This excerpt taken from the MRO 10-Q filed Aug 8, 2005.
Net Realizable Value of Inventories
Generally accepted accounting principles require that inventories be carried at lower of cost or market. Accordingly, when the cost basis of our inventories of liquid hydrocarbons and refined petroleum products exceed market value, we establish an inventory market valuation (IMV) reserve to reduce the cost basis of our inventories to net realizable value. Adjustments to the IMV reserve result in noncash charges or credits to income from operations.
Since the prices of liquid hydrocarbons and refined petroleum products do not correlate perfectly, there is no absolute price threshold below which an IMV adjustment will be recognized. However, prior to the Acquisition on June 30, 2005, we generally established an IMV reserve when crude oil prices fell below $22 per barrel. As a result of the Acquisition, we generally will establish an IMV reserve when crude oil prices fall below $33 per barrel. As of June 30, 2005, with the West Texas Intermediate spot price at $56.73 per barrel, no IMV reserve was needed.