BP and Contingent Liabilities

BP and Contingent Liabilities

By
Elizabeth Blankespoor, C. Gregory Rogers, Jaclyn Foroughi
2015|Case No.A220| Length 24 pgs.

On April 20, 2010, as BP p.l.c., the third-largest listed oil producer in the world, was preparing to report strong first quarter results, an explosion occurred on its drilling rig Deepwater Horizon, killing 11 workers and injuring 16 others. Over the next two days, the rig burned and sank, resulting in a massive offshore oil spill in the Gulf of Mexico. The spill was considered “the largest environmental disaster to hit the United States” and the largest accidental marine oil spill in history.

The financial reporting implications of the accident and subsequent claims, especially the recognition and measurement of provisions and related expenses, and disclosure of contingent liabilities, were a major consideration for BP and its investors.

Learning Objective

Provide students with an opportunity to analyze the financial reporting implications of the BP accident and subsequent claims, especially the recognition and measurement of provisions and related expenses, and disclosures of contingent liabilities.

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