Sunoco 2007 Annual Report Download - page 50

primarily due to the accelerated expense recognition. The
future impact of the non-substantive vesting period will
be dependent upon the value of future stock-based awards
granted to employees who are eligible to retire prior to
the normal vesting periods of the awards.
Asset Retirement Obligations
At December 31, 2005, Sunoco implemented FASB Inter-
pretation No. 47, “Accounting for Conditional Asset
Retirement Obligations” (“FASB Interpretation No. 47”).
FASB Interpretation No. 47 clarifies that the term
“conditional asset retirement obligation” as used in
Statement of Financial Accounting Standards No. 143,
“Accounting for Asset Retirement Obligations” (“SFAS
No. 143”), refers to a legal obligation to perform an asset
retirement activity 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. FASB Inter-
pretation No. 47 provides that a liability for the fair value
of a conditional asset retirement obligation should be
recognized if that fair value can be reasonably estimated.
FASB Interpretation No. 47 also clarifies when an entity
would have sufficient information to reasonably estimate
the fair value of an asset retirement obligation.
In conjunction with the implementation of FASB Inter-
pretation No. 47, at December 31, 2005, Sunoco re-
corded an increase in asset retirement obligations of $57
million and a related increase in net properties, plants
and equipment of $47 million primarily attributable to
product storage tanks at Company facilities. The $10 mil-
lion cumulative effect of this accounting change ($6 mil-
lion after tax) has been included in cost of products sold
and operating expenses in the 2005 consolidated state-
ment of income. Sunoco did not reflect the $6 million
after-tax charge as a cumulative effect of accounting
change as it was not material. At December 31, 2007
Sunoco’s liability for asset retirement obligations
amounted to $69 million. Sunoco has legal asset retire-
ment 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. Con-
sequently, the retirement obligations for these assets can-
not be measured at this time.
New Accounting Principles
In September 2006, Statement of Financial Accounting
Standards No. 157, “Fair Value Measurements” (“SFAS
No. 157”), was issued. SFAS No. 157 defines fair value,
establishes a framework for measuring fair value and ex-
pands disclosures about such measurements that are per-
mitted or required under other accounting pronounce-
ments. While SFAS No. 157 may change the method of
calculating fair value, it does not require any new fair
value measurements.
In February 2007, Statement of Financial Accounting
Standards No. 159, “The Fair Value Option for Financial
Assets and Financial Liabilities” (“SFAS No. 159”), was
issued. SFAS No. 159 permits entities to choose to meas-
ure many financial instruments and certain other items at
fair value that are not currently required to be measured
at fair value, with unrealized gains and losses on such
items reported in earnings.
In December 2007, Statement of Financial Accounting
Standards No. 141 (revised 2007), “Business Combina-
tions” (“SFAS No. 141R”), was issued. SFAS No. 141R
replaces Statement of Financial Accounting Standards
No. 141, “Business Combinations,” and also requires,
among other things, that all business combinations be
accounted for by the acquisition method. Under this
method, the acquiring business measures and recognizes
the acquired business, as a whole, and the assets acquired
and liabilities assumed at their fair values as of the acquis-
ition date.
In December 2007, Statement of Financial Accounting
Standards No. 160, “Noncontrolling Interests in Con-
solidated Financial Statements” (“SFAS No. 160”), was
issued. Among other things, SFAS No. 160 amends Ac-
counting Research Bulletin No. 51, “Consolidated
Financial Statements,” to establish standards for the ac-
counting and reporting of noncontrolling (minority) in-
terests in consolidated financial statements. The new
standard will require that minority interests be reported
as a component of shareholders’ equity and that con-
solidated net income include amounts attributable to the
minority interests with such amounts separately disclosed
on the face of the income statement. SFAS No. 160 also
will require that all changes in minority interests that do
not result in a loss of control of the subsidiary be ac-
counted for as equity transactions.
SFAS No. 157 must be implemented for certain balance
sheet items effective January 1, 2008 and for all other
balance sheet items by January 1, 2009, SFAS No. 159
must be implemented effective January 1, 2008 and SFAS
No. 141R and SFAS No. 160 must be implemented
effective January 1, 2009. Sunoco is currently evaluating
the impact of these new accounting principles on its
financial statements.
2. Changes in Business and Other Matters
Acquisitions
Logistics Assets—In March 2006, Sunoco Logistics
Partners L.P., the 43-percent owned consolidated master
limited partnership through which Sunoco conducts a
substantial portion of its logistics operations, purchased
two separate crude oil pipeline systems and related storage
facilities located in Texas, one from affiliates of Black
Hills Energy, Inc. (“Black Hills”) for $41 million and the
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