BusinessCompany NewsFair value headache pains BP

Fair value headache pains BP

BP’s poor performance has been compounded by the burden of IFRS fair value demands

Earlier this week, the company disclosed that its third-quarter profits had
dropped by almost $2bn (£1bn) compared to the same period in 2006, but also took
the decision to present its figures in a way that stripped out the effects of
fair value.

Inventory losses amount to $539m under fair value. The requirement caused
massive swings in the value of its futures contracts, which has led to
BP taking
steps to present its numbers in such a way that allows investors to see the
‘economic effect of these activities as a whole’.

Under IFRS, BP’s inventories and contracts are recorded at historic cost and
on an accruals basis respectively.

A major sticking point concerning hedge accounting still remains for BP,
because the related derivative instruments must be recorded at fair value, with
gains and losses recognised on the income sheet. BP said in the report that
‘hedge accounting is either not permitted or not followed, principally due to
the impracticality of effectiveness testing requirements’.

Related Articles

M&S business rate liabilities based on £570m rateable value

Company News M&S business rate liabilities based on £570m rateable value

4m Emma Smith, Managing Editor
BDO replaces Deloitte as Mitie auditor

Audit BDO replaces Deloitte as Mitie auditor

8m Emma Smith, Managing Editor
CVR Global appoints partner in London office

Company News CVR Global appoints partner in London office

1y Alia Shoaib, Reporter
FTSE100 failing to provide adequate ethics information

Company News FTSE100 failing to provide adequate ethics information

1y Alia Shoaib, Reporter
Moore Stephens recruits new private client partner

Accounting Firms Moore Stephens recruits new private client partner

1y Emma Smith, Managing Editor
Magma Group announces merger, partner promotions

Accounting Firms Magma Group announces merger, partner promotions

1y Emma Smith, Managing Editor
BDO on ‘recruitment spree’ with multiple partner appointments

Accounting Firms BDO on ‘recruitment spree’ with multiple partner appointments

1y Emma Smith, Managing Editor
Brand strength leads to fee income growth for RSM

Accounting Firms Brand strength leads to fee income growth for RSM

1y Emma Smith, Managing Editor