HollyFrontier 2015 Annual Report Download - page 73

Table of Contents HOLLYFRONTIER CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Continued
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Deferred Maintenance Costs: Our refinery units require regular major maintenance and repairs which are commonly referred to
as “turnarounds.” Catalysts used in certain refinery processes also require regular “change-outs.” The required frequency of the
maintenance varies by unit and by catalyst, but generally is every two to five years. Turnaround costs are deferred and amortized
over the period until the next scheduled turnaround. Other repairs and maintenance costs are expensed when incurred. Deferred
turnaround and catalyst amortization expense was $107.8 million, $96.9 million and $84.8 million for the years ended December 31,
2015, 2014 and 2013, respectively.
Environmental Costs: Environmental costs are charged to operating expenses if they relate to an existing condition caused by
past operations and do not contribute to current or future revenue generation. Liabilities are recorded when site restoration and
environmental remediation, cleanup and other obligations are either known or considered probable and can be reasonably estimated.
Such estimates are undiscounted and require judgment with respect to costs, time frame and extent of required remedial and clean-
up activities and are subject to periodic adjustments based on currently available information. Recoveries of environmental costs
through insurance, indemnification arrangements or other sources are included in other assets to the extent such recoveries are
considered probable.
Contingencies: We are subject to proceedings, lawsuits and other claims related to environmental, labor, product and other matters.
We are required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of
probable losses. A determination of the amount of reserves required, if any, for these contingencies is made after careful analysis
of each individual issue. The required reserves may change in the future due to new developments in each matter or changes in
approach such as a change in settlement strategy in dealing with these matters.
Income Taxes: Provisions for income taxes include deferred taxes resulting from temporary differences in income for financial
and tax purposes, using the liability method of accounting for income taxes. The liability method requires the effect of tax rate
changes on deferred income taxes to be reflected in the period in which the rate change was enacted. The liability method also
requires that deferred tax assets be reduced by a valuation allowance unless it is more likely than not that the assets will be realized.
Potential interest and penalties related to income tax matters are recognized in income tax expense. We believe we have appropriate
support for the income tax positions taken and to be taken on our income tax returns and that our accruals for tax liabilities are
adequate for all open years based on an assessment of many factors, including past experience and interpretations of tax law applied
to the facts of each matter.
New Accounting Pronouncements
Revenue Recognition
In May 2014, an accounting standard update (ASU 2014-09, “Revenue from Contracts with Customers”) was issued requiring
revenue to be recognized when promised goods or services are transferred to customers in an amount that reflects the expected
consideration for these goods or services. This standard has an effective date of January 1, 2018, and we are evaluating the impact
of this standard.
Debt Issuance Costs
In April 2015, an accounting standard update (ASU 2015-03, “Simplifying the Presentation of Debt Issuance Costs”) was issued
requiring that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from
the carrying amount of a respective debt liability. We adopted this standard effective December 31, 2015 (on a retrospective basis)
and have recast our December 31, 2014 consolidated balance sheet. As a result, $0.6 million of deferred debt issuance costs
previously classified as non-current assets under “Intangibles and other assets” have been reclassified as a direct reduction to long-
term debt.
Deferred income taxes
In November 2015, an accounting standard update (ASU 2015-17, “Balance Sheet Classification of Deferred Taxes”) was issued
requiring deferred tax liabilities and assets to be classified as noncurrent amounts. We adopted this standard effective December
31, 2015 (on a retrospective basis) and have recast our December 31, 2014 consolidated balance sheet. As a result, $17.4 million
of deferred income tax liabilities previously classified as current liabilities have been reclassified as noncurrent deferred income
tax liabilities.