Sunoco 2011 Annual Report Download - page 77

Sunoco, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The consolidated financial statements of Sunoco, Inc. and subsidiaries (collectively, “Sunoco” or the
“Company”) contain the accounts of all entities that are controlled and variable interest entities (“VIEs”) for
which the Company is the primary beneficiary. Corporate joint ventures and other investees over which the
Company does not have a controlling financial interest are accounted for by the equity method. Effective
January 1, 2010, the Company adopted new accounting guidance concerning the accounting and reporting for
VIEs. The new guidance, among other things, clarifies when a company is to be deemed the primary beneficiary
and requires an ongoing reassessment of whether an entity is the primary beneficiary of a VIE. Adoption of this
new guidance had no impact on the Company’s assessments of its interests in VIEs.
A VIE is defined as a legal entity that has equity investors that do not have sufficient equity at risk for the
entity to support its activities without additional subordinated financial support or, as a group, the holders of the
equity at risk lack (i) the power to direct the entity’s activities or (ii) the obligation to absorb the expected losses
or the right to receive the expected residual returns of the entity. A VIE is required to be consolidated by a
company if that company is the primary beneficiary. The primary beneficiary is (i) the company that is subject to
a majority of the risk of loss from the VIE’s activities or, if no company is subject to a majority of such risk, the
company that is entitled to receive a majority of the VIE’s residual returns, and (ii) has the power to direct the
activities of a VIE that most significantly impact the VIE’s economic performance.
Sunoco completed divestments of its phenol and acetone chemicals manufacturing facilities during 2011
and completed the sale of the common stock of its polypropylene chemicals business in 2010. In 2009, Sunoco
completed the sale of its Tulsa refinery. As a result of these transactions, the results of operations of Sunoco’s
chemicals businesses and the Tulsa refinery, including related charges for asset write-downs and gains (losses)
recognized in connection with such divestments, have been classified as discontinued operations for all periods
presented in the consolidated statements of operations and related notes (Note 2).
On January 17, 2012, the Company completed the separation of SunCoke Energy, Inc. (“SunCoke Energy”)
from Sunoco by distributing its remaining shares of SunCoke Energy common stock to Sunoco shareholders by
means of a spin-off. The results of operations of the Coke business will be classified as discontinued operations
in the consolidated statements of operations effective with the distribution date (Note 16).
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Actual amounts could differ from these estimates.
Reclassifications
Certain amounts in the prior years’ financial statements have been reclassified to conform to the current-
year presentation.
Revenue Recognition
The Company sells various refined products (including gasoline, middle distillates, residual fuel and
petrochemicals), coke and coal and also sells crude oil in connection with the crude oil acquisition and marketing
activities of its publicly traded limited partnership. In addition, the Company sells a broad mix of merchandise
such as groceries, fast foods and beverages at its convenience stores, operates common carrier pipelines and
provides terminalling services, including storage, distribution and blending services, through its publicly traded
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