BP Alaska is not obligated to continue production from the interests of 1989 labor or to maintain production at any level and may halt or stop production at any time. The Trust has no right to resume the exploitation of the 1989 labour interests or to participate in BP Alaska`s operational decisions through the Prudhoe Bay Unit. The operation of the Prudhoe Bay Unit is subject to normal operating risks for the production and transportation of oil in Alaska. In the event of damage to the infrastructure, facilities and equipment of the Prudhoe Bay field, which is covered by insurance, BP Alaska is not required to use insurance products to repair such damage and may choose to retain these revenues and close the damaged areas for production. When it was founded in February 1989, the Royalty Interest, owned by the Trust, had a book value of $535,000,000. In accordance with generally accepted accounting principles, the Trust has depreciated the value of royalties on the basis of production methods. These amortizations were billed directly to the Corpus Trust and did not affect cash revenues. In addition, the Trust has consistently assessed the impairment of the interest on the royalty by comparing the expected un counted cash flows of royalty interest to book value according to the accounting standards of the Financial Council Codification (ASC) 360, Property, Plant, and Equipment. If the expected uncounted future cash flows were less than book value, the Trust recorded the impairment on the difference between book value and the estimated fair value of royalties. As of December 31, 2010, the Trust had accumulated amortization of $359,473,000 and aggregate impairments of $175,527,000, thereby reducing the book value of royalties to zero. While these financial statements differ from the financial statements established according to the generally accepted accounting standards in the United States of America, the modified cash base of reporting products and distributions is considered the most useful, with quarterly distributions to the holders of the trust unit being based on net cash revenues. The attached amended fund financial statements contain all adjustments necessary to fairly present the trust`s assets, liabilities and corpus as of December 31, 2018 and 2017, as well as changes to cash receipts and distributions, as well as changes to the fiduciary corpus for years past December 31, 2018, 2017 and 2016. Adjustments are of a recurring nature and, according to the agent, necessary to properly present the results of the transactions.
The Trust files its federal tax return as a Grantor Trust under Part E of Part I of Sub-Chapter J of the 1986 Internal Tax Code, as amended, and not as a taxable corporation.