BPs fourth-quarter 2010 earnings report included in the BP press release dated February 1, 2011, includes the following disclosure about the provision for Individual and Business Claims, and State and Local Claims under the Oil Pollution Act of 1990.

In estimating the amount of the provision, BP has determined a range of possible outcomes for Individual and Business Claims, and State and Local Claims. These determinations are based on BPs claims payment experience, the application of insurance industry benchmark data, the use of a combination of actuarial and statistical methods and management judgements where appropriate. The methods selected are consistent with those used by the insurance industry to estimate a range of total expenditures for both reported and unreported claims. These methods have been adopted on the basis that, at this stage of development, the application of insurance industry standard techniques for the estimation of ultimate losses is an appropriate approach for the costs arising from the Deepwater Horizon oil spill.

Through the application of this approach, BP has concluded that a reasonable range of possible outcomes for the amount of the provision as at 31 December 2010 is $6 billion to $13 billion. BP believes that the provision recorded at 31 December 2010 of $9.2 billion represents a reliable best estimate from within this range of possible outcomes. These provision estimates are in addition to the $3.2 billion of claims paid in 2010. BPs management has utilized actuarial techniques and its judgement in determining this reliable best estimate. However, it is possible that the final outcome could lie outside this range.

i. Under both IFRS and U.S. GAAP, if there is a large homogeneous population of claims, then the obligation is generally measured at its expected value. Under IFRS, if there is a large population and a continuous range of equally possible outcomes, then the obligation is measured at the mid-point of the range. Under U.S. GAAP, if no amount within a range is a better estimate than any other, then the obligation is measured at the low end of the range. Furthermore, under U.S. GAAP that method is not limited to large populations of events and thus could be applied to individual events.

Assume that BP faces a large and relatively homogenous number claims from individuals, businesses, states, and local governments. Explain, how BP treated these claims in the 2010 fourth-quarter balance sheet and income statement. If BP followed U.S. GAAP, would the accounting treatment differ? Explain?