DCP MIDSTREAM PARTNERS, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2011, 2010 and 2009 — (Continued)
The results of operations for acquisitions accounted for as business combinations have been included in the
consolidated financial statements since their respective acquisition dates and we have retrospectively adjusted
the December 31, 2010 consolidated balance sheet for changes in our purchase price allocation for our
December 30, 2010 acquisition of Marysville.
2. Summary of Significant Accounting Policies
Use of Estimates
— Conformity with GAAP requires management to make estimates and assumptions
that affect the amounts reported in the consolidated financial statements and notes. Although these estimates are
based on management’s best available knowledge of current and expected future events, actual results could
differ from those estimates.
Cash and Cash Equivalents
— We consider investments in highly liquid financial instruments purchased
with an original stated maturity of 90 days or less to be cash equivalents.
Short-Term Investments
— We may invest available cash balances in various financial instruments, such
as commercial paper and money market instruments. These instruments provide for a high degree of liquidity
through features which allow for the redemption of the investment at its face amount plus earned income. As
we generally intend to sell these instruments within one year or less from the balance sheet date, and as they are
available for use in current operations, they are classified as current assets, unless otherwise restricted.
We classify all short-term investments as available-for-sale as we do not intend to hold them to maturity,
nor are they bought or sold with the objective of generating profit on short-term differences in prices. Short-
term investments are recorded at fair value, with changes in fair value recorded as unrealized gains and losses in
accumulated other comprehensive income (loss), or AOCI. The cost, including accrued interest on investments,
approximates fair value, due to the short-term, highly liquid nature of the securities held by us; interest rates are
re-set on a daily, weekly or monthly basis.
Inventories
— Inventories, which consist primarily of NGLs and natural gas, are recorded at the lower of
weighted-average cost or market value. Transportation costs are included in inventory.
Property, Plant and Equipment
— Property, plant and equipment are recorded at historical cost. The cost
of maintenance and repairs, which are not significant improvements, are expensed when incurred. Depreciation
is computed using the straight-line method over the estimated useful lives of the assets.
Goodwill and Intangible Assets
— Goodwill is the cost of an acquisition less the fair value of the net
assets of the acquired business. We perform an annual impairment test of goodwill in the third quarter, and
update the test during interim periods when we believe events or changes in circumstances indicate that we may
not be able to recover the carrying value of a reporting unit. We primarily use a discounted cash flow analysis
to perform the assessment. Key assumptions in the analysis include the use of an appropriate discount rate,
estimated future cash flows and an estimate of operating and general and administrative costs. In estimating
cash flows, we incorporate current market information, as well as historical and other factors, into our
forecasted commodity prices. For certain reporting units, we may elect to first assess qualitative factors to
determine whether it is more likely than not that the fair value of our reporting units is less than the carrying
value.
Intangible assets consist primarily of customer contracts, including commodity purchase, transportation
and processing contracts and related relationships. These intangible assets are amortized on a straight-line basis
over the period of expected future benefit. Intangible assets are removed from the gross carrying amount and
the total of accumulated amortization in the period in which they become fully amortized.
Long-Lived Assets
— We periodically evaluate whether the carrying value of long-lived assets has been
impaired when circumstances indicate the carrying value of those assets may not be recoverable. This
evaluation is based on undiscounted cash flow projections. The carrying amount is not recoverable if it exceeds
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