The table above shows the carrying amount of goodwill for the segment and the excess of the recoverable amount over the carrying amount (the
headroom).
In 2014, the recoverable amount is calculated using a fair value less costs of disposal approach, whereas a value-in-use approach was used in 2013.
The change in valuation technique was made in order to more accurately reflect the recoverable amount, based on our view of assumptions that would
be used by a market participant. Both the fair value less costs of disposal and value-in-use calculations are based on the cash flows expected to be
generated by the projected oil or natural gas production profiles up to the expected dates of cessation of production of each producing field, based on
current estimates of reserves (for value in use) and reserves and risked resources (for fair value less costs of disposal). The fair value calculation is
based primarily on level 3 inputs as defined by the IFRS 13 ‘Fair value measurement’ hierarchy. As the production profile and related cash flows can be
estimated from BP’s experience, management believes that the estimated cash flows expected to be generated over the life of each field is the
appropriate basis upon which to assess goodwill and individual assets for impairment. The estimated date of cessation of production depends on the
interaction of a number of variables, such as the recoverable quantities of hydrocarbons, the production profile of the hydrocarbons, the cost of the
development of the infrastructure necessary to recover the hydrocarbons, production costs, the contractual duration of the production concession and
the selling price of the hydrocarbons produced. As each producing field has specific reservoir characteristics and economic circumstances, the cash
flows of the fields are computed using appropriate individual economic models and key assumptions agreed by BP management. Capital expenditure,
operating costs and expected hydrocarbon production profiles are derived from the business segment plan adjusted for assumptions reflecting the
current price environment. Estimated production volumes and cash flows up to the date of cessation of production on a field-by-field basis are
developed to be consistent with this. The production profiles used are consistent with the reserve and resource volumes approved as part of BP’s
centrally controlled process for the estimation of proved and probable reserves and total resources. Intangible assets are deemed to have a recoverable
amount equal to their carrying amount. Consistent with prior years, the 2014 review for impairment was carried out during the fourth quarter.