Sunoco 2015 Annual Report Download - page 79

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Lease Accounting
The Partnership accounts for arrangements that convey the right to use property, plant or equipment for a stated period of
time as leases. Whether an arrangement contains a lease is determined at inception of the arrangement based on all of the facts
and circumstances. The Partnership reassesses whether an arrangement contains a lease after the inception of the arrangement
only if (a) there is a change in the contractual terms, (b) a renewal option is exercised or an extension is agreed to by the parties
to the arrangement, (c) there is a change in the determination of whether or not fulfillment is dependent on specified property,
plant, or equipment, or (d) there is a substantial physical change to the specified property, plant, or equipment. The Partnership
continually analyzes its new and existing arrangements to evaluate whether they contain leases. Revenue or expense from
arrangements where the Partnership is the lessor or lessee, respectively, is recognized ratably over the term of the underlying
arrangement.
Net Income Attributable to Sunoco Logistics Partners L.P. Per Limited Partner Unit
The Partnership uses the two-class method to determine basic and diluted earnings per unit. The two-class method is an
earnings allocation formula that determines the earnings for each class of equity ownership and participating security according
to distributions declared and participation rights in undistributed earnings. The Partnership calculates basic and diluted net
income attributable to Sunoco Logistics Partners L.P. ("net income attributable to SXL") per limited partner unit by dividing net
income attributable to SXL, after deducting the amounts allocated to the general partner’s interest and incentive distribution
rights ("IDRs"), by the weighted average number of limited partner units and Class B units outstanding during the period. IDRs
in a master limited partnership are treated as participating securities for the purpose of computing net income attributable to
limited partner units. The general partner holds all of the IDRs. In addition, when earnings differ from cash distributions,
undistributed or over distributed earnings are to be allocated to the general partner, limited partners and Class B unitholders
based on the contractual terms of the partnership agreement. See Note 12 for additional information on the terms of the Class B
units.
3. Acquisitions
A key component of the Partnership's primary business strategy is to pursue strategic and accretive acquisitions that
complement its existing asset base. The Partnership completed the following acquisitions during the years ended December 31,
2015, 2014 and 2013:
• In December 2014, the Partnership acquired an additional 28.3 percent ownership interest in the West Texas Gulf
from Chevron Pipe Line Company for $325 million, increasing the Partnership's controlling financial interest to
88.6 percent. In January 2015, the Partnership acquired the remaining noncontrolling ownership interest in West
Texas Gulf for $131 million. As these transactions represented the acquisition of ownership interest in a
consolidated subsidiary, noncontrolling interest and partners’ equity were reduced by $92 and $364 million,
respectively, in accordance with applicable accounting guidance. West Texas Gulf is reflected as a consolidated
subsidiary within the Crude Oil segment.
• In the second quarter 2014, the Partnership acquired a crude oil purchasing and marketing business from EDF
Trading North America, LLC ("EDF"). The purchase consisted of a crude oil acquisition and marketing business
and related assets which handle 20 thousand barrels per day. The acquisition also included a promissory note that
was convertible to an equity interest in a rail facility (see below). The acquisition is included in the Crude Oil
segment.
• In the second quarter 2014, the Partnership acquired a 55 percent economic and voting interest in PRT, a rail
facility in Wellington, Utah. As the Partnership acquired a controlling financial interest in PRT, the entity is
reflected as a consolidated subsidiary of the Partnership from the acquisition date and is included in the Crude Oil
segment. The terms of the acquisition provide PRT’s noncontrolling interest holders the option to sell their
interests to the Partnership at a price defined in the purchase agreement. As a result, the noncontrolling interests
attributable to PRT are excluded from the Partnership's total equity and are instead reflected as redeemable
interests in the consolidated balance sheet.
The $65 million purchase price for the EDF and PRT acquisitions (net of cash received) consisted primarily of net
working capital largely attributable to inventory ($24 million), properties, plants and equipment ($14 million), and
intangible assets ($28 million). These fair value allocations also resulted in an increase to goodwill ($12 million)
and redeemable noncontrolling interests ($15 million).