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Uncle Bill
09-23-2010, 11:26 AM
Sooo, I thought I'd bring this little bit of info to your attention. Since the lefties of the nation were gloating over how quickly Obama muscled BP into that 20 Billion slush fund...after further review it becomes apparent your POTUS negotiated another sham. The taxpayers get the shaft again from this ignorant loser.

UB




BP fund


What a 'find' we have in Obama!


Subject: BP Establishes 20 Billion Fund It seemed like a miracle that our President was able to convince BP to establish a $20 billion escrow fund to compensate those hurt by the oil plume in the Gulf of Mexico . After all, he had no constitutional power to force them to do so; so had to resort to Chicago-style negotiating.

Ever wonder why BP made the concession so quickly?

Take a closer look at the effect on BP's finances for the answer:

1. BP will establish a $20 billion fund, but will pay only $7 billion into it during 2010.

2. BP is a British corporation, but has a very large operating entity in the US. However, only about 30% of its income is derived from the US.

3. By Generally Accepted Accounting Principles (GAAP), BP must book the entire $20 billion expense in the year accrued. Therefore, they will book a $20 billion expense in 2010, reducing their US tax liability by $7 billion.

4. The President also convinced this massive corporation to show their concern for the "small people" by withholding dividends to their shareholders for the last 3 quarters of 2010. This reduces their outward cash flow by about $7.5 billion, including approximately 40% of that amount to US citizens. If the Bush tax cuts survive through 2010, the US Treasury will lose another $450 million in taxes on that amount. No need to even discuss the effect on the US economy.

Now, let's summarize the results into bullet points easily understood by all.

BP Cash Flow:

o Escrow funding ($7 billion)

o Dividend saving $7.5 billion

o Tax savings $7 billion

o Net favorable cash flow: $7.5 billion


US Treasury Tax Receipts:

o from BP Corporate income tax .... minus $7.5 billion

o from BP Shareholders' income tax ..... minus $0.45 billion

o Net loss of US dividend income tax receipts ..... minus $3.0 billion



Total tax receipts loss: $10.95 billion. A huge hit!

Many feared this would happen. After all, our President was the most inexperienced man in the room.

Did he get "Sucker Punched"? Should he be negotiating anything dealing with money and finances?

Bottom line: The $20 Billion BP is putting up will create a $7.5 Billion positive cash flow for BP this year and a $10.95 billion loss to our Treasury. But, Obama actually thinks he really did something special.

In reality, BP executives are laughing at him. He is in over his head when he starts dealing with savvy business people.

AIN'T CHANGE GREAT?????

YardleyLabs
09-23-2010, 12:08 PM
Ignoring the quality of the places that have reprinted this email gem (see, for example, http://niggermania.net/forum/showthread.php?23414-BP-VS-THE-NIGGER-Who-Won ), this analysis both understates and misstates the issues. In fact, BP has currently claimed losses of over $32 billion as a result of the spill, which will produce a total US tax credit of almost $10 billion. How is that possible? Why would the US tax payer be paying one-third of the costs of their mistakes?

The answer, of course is simple. Our tax system taxes profits, and our accounting system mandates accrual accounting. If a business messes up and loses money, both the government and the shareholders lose. When a business performs brilliantly, both the shareholders and the taxpayers benefit. Taxpayers are the partners of businesses both in good times and bad. This has been a fear in England since the whole disaster began because BP actually pays the majority of all corporate tax receipts in England.

Some aspects of BP's financial filings may be open to review. For example, if it is hit with penalties for the oil released, the cost of those fines may not be deductible as a business expense. In addition, to the extent that it has valid claims against its business partners for a portion of the costs incurred, it may be required to reduce its reserves by the estimated value of those offsets. Where the costs being recognized under accounting rules are for future obligations, BP will not have any additional expense offsets as those claims are paid and will being paying future taxes against income that it will not have on a cash flow basis. The other side of that equation is that BP, and other businesses, spend billions each year on capital assets (e.g. drilling platforms) that cannot be expensed in the year they are purchased. Rather, the cost must be depreciated over time, with taxes paid on "profits" that are not realized in cash because the cash was spent on the investment. That is the "miracle" of accrual accounting. Generally, it works against the business.

Until now, much has been made of the fact that the $20 billion escrow account did not limit BP's future liability. Rather, it simply provided a way of segregating assets to protect claims in the event that the business failed. Based on the speed with which the oil itself has dissipated, there may be a question about whether the reserve for damages is actually excessive. What happens to the fund if there are not $20 billion in valid claims?