DCP MIDSTREAM PARTNERS, LP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Years Ended December 31, 2011, 2010 and 2009 — (Continued)
Noncontrolling Interest
— Noncontrolling interest represents any third party or affiliate interest in
non-wholly-owned entities that we consolidate. For financial reporting purposes, the assets and liabilities of
these entities are consolidated with those of our own, with any third party or affiliate interest in our
consolidated balance sheet amounts shown as noncontrolling interest in equity. Distributions to and
contributions from noncontrolling interests represent cash payments to and cash contributions from,
respectively, such third party and affiliate investors.
Accounting for Risk Management Activities and Financial Instruments
— Non-trading energy
commodity derivatives are designated as either a hedge of a forecasted transaction or future cash flow (cash
flow hedge), a hedge of a recognized asset, liability or firm commitment (fair value hedge), or normal
purchases or normal sales. The remaining non-trading derivatives, which are related to asset-based activities for
which the normal purchases or normal sale exception is not elected, are recorded at fair value in the
consolidated balance sheets as unrealized gains or unrealized losses in derivative instruments, with changes in
the fair value recognized in the consolidated statements of operations. For each derivative, the accounting
method and presentation of gains and losses or revenue and expense in the consolidated statements of
operations are as follows:
Classification of Contract
Accounting Method
Presentation of Gains & Losses or Revenue & Expense
Non-Trading Derivative Activity Mark-to-market method (a) Net basis in gains and losses from commodity
derivative activity
Cash Flow Hedge
Hedge method (b)
Gross basis in the same consolidated statements
of operations category as the related hedged item
Fair Value Hedge
Hedge method (b)
Gross basis in the same consolidated statements
of operations category as the related hedged item
Normal Purchases or Normal Sales Accrual method (c)
Gross basis upon settlement in the corresponding
consolidated statements of operations category
based on purchase or sale
(a) Mark-to-market method — An accounting method whereby the change in the fair value of the asset or liability is
recognized in the consolidated statements of operations in gains and losses from commodity derivative activity
during the current period.
(b) Hedge method — An accounting method whereby the change in the fair value of the asset or liability is recorded
in the consolidated balance sheets as unrealized gains or unrealized losses on derivative instruments. For cash
flow hedges, there is no recognition in the consolidated statements of operations for the effective portion until
the service is provided or the associated delivery period impacts earnings. For fair value hedges, the change in
the fair value of the asset or liability, as well as the offsetting changes in value of the hedged item, are
recognized in the consolidated statements of operations in the same category as the related hedged item.
(c) Accrual method — An accounting method whereby there is no recognition in the consolidated balance sheets or
consolidated statements of operations for changes in fair value of a contract until the service is provided or the
associated delivery period impacts earnings.
Cash Flow and Fair Value Hedges
— For derivatives designated as a cash flow hedge or a fair value
hedge, we maintain formal documentation of the hedge. In addition, we formally assess both at the inception of
the hedging relationship and on an ongoing basis, whether the hedge contract is highly effective in offsetting
changes in cash flows or fair values of hedged items. All components of each derivative gain or loss are
included in the assessment of hedge effectiveness, unless otherwise noted.
The fair value of a derivative designated as a cash flow hedge is recorded in the consolidated balance
sheets as unrealized gains or unrealized losses on derivative instruments. The effective portion of the change in
fair value of a derivative designated as a cash flow hedge is recorded in partners’ equity in accumulated other
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