Sunoco 2013 Annual Report Download - page 69

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Affiliated revenues are generated from 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 its affiliates (including Sunoco). Sales of
crude oil and refined products to affiliated entities are priced using market based rates. Affiliated entities pay fees for
transportation or terminalling services based on the terms and conditions of an established agreement or 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, 2013 and 2012, cash equivalents consisted of time deposits and money
market investments.
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 customers' credit ratings. Outstanding customer receivable balances are regularly reviewed for
possible non-payment indicators and reserves are recorded for doubtful accounts based upon management's expectations
regarding collectability. Actual receivable 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 determined 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 estimated useful lives of the related assets.
Capitalized Interest
The Partnership capitalizes interest incurred on funds borrowed for certain capital projects during periods in which
construction activities are in progress to bring those projects to their intended use.
Investment in Affiliates
Investment in affiliates, which consist of corporate joint ventures in which the Partnership does not have a controlling
financial interest, but over which the Partnership can exercise significant influence, are accounted for under the equity method
of accounting. Under this method, an investment is carried at cost, adjusted for the equity in income (loss), reduced for
dividends received and adjusted for changes in accumulated other comprehensive income (loss). 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 also presented within other income in the consolidated statements of
comprehensive income.
Acquisitions
The Partnership records assets acquired and liabilities assumed as part of third-party business combinations 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 results
of current operations. The results of operations of acquired businesses are included in the Partnership's results from the dates of
acquisition.