Question 5 The extract below is taken from the notes to the financial statements of BP (the global oil and gas business) for the year 2015. Amounts shown are in USD millons. 22. Provisions 18720 167 Allenuary 2015 Exchange adjustments New or increased provisions Write-back of unused provisions Unwinding of discount Change in discount rate Utilation c alied to other payables Deletions A: 31 December 2015 15001 1201 18.946 Assume the following: - Tax authorities allow a deduction in the computation of BP's taxable profit only at the time when provisions are paid in cash; - At 31 December 2015 BP expected to make the following payments regarding its existing decommissioning provisions: $8.946 million during the financial year ending 31 December 2016: o $10,000 million during the financial year ending 31 December 2017. By 31 December 2015, the following tax rates had been enacted: 35% for the financial year ending 31 December 2015 o 32% for the financial year ending 31 December 2016 o 30% for the financial year ending 31 December 2017. Required: a) Briefly explain the nature of, and the accounting for, each of the following items (found in the BP extract above 1. "New or increased provisions" 4 marks 2. Unwinding of discount 4 marks 3. Utilization 4 marks (Continued on the following page) Page 7 of 8 b) Compute the deferred tax Item that should be shown on BP's consolldated statement of financial position on 31 December 2015 In relation to its decommissioning provisions, explaining the related IFRS rules and showing al workings 13 marks Question 5 The extract below is taken from the notes to the financial statements of BP (the global oil and gas business) for the year 2015. Amounts shown are in USD millons. 22. Provisions 18720 167 Allenuary 2015 Exchange adjustments New or increased provisions Write-back of unused provisions Unwinding of discount Change in discount rate Utilation c alied to other payables Deletions A: 31 December 2015 15001 1201 18.946 Assume the following: - Tax authorities allow a deduction in the computation of BP's taxable profit only at the time when provisions are paid in cash; - At 31 December 2015 BP expected to make the following payments regarding its existing decommissioning provisions: $8.946 million during the financial year ending 31 December 2016: o $10,000 million during the financial year ending 31 December 2017. By 31 December 2015, the following tax rates had been enacted: 35% for the financial year ending 31 December 2015 o 32% for the financial year ending 31 December 2016 o 30% for the financial year ending 31 December 2017. Required: a) Briefly explain the nature of, and the accounting for, each of the following items (found in the BP extract above 1. "New or increased provisions" 4 marks 2. Unwinding of discount 4 marks 3. Utilization 4 marks (Continued on the following page) Page 7 of 8 b) Compute the deferred tax Item that should be shown on BP's consolldated statement of financial position on 31 December 2015 In relation to its decommissioning provisions, explaining the related IFRS rules and showing al workings 13 marks