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BP Business Economic Loss Claim Appeal 2016-274: No “step one” matching and smoothing requirement under Policy 495


The following is an Appeal Panel Decision issued pursuant to Section 6 of the BP Deepwater Horizon Economic & Property Damages Settlement Agreement and the Rules Governing the BP Appeals Process. Links may have been added to assist the reader. The original decision may be found here, as well as a glossary of BP Settlement terms.

Claimant is a multi-family residential rental business in Birmingham, Alabama. The Settlement Program issued an award of $101,179, pre-RTP. This appeal concerns Claimant’s P&L entries for forfeited tenant deposits. Claimant’s P&Ls activated several Policy 495 “triggers,” and accordingly the award was calculated pursuant to the AVM methodology. BP notes Claimant’s P&Ls record “Forfeited Deposit” revenue on roughly a quarterly basis in 2010 and 2011. BP argues that in 2009 Claimant appears to have recorded the first three quarters’ worth of these entries entirely in September, with $18,864 in such revenues, having recorded no such revenues before then for 2009. BP cites Policy 495 in advocating that the Settlement program had an obligation to correct “Errors,” which include “mistakes in applying applicable accounting principles based on the claimant’s method of accounting; oversights or misinterpretation of the facts; [and] input or calculation errors,” among other things. See Policy 495 at pp. 2-3. BP asserts failure to determine the individual lease periods involved, and then to allocate the revenue evenly throughout the lease periods, constitutes such an “Error.”

The financials demonstrate that Claimant booked the forfeiture revenue in a consistent manner. There is no evidence to indicate when these forfeitures were recognized, or the length of the leases involved, other than when the bookings were made. Moreover, BP’s argument on appeal is based on the assumption that Policy 495 calls for the smoothing of revenues prior to applying the trigger exercise and, if triggered, application of the appropriate matching formula. Here the exercise triggered the AVM methodology, which was applied. As has been held repeatedly, there is no “step one” matching and smoothing requirement under Policy 495 that precedes the application of the AVM methodology. The very purpose of the AVM methodology is to achieve sufficient matching. There is no error. BP’s appeal is denied, and Claimant’s Final Proposal, consistent with the Award, is hereby selected.

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