Basis Of Reporting

6 Months Ended

Jun. 30, 2011

Basis Of Reporting

Basis Of Reporting

1.     Basis of Reporting

                The focus of Syntroleum Corporation and subsidiaries is the commercialization of our technologies to produce synthetic liquid hydrocarbons.  Operations to date have consisted of activities related to the commercialization of a proprietary process (the "Syntroleum® Process") and previously consisted of research and development of the Syntroleum® Process designed to convert carbonaceous material (biomass, coal, natural gas and petroleum coke) into synthetic liquid hydrocarbons.  Synthetic hydrocarbons produced by the Syntroleum® Process can be further processed using the Syntroleum Synfining® Process into high quality liquid fuels, such as diesel, jet fuel, kerosene, naphtha, propane and other renewable chemical products. 

                Our Bio-Synfining™ Technology is a renewable fuels application of our Synfining® Technology.  This technology is applied commercially via our Dynamic Fuels, LLC joint venture with Tyson Foods, Inc.  The technology processes renewable triglycerides and/or fatty acids to make renewable synthetic products. 

                The consolidated financial statements include the accounts of Syntroleum Corporation and our majority-owned subsidiaries.  All significant inter-company accounts and transactions have been eliminated.  Companies in which we own a 20 percent to 50 percent interest, but in which we do not have a controlling interest are accounted for by the equity method.  We own 50 percent and have a non-controlling interest in Dynamic Fuels, LLC ("Dynamic Fuels"). The entity is accounted for under the equity method and is not required to be consolidated in our financial statements; however, our share of the Dynamic Fuels results of operations is reflected in the Consolidated Statements of Operations and the subsidiary's summarized financial information is reported in Note 5, "Investment in and Loans to Dynamic Fuels, LLC".  The carrying value of our investment in Dynamic Fuels is reflected in "Investment in and Loans to Dynamic Fuels, LLC" in our Consolidated Balance Sheets.  

The consolidated financial statements included in this report have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC").  Accordingly, these statements reflect all adjustments (consisting of normal recurring entries), which are, in the opinion of management, necessary for a fair statement of the financial results for the interim periods presented. These financial statements should be read together with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC under the Securities Exchange Act of 1934.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Our financial position and results of operations are materially affected by Dynamic Fuels' financial position and results of operations as of and for the six months ended March 31, 2011.  During this period, the plant was commencing initial operations while its operating and financial controls were undergoing late-stage development.  As a result the financial statements may be more significantly impacted by management's estimates and assumptions than they will be when operations stabilize and the accounting processes mature.  Actual results could differ from those estimates.