Sunoco 2011 Annual Report Download - page 65

Sunoco is also required to accelerate the recognition of a portion of its cumulative actuarial losses into
earnings if the amount of pension liabilities settled in a given year is greater than the service and interest cost
components of the related defined benefit plans expense. As a result of the workforce reduction, divestments and
the permanent shutdown of the Eagle Point refinery, the Company incurred pretax noncash settlement losses
totaling $56, $56 and $111 million with respect to its defined benefit plans in 2011, 2010 and 2009, respectively.
In addition, as a result of the above-noted changes, the service cost and interest on the existing defined benefit
pension plan obligations have declined. This reduction in service and interest cost increases the likelihood that
settlement gains or losses, representing the accelerated amortization of deferred gains and losses, will be
recognized in the future as previously earned lump sum payments are made.
Set forth below are the estimated increases in expense and the related benefit obligations, which represents
the projected benefit obligation for defined benefit plans, that would occur in 2012 from a change in the indicated
assumptions (dollars in millions):
Change
in Rate Expense*
Benefit
Obligations*
Pension benefits:
Decrease in the discount rate ............................. 0.25% $2 $27
Decrease in the long-term expected rate of return
on plan assets ....................................... 0.25% $2 $—
*Excludes amounts attributable to SunCoke Enegy which was separated from Sunoco by means of a spin-off on January 17, 2012.
Long-Lived Assets
The cost of plants and equipment is generally depreciated on a straight-line basis over the estimated useful
lives of the assets. Useful lives are based on historical experience and are adjusted when changes in planned use,
technological advances or other factors show that a different life would be more appropriate. Changes in useful
lives that do not result in the impairment of an asset are recognized prospectively. There have been no significant
changes in the useful lives of the Company’s plants and equipment during the 2009-2011 period.
A decision to dispose of an asset may necessitate an impairment review. If the criteria of assets held for sale
are met, an impairment would be recognized for any excess of the aggregate carrying amount of assets and
liabilities included in the disposal group over their fair value less cost to sell. The aggregate fair value less cost to
sell of the Toledo refinery and related assets, which were classified as held for sale at December 31, 2010,
exceeded the related carrying amount of the disposal group and, as a result, no impairment was recognized in
2010.
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. Such events and
circumstances include, among other factors: operating losses; unused capacity; market value declines;
technological developments resulting in obsolescence; changes in demand for the Company’s products or in
end-use goods manufactured by others utilizing the Company’s products as raw materials; changes in the
Company’s business plans or those of its major customers, suppliers or other business partners; a decision to
dispose of an asset; changes in competition and competitive practices; uncertainties associated with the United
States and world economies; changes in the expected level of capital, operating or environmental remediation
expenditures; and changes in governmental regulations or actions. Additional factors impacting the economic
viability of long-lived assets are described under “Forward-Looking Statements” below.
Long-lived assets that are not held for sale are considered impaired when the undiscounted net cash flows
expected to be generated by the assets are less than their carrying amount. Such estimated future cash flows are
highly subjective and are based on numerous assumptions about future operations and market conditions. The
impairment recognized is the amount by which the carrying amount exceeds the fair market value of the impaired
57