December <strong>20</strong>11, as shown in the table above, exclude $2<strong>20</strong> million (<strong>20</strong>10 $299 million) due from <strong>and</strong>due to an intermediate associate which provides funding for our associate The Baku-Tbilisi-Ceyhan Pipeline <strong>Company</strong>. These balances are expected to besettled in cash throughout the period to <strong>20</strong>15.Dividends receivable at 31 December <strong>20</strong>11 of $38 million (<strong>20</strong>10 $39 million) are also excluded from the table above.<strong>BP</strong> has commitments amounting to $1,477 million (<strong>20</strong>10 $310 million) in relation to contracts with its associates for the purchase of crude oil <strong>and</strong>oil products, transportation <strong>and</strong> storage. See Note 44 for further information on capital commitments relating to <strong>BP</strong>’s investments in associates.On 18 October <strong>20</strong>10, <strong>BP</strong> announced that it had reached agreement to sell assets in Vietnam, together with its upstream businesses <strong>and</strong>associated interests in Venezuela, to TNK-<strong>BP</strong> which is an associate <strong>and</strong> therefore a related party of the group. This transaction is part of the group’sdisposal programme <strong>and</strong> is the result of normal commercial negotiations. As at 31 December <strong>20</strong>10, a deposit of $1 billion had been received fromTNK-<strong>BP</strong> in advance of completion of this transaction <strong>and</strong> was reported within finance debt on the group balance sheet. This deposit was not reflectedin the amount payable in the table above. The sale of the Venezuelan business <strong>and</strong> the sale of the upstream <strong>and</strong> certain midstream assets in Vietnamcompleted during <strong>20</strong>11. Additional disposal proceeds of $0.7 billion were received upon completion of these transactions. The sale of the group’sremaining equity-accounted investment in the Phu My 3 plant facility in Vietnam is expected to complete in <strong>20</strong>12. See Note 4 for further information.A deposit of $30 million relating to the disposal of the Phu My 3 plant facility remains reported within finance debt on the group balance sheet at31 December <strong>20</strong>11.216 <strong>BP</strong> <strong>Annual</strong> <strong>Report</strong> <strong>and</strong> <strong>Form</strong> <strong>20</strong>-F <strong>20</strong>11
Notes on financial statements26. Financial instruments <strong>and</strong> financial risk factorsThe accounting classification of each category of financial instruments, <strong>and</strong> their carrying amounts, are set out below.$ millionAt 31 December <strong>20</strong>11NoteLoans <strong>and</strong>receivablesAvailable-forsalefinancialassetsAt fair valuethrough profitor lossFinancialDerivative liabilitieshedging measured atinstruments amortized costTotalcarryingamountFinancial assetsOther investments – equity shares 27 – 1,128 – – – 1,128– other 27 – 1,277 – – – 1,277Loans 1,128 – – – – 1,128Trade <strong>and</strong> other receivables 29 36,879 – – – – 36,879Derivative financial instruments 33 – – 7,188 1,707 – 8,895Cash <strong>and</strong> cash equivalents 30 9,750 4,317 – – – 14,067Financial liabilitiesTrade <strong>and</strong> other payables 32 – – – – (50,651) (50,651)Derivative financial instruments 33 – – (6,436) (557) – (6,993)Accruals – – – – (6,321) (6,321)Finance debt 34 – – – – (44,183) (44,183)47,757 6,722 752 1,150 (101,155) (44,774)$ millionAt 31 December <strong>20</strong>10NoteLoans <strong>and</strong>receivablesAvailable-forsalefinancialassetsAt fair valuethrough profitor lossDerivativehedginginstrumentsFinancialliabilitiesmeasured atamortized costTotalcarryingamountFinancial assetsOther investments – equity shares 27 – 1,191 – – – 1,191– other 27 – 1,532 – – – 1,532Loans 1,141 – – – – 1,141Trade <strong>and</strong> other receivables 29 32,380 – – – – 32,380Derivative financial instruments 33 – – 7,222 1,344 – 8,566Cash <strong>and</strong> cash equivalents 30 13,462 5,094 – – – 18,556Financial liabilitiesTrade <strong>and</strong> other payables 32 – – – – (56,499) (56,499)Derivative financial instruments 33 – – (7,254) (279) – (7,533)Accruals – – – – (6,249) (6,249)Finance debt 34 – – – – (39,139) (39,139)46,983 7,817 (32) 1,065 (101,887) (46,054)The fair value of finance debt is shown in Note 34. For all other financial instruments, the carrying amount is either the fair value, or approximates the fair value.Financial risk factorsThe group is exposed to a number of different financial risks arising from natural business exposures as well as its use of financial instruments including:market risks relating to commodity prices, foreign currency exchange rates, interest rates <strong>and</strong> equity prices; credit risk; <strong>and</strong> liquidity risk.The group financial risk committee (GFRC) advises the group chief financial officer (CFO) who oversees the management of these risks. The GFRCis chaired by the CFO <strong>and</strong> consists of a group of senior managers including the group treasurer <strong>and</strong> the heads of the group finance, tax <strong>and</strong> the integratedsupply <strong>and</strong> trading functions. The purpose of the committee is to advise on financial risks <strong>and</strong> the appropriate financial risk governance framework for thegroup. The committee provides assurance to the CFO <strong>and</strong> the group chief executive (GCE), <strong>and</strong> via the GCE to the board, that the group’s financialrisk-taking activity is governed by appropriate policies <strong>and</strong> procedures <strong>and</strong> that financial risks are identified, measured <strong>and</strong> managed in accordance withgroup policies <strong>and</strong> group risk appetite.The group’s trading activities in the oil, natural gas <strong>and</strong> power markets are managed within the integrated supply <strong>and</strong> trading function, while theactivities in the financial markets are managed by the integrated supply <strong>and</strong> trading function, on behalf of the treasury function. All derivative activity iscarried out by specialist teams that have the appropriate skills, experience <strong>and</strong> supervision. These teams are subject to close financial <strong>and</strong> managementcontrol.The integrated supply <strong>and</strong> trading function maintains formal governance processes that provide oversight of market risk associated withtrading activity. These processes meet generally accepted industry practice <strong>and</strong> reflect the principles of the Group of Thirty Global Derivatives Studyrecommendations. A policy <strong>and</strong> risk committee monitors <strong>and</strong> validates limits <strong>and</strong> risk exposures, reviews incidents <strong>and</strong> validates risk-related policies,methodologies <strong>and</strong> procedures. A commitments committee approves value-at-risk delegations, the trading of new products, instruments <strong>and</strong> strategies<strong>and</strong> material commitments.In addition, the integrated supply <strong>and</strong> trading function undertakes derivative activity for risk management purposes under a separate controlframework as described more fully below.Financial statements<strong>BP</strong> <strong>Annual</strong> <strong>Report</strong> <strong>and</strong> <strong>Form</strong> <strong>20</strong>-F <strong>20</strong>11 217
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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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