IFRS fair value demands batter oil giant BP
Accounting requirements blamed as BP announces possible £220m+ hit to its fourth-quarter earnings
Wild fluctuations generated by IFRS fair value accounting could batter the
revenues of
BP to
the tune of more than £200m, sparking criticism from industry watchers.
‘This has basically made me ignore earnings – I’ll be concentrating on the
cashflow,’ said a source. ‘Fluctuations, particularly around hedging and stocks
means that there’s a lot of volatility. The earnings were never really that
useful.’
Analyst reports showed that accounting changes and unrealised inventory gains
added $440m to BP’s balance sheet in the third quarter, but BP said that the
demands would remove a similar amount for the most recent period, giving an
indication of the uncertainty involved for investors.
A BP statement said: ‘ A significant negative impact related to IFRS fair
value accounting is expected in 4Q’06, compared to a significant positive impact
in 3Q’06.’
The FTSE 100 heavyweight
announced that it would be taking the severe hit to its its refining and
marketing arm after a series of setbacks. Oil production at the corporate
has has been hampered because of severe delays starting new fields in the Gulf
of Mexico and pipeline leaks that shut down supplies from Alaska, causing
concern in the City.
In its trading statement BP was unable to put an official figure on the
extent of the hit because ‘data is not available at this time that would allow
quantification of potential
IFRS fair
value accounting gains or charges, or of any potential consolidation
adjustment.’
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