Energy Transfer 2015 Annual Report Download - page 174

Table of Contents
Additionally, this update requires that the acquirer record, in the same period’s financial statements, the effect on earnings of changes in depreciation,
amortization, or other income effects, if any, as a result of the change to the provisional amounts, calculated as if the accounting had been completed at
the acquisition date. Finally, this update requires an entity to present separately on the face of the income statement or disclose in the notes the portion
of the amount recorded in current-period earnings by line item that would have been recorded in previous reporting periods if the adjustment to the
provisional amounts had been recognized as of the acquisition date. The amendments in this update are effective for financial statements issued with
fiscal years beginning after December 15, 2015, including interim periods within that reporting period. We do not anticipate a material impact to our
financial position or results of operations as a result of the adoption of this standard.
In November 2015, the FASB issued ASU No. 2015-17,  (“ASU 2015-17”),
which is intended to improve how deferred taxes are classified on organizations’ balance sheets. The ASU eliminates the current requirement for
organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations are now required
to classify all deferred tax assets and liabilities as noncurrent. We adopted the provisions of ASU 2015-17 upon issuance and prior period amounts have
been reclassified to conform to the current period presentation. As a result of the early adoption and retrospective application of ASU 2015-17, $85
million of deferred tax liability previously presented as an other current liability as of December 31, 2014 has been reclassified to other non-current
liabilities in our consolidated financial statements.
Revenue Recognition
Revenues for sales of natural gas and NGLs are recognized at the later of the time of delivery of the product to the customer or the time of sale or
installation. Revenues from service labor, transportation, treating, compression and gas processing are recognized upon completion of the service.
Transportation capacity payments are recognized when earned in the period the capacity is made available.
Our intrastate transportation and storage and interstate transportation and storage segments’ results are determined primarily by the amount of capacity
our customers reserve as well as the actual volume of natural gas that flows through the transportation pipelines. Under transportation contracts, our
customers are charged (i) a demand fee, which is a fixed fee for the reservation of an agreed amount of capacity on the transportation pipeline for a
specified period of time and which obligates the customer to pay even if the customer does not transport natural gas on the respective pipeline, (ii) a
transportation fee, which is based on the actual throughput of natural gas by the customer, (iii) fuel retention based on a percentage of gas transported on
the pipeline, or (iv) a combination of the three, generally payable monthly. Fuel retained for a fee is typically valued at market prices.
Our intrastate transportation and storage segment also generates revenues and margin from the sale of natural gas to electric utilities, independent power
plants, local distribution companies, industrial end-users and other marketing companies on the HPL System. Generally, we purchase natural gas from the
market, including purchases from our marketing operations, and from producers at the wellhead.
In addition, our intrastate transportation and storage segment generates revenues and margin from fees charged for storing customers’ working natural gas
in our storage facilities. We also engage in natural gas storage transactions in which we seek to find and profit from pricing differences that occur over
time utilizing the Bammel storage reservoir. We purchase physical natural gas and then sell financial contracts at a price sufficient to cover our carrying
costs and provide for a gross profit margin. We expect margins from natural gas storage transactions to be higher during the periods from November to
March of each year and lower during the period from April through October of each year due to the increased demand for natural gas during colder
weather. However, we cannot assure that management’s expectations will be fully realized in the future and in what time period, due to various factors
including weather, availability of natural gas in regions in which we operate, competitive factors in the energy industry, and other issues.
Results from the midstream segment are determined primarily by the volumes of natural gas gathered, compressed, treated, processed, purchased and sold
through our pipeline and gathering systems and the level of natural gas and NGL prices. We generate midstream revenues and gross margins principally
under fee-based or other arrangements in which we receive a fee for natural gas gathering, compressing, treating or processing services. The revenue
earned from these arrangements is directly related to the volume of natural gas that flows through our systems and is not directly dependent on
commodity prices.
We also utilize other types of arrangements in our midstream segment, including (i) discount-to-index price arrangements, which involve purchases of
natural gas at either (1) a percentage discount to a specified index price, (2) a specified index price less a fixed amount or (3) a percentage discount to a
specified index price less an additional fixed amount, (ii) percentage-of-proceeds arrangements under which we gather and process natural gas on behalf
of producers, sell the resulting residue gas and NGL volumes at market prices and remit to producers an agreed upon percentage of the proceeds based on
an index price, (iii) keep-whole arrangements where we gather natural gas from the producer, process the natural gas and sell the
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