Sunoco 2008 Annual Report Download - page 75

Download and view the complete annual report

Please find page 75 of the 2008 Sunoco annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 120

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120

statements in accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income
Taxes,” by prescribing the minimum recognition threshold and measurement attribute a tax position taken or
expected to be taken on a tax return is required to meet before being recognized in the financial statements. As a
result of the implementation of FASB Interpretation No. 48, the Company recorded a $12 million reduction in
retained earnings at January 1, 2007 to recognize the cumulative effect of the adoption of this standard. The
Company recognizes interest related to unrecognized tax benefits in interest cost and debt expense and penalties
in income tax expense in the consolidated statements of income. Unrecognized tax benefits and accruals for
interest and penalties are included in other deferred credits and liabilities in the consolidated balance sheets.
Retirement Benefit Liabilities
Effective December 31, 2006, the Company adopted Statement of Financial Accounting Standards No. 158,
“Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans” (“SFAS No. 158”), which
amended Statement of Financial Accounting Standards No. 87, “Employers’ Accounting for Pensions,” and
Statement of Financial Accounting Standards No. 106, “Employers’ Accounting for Postretirement Benefits
Other Than Pensions.” SFAS No. 158, among other things, requires that the funded status of defined benefit and
postretirement benefit plans be fully recognized on the balance sheet. The funded status is determined by the
difference between the fair value of plan assets and the benefit obligation, with the benefit obligation represented
by the projected benefit obligation for defined benefit plans and the accumulated postretirement benefit
obligation for postretirement benefit plans. Under SFAS No. 158, previously unrecognized actuarial gains
(losses) and prior service costs (benefits) are recognized in the consolidated balance sheets as a reduction in
prepaid retirement costs or an increase in the retirement benefit liability with a corresponding charge or credit
initially to the accumulated other comprehensive loss component of shareholders’ equity. The charge or credit to
shareholders’ equity, which is reflected net of related tax effects, is subsequently recognized in net income when
amortized as a component of defined benefit plans and postretirement benefit plans expense with an offsetting
adjustment to comprehensive income for the period.
Upon adoption of SFAS No. 158, the Company recorded an after-tax charge totaling $192 million to the
accumulated other comprehensive loss component of shareholders’ equity at December 31, 2006. The adoption
of SFAS No. 158 had no impact on Sunoco’s 2006 consolidated statement of income. Under the predecessor
accounting rules, a minimum pension liability adjustment was required in shareholders’ equity to reflect the
unfunded accumulated benefit obligation relating to these plans.
Minority Interests in Cokemaking Operations
Cash investments by third parties were recorded as an increase in minority interests in the consolidated
balance sheets. There was no recognition of any gain at the dates cash investments were made as the third-party
investors were entitled to a preferential return on their investments.
Nonconventional fuel credit and other net tax benefits generated by the Company’s cokemaking operations
that were allocated to third-party investors prior to the completion of the preferential return period during the
fourth quarter of 2007 were recorded as a reduction in minority interests and were included as income in the
Coke segment. The investors’ preferential return was recorded as an increase in minority interests and was
recorded as expense in the Corporate and Other segment. The net of these two amounts represented a noncash
change in minority interests in cokemaking operations, which was recognized in other income, net, in the
consolidated statements of income. Upon completion of the preferential return period, the third-party investor’s
share of net income generated by the Company’s cokemaking operations is recorded as a noncash increase in
minority interest expense in the Coke segment and is included in selling, general and administrative expenses in
the consolidated statements of income.
Cash payments, representing the distributions of the investors’ share of cash generated by the cokemaking
operations, are recorded as a reduction in minority interests.
67