PBF Energy 2012 Annual Report Download - page 108

PBF ENERGY INC. AND SUBSIDIARIES
(COMBINED AND CONSOLIDATED WITH PBF ENERGY COMPANY LLC AND SUBSIDIARIES)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT AND BARREL DATA)
2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Inventory (Continued)
Company took title to the crude oil as it was delivered to the refinery processing units. The Company had
custody and risk of loss for MSCG’s crude oil stored on the refinery premises. As a result, the Company recorded
the crude oil in the Toledo refinery’s storage facilities as inventory with a corresponding accrued liability. The
Toledo Crude Oil Supply Agreement was replaced effective June 1, 2011. Under the new Toledo Crude Oil
Supply Agreement, the Company takes title to crude oil at various pipeline locations for delivery to the refinery
or sale to third parties. The Company records the crude oil inventory when it receives title. Payment for the crude
oil is due to MSCG under the Toledo Crude Oil Supply Agreement three days after the crude oil is delivered to
the Toledo refinery processing units or upon sale to a third party.
Property, Plant, and Equipment
Property, plant and equipment additions are recorded at cost. The Company capitalizes costs associated with the
preliminary, pre-acquisition and development/construction stages of a major construction project. The Company
capitalizes the interest cost associated with major construction projects based on the effective interest rate of total
borrowings. The Company also capitalizes costs incurred in the acquisition and development of software for
internal use, including the costs of software, materials, consultants and payroll-related costs for employees
incurred in the application development stage.
Depreciation is computed using the straight-line method over the following estimated useful lives:
Process units and equipment ....................... 5-25 years
Pipeline and equipment ........................... 5-20 years
Buildings ....................................... 25-40 years
Computers, furniture and fixtures ................... 3-15 years
Leasehold improvements .......................... 20years
Maintenance and repairs are charged to operating expenses as they are incurred. Improvements and betterments,
which extend the lives of the assets, are capitalized.
Deferred Charges and Other Assets, Net
Deferred charges and other assets include refinery turnaround costs, catalyst, precious metals catalyst, linefill,
deferred financing costs and intangible assets. Refinery turnaround costs, which are incurred in connection with
planned major maintenance activities, are capitalized when incurred and amortized on a straight-line basis over
the period of time estimated to lapse until the next turnaround occurs (generally 3 to 5 years).
Precious metals catalyst and linefill are considered indefinite-lived assets as they are not expected to deteriorate
in their prescribed functions. Such assets are assessed for impairment in connection with the Company’s review
of its long-lived assets as indicators of impairment develop.
Deferred financing costs are capitalized when incurred and amortized over the life of the loan (1 to 8 years).
Intangible assets with finite lives primarily consist of catalyst, emission credits and permits and are amortized
over their estimated useful lives of 1 to 10 years.
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