Valero 2015 Annual Report Download - page 78

Table of Contents
VALERO ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
in fair value recognized in net income; (ii) simplifies the impairment assessment of equity investments without readily determinable fair
values by requiring a qualitative assessment to identify impairment; (iii) eliminates the requirement for an entity to disclose the methods
and significant assumptions used to estimate the fair value of financial instruments measured at amortized cost; (iv) requires an entity to
use the exit price notion when measuring the fair value of financial instruments for disclosure purposes; and (v) requires separate
presentation of financial assets and financial liabilities by measurement category and form of financial asset on the balance sheet or the
accompanying notes to the financial statements. These provisions are effective for annual reporting periods beginning after
December 15, 2017, and interim periods within those annual periods. The standard is to be applied using a cumulative-effect
adjustment to the balance sheet as of the beginning of the fiscal year of adoption. We are currently evaluating the effect that adopting
this standard will have on our financial statements and related disclosures.
In February 2016, the ASC was amended and a new accounting standard, ASC Topic 842, “Leases,” was issued to increase the
transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and
disclosing key information about leasing arrangements. In order to meet that objective, the new standard requires recognition of the
assets and liabilities that arise from leases. Accordingly, a lessee will recognize a right-of-use (ROU) asset for its right to use the
underlying asset and a lease liability for the corresponding lease obligation. Both the ROU asset and lease liability will initially be
measured at the present value of the future minimum lease payments over the lease term. Subsequent measurement, including the
presentation of expenses and cash flows, will depend on the classification of the lease as either a finance or an operating lease. Initial
costs directly attributable to negotiating and arranging the lease will be included in the ROU asset. Lessees can make an accounting
policy election by class of underlying asset not to recognize a ROU asset and corresponding lease liability for leases with a term of
12 months or less. Accounting by lessors will remain largely unchanged from current U.S. GAAP. In transition, lessees and lessors are
required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The
modified retrospective approach includes a number of optional practical expedients that companies may elect to apply. These practical
expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases
that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or
to purchase the underlying asset. The transition guidance also provides specific guidance for sale and leaseback transactions, build-to-
suit leases, leveraged leases, and amounts previously recognized in accordance with the business combinations guidance for leases. The
new standard is effective for public companies for fiscal years beginning after December 15, 2018, and interim periods within those
years, with early adoption permitted. We are currently evaluating the effect that adopting this standard will have on our financial
statements and related disclosures.
2. DISCONTINUED OPERATIONS
In May 2014, we abandoned our Aruba Refinery, except for the associated crude oil and refined products terminal assets that we
continue to operate. As a result, the refinery’s results of operations have been presented in this report as discontinued operations for the
years ended December 31, 2014 and 2013.
The Aruba Refinery resides on land leased from the Government of Aruba (GOA) and our agreements with the GOA require us to
dismantle our leasehold improvements under certain conditions. Because of our May 2014 decision to abandon the refining assets, we
believe the GOA will require us to dismantle those
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