Sunoco 2012 Annual Report Download - page 78

decreased for the equity in loss from the date of acquisition, reduced for dividends received and increased or
decreased for adjustments in other comprehensive income. Income recognized from the Partnership’s corporate
joint venture interests is presented within other income in the consolidated statements of comprehensive income.
The Partnership allocates the excess of its investment cost over its equity in the net assets of affiliates to the
underlying tangible and intangible assets of the corporate joint ventures. Other than land and indefinite-lived
intangible assets, all amounts allocated, principally to pipeline and related assets, are amortized using the
straight-line method over their estimated useful life of 40 years. The amortization of these amounts is included
within depreciation and amortization in the consolidated statements of comprehensive income.
Acquisitions
The assets acquired and liabilities assumed as part of the Partnership’s business combinations are recorded
at their estimated fair values as of the date of acquisition. Any excess of consideration transferred plus the fair
value of noncontrolling interest over the estimated fair value of the net assets acquired is recorded as goodwill.
To the extent the estimated fair value of the net assets acquired exceeds the purchase price plus the fair value of
the noncontrolling interest, a gain is recorded in current operations. The results of operations of acquired
businesses are included in the Partnership’s results from the dates of acquisition.
The Partnership’s asset acquisitions are recorded at the purchase price, which is allocated to the acquired
assets and assumed liabilities based on their relative estimated fair values.
Assets acquired and liabilities assumed include tangible and intangible assets, and contingent assets and
liabilities. The estimated fair values of these assets and liabilities are determined based on observable inputs such
as quoted market prices, information from comparable transactions, offers made by other prospective acquirers in
the cases where the Partnership has certain rights to acquire additional interests in existing investments, and the
replacement cost of assets in the same condition or stage of usefulness, or on unobservable inputs such as
expected future cash flows or internally developed estimates of value. The Partnership’s fair value measurements
are classified within the fair value hierarchy established by GAAP based on the lowest level (least observable)
input that is significant to the measurement in its entirety.
See Note 3 for additional information concerning the Partnership’s acquisitions during 2011 and 2010.
Impairment of Long-Lived Assets
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
estimated fair value of the impaired asset. Long-lived assets held for sale are recorded at the lower of their
carrying amount or estimated fair value less cost to sell the assets.
In September 2011, Sunoco announced its intention to exit its refining business in the northeast and initiated
a process to sell its refineries located in Philadelphia and Marcus Hook, Pennsylvania. In December 2011, the
main processing units at the Marcus Hook refinery were idled indefinitely. Management assessed the impact that
Sunoco’s decision to exit its refining business in the northeast would have on the Partnership’s assets that
historically served the refineries and determined that the Partnership’s refined products pipeline and terminal
assets continued to have expected future cash flows that support their carrying values. However, the Partnership
recognized a $42 million charge in the fourth quarter 2011 for crude oil terminal assets which would have been
negatively impacted if the Philadelphia refinery was permanently idled. The charge included a $31 million non-
cash impairment for asset write-downs at the Fort Mifflin Terminal Complex and $11 million for regulatory
obligations which would have been incurred if these assets were permanently idled. In September 2012, Sunoco
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