Sunoco 2010 Annual Report Download - page 81

Crude oil and refined product exchange transactions, which are entered into primarily to acquire crude oil
and refined products of a desired quality or at a desired location, are netted in cost of products sold and operating
expenses in the consolidated statements of operations.
Consumer excise taxes on sales of refined products and merchandise are included in both revenues and costs
and expenses in the consolidated statements of operations, with no effect on net income.
Cash Equivalents
Sunoco considers all highly liquid investments with a remaining maturity of three months or less at the time
of purchase to be cash equivalents. These cash equivalents consist principally of time deposits and money market
investments.
Inventories
Inventories are valued at the lower of cost or market. The cost of crude oil and petroleum and chemical
product inventories is determined using the last-in, first-out method (“LIFO”). The cost of coal and coke
inventories is determined primarily on a first-in, first-out method. The cost of materials, supplies and other
inventories is determined using principally the average-cost method.
Depreciation and Retirements
Plants and equipment are generally depreciated on a straight-line basis over their estimated useful lives.
Gains and losses on the disposals of fixed assets are generally reflected in net income.
Impairment of Long-Lived Assets
Long-lived assets held for sale are recorded at the lower of their carrying amount or fair value less cost to
sell. Long-lived assets, other than those held for sale, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets may not be recoverable. An asset is considered to
be impaired when the undiscounted estimated net cash flows expected to be generated by the asset are less than
its carrying amount. The impairment recognized is the amount by which the carrying amount exceeds the fair
value of the impaired asset.
Goodwill and Intangible Assets
Goodwill, which represents the excess of the purchase price over the fair value of net assets acquired, and
indefinite-lived intangible assets are tested for impairment at least annually rather than being amortized. Sunoco
determined that the $31 million of goodwill pertaining to its polypropylene chemicals business was impaired
during 2008 and $2 million of goodwill allocated to its Eagle Point refinery was impaired during 2009 (Note 2).
No other goodwill or any indefinite-lived intangible assets were impaired during the 2008-2010 period.
Intangible assets with finite useful lives are amortized over their useful lives in a manner that reflects the pattern
in which the economic benefit of the intangible assets is consumed. In addition, goodwill and intangible assets
associated with assets to be disposed of are included in the carrying amount of such assets in determining the
gain or loss on disposal.
Environmental Remediation
Sunoco accrues environmental remediation costs for work at identified sites where an assessment has
indicated that cleanup costs are probable and reasonably estimable. Such accruals are undiscounted and are based
on currently available information, estimated timing of remedial actions and related inflation assumptions,
existing technology and presently enacted laws and regulations. If a range of probable environmental cleanup
costs exists for an identified site, the minimum of the range is accrued unless some other point in the range is
more likely in which case the most likely amount in the range is accrued.
Maintenance Shutdowns
Maintenance and repair costs in excess of $500 thousand incurred in connection with major maintenance
shutdowns are capitalized when incurred and amortized over the period benefited by the maintenance activities.
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