Sunoco 2012 Annual Report Download - page 77

to the Partnership’s end markets. Any net differential for exchange transactions is recorded as an adjustment of
inventory costs in the purchases component of cost of products sold and operating expenses in the consolidated
statements of comprehensive income.
Affiliated revenues consist of sales of crude oil and refined products, as well as the provision of crude oil
and refined products, pipeline transportation, terminalling and storage services to ETP and Sunoco (including
their affiliated entities). Sales of crude oil and refined products to affiliated entities are priced using market based
rates. Sunoco and its affiliated entities pay fees for transportation or terminalling services based on the terms and
conditions of an established agreement or utilizing published tariffs.
Cash Equivalents
The Partnership considers all highly liquid investments with a remaining maturity of three months or less at
the time of purchase to be cash equivalents. At December 31, 2012 and 2011, these cash equivalents consisted of
money market accounts.
Accounts Receivable, Net
Accounts receivable represent valid claims against non-affiliated customers (see Note 4 for affiliated
receivables) for products sold or services rendered. The Partnership extends credit terms to certain customers
after review of various credit indicators, including the customer’s credit rating. Outstanding customer receivable
balances are regularly reviewed for possible non-payment indicators and reserves are recorded for doubtful
accounts based upon management’s estimate of collectability at the time of review. Actual balances are charged
against the reserve when all collection efforts have been exhausted.
Inventories
Inventories are valued at the lower of cost or market. Crude oil and refined products inventory costs have
been determined using the last-in, first-out method (“LIFO”). Under this methodology, the cost of products sold
consists of the actual acquisition costs of the Partnership, which include transportation and storage costs. Such
costs are adjusted to reflect increases or decreases in inventory quantities, which are valued based on the changes
in the LIFO inventory layers. The cost of materials, supplies and other inventories is principally determined using
the average-cost method.
Properties, Plants and Equipment
Properties, plants and equipment are stated at cost. Additions to properties, plants and equipment, including
replacements and improvements, are recorded at cost. Repair and maintenance expenditures are charged to
expense as incurred. Depreciation is provided principally using the straight-line method based on the estimated
useful lives of the related assets. For certain interstate pipelines, the depreciation rate is applied to the net asset
value based on the Federal Energy Regulatory Commission’s (“FERC”) requirements, which approximates the
useful lives prescribed under GAAP.
Capitalized Interest
The Partnership capitalizes interest on borrowed funds related to capital projects for periods that
construction activities are in progress to bring these projects to their intended use.
Investment in Affiliates
Investment in affiliates, which consist of corporate joint ventures, are accounted for under the equity method
of accounting. Under this method, an investment is carried at cost, increased for the equity in income or
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