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 millions 22. Provisions At 1 January 201 Exchange adjustments New or increased provisions Write-back of unused provisions Unwinding of discount Change in discount rate Utilization Reclassified to other payables 18,720 (356) 972 167 37 (500) At 31 December 2015 18,946 Assume the following: -Tax authorities allow a deduction in the computation of BP's taxable profit only -At 31 December 2015 BP expected to make the following payments regarding o $8,946 million during the financial year ending 31 December 2016; at the time when provisions are paid in cash; its existing decommissioning provisions: $10,000 million during the financial year ending 31 December 2017 o By 31 December 2015, the following tax rates had been enacted o 35% for the financial year ending 31 December 2015; o 32% for the financial year ending 31 December 2016; 30% for the financial year ending 31 December 2017 Required a) Biefly explain the nature of, and the accounting for, each of the following items (found in the BP extract above): 1. "New or increased provisions 2. "Unwinding of discount 3. "Utilization 4 marks 4 marks 4 marks Continued on the following page) Page 7 of 8 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 millions 22. Provisions At 1 January 201 Exchange adjustments New or increased provisions Write-back of unused provisions Unwinding of discount Change in discount rate Utilization Reclassified to other payables 18,720 (356) 972 167 37 (500) At 31 December 2015 18,946 Assume the following: -Tax authorities allow a deduction in the computation of BP's taxable profit only -At 31 December 2015 BP expected to make the following payments regarding o $8,946 million during the financial year ending 31 December 2016; at the time when provisions are paid in cash; its existing decommissioning provisions: $10,000 million during the financial year ending 31 December 2017 o By 31 December 2015, the following tax rates had been enacted o 35% for the financial year ending 31 December 2015; o 32% for the financial year ending 31 December 2016; 30% for the financial year ending 31 December 2017 Required a) Biefly explain the nature of, and the accounting for, each of the following items (found in the BP extract above): 1. "New or increased provisions 2. "Unwinding of discount 3. "Utilization 4 marks 4 marks 4 marks Continued on the following page) Page 7 of 8