Sunoco 2014 Annual Report Download - page 58

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Our long-lived assets include identifiable intangible assets, which are comprised of customer relationships consisting of
throughput contracts and historical shipping rights, and technology related assets, which consist of patented technology
associated with our butane blending services. Customer relationship intangible assets represent the estimated economic value
assigned to certain relationships acquired in connection with business combinations or asset purchases whereby (i) we acquired
information about or access to customers, (ii) the customers now have the ability to transact business with us and (iii) we are
positioned due to limited competition to provide products or services to the customers. The customer relationship intangible
assets are amortized on a straight-line basis over their respective economic lives. Technology related intangible assets consist of
our patents for the blending of butane into refined products. These patents are amortized over their remaining legal lives. The
value assigned to these intangible assets is amortized through depreciation and amortization expense, over a weighted average
amortization period of approximately 17 years.
Long-lived assets are reviewed for impairment whenever events or circumstances indicate that the carrying amount of the
assets may not be recoverable. Such events and circumstances include, but are not limited to: operating losses; unused capacity;
market value declines; technological developments resulting in obsolescence; changes in demand for products manufactured by
others utilizing our services or for our products; changes in competition and competitive practices; uncertainties associated with
the United States and world economies; changes in the expected level of environmental capital, operating or remediation
expenditures; and changes in governmental regulations or actions. Additional factors impacting the economic viability of long-
lived assets are discussed under "Forward-Looking Statements" in this document.
A long-lived asset is considered to be impaired when the undiscounted net cash flows expected to be generated by the asset
are less than its 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 asset. It is often difficult to precisely estimate fair market value because quoted market
prices for our long-lived assets may not be readily available. Therefore, fair market value is generally based on the present values
of estimated future cash flows using discount rates commensurate with the risks associated with the assets being reviewed for
impairment.
In 2012, we recognized a non-cash impairment charge of $9 million related to a cancelled software project for the crude oil
acquisition and marketing business and a refined products pipeline project in Texas.
Goodwill. Goodwill represents the excess of consideration transferred plus the fair value of noncontrolling interests of an
acquired business over the fair value of net assets acquired. Goodwill is not amortized; however it is tested for impairment
annually or more often if warranted by events or changes in circumstances indicating that the carrying value may exceed the
estimated fair value.
Management's process of evaluating goodwill for impairment involves estimating the fair value of our reporting units that
contain goodwill. Inherent in estimating the fair value for each reporting unit are certain judgments and estimates relating to
market multiples for comparable businesses, including management's interpretation of current economic indicators and market
conditions, and assumptions about our strategic plans with regard to our operations. To the extent additional information arises,
market conditions change or our strategies change, it is possible that the conclusion regarding whether the goodwill is impaired
could change and result in future goodwill impairment charges.
Fair value is estimated using a market multiple methodology whereby multiples of business enterprise value to EBITDA of
comparable companies are used to estimate the fair value of the reporting units. Management establishes fair value by comparing
the reporting unit to other companies that are similar, from an operational or industry standpoint, and considers the risk
characteristics in order to determine the risk profile relative to the comparable companies as a group. The most significant
assumptions are the market multiplies.
Environmental Remediation. At December 31, 2014, our accrual for environmental remediation activities was $14 million.
This accrual is for work at identified sites where an assessment has indicated that cleanup costs are probable and reasonably
estimable. The accrual is undiscounted and is based on currently available information regarding estimated timing of remedial
actions and related inflation assumptions, existing technology and presently enacted laws and regulations. It is often extremely
difficult to develop reasonable estimates of future site remediation costs due to changing regulations, changing technologies and
their associated costs, and changes in the economic environment. In the above instances, if a range of probable environmental
cleanup costs exists for an identified site, the minimum of the range is accrued unless some other point or points in the range are
more likely, in which case the most likely amount in the range is accrued. Engineering studies, historical experience and other
factors are used to identify and evaluate remediation alternatives and their related costs in determining the estimated accruals for
environmental remediation activities. Losses attributable to unasserted claims are also reflected in the accruals to the extent their
occurrence is probable and reasonably estimable.
Management believes that none of the current remediation projects are material, individually or in the aggregate, to our
financial position at December 31, 2014. As a result, our exposure to adverse developments with respect to any individual site is