Sunoco 2015 Annual Report Download - page 93

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The Partnership's derivative positions are comprised of commodity contracts. The following table sets forth the impact of
derivatives on the Partnership's results of operations for the periods presented:
Location of Gains (Losses)
Recognized in Earnings Gains (Losses) Recognized in Earnings
(in millions)
Year Ended December 31, 2015
Derivatives not designated as hedging instruments:
Commodity contracts Sales and other operating revenue $ 47
Commodity contracts Cost of products sold (26)
Commodity contracts Operating expenses (1)
$ 20
Year Ended December 31, 2014
Derivatives not designated as hedging instruments:
Commodity contracts Sales and other operating revenue $ 81
Commodity contracts Cost of products sold (20)
$ 61
Year Ended December 31, 2013
Derivatives designated as cash flow hedging
instruments:
Commodity contracts Sales and other operating revenue $ (1)
Commodity contracts Cost of products sold —
$(1)
Derivatives not designated as hedging instruments:
Commodity contracts Sales and other operating revenue $ (7)
Commodity contracts Cost of products sold 1
$(6)
Credit Risk Management
The Partnership maintains credit policies with regard to its counterparties that management believes minimize the overall
credit risk through credit analysis, credit approvals, credit limits and monitoring procedures. The credit positions of the
Partnership's customers are analyzed prior to the extension of credit and periodically after credit has been extended. The
Partnership's counterparties consist primarily of financial institutions and major integrated oil companies. This concentration of
counterparties may impact the Partnership's overall exposure to credit risk, either positively or negatively, as the counterparties
may be similarly affected by changes in economic, regulatory or other conditions.
Interest Rate Risk Management
The Partnership has interest rate risk exposure for changes in interest rates related to its outstanding borrowings. The
Partnership manages its exposure to changes in interest rates through the use of a combination of fixed-rate and variable-rate
financial instruments. At December 31, 2015, the Partnership had $562 million of consolidated variable-rate borrowings under the
$2.50 billion Credit Facility.
16. Fair Value Measurements
The estimated fair value of the Partnership's financial instruments has been determined based on management's
assessment of available market information and appropriate valuation methodologies. The Partnership's current assets (other
than derivatives and inventories) and current liabilities (other than derivatives) are financial instruments and most of these
items are recorded at cost in the consolidated balance sheets. The estimated fair value of these financial instruments
approximates their carrying value due to their short-term nature. The Partnership's derivatives are measured and recorded at fair
value based on observable market prices. The estimated fair value of the Partnership's senior notes is determined using
observable market prices, as these notes are actively traded (level 1). The estimated aggregate fair value of the senior notes at
December 31, 2015 was $4.2 billion, compared to the carrying amount of $5.1 billion. The estimated aggregate fair value of the
senior notes at December 31, 2014 was $4.1 billion, compared to the carrying amount of $4.1 billion.
For further information regarding the Partnership's fair value measurements, see Notes 2, 12 and 15.