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BP sees $5.5bn balance sheet impact of FRS17

UK – Oil giant BP says the new pension accounting standard FRS17 would have reduced shareholders’ interest by more than 5.5 billion dollars (4.5 billion euros) – though it would have boosted profit.

“The effect of adopting FRS 17 is to increase profit before taxation for 2003 by 354 million dollars and to reduce BP shareholders’ interest at 31 December by 5,523 million dollars,” BP said in its new annual report.

FRS17 and its international counterpart IAS19 take a market snapshot view of pension liabilities. Last week Swedish banking group SEB said the new standard would hit 2004 profit by around 250 million crowns (27.2 million euros).

“I don’t think any of these numbers are new,” said a BP spokesman. “It’s just bringing them into the balance sheet.”

BP said that costs recognised for providing pension and other post-retirement benefits on a FRS17 basis in 2003 was 582 million. The figure was expected to be just over one billion dollars in 2004.

BP, which last year contributed 2.5 billion dollars to its US and UK plans to reduce their shortfall, said it will adopt FRS17 for 2004. It has been using it in footnotes to its annual accounts in 2001 and 2002.

BP expects to make 400 million dollars in pension contributions in 2004. It said the market value of its UK schemes was 19.2 billion dollars, while the US schemes were 6.85 billion dollars. The UK and US schemes were 117% and 88% funded on this measure.

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