PBF Energy 2012 Annual Report Download - page 109

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)
Long-Lived Assets and Definite-Lived Intangibles
The Company reviews its long-lived assets for impairment whenever events or changes in circumstances indicate
the carrying value may not be recoverable. Impairment is evaluated by comparing the carrying value of the long-
lived assets to the estimated undiscounted future cash flows expected to result from use of the assets and their
ultimate disposition. If such analysis indicates that the carrying value of the long-lived assets is not considered to
be recoverable, the carrying value is reduced to the fair value.
Impairment assessments inherently involve judgment as to assumptions about expected future cash flows and the
impact of market conditions on those assumptions. Although management would utilize assumptions that it
believes are reasonable, future events and changing market conditions may impact management’s assumptions,
which could produce different results.
Asset Retirement Obligations
The Company records an asset retirement obligation at fair value for the estimated cost to retire a tangible long-
lived asset at the time the Company incurs that liability, which is generally when the asset is purchased,
constructed, or leased. The Company records the liability when it has a legal or contractual obligation to incur
costs to retire the asset and when a reasonable estimate of the fair value of the liability can be made. If a
reasonable estimate cannot be made at the time the liability is incurred, the Company will record the liability
when sufficient information is available to estimate the liability’s fair value. Certain of the Company’s asset
retirement obligations are based on its legal obligation to perform remedial activity at its refinery sites when it
permanently ceases operations of the long-lived assets. The Company therefore considers the settlement date of
these obligations to be indeterminable. Accordingly, the Company cannot calculate an associated asset retirement
liability for these obligations at this time. The Company will measure and recognize the fair value of these asset
retirement obligations when the settlement date is determinable.
Environmental Matters
Liabilities for future remediation costs are recorded when environmental assessments and/or remedial efforts are
probable and the costs can be reasonably estimated. Other than for assessments, the timing and magnitude of
these accruals generally are based on the completion of investigations or other studies or a commitment to a
formal plan of action. Environmental liabilities are based on best estimates of probable future costs using currently
available technology and applying current regulations, as well as the Company’s own internal environmental
policies. The measurement of environmental remediation liabilities may be discounted to reflect the time value of
money if the aggregate amount and timing of cash payments of the liabilities are fixed or reliably determinable. The
actual settlement of the Company’s liability for environmental matters could materially differ from its estimates due
to a number of uncertainties such as the extent of contamination, changes in environmental laws and regulations,
potential improvements in remediation technologies and the participation of other responsible parties.
Stock-Based Compensation
Stock-based compensation includes the accounting effect of options to purchase PBF Energy Class A common stock
granted by the Company to certain employees, Series A warrants issued or granted by PBF LLC to employees in
connection with their acquisition of PBF LLC Series A units, options to acquire Series A units of PBF LLC granted by
PBF LLC to certain employees, Series B units of PBF LLC that were granted to certain members of management and
F-17