PBF Energy 2012 Annual Report Download - page 151

PAULSBORO REFINING BUSINESS
NOTES TO FINANCIAL STATEMENTS—(Continued)
asset is not recoverable, an impairment loss is recognized in an amount by which its carrying amount exceeds its
fair value, with fair value determined based on discounted estimated net cash flows or other appropriate methods.
On December 16, 2010, the Business recorded an asset impairment charge of $896 million as a result of Valero’s
sale of the Business to PBF Holding on December 17, 2010.
Environmental Matters
Liabilities for future remediation costs were recorded when environmental assessments and/or remedial efforts
were probable and the costs could be reasonably estimated. Other than for assessments, the timing and magnitude
of these accruals generally were based on the completion of investigations or other studies or a commitment to a
formal plan of action. Environmental liabilities were based on best estimates of probable undiscounted future
costs over a 20-year time period using currently available technology and applying current regulations, as well as
the Business’ own internal environmental policies. Amounts recorded for environmental liabilities were not
reduced by possible recoveries from third parties.
Asset Retirement Obligations
The Business had asset retirement obligations with respect to certain of its refinery assets due to various legal
obligations to clean and/or dispose of various component parts at the time they were retired. As of December 31,
2010, the Business had recorded asset retirement obligations related to certain pond closures and a landfill
closure.
In addition to these recorded asset retirement obligations, the Business had asset retirement obligations with
respect to certain other component parts of its refinery assets. However, those component parts could be used for
extended and indeterminate periods of time as long as they were properly maintained and/or upgraded. It was
management’s practice and current intent to maintain those refinery assets and continue making improvements to
those assets based on technological advances. As a result, management believed that those refinery assets had an
indeterminate life for purposes of estimating asset retirement obligations because dates or ranges of dates upon
which such refinery assets would be retired cannot be reasonably estimated at this time. When a date or range of
dates can be reasonably estimated for the retirement of any component part of those refinery assets, an estimate
of the cost of performing the retirement activities will be determined and a liability will be recorded for the fair
value of that cost using established present value techniques.
Net Parent Investment
The net parent investment represents a net amount consisting of the Parent’s initial investment in the Business
and subsequent adjustments resulting from the operations of the Business and various transactions between the
Business and Valero. The Business participated in the Parent’s centralized cash management program under
which all of the Business’ cash receipts were remitted to and all cash disbursements were funded by the Parent.
Other transactions affecting the net parent investment include general and administrative expenses incurred by
Valero and allocated to the Business. There were no terms of settlement or interest charges associated with the
net parent investment.
Revenue Recognition
Revenues were recorded by the Business upon delivery of the refined products to the Parent, which was the point
at which title to the products was transferred.
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