World Fuel Services 2014 Annual Report Download - page 60

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During 2014, we made other investments, aggregating to $18.0 million. Additionally, in December 2014, we sold our crude
oil joint venture interests for $43.0 million in cash and future contingent payments (“operational overrides”) equal to 22.5
cents per barrel of crude oil received at the Pioneer Terminal in New Town, North Dakota, up to a maximum of 80,000
barrels per day through December 2026. At the sale closing date, the present value, based on a 9% discount rate, of the
maximum operational overrides was $49.2 million. We have elected to record the operational overrides in the periods in
which they are realized (when the crude oil is received at the Pioneer Terminal), and for 2014, the amount of operation
overrides recorded was not significant. The purchaser has the option to pay at any time the then-present value, using a
9% discount rate, of the maximum remaining future contingent payments. For 2014, we recorded a gain on the sale of
such investments of $18.1 million, which is included in other income, net in the consolidated statements of income and
comprehensive income. The after-tax gain, net of certain related operating expenses was $9.9 million, or $0.14 per basic
and diluted share.
As of December 31, 2014 and 2013, we had other investments of $69.5 million and $83.8 million, respectively, which are
included within identifiable intangible and other non-current assets.
Extinguishment of Liabilities
In the normal course of business, we accrue liabilities for fuel and services received for which invoices have not yet been
received. These liabilities are derecognized, or extinguished, if either (i) payment is made to relieve our obligation for the
liability or (ii) we are legally released from our obligation for the liability, such as when our legal obligations with respect to
such liabilities lapse or otherwise no longer exist. We derecognized vendor liability accruals due to the legal release of our
obligations in the amount of $5.3 million, $8.5 million and $11.2 million during 2014, 2013 and 2012, respectively, which is
reflected as a reduction of cost of revenue in the accompanying consolidated statements of income and comprehensive
income.
Revenue Recognition
Revenue from the sale of fuel is recognized when the sales price is fixed or determinable, collectability is reasonably assured
and title passes to the customer, which is when the delivery of fuel is made to our customer directly from us, the supplier or
a third-party subcontractor. Our fuel sales are generated as a fuel reseller as well as from on-hand inventory supply. When
acting as a fuel reseller, we generally purchase fuel from the supplier, and contemporaneously resell the fuel to the
customer, normally taking delivery for purchased fuel at the same place and time as the delivery is made to the customer.
We record the gross sale of the fuel as we generally take inventory risk, have latitude in establishing the sales price, have
discretion in the supplier selection, maintain credit risk and are the primary obligor in the sales arrangement.
Revenue from fuel-related services is recognized when services are performed, the sales price is fixed or determinable and
collectability is reasonably assured. We record the sale of fuel-related services on a gross basis as we generally have
latitude in establishing the sales price, have discretion in supplier selection, maintain credit risk and are the primary obligor
in the sales arrangement.
Commission from fuel broker services is recognized when services are performed and collectability is reasonably assured.
When acting as a fuel broker, we are paid a commission by the supplier.
Revenue from card payment and processing transactions is recognized at the time the purchase is made by the customer
using the charge card. Revenue from charge card transactions is generated from processing fees.
Vendor and Customer Rebates and Branding Allowances
We receive vendor rebates and branding allowances from a number of our fuel suppliers. Typically, a portion of the rebates
and allowances is passed on to our customers under the same terms as required by our fuel suppliers. Generally, volume
rebates are received from vendors under structured programs based on the level of fuel purchased or sold as specified in
the applicable vendor agreements. Many of the vendor agreements require repayment of all or a portion of the amount
received if we (or our customers, typically branded dealers) elect to discontinue selling the specified brand of fuel at certain
locations. As of December 31, 2014, the estimated amount of fuel rebates and branding allowances that would have to be
repaid upon de-branding at these locations, net of the amount due to us from the branded dealers under similar agreements
between us and such dealers were not significant. No liability is recorded for the amount of obligations which would become
payable upon de-branding.
Some of these vendor rebate and branding allowance arrangements require that we make assumptions and judgments
regarding, for example, the likelihood of attaining specified levels of purchases or selling specified volume of products. We
routinely review the relevant, significant factors and make adjustments when the facts and circumstances dictate that an
adjustment is warranted.