PBF Energy 2015 Annual Report Download - page 136

PBF ENERGY INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE, UNIT, PER SHARE, PER UNIT AND BARREL DATA)
F- 19
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 restricted PBF LLC Series A Units and restricted PBF Energy Class A common stock granted to
certain directors and officers. The estimated fair value of the options to purchase PBF Energy Class A common
stock and the PBF LLC Series A warrants and options is based on the Black-Scholes option pricing model and the
fair value of the PBF LLC Series B units is estimated based on a Monte Carlo simulation model. The estimated
fair value is amortized as stock-based compensation expense on a straight-line method over the vesting period and
included in general and administration expense.
Additionally, stock-based compensation also includes unit-based compensation provided to certain officers, non-
employee directors and seconded employees of PBFX's general partner, PBF GP, or its affiliates, consisting of
PBFX phantom units. The fair value of PBFX's phantom units are measured based on the fair market value of the
underlying common units on the date of grant based on the common unit closing price on the grant date. The
estimated fair value of PBFX's phantom units is amortized over the vesting period using the straight-line method.
Awards vest over a four year service period. The phantom unit awards may be settled in common units, cash or a
combination of both. Expenses related to unit-based compensation are also included in general and administrative
expenses.