World Fuel Services 2015 Annual Report Download - page 61

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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 $8.2 million, $5.2 million and $8.5 million during 2015, 2014 and 2013, 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, 2015, 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.
Vendor volume rebates are recognized as a reduction of cost of revenue in the period earned when realization is probable
and estimatable and when certain other conditions are met. The rebates passed on to our customers are recognized as a
reduction of revenue in the period earned in accordance with the applicable customer agreements. The rebate terms of the
customer agreements are generally similar to those of the vendor agreements. We also receive branding allowances from
fuel suppliers to defray the costs of branding and enhancing certain of our customer locations. The branding allowances
received are recorded as a reduction of cost of revenue. The amounts recorded as a reduction of revenue related to volume
rebates and branding allowance arrangements paid to our customers and the amounts recorded as a reduction to cost of
revenue related to volume rebates received from vendors were not significant during each of the years presented on the
consolidated statements of income and comprehensive income.
Share-Based Payment Awards
We account for share-based payment awards on a fair value basis. Under fair value accounting, the grant-date fair value of
the share-based payment award is amortized as compensation expense, on a straight-line basis, over the vesting period
for both graded and cliff vesting awards. Annual compensation expense for share-based payment awards is reduced by an
expected forfeiture amount on outstanding share-based payment awards.
The estimated fair value of stock awards, such as restricted stock and restricted stock units (“RSUs”) is based on the
grant-date market value of our common stock, as defined in the respective plans under which the awards were granted. To