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

Notes on financial statements33. Derivative financial instruments continuedThe following table shows the changes in the day-one profits and losses deferred on the balance sheet.http://www.bp.com/downloads/dfi$ million2011 2010Power priceNaturalgas price Oil priceNaturalgas priceFair value of contracts not recognized through the income statement at 1 January – 69 21 33Fair value of new contracts at inception not recognized in the income statement 9 51 – 39Fair value recognized in the income statement – (6) (21) (3)Fair value of contracts not recognized through profit at 31 December 9 114 – 69The following table shows the fair value of derivative assets and derivative liabilities held for trading, analysed by maturity period and by methodology offair value estimation.IFRS 7 ‘Financial Instruments: Disclosures’ sets out a fair value hierarchy which consists of three levels that describe the methodology ofestimation as follows:Level 1 – using quoted prices in active markets for identical assets or liabilities.Level 2 – using inputs for the asset or liability, other than quoted prices, that are observable either directly (i.e. as prices) or indirectly(i.e. derived from prices).Level 3 – using inputs for the asset or liability that are not based on observable market data such as prices based on internal models or othervaluation methods.This information is presented on a gross basis, that is, before netting by counterparty.Less than1 year 1-2 years 2-3 years 3-4 years 4-5 years$ million2011Over5 years TotalFair value of derivative assetsLevel 1 229 18 5 – – – 252Level 2 7,225 2,725 1,123 269 81 8 11,431Level 3 310 284 253 221 170 500 1,7387,764 3,027 1,381 490 251 508 13,421Less: netting by counterparty (4,006) (1,554) (601) (65) (4) (3) (6,233)3,758 1,473 780 425 247 505 7,188Fair value of derivative liabilitiesLevel 1 (168) (49) – – – – (217)Level 2 (6,323) (2,479) (887) (163) (21) (7) (9,880)Level 3 (190) (164) (157) (149) (112) (383) (1,155)(6,681) (2,692) (1,044) (312) (133) (390) (11,252)Less: netting by counterparty 4,006 1,554 601 65 4 3 6,233(2,675) (1,138) (443) (247) (129) (387) (5,019)Net fair value 1,083 335 337 178 118 118 2,169Less than1 year 1-2 years 2-3 years 3-4 years 4-5 years$ million2010Over5 years TotalFair value of derivative assetsLevel 1 122 36 12 5 – – 175Level 2 7,132 1,928 639 239 109 – 10,047Level 3 341 314 296 267 165 410 1,7937,595 2,278 947 511 274 410 12,015Less: netting by counterparty (3,694) (884) (160) (50) (21) (2) (4,811)3,901 1,394 787 461 253 408 7,204Fair value of derivative liabilitiesLevel 1 (239) (6) (46) – – – (291)Level 2 (6,733) (1,685) (617) (107) (44) – (9,186)Level 3 (205) (148) (125) (114) (92) (279) (963)(7,177) (1,839) (788) (221) (136) (279) (10,440)Less: netting by counterparty 3,694 884 160 50 21 2 4,811(3,483) (955) (628) (171) (115) (277) (5,629)Net fair value 418 439 159 290 138 131 1,575226 BP Annual Report and Form 20-F 2011