Page 125 - DCP AR2011 Dev

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DCP MIDSTREAM PARTNERS, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2011, 2010 and 2009 — (Continued)
the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset.
We consider various factors when determining if these assets should be evaluated for impairment, including but
not limited to:
• significant adverse change in legal factors or business climate;
• a current-period operating or cash flow loss combined with a history of operating or cash flow losses, or
a projection or forecast that demonstrates continuing losses associated with the use of a long-lived asset;
• an accumulation of costs significantly in excess of the amount originally expected for the acquisition or
construction of a long-lived asset;
• significant adverse changes in the extent or manner in which an asset is used, or in its physical
condition;
• a significant adverse change in the market value of an asset; or
• a current expectation that, more likely than not, an asset will be sold or otherwise disposed of before the
end of its estimated useful life.
If the carrying value is not recoverable, the impairment loss is measured as the excess of the asset’s
carrying value over its fair value. We assess the fair value of long-lived assets using commonly accepted
techniques, and may use more than one method, including, but not limited to, recent third party comparable
sales and discounted cash flow models. Significant changes in market conditions resulting from events such as
the condition of an asset or a change in management’s intent to utilize the asset would generally require
management to reassess the cash flows related to the long-lived assets.
Asset Retirement Obligations
— Our asset retirement obligations relate primarily to the retirement of
various gathering pipelines and processing facilities, obligations related to right-of-way easement agreements,
and contractual leases for land use. We adjust our asset retirement obligation each quarter for any liabilities
incurred or settled during the period, accretion expense and any revisions made to the estimated cash flows.
Asset retirement obligations associated with tangible long-lived assets are recorded at fair value in the
period in which they are incurred, if a reasonable estimate of fair value can be made, and added to the carrying
amount of the associated asset. This additional carrying amount is then depreciated over the life of the asset.
The liability is determined using a risk free interest rate, and increases due to the passage of time based on the
time value of money until the obligation is settled.
Investments in Unconsolidated Affiliates
— We use the equity method to account for investments in
greater than 20% owned affiliates that are not variable interest entities and where we do not have the ability to
exercise control, and investments in less than 20% owned affiliates where we have the ability to exercise
significant influence.
We evaluate our investments in unconsolidated affiliates for impairment whenever events or changes in
circumstances indicate that the carrying value of such investments may have experienced a decline in value.
When there is evidence of loss in value, we compare the estimated fair value of the investment to the carrying
value of the investment to determine whether impairment has occurred. We assess the fair value of our
investments in unconsolidated affiliates using commonly accepted techniques, and may use more than one
method, including, but not limited to, recent third party comparable sales and discounted cash flow models. If
the estimated fair value is considered to be permanently less than the carrying value, the excess of the carrying
value over the estimated fair value is recognized as an impairment loss.
Unamortized Debt Expense
— Expenses incurred with the issuance of long-term debt are amortized over
the term of the debt using the effective interest method. These expenses are recorded on the consolidated
balance sheet as other long-term assets.
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