Sunoco 2010 Annual Report Download - page 83

prior to December 2008 that vest when an employee becomes retirement eligible (i.e., the vesting period cannot
exceed the date an employee becomes retirement eligible). For awards granted in December 2008 and thereafter,
there was no accelerated vesting for retirement-eligible employees.
Asset Retirement Obligations
Sunoco establishes accruals for the fair value of conditional asset retirement obligations (i.e., legal
obligations to perform asset retirement activities 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) if the fair value can be reasonably
estimated. Sunoco has legal asset retirement 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. Consequently, the
retirement obligations for these assets cannot be measured at this time.
Fair Value Measurements
The Company determines fair value as the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the measurement date. As required, the
Company utilizes valuation techniques that maximize the use of observable inputs (levels 1 and 2) and minimize
the use of unobservable inputs (level 3) within the fair value hierarchy included in current accounting guidance.
The Company generally applies the “market approach” to determine fair value. This method uses pricing and
other information generated by market transactions for identical or comparable assets and liabilities. Assets and
liabilities are classified within the fair value hierarchy based on the lowest level (least observable) input that is
significant to the measurement in its entirety.
2. Changes in Business and Other Matters
Acquisitions
In July 2010, Sunoco Logistics Partners L.P. acquired a butane blending business from Texon L.P. for $152
million including inventory. The acquisition includes patented technology for blending butane into gasoline,
contracts with customers currently utilizing the patented technology, butane inventories and other related assets.
The Partnership also increased its ownership interest in a pipeline joint venture for $6 million in July 2010. This
interest continues to be accounted for as an equity method investment.
The Partnership also exercised its rights to acquire additional ownership interests in Mid-Valley Pipeline
Company (“Mid-Valley”) and West Texas Gulf Pipe Line Company (“WTG”) for a total of $85 million during
the third quarter of 2010, increasing its ownership interests in Mid-Valley and WTG to 91 and 60 percent,
respectively. As the Partnership now has a controlling financial interest in both Mid-Valley and WTG, the joint
ventures are now both reflected as consolidated subsidiaries of Sunoco from the dates of their respective
acquisitions. In connection with these acquisitions, Sunoco recognized a $128 million pretax gain ($37 million
after tax attributable to Sunoco shareholders) from the remeasurement of the pre-acquisition equity interests in
Mid-Valley and WTG to fair value upon consolidation. The fair value of such interests was determined based on
the amounts paid by the Partnership in connection with the exercise of its acquisition rights. These gains are
reported separately in the consolidated statement of operations.
In December 2010, Sunoco acquired 25 retail locations consisting of assets located in the Buffalo, Syracuse,
Albany, and Rochester markets of central and northern New York for $25 million including inventory.
75