Sunoco 2014 Annual Report Download - page 73

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Revenue Recognition
Pipeline revenues are recognized upon delivery of the barrels to the location designated by the shipper. Acquisition and
marketing revenues for crude oil, refined products and NGLs are recognized when title to and risk of loss of the product is
transferred to the customer. Terminalling and storage revenues are recognized at the time the services are provided. Revenues
are not recognized for crude oil exchange transactions, which are entered into primarily to acquire crude oil of a desired quality
or to reduce transportation costs by taking delivery closer to the Partnership's end markets. Any net differential for exchange
transactions is recorded as an adjustment to cost of products sold in the consolidated statements of comprehensive income.
Affiliated revenues are generated from sales of crude oil, refined products and NGLs, as well as the provision of crude
oil, refined products, NGLs, pipeline transportation, terminalling and storage services to ETP and its affiliates (including
Sunoco). Sales of crude oil, refined products and NGLs to affiliated entities are priced using market-based rates. Affiliated
entities pay fees for transportation or terminalling services based on the terms and conditions of an established agreement or
published tariffs.
Cash Equivalents
The Partnership considers all highly liquid investments with a remaining maturity of three months or less at the time of
purchase to be cash equivalents. At December 31, 2014 and 2013, cash equivalents consisted of time deposits and money
market investments.
Accounts Receivable, Net
Accounts receivable represent valid claims against non-affiliated customers (see Note 4 for affiliated receivables) for
products sold or services rendered. The Partnership extends credit terms to certain customers after review of various credit
indicators, including the customers' credit ratings. Outstanding customer receivable balances are regularly reviewed for
possible non-payment indicators and reserves are recorded for doubtful accounts based upon management's expectations
regarding collectability. Actual receivable balances are charged against the reserve when all collection efforts have been
exhausted.
Inventories
Inventories are valued at the lower of cost or market. Crude oil and refined products inventory costs have been
determined using the last-in, first-out method ("LIFO"). Under this methodology, the cost of products sold consists of the actual
acquisition costs of the Partnership, which include transportation and storage costs. Such costs are adjusted to reflect increases
or decreases in inventory quantities, which are valued based on the changes in the LIFO inventory layers. The cost of materials,
supplies and other inventories is principally determined using the average-cost method.
At December 31, 2014, a lower of cost or market adjustment was applied to crude oil, refined products and NGL
inventories due to a decline in the market price of these products during the fourth quarter 2014. The write down was calculated
based upon current replacement costs. See Note 6 for additional information.
Properties, Plants and Equipment
Properties, plants and equipment are stated at cost. Additions to properties, plants and equipment, including replacements
and improvements, are recorded at cost. Repair and maintenance expenditures are charged to expense as incurred. Depreciation
is determined principally using the straight-line method based on the estimated useful lives of the related assets. For certain
interstate pipelines, the depreciation rate is applied to the net asset value based on the Federal Energy Regulatory Commission's
("FERC") requirements, which approximates the estimated useful lives of the related assets.
Capitalized Interest
The Partnership capitalizes interest incurred on funds borrowed for contributions to joint venture interests and to certain
capital projects during periods in which construction activities are in progress to bring those projects to their intended use.
Investment in Affiliates
Investment in affiliates, which consist of corporate joint ventures in which the Partnership does not have a controlling
financial interest, but over which the Partnership can exercise significant influence, are accounted for under the equity method
of accounting. Under this method, an investment is carried at cost, adjusted for the equity in income (loss), reduced for
dividends received and adjusted for changes in accumulated other comprehensive income (loss). Income recognized from the
Partnership's corporate joint venture interests is presented within other income in the consolidated statements of comprehensive
income.
The Partnership allocates the excess of its investment cost over its equity in the net assets of affiliates to the underlying
tangible and intangible assets of the corporate joint ventures. Other than land and indefinite-lived intangible assets, all amounts