Revenues

Adoption of ASC Topic 606, "Revenue from Contracts with Customers"

On January 1, 2018, we adopted Topic 606 using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under Topic 606, while prior period amounts are not adjusted and continue to be reported in accordance with our historical accounting policies under Topic 605.

There was no material impact to opening retained earnings as a result of adoption of Topic 606 that resulted in a cumulative effect adjustment.

Revenue Recognition

Revenue is recognized when obligations under the terms of a contract with our customers are satisfied; generally, this occurs with the transfer of control of our petroleum products, convenience merchandise, Renewable Identification Numbers ("RINs") and other assets to our third-party customers. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Excise and sales tax that we collect where we have determined we are the principal in the transaction have been recorded as revenue on a jurisdiction-by-jurisdiction basis.

The Company enters into buy/sell and similar arrangements when petroleum products are held at one location but are needed at a different location. The Company often pays or receives funds related to the buy/sell arrangements based on location or quality differences. The Company continues to account for these transactions as non-monetary exchanges under existing accounting guidance and typically reports these on a net basis in the Consolidated Income Statement.

The following tables disaggregates our revenue by major source for the three and nine months ended September 30, 2018 and 2017, respectively:



	Three Months Ended September 30, 2018						Three Months Ended September 30, 2017
(Millions of dollars)	Marketing		Corporate and Other Assets		Consolidated		Marketing		Corporate and Other Assets		Consolidated
Petroleum product sales (at retail) ¹	$	2,770.1	$	—	$	2,770.1	$	2,281.9	$	—	$	2,281.9
Petroleum product sales (at wholesale) ¹	381.4		—		381.4		299.0		—		299.0
Total petroleum product sales	3,151.5		—		3,151.5		2,580.9		—		2,580.9
Merchandise sales	623.7		—		623.7		605.6		—		605.6
Other operating revenues:
RINs	11.6		—		11.6		48.7		—		48.7
Other revenues ²	1.2		—		1.2		1.1		—		1.1
Total revenues	$	3,788.0	$	—	$	3,788.0	$	3,236.3	$	—	$	3,236.3



	Nine Months Ended September 30, 2018						Nine Months Ended September 30, 2017
(Millions of dollars)	Marketing		Corporate and Other Assets		Consolidated		Marketing		Corporate and Other Assets		Consolidated
Petroleum product sales (at retail) ¹	$	7,910.6	$	—	$	7,910.6	$	6,684.0	$	—	$	6,684.0
Petroleum product sales (at wholesale) ¹	1,072.2		—		1,072.2		866.9		—		866.9
Total petroleum product sales	8,982.8		—		8,982.8		7,550.9		—		7,550.9
Merchandise sales	1,807.5		—		1,807.5		1,777.1		—		1,777.1
Other operating revenues:
RINs	67.3		—		67.3		114.4		—		114.4
Other revenues ²	3.1		0.5		3.6		4.4		0.2		4.6
Total revenues	$	10,860.7	$	0.5	$	10,861.2	$	9,446.8	$	0.2	$	9,447.0

¹ Includes excise and sales taxes that remain eligible for inclusion under Topic 606

² Primarily includes collection allowance on excise and sales taxes and other miscellaneous items

The Company adopted ASC Topic 606 as of January 1, 2018 using the modified retrospective method. The impact of the excise and sales taxes collected and remitted to government authorities included in petroleum product sales that would have been recognized under previous revenue recognition guidance would have increased third quarter 2018 petroleum product sales (at retail) by $6.9 million and petroleum product sales (at wholesale) by $44.8 million for a total increase in petroleum product sales of $51.7 million. For the nine months ended September 30, 2018, petroleum product sales (at retail) would have increased by $18.9 million and petroleum product sales (at wholesale) by $124.9 million for a total increase in petroleum product sales of $143.8 million.

Marketing segment

Petroleum product sales (at retail). For our retail store locations, the revenue related to petroleum product sales is recognized as the fuel is pumped to our customers. The transaction price at the pump typically includes some portion of sales or excise taxes as levied in the respective jurisdictions. Those taxes that are collected for remittance to governmental entities on a pass through basis are not recognized as revenue and they are recorded to a liability account until they are paid. Our customers typically use a mixture of cash, checks, credit cards and debit cards to pay for our products as they are received. We have accounts receivable from the various credit/debit card providers at any point in time related to product sales made on credit cards and debit cards. These receivables are typically collected in two to seven days, depending on the terms with the particular credit/debit card providers. Payment fees retained by the credit/debit card providers are recorded as station and other operating expenses.

Petroleum product sales (at wholesale). Our sales of petroleum products at wholesale are generally recorded as revenue when the deliveries have occurred and legal ownership of the product has transferred to the customer. Title transfer for bulk refined product sales typically occurs at pipeline custody points and upon trucks loading at product terminals. For bulk pipeline sales, we record receivables from customers that are generally collected within a week from custody transfer date. For our rack product sales, the majority of our customers' accounts are drafted by us within 10 days from product transfer.

Merchandise sales. For our retail store locations, the revenue related to merchandise sales is recognized as the customer completes their purchase at our locations. The transaction price typically includes some portion of sales tax as levied in the respective jurisdictions. Those taxes that are collected for remittance to governmental entities on a pass through basis are not recognized as revenue and they are recorded to a liability account until they are paid. As noted above, a mixture of payment types are used for these revenues and the same terms for credit/debit card receivables are realized.

The most significant judgment with respect to merchandise sales revenue is determining whether we are the principal or agent for some categories of merchandise such as lottery tickets, lotto tickets, newspapers and other small categories of merchandise. For scratch-off lottery tickets, we have determined we are the principal in the majority of the jurisdictions and therefore we record those sales on a gross basis. We have some categories of merchandise (such as lotto tickets) where we are the agent and the revenues recorded for those transactions are our net commission only.

In June 2018 the Company initiated a loyalty pilot program through a limited number of its retail locations. The customers earn rewards based on their spending or other promotional activities. This program creates a performance obligation which requires us to defer a portion of sales revenue to the loyalty program participants until they redeem their rewards. The rewards may be redeemed for merchandise or cash discounts on fuel purchases. Due to the limited nature of the pilot program and the short amount of time the program has been in effect, the deferred revenues recorded in the three and nine months ended September 30, 2018 were immaterial.

RINs sales. For the sale of RINs, we recognize revenue when the RIN is transferred to the counter-party and the sale is completed. Receivables from our counter-parties related to the RIN sales are typically collected within five days of the sale.

Other revenues. Items reported as other operating revenues include collection allowances for excise and sales tax and other miscellaneous items and are recognized as revenue when the transaction is completed.

Accounts receivable

Trade accounts receivable on the balance sheet represents both receivables related to contracts with customers and other trade receivables. At September 30, 2018 and December 31, 2017, we had $171.2 million and $145.6 million of receivables, respectively, related to contracts with customers recorded. All of the trade accounts receivable related to contracts with customers outstanding at June 30, 2018 and December 31, 2017 were collected during the succeeding quarter. These receivables were generally related to credit and debit card transactions along with short term bulk and wholesale sales from our customers, which have a very short settlement window.