Sunoco 2009 Annual Report Download - page 78

Consumer excise taxes on sales of refined products and merchandise are included in both revenues and costs
and expenses, with no effect on net income.
Cash Equivalents
Sunoco considers all highly liquid investments with a remaining maturity of three months or less at the time
of purchase to be cash equivalents. These cash equivalents consist principally of time deposits and money market
investments.
Inventories
Inventories are valued at the lower of cost or market. The cost of crude oil and petroleum and chemical
product inventories is determined using the last-in, first-out method (“LIFO”). The cost of materials, supplies and
other inventories is determined using principally the average-cost method.
Depreciation and Retirements
Plants and equipment are generally depreciated on a straight-line basis over their estimated useful lives.
Gains and losses on the disposals of fixed assets are generally reflected in net income.
Impairment of Long-Lived Assets
Long-lived assets held for sale are recorded at the lower of their carrying amount or fair market value less
cost to sell. Long-lived assets, other than those held for sale, are reviewed for impairment whenever events or
changes in circumstances indicate that the carrying amount of the assets may not be recoverable. An asset is
considered to be impaired when the undiscounted estimated net cash flows expected to be generated by the asset
are less than its carrying amount. The impairment recognized is the amount by which the carrying amount
exceeds the fair market value of the impaired asset.
Goodwill and Intangible Assets
Goodwill, which represents the excess of the purchase price over the fair value of net assets acquired, and
indefinite-lived intangible assets are tested for impairment at least annually rather than being amortized. Sunoco
determined that the $31 million of goodwill pertaining to its polypropylene business was impaired during 2008
and $2 million of goodwill allocated to its Eagle Point refinery was impaired during 2009 (Note 2). No other
goodwill or any indefinite-lived intangible assets were impaired during the 2007-2009 period. Intangible assets
with finite useful lives are amortized over their useful lives in a manner that reflects the pattern in which the
economic benefit of the intangible assets is consumed. In addition, goodwill and intangible assets associated with
assets to be disposed of are included in the carrying amount of such assets in determining the gain or loss on
disposal.
Environmental Remediation
Sunoco accrues environmental remediation costs for work at identified sites where an assessment has
indicated that cleanup costs are probable and reasonably estimable. Such accruals are undiscounted and are based
on currently available information, estimated timing of remedial actions and related inflation assumptions,
existing technology and presently enacted laws and regulations. If a range of probable environmental cleanup
costs exists for an identified site, the minimum of the range is accrued unless some other point in the range is
more likely in which case the most likely amount in the range is accrued.
Maintenance Shutdowns
Maintenance and repair costs in excess of $500 thousand incurred in connection with major maintenance
shutdowns are capitalized when incurred and amortized over the period benefited by the maintenance activities.
Derivative Instruments
From time to time, Sunoco uses swaps, options, futures, forwards and other derivative instruments to hedge
a variety of price risks. Such derivative instruments are used to achieve ratable pricing of crude oil purchases, to
convert certain expected refined product sales to fixed or floating prices, to lock in what Sunoco considers to be
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