Property, Plant and Equipment Accounting Policy
Property, plant and equipment is stated at cost, less accumulated depreciation and accumulated impairment losses.
The initial cost of an asset comprises its purchase price or construction cost, any costs directly attributable to bringing the asset into operation, the initial estimate of any decommissioning obligation, if any, and, for qualifying assets, borrowing costs. The purchase price or construction cost is the aggregate amount paid and the fair value of any other consideration given to acquire the asset. The capitalized value of a finance lease is also included within property, plant and equipment. Exchanges of assets are measured at fair value unless the exchange transaction lacks commercial substance or the fair value of neither the asset received nor the asset given up is reliably measurable. The cost of the acquired asset is measured at the fair value of the asset given up, unless the fair value of the asset received is more clearly evident. Where fair value is not used, the cost of the acquired asset is measured at the carrying amount of the asset given up. The gain or loss on derecognition of the asset given up is recognized in profit or loss.
Expenditure on major maintenance refits or repairs comprises the cost of replacement assets or parts of assets, inspection costs and overhaul costs. Where an asset or part of an asset that was separately depreciated is replaced and it is probable that future economic benefits associated with the item will flow to BP, the expenditure is capitalized and the carrying amount of the replaced asset is derecognized. Inspection costs associated with major maintenance programmes are capitalized and amortized over the period to the next inspection. Overhaul costs for major maintenance programmes, and all other maintenance costs are expensed as incurred.
Oil and natural gas properties, including related pipelines, are depreciated using a unit-of-production method. The cost of producing wells is amortized over proved developed reserves. Licence acquisition, common facilities and future decommissioning costs are amortized over total proved reserves. The unit-of-production rate for the amortization of common facilities costs takes into account expenditures incurred to date, together with the future capital expenditure expected to be incurred in relation to these common facilities.
Other property, plant and equipment is depreciated on a straight line basis over its expected useful life. The useful lives of BP's other property, plant and equipment are as follows:
| Land improvements |
15 to 25 years |
| Buildings |
20 to 50 years |
| Refineries |
20 to 30 years |
| Petrochemicals |
20 to 30 years |
| Pipelines |
10 to 50 years |
| Service stations |
15 years |
| Office equipment |
3 to 7 years |
| Fixtures and fittings |
5 to 15 years |
The expected useful lives of property, plant and equipment are reviewed on an annual basis and, if necessary, changes in useful lives are accounted for prospectively.
The carrying amount of property, plant and equipment is reviewed for impairment whenever events or changes in circumstances indicate the carrying value may not be recoverable.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the continued use of the asset. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the item) is included in the income statement in the period in which the item is derecognized.
Source: BP PLC, Annual Report
Property, Plant and Equipment Disclosure
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BP PLC, Statement of Financial Position, Property, Plant and Equipment
Source: Based on data from BP PLC Annual Reports
| Item |
Description |
The company |
| Land and land improvements |
Real estate assets held for productive use and depreciable assets that are an addition or improvement to real estate held for productive use. |
BP PLC's land and land improvements declined from 2009 to 2010 and from 2010 to 2011.
|
| Buildings |
Carrying amount as of the balance sheet date of long-lived, depreciable assets that include building structures held for productive use including any addition, improvement, or renovation to the structure, such as interior masonry, interior flooring, electrical, and plumbing. |
BP PLC's buildings declined from 2009 to 2010 but then slightly increased from 2010 to 2011.
|
| Plant, machinery and equipment |
Carrying amount as of the balance sheet date of long-lived, depreciable asset used in production process to produce goods and services. |
BP PLC's plant, machinery and equipment increased from 2009 to 2010 but then declined significantly from 2010 to 2011.
|
| Fixtures, fittings and office equipment |
Carrying amount at the balance sheet date for long-lived, depreciable asset commonly used in offices and stores. Examples include desks, chairs, and store fixtures. |
BP PLC's fixtures, fittings and office equipment declined from 2009 to 2010 but then increased from 2010 to 2011 exceeding 2009 level.
|
| Property, plant and equipment, cost |
Carrying amount at the balance sheet date for long-lived physical assets used in the normal conduct of business and not intended for resale. This can include land, physical structures, machinery, vehicles, furniture, computer equipment, construction in progress, and similar items. Amount does not include depreciation. |
BP PLC's property, plant and equipment, cost increased from 2009 to 2010 and from 2010 to 2011.
|
| Property, plant and equipment, net book amount |
Tangible assets that are held by an entity for use in the production or supply of goods and services, for rental to others, or for administrative purposes and that are expected to provide economic benefit for more than one year; net of accumulated depreciation. Examples include land, buildings, and production equipment. |
BP PLC's property, plant and equipment, net book amount increased from 2009 to 2010 and from 2010 to 2011.
|
Property, Plant and Equipment Ratios (Summary)
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BP PLC, Property, Plant and Equipment Ratios
| Ratio |
Description |
The company |
| Average age |
As long as straight-line depreciation is used, this is an accurate estimate of asset age as a percentage of depreciable life. The relative age is a useful measure of whether the company's fixed asset base is old or new. Newer assets are likely to be more efficient. |
BP PLC's average age of depreciable property, plant and equipment improved from 2009 to 2010 and from 2010 to 2011.
|
| Estimated total useful life |
Over longer time periods, this ratio is a useful measure of company's depreciation policy and can be used for comparisons with competitors. |
BP PLC's estimated total useful life of depreciable property, plant and equipment increased from 2009 to 2010 and from 2010 to 2011.
|
| Estimated time elapsed since purchase |
The approximate age in years of a company's fixed assets. Useful for comparison purposes. |
BP PLC's estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2009 to 2010 but then improved from 2010 to 2011 exceeding 2009 level.
|
| Estimated remaining life |
|
BP PLC's estimated remaining life of depreciable property, plant and equipment increased from 2009 to 2010 and from 2010 to 2011.
|
Average Age
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2011 Calculations
| Ratio |
Description |
The company |
| Average age |
As long as straight-line depreciation is used, this is an accurate estimate of asset age as a percentage of depreciable life. The relative age is a useful measure of whether the company's fixed asset base is old or new. Newer assets are likely to be more efficient. |
BP PLC's average age of depreciable property, plant and equipment improved from 2009 to 2010 and from 2010 to 2011.
|
Estimated Total Useful Life
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2011 Calculations
| Ratio |
Description |
The company |
| Estimated total useful life |
Over longer time periods, this ratio is a useful measure of company's depreciation policy and can be used for comparisons with competitors. |
BP PLC's estimated total useful life of depreciable property, plant and equipment increased from 2009 to 2010 and from 2010 to 2011.
|
Estimated Age, Time Elapsed Since Purchase
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2011 Calculations
| Ratio |
Description |
The company |
| Estimated time elapsed since purchase |
The approximate age in years of a company's fixed assets. Useful for comparison purposes. |
BP PLC's estimated time elapsed since purchase of depreciable property, plant and equipment deteriorated from 2009 to 2010 but then improved from 2010 to 2011 exceeding 2009 level.
|
Estimated Remaining Life
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2011 Calculations
| Ratio |
Description |
The company |
| Estimated remaining life |
|
BP PLC's estimated remaining life of depreciable property, plant and equipment increased from 2009 to 2010 and from 2010 to 2011.
|
