BP Company Accounting Report: Financial Analysis and Disclosures

This report provides a comprehensive overview of British Petroleum's accounting practices, including a brief company overview and its subsidiaries, Amoco and Castrol. It delves into the company's financial statements, explaining the reasons for consolidation and sources of finance, including equity, share capital, and treasury shares. The report highlights key disclosures, such as corporate governance, audit committees, and sustainability initiatives. It also examines non-controlling interests, goodwill, impairment, and foreign currency transactions. The report offers suggestions for improving disclosures based on effective communication principles and IFRS standards, offering a detailed analysis of BP's financial performance and reporting practices.

British Petroleum
Company Accounting

Brief overview of the company
The company of British petroleum is an multinational
oil company headquartered in London. It is one of the
seven globally famous gas and oil business. It is the
sixth largest energy company in the world in terms of
market capitalization. The company of British
petroleum has been listed in the London stock
exchange and is a constituent of FTSE 100 index. At
present the British petroleum deals with other
countries too that includes Europe, North and south
America, Asia, Australia and Africa.

British petroleum
Group and its
operations• The composition and subsidiaries: The two main subsidiaries of British petroleum is
Amoco and Castrol.
• Joint Ventures: The British Petroleum has joint ventures with AMPM, Aral and Wild
Bean café. Each of the the ventures have different kind of activities and has its own
heritage, personality and performance. According to the annual report, this includes
the main investment that has been taken place in the financial year 2017.
• The main operations of the group: The group operates in in more than 70 nations
worldwide in producing oil and gas on land and onshore. The groups main objective is
to spread the energy around the globe. It manufactures and markets fuels and raw
materials that are used in the products including phone to food packaging. In addition
to that the group participates in finding out new access to discover additional
resources and replenish the development options and renew the portfolio.

Consolidated financial
statement
The reasons for which British petroleum decided to prepare the
consolidated financial statement are as follows:
1. In order to supply the relevant information to investors in the parent
entity.
2. To enable group comparison with similar companies.
3. To assist the accountability discharge by the group management.
4. Moreover, the as per IAS 27 that deals with consolidated and
separate financial statement an entity must consolidate another
entity, for the disclosures such as process of change in ownership and
technique for separate financial statement(Chen, et al., 2015).

Sources of finance and
ownership
• The share capital identifies the nominal value that is aggregate of all ordinary
and preference shares in issue, that includes the treasury shares.
• Equity: The company is funded by equity in the financial year of 2017 of
21049696 each at 25 cent that amounts to $5263 million.
• Moreover there has been issue of cumulative preference shares which is 7233
shares at 8% interest and 5473 at 9% that amounts to $21 million in total.
• There has been issue 1614657 of treasury shares that amounts to $403 million
• The has been issue of ESOP of 9705 shares that amounts to $2 million.
• the group is owned by the directors of the British petroleum which is the
parent company.

Disclosures of British petroleum
The disclosures of the Company regarding the following is has been revealed on the annual
report and the sustainability report of the company. It is the process of releasing the
relevant information of the company that can influence the investment decisions. T makes
the investing fair as per the Securities and Exchange commission.
• Corporate governance: The operating management system of BP brings together the
requirements on health, safety, security, the environment, social responsibility and
operational reliability, as well as related issues, such as maintenance, contractor relations
and organizational learning, into a common management system.
• Audit committees: The committee monitors the effectiveness of the group’s financial
reporting, systems of internal control and risk management and the integrity of the
group’s external and internal audit processes.
• Sustainability: BP uses the Global Reporting Initiative (GRI) G4 guidelines, a
comprehensive set of indicators covering all dimensions of sustainable development.

non-controlling Interest
• The portion of non controlling interest of the equity ownership in a
subsidiary that is not attributable to the parent company who has a
controlling interest and consolidates the subsidiaries financial results
with its own(Ryerson et al. 2016).
• The non control interest is found as per IFRS 12 is accumulated at the
financial year end and it is found in the notes to accounts under the
head of equity in the annual report.
• In the chosen company of British petroleum there is no non
controlling interest found in the annual report.

Other disclosures in BP
• Goodwill and acquisition: the Goodwill is an intangible assets that takes place when one
company purchases another company for a premium value. Goodwill is considered an
intangible asset because it is not a physical asset like buildings or equipment. The goodwill
account can be found in the assets portion of a balance sheet of the company. BP has a
goodwill of $11551million in the year of 2017.
• Gains and bargains: The gains and bargains includes the assets that are acquired for a less fair
market value.in this case a corporate entity is required acquired by another for an amount
that is less than the fair market value of its net assets. It is disclosed as a gain in the income
statement(Tricker and Tricker 2015).
• Impairment: The process of Impairment test is theanalysis of whether the items from balance
sheet are worth the stated amount in the balance sheet. The amount in the balance sheet
shall be reduced if impairment test signifies lower value(Holden, Linnerud and Banister 2017).
The testing for impairment can be applied for tax accounts as well as commercial that is audit
accounts. The BP has an impairment of $1216 million.

Foreign Currency Transactions
• The concept of foreign currency deals with the settlement either by
payment or receipt in a foreign currency. In case the rates of the exchange
changes there is a gain or a loss on the exchange(Johansson, Hjelström
and Hellman 2016). In the British Petroleum there is no foreign currency
dealing as per the annual report.
• The foreign currency transactions are recorded in the accounts
receivables at the time of gains and debits on accounts payable in case of
loss(McCahery, Sautner and Starks 2016).
• The subsidiaries in the company of British Petroleum are Castrol and
Amoco, both are headquartered in UK. Hence there is no foreign
subsidiary.

Suggestions for Disclosures
• There can be a disclosure of seven effective communication principle
that could be included in the general disclosure standard or described
in the guidance that is non-mandatory
• The Possible approaches to improve objectives of disclosure and
requirements in the Standards of IFRS.
• Fair presentation principles and performance disclosures measures
and non-IFRS information in financial statements, to make sure that
such information are not misleading.

Reference
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• Tricker, R.B. and Tricker, R.I., 2015. Corporate governance: Principles, policies, and practices. Oxford University Press, USA.
• McCahery, J.A., Sautner, Z. and Starks, L.T., 2016. Behind the scenes: The corporate governance preferences of institutional
investors. The Journal of Finance, 71(6), pp.2905-2932.
• Holden, E., Linnerud, K. and Banister, D., 2017. The imperatives of sustainable development. Sustainable
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Development, 23(3), pp.176-187.
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Business guidelines two decades after Brundtland. sustainable development, 22(1), pp.15-32.
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International Accounting, Auditing and Taxation, 27, pp.13-25.