Sunoco 2011 Annual Report Download - page 68

Deferred Income Taxes
The Company recognizes benefits in earnings and related deferred tax assets for net operating loss
carryforwards (“NOLs”) and tax credit carryforwards. If necessary, a charge to earnings and a related valuation
allowance are recorded to reduce deferred tax assets to an amount that is more likely than not to be realized by
the Company in the future. Deferred income tax assets attributable to state and federal NOLs and federal tax
credit carryforwards totaling $79 million (net of federal income tax effects), $24 million and $79 million,
respectively, have been recognized in Sunoco’s consolidated balance sheet as of December 31, 2011. The state
NOLs begin to expire in 2019 with a substantial portion expiring in 2029 and 2030. The federal NOL expires in
2031, while $49 million of the federal tax credit carryforwards expires in 2030 and 2031 and the balance has no
expiration date. The Company has determined that a valuation allowance totaling $38 million (net of federal
income tax effects) is required for the state NOLs at December 31, 2011 primarily due to significant restrictions
on their use in the Commonwealth of Pennsylvania. No valuation allowance has been established for the federal
NOL or tax credit carryforwards. The Company also has deferred state tax assets for certain of its subsidiaries
due to the projected reversal of temporary differences largely resulting from the impairment of its Northeast
Refineries. In making the assessment of the realizability of the deferred tax assets, the Company relies on future
reversals of existing taxable temporary differences, tax planning strategies and forecasted taxable income based
on historical and projected future operating results. A key portion of the support for recognition of these deferred
tax assets is the expected gains in 2012 on the liquidation of the Company’s crude oil and refined product
inventories as a result of its exit from the refining business. The potential need for valuation allowances is
regularly reviewed by management. If it is more likely than not that the recorded asset will not be realized,
additional valuation allowances which increase income tax expense may be recognized in the period such
determination is made. Likewise, if it is more likely than not that additional deferred tax assets will be realized,
an adjustment to the deferred tax asset will increase income in the period such determination is made.
New Accounting Pronouncements
For a discussion of recently issued accounting standards requiring adoption subsequent to December 31,
2011, see Note 1 to the Consolidated Financial Statements (Item 8).
Forward-Looking Statements
Some of the information included in this report contains “forward-looking statements” (as defined in
Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934). These
forward-looking statements discuss estimates, goals, intentions and expectations as to future trends, plans, events,
results of operations or financial condition, or state other information relating to the Company, based on current
beliefs of management as well as assumptions made by, and information currently available to, Sunoco. Forward-
looking statements generally will be accompanied by words such as “anticipate,” “believe,” “budget,” “could,”
“estimate,” “expect,” “forecast,” “intend,” “may,” “plan,” “possible,” “potential,” “predict,” “project,”
“scheduled,” “should,” or other similar words, phrases or expressions that convey the uncertainty of future events
or outcomes. Although management believes these forward-looking statements are reasonable, they are based
upon a number of assumptions concerning future conditions, any or all of which may ultimately prove to be
inaccurate. Forward-looking statements involve a number of risks and uncertainties that could cause actual
results to differ materially from those discussed in this report. In addition, statements in this report concerning
future dividend declarations are subject to approval by the Company’s Board of Directors and will be based upon
circumstances then existing. Such risks and uncertainties include, without limitation:
• General economic, financial and business conditions which could affect Sunoco’s financial condition
and results of operations;
• Changes in refining and marketing margins;
• Variation in crude oil and petroleum-based commodity prices and availability of crude oil and
feedstock supply or transportation;
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