Sunoco 2010 Annual Report Download - page 80

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Sunoco, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The consolidated financial statements of Sunoco, Inc. and subsidiaries (collectively, “Sunoco” or the
“Company”) contain the accounts of all entities that are controlled and variable interest entities (“VIEs”) for
which the Company is the primary beneficiary. Corporate joint ventures and other investees over which the
Company has the ability to exercise significant influence that are not consolidated are accounted for by the equity
method. Effective January 1, 2010, the Company adopted new accounting guidance concerning the accounting
and reporting for VIEs. The new guidance, among other things, clarifies when a company is to be deemed the
primary beneficiary and requires an ongoing reassessment of whether an entity is the primary beneficiary of a
VIE. Adoption of this new guidance had no impact on the Company’s assessments of its interests in VIEs.
A variable interest entity is defined as a legal entity that has equity investors that do not have sufficient
equity at risk for the entity to support its activities without additional subordinated financial support or, as a
group, the holders of the equity at risk lack (i) the power to direct the entity’s activities or (ii) the obligation to
absorb the expected losses or the right to receive the expected residual returns of the entity. A VIE is required to
be consolidated by a company if that company is the primary beneficiary. The primary beneficiary is (i) the
company that is subject to a majority of the risk of loss from the VIE’s activities or, if no company is subject to a
majority of such risk, the company that is entitled to receive a majority of the VIE’s residual returns, and (ii) has
the power to direct the activities of a VIE that most significantly impact the VIE’s economic performance.
On March 31, 2010, Sunoco completed the sale of the common stock of its polypropylene chemicals
business to Braskem S.A. The assets sold as part of this transaction included the polypropylene manufacturing
facilities in LaPorte, TX, Neal, WV, and Marcus Hook, PA, a propylene supply agreement and related inventory.
On June 1, 2009, Sunoco completed the sale of its Tulsa refinery to Holly Corporation. The transaction also
included the sale of inventory attributable to the refinery. As a result of the sale of the polypropylene chemicals
business and Tulsa refinery, such operations have been classified as discontinued operations for all periods
presented in the consolidated statements of operations and related footnotes (Note 2).
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles
requires management to make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual amounts could differ from these estimates.
Reclassifications
Certain amounts in the prior years’ financial statements have been reclassified to conform to the current-
year presentation.
Revenue Recognition
The Company sells various refined products (including gasoline, middle distillates, residual fuel and
petrochemicals), coke and coal and also sells crude oil in connection with the crude oil gathering and marketing
activities of its publicly traded limited partnership. In addition, the Company sells a broad mix of merchandise
such as groceries, fast foods and beverages at its convenience stores, operates common carrier pipelines and
provides terminalling services through its publicly traded limited partnership and provides a variety of car care
services at its retail gasoline outlets. Revenues related to the sale of products are recognized when title passes,
while service revenues are recognized when services are provided. Title passage generally occurs when products
are shipped or delivered in accordance with the terms of the respective sales agreements. In addition, revenues
are not recognized until sales prices are fixed or determinable and collectibility is reasonably assured.
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