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BP Business Economic Loss Claim Appeal 2016-304: Accrual P&Ls v. Cash Tax Returns


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 filed this Business Economic Loss claim. The Settlement Program awarded $305,723.29, preRTP. BP appeals.

BP argues on appeal that the Settlement Program erred because it did not resolve discrepancies between revenue and net income as recorded in Claimant’s tax returns and P&Ls. In support of its contention, BP cites numerous discrepancies. See BP’s Initial Proposal, at 1.

In response, Claimant notes many of the differences flow from the accrual nature of the P&Ls and the hybrid approach of the tax returns. Indeed, the Settlement Program accountants noted the importance of this distinction. In Note 7, the accountants observed, “The Claimant files its tax returns on a hybrid basis that is close to the cash basis… P&Ls are on accrual basis.”

In essence, the problem is one that has commonly occurred when tax returns are on a cash basis and P&Ls are on an accrual basis.The record reflects the Settlement Program accountants zealously sought to address all discrepancies. See Notes 6, 7, 10, 11, 12, 13, 14, 15, 16, and 17. In addition, the Settlement Program applied Policy 495, utilizing the Construction Methodology. In applying Policy 495, the Settlement Program produced a sufficiently matched result, meeting the requirements of the Settlement Agreement and the law. On balance, the Settlement Program reached the correct result. Claimant’s Final Proposal adopted the Settlement Program’s Final Award and thus prevails.

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