Sunoco 2011 Annual Report Download - page 80

accumulated other comprehensive loss component of equity. The credit (charge) to equity, which is reflected net
of related tax effects, is subsequently recognized in earnings when amortized as a component of defined benefit
plans and postretirement benefit plans expense. In addition, the credit (charge) may also be recognized in
earnings as a result of a plan curtailment or settlement.
Noncontrolling Interests
The Company reflects all changes in noncontrolling interests that do not result in a loss of control of the
subsidiary as equity transactions at the time of the change. In addition, the Company recognizes any gains
(losses) in earnings resulting from the remeasurement of its pre-acquisition equity interests to fair value upon
consolidation.
Stock-Based Compensation
Stock-based compensation awards are recorded utilizing a fair-value-based method of accounting.
Asset Retirement Obligations
Sunoco establishes accruals for the fair value of conditional asset retirement obligations (i.e., legal
obligations to perform asset retirement activities in which the timing and/or method of settlement are conditional
on a future event that may or may not be within the control of the entity) if the fair value can be reasonably
estimated. Sunoco has legal asset retirement obligations for several other assets at its refineries, pipelines and
terminals, for which it is not possible to estimate when the obligations will be settled. Consequently, the
retirement obligations for these assets cannot be measured at this time.
Fair Value Measurements
The Company determines fair value as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. As required, the
Company utilizes valuation techniques that maximize the use of observable inputs (levels 1 and 2) and minimize
the use of unobservable inputs (level 3) within the fair value hierarchy included in current accounting guidance.
The Company generally applies the “market approach” to determine fair value when available. This method uses
pricing and other information generated by market transactions for identical or comparable assets and liabilities.
Assets and liabilities are classified within the fair value hierarchy based on the lowest level (least observable)
input that is significant to the measurement in its entirety.
In May 2011, new accounting guidance was issued which amended certain fair value measurement
provisions and provides for enhanced disclosure requirements. The most significant change in disclosures is an
expansion of the information required for fair value measurements based on unobservable inputs (level 3). The
provisions of this guidance are effective January 1, 2012 for the Company and are not expected to have a
material impact on the consolidated financial statements and disclosures.
2. Changes in Business and Other Matters
Acquisitions
In January 2011, SunCoke Energy acquired Harold Keene Coal Co., Inc. (“HKCC”), based in Honaker, VA,
for $52 million. The purchase price included a net cash payment of $38 million and contingent consideration
totaling $14 million primarily related to the estimated fair value of contingent royalty payments to the seller if
certain minimum production levels are met for a period of up to 20 years. The assets acquired, which are adjacent
to SunCoke Energy’s existing mining operations, include two active underground mines and one active surface
and highwall mine currently producing between 250 and 300 thousand tons of coal annually.
In May 2011, Sunoco Logistics Partners L.P. (the “Partnership”) obtained a controlling financial interest in
Inland Corporation (“Inland”) through a series of transactions involving Sunoco and a third party. Sunoco
exercised its rights to acquire additional ownership interests in Inland for $56 million, net of cash received, and
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