Sunoco 2014 Annual Report Download - page 74

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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.
Assets acquired and liabilities assumed in connection with acquisitions from entities under common control are recorded
by the Partnership at the entity's net carrying value. The Partnership records any difference between the consideration paid and
the carrying value of the net assets and liabilities as a distribution from or contribution to equity.
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 recent acquisitions.
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.
During the second quarter 2012, the Partnership reversed $10 million of regulatory obligations which were no longer
expected to be incurred.
The Partnership recognized an impairment charge of $9 million in 2012. These charges related to the cancellation of a
software project and other costs associated with the write-off of assets that the Partnership could not deploy elsewhere within
its operations.
Goodwill
Goodwill, which represents the excess of the purchase price in a business combination over the fair value of net assets
acquired, is tested for impairment annually in the fourth quarter, or more often if events or changes in circumstances indicate
that the carrying value of goodwill may exceed its estimated fair value. The Partnership determined during 2014, 2013 and
2012 that goodwill was not impaired.
Management's process of evaluating goodwill for impairment involves estimating the fair value of the Partnership's
reporting units that contain goodwill. Inherent in estimating the fair value for each reporting unit are certain judgments and
estimates relating to market multiples for comparable businesses, management's interpretation of current economic indicators
and market conditions, and assumptions about the Partnership's strategic plans with regard to its operations. To the extent
additional information arises, market conditions change or the Partnership's strategies change, it is possible that the conclusion
regarding whether the goodwill is impaired could change and result in future goodwill impairment charges.
Fair value is estimated using a market multiple methodology whereby the ratios of business enterprise value to earnings
before interest, taxes, depreciation and amortization ("EBITDA") of comparable companies are used to estimate the fair value
of the Partnership's reporting units. Management establishes fair value by comparing the reporting unit to other companies that
are similar, from an operational or industry perspective, and by considering risk characteristics in order to determine the risk
profile relative to the comparable companies as a group. The most significant assumptions are the market multiples.