PBF Energy 2012 Annual Report Download - page 150

PAULSBORO REFINING BUSINESS
NOTES TO FINANCIAL STATEMENTS—(Continued)
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results
could differ from those estimates. On an ongoing basis, management reviewed its estimates based on currently
available information. Changes in facts and circumstances could result in revised estimates.
Inventories
Inventories represent inventories located at the refinery and consisted of refinery feedstocks purchased for
processing, refined products, and materials and supplies. Inventories were carried at the lower of cost or market.
The cost of refinery feedstocks purchased for processing and refined products were determined under the last-in,
first-out (LIFO) method using the dollar-value LIFO method, with any increments valued based on purchase
prices at the end of the year. The cost of materials and supplies was determined under the weighted-average cost
method.
Property, Plant and Equipment
Property, plant and equipment were stated at cost. Additions to property, plant and equipment, including
capitalized interest and certain costs allocable to construction and property purchases, were recorded at cost.
The costs of minor property units (or components of property units), net of salvage value, retired or abandoned
were charged or credited to accumulated depreciation under the composite method of depreciation. Gains or
losses on sales or other dispositions of major units of property were recorded in income and were reported in
depreciation and amortization expense.
Depreciation of property, plant and equipment was recorded on a straight-line basis over the estimated useful
lives of the related facilities primarily using the composite method of depreciation. Leasehold improvements and
assets acquired under capital leases were amortized using the straight-line method over the shorter of the lease
term or the estimated useful life of the related asset. The Business recorded additional accumulated depreciation
of $354,829 in recognition of the asset impairment discussed below and in Note 3.
Deferred Charges and Other Assets
Deferred charges and other assets included the following:
• refinery turnaround costs, which were incurred in connection with planned major maintenance
activities at the Paulsboro Refinery and which were deferred when incurred and amortized on a
straight-line basis over the period of time estimated to lapse until the next turnaround occurs;
• fixed-bed catalyst costs, representing the cost of catalyst that was changed out at periodic intervals
when the quality of the catalyst has deteriorated beyond its prescribed function, which were deferred
when incurred and amortized on a straight-line basis over the estimated useful life of the specific
catalyst; and
• process royalty costs, which were deferred when incurred and amortized over the life of the specific
royalty.
Impairment and Disposal of Long-Lived Assets
Long-lived assets were tested for recoverability whenever events or changes in circumstances indicated that the
carrying amount might not be recoverable. A long-lived asset is not recoverable if its carrying amount exceeds
the sum of the undiscounted cash flows expected to result from its use and eventual disposition. If a long-lived
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