Valero 2015 Annual Report Download - page 72

Table of Contents
VALERO ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
income. However, a gain or loss is recognized in income for a major property asset that is retired, replaced, or sold and for an abnormal
disposition of a property asset (primarily involuntary conversions). Gains and losses are reflected in depreciation and amortization
expense, unless such amounts are reported separately due to materiality.
Depreciation of property assets used in our ethanol segment and our former retail segment (see Note 3) is recorded on a straight-line
basis over the estimated useful lives of the related assets. Leasehold improvements are amortized on a straight-line basis over the shorter
of the lease term or the estimated useful life of the related asset. Assets acquired under capital leases are amortized on a straight-line
basis over (i) the lease term if transfer of ownership does not occur at the end of the lease term or (ii) the estimated useful life of the
asset if transfer of ownership does occur at the end of the lease term.
Deferred Charges and Other Assets
“Deferred charges and other assets, net” primarily include the following:
• turnaround costs, which are incurred in connection with planned major maintenance activities at our refineries and ethanol
plants and which are deferred when incurred and amortized on a straight-line basis over the period of time estimated to lapse
until the next turnaround occurs;
• fixed-bed catalyst costs, representing the cost of catalyst that is changed out at periodic intervals when the quality of the catalyst
has deteriorated beyond its prescribed function, which are deferred when incurred and amortized on a straight-line basis over
the estimated useful life of the specific catalyst;
• income taxes receivable;
• investments in joint ventures accounted for under the equity method;
• intangible assets; and
• re-imaging costs associated with branded outlets.
Impairment of Assets
Long-lived assets are tested for recoverability whenever events or changes in circumstances indicate that the carrying amount of the
asset may not be recoverable. A long-lived asset is not recoverable if its carrying amount exceeds the sum of the undiscounted cash
flows expected to result from its use and eventual disposition. If a long-lived asset is not recoverable, an impairment loss is recognized
for the amount by which the carrying amount of the long-lived asset exceeds its fair value, with fair value determined based on
discounted estimated net cash flows or other appropriate methods.
We evaluate our equity method investments for impairment when there is evidence that we may not be able to recover the carrying
amount of our investments or the investee is unable to sustain an earnings capacity that justifies the carrying amount. A loss in the value
of an investment that is other than a temporary decline is recognized currently in income, and is based on the difference between the
estimated current fair value of the investment and its carrying amount.
Environmental Matters
Liabilities for future remediation costs are recorded when environmental assessments and/or remedial efforts are probable and the costs
can be reasonably estimated. Other than for assessments, the timing and magnitude of these accruals generally are based on the
completion of investigations or other studies or a commitment
66