Summary of Significant Accounting Policies

9 Months Ended

Apr. 30, 2011

Summary of Significant Accounting Policies

B.   Summary of significant accounting policies

(1) Nature of operations:

Ferrellgas Partners is a holding entity that conducts no operations and has two subsidiaries, Ferrellgas Partners Finance Corp. and the operating partnership. Ferrellgas Partners owns a 100% equity interest in Ferrellgas Partners Finance Corp., whose only business activity is to act as the co-issuer and co-obligor of any debt issued by Ferrellgas Partners. The operating partnership is the only operating subsidiary of Ferrellgas Partners. Ferrellgas is a single reportable operating segment.

The operating partnership is engaged primarily in the distribution of propane and related equipment and supplies in the United States. The propane distribution market is seasonal because propane is used primarily for heating in residential and commercial buildings. Therefore, the results of operations for the nine months ended April 30, 2011 and 2010 are not necessarily indicative of the results to be expected for a full fiscal year. The operating partnership serves approximately one million residential, industrial/commercial, portable tank exchange, agricultural, wholesale and other customers in all 50 states, the District of Columbia and Puerto Rico. 

      (2) Accounting estimates: 

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from these estimates. Significant estimates impacting the condensed consolidated financial statements include accruals that have been established for contingent liabilities, pending claims and legal actions arising in the normal course of business, useful lives of property, plant and equipment assets, residual values of tanks, capitalization of customer tank installation costs, amortization methods of intangible assets, valuation methods used to value sales returns and allowances, allowance for doubtful accounts, fair values of derivative contracts and stock and unit-based compensation calculations.

(3) Supplemental cash flow information:        

Certain cash flow and significant non-cash activities are presented below:

	For the nine months ended April 30,
	2011	2010
CASH PAID FOR:
Interest	$69,508	$66,979
Income taxes	34	942
NON-CASH INVESTING ACTIVITIES:
Issuance of common units in connection with acquisitions	1,625	3,061
Issuance of liabilities in connection with acquisitions	1,684	5,494
Property, plant and equipment additions	800	868

      See Note B – Summary of significant accounting policies - (5) New accounting standards – Transfers of financial assets and variable interest entities – below for a discussion of the non-cash impact of the adoption of new accounting standards during the current year period.

(4) Accounts receivable securitization: 

Through its wholly-owned and consolidated subsidiary Ferrellgas Receivables, LLC ("Ferrellgas Receivables"), the operating partnership has agreements to securitize, on an ongoing basis, a portion of its trade accounts receivable. See Note B – Summary of significant accounting policies - (5) New accounting standards – Transfers of financial assets and variable interest entities – below regarding a new accounting standard for financial asset transfers that was effective August 1, 2010.

(5) New accounting standards: 

Transfers of financial assets and variable interest entities

In June 2009, the Financial Accounting Standards Board ("FASB") issued two amendments to existing GAAP, one of which eliminates the concept of a qualifying special-purpose-entity ("QSPEs"). The second amends guidance applicable to variable interest entities ("VIEs"). The provisions of these amendments require Ferrellgas to evaluate all VIEs to determine whether they must be consolidated.

As a result of the prospective adoption of these amendments on August 1, 2010, Ferrellgas Receivables is now accounted for as a consolidated subsidiary. Upon adoption, Ferrellgas recognized $107.9 million of "Accounts receivable pledged as collateral, net," $0.6 million of "Other assets, net" and $47.0 million of "Collateralized notes payable," derecognized $44.9 million of "Notes receivable from Ferrellgas Receivables" and $15.3 million of "Retained interest in Ferrellgas Receivables" and recorded a $1.3 million "Cumulative effect of a change in accounting principle."

Subsequent to adoption, expenses associated with these transactions are now recorded in "Interest expense" and are no longer recorded in "Loss on transfer of accounts receivable related to the accounts receivable securitization" or "Service income related to the accounts receivable securitization" in the condensed consolidated statements of earnings. Additionally, borrowings and repayments associated with these transactions are now recorded in "Cash flows from financing activities" and no longer recorded in "Cash flows from operating activities" in the condensed consolidated statements of cash flows. The adoption of these amendments did not have a significant impact on Ferrellgas' debt covenant agreements.

Ferrellgas, L.P. and Subsidiaries [Member]

Summary of Significant Accounting Policies

B.   Summary of significant accounting policies

(1) Nature of operations:

Ferrellgas, L.P. is a single reportable operating segment engaged primarily in the distribution of propane and related equipment and supplies in the United States. The propane distribution market is seasonal because propane is used primarily for heating in residential and commercial buildings. Therefore, the results of operations for the nine months ended April 30, 2011 and 2010 are not necessarily indicative of the results to be expected for a full fiscal year. Ferrellgas, L.P. serves approximately one million residential, industrial/commercial, portable tank exchange, agricultural, wholesale and other customers in all 50 states, the District of Columbia and Puerto Rico.

(2) Accounting estimates:

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results could differ from these estimates. Significant estimates impacting the condensed consolidated financial statements include accruals that have been established for contingent liabilities, pending claims and legal actions arising in the normal course of business, useful lives of property, plant and equipment assets, residual values of tanks, capitalization of customer tank installation costs, amortization methods of intangible assets, valuation methods used to value sales returns and allowances, allowance for doubtful accounts, fair values of derivative contracts and stock and unit-based compensation calculations.

(3) Supplemental cash flow information:

Certain cash flow and significant non-cash activities are presented below:

	For the nine months ended April 30,
	2011	2010
CASH PAID FOR:
Interest	$55,015	$48,547
Income taxes	19	916
NON-CASH INVESTING ACTIVITIES:
Assets contributed from Ferrellgas Partners in connection with           acquisitions	1,625	3,061
Issuance of liabilities in connection with acquisitions	1,684	5,494
Property, plant and equipment additions	800	868

      See Note B – Summary of significant accounting policies - (5) New accounting standards – Transfers of financial assets and variable interest entities – below for a discussion of the non-cash impact of the adoption of new accounting standards during the current year period.

      (4) Accounts receivable securitization: 

Through its wholly-owned and consolidated subsidiary Ferrellgas Receivables, LLC ("Ferrellgas Receivables"), Ferrellgas, L.P. has agreements to securitize, on an ongoing basis, a portion of its trade accounts receivable. See Note B – Summary of significant accounting policies - (5) New accounting standards – Transfers of financial assets and variable interest entities – below regarding a new accounting standard for financial asset transfers that was effective August 1, 2010.

(5) New accounting standards:

Transfers of financial assets and variable interest entities

In June 2009, the Financial Accounting Standards Board ("FASB") issued two amendments to existing GAAP, one of which eliminates the concept of a qualifying special-purpose-entity ("QSPEs"). The second amends guidance applicable to variable interest entities ("VIEs"). The provisions of these amendments require Ferrellgas, L.P. to evaluate all VIEs to determine whether they must be consolidated.

As a result of the prospective adoption of these amendments on August 1, 2010, Ferrellgas Receivables is now accounted for as a consolidated subsidiary. Upon adoption, Ferrellgas, L.P. recognized $107.9 million of "Accounts receivable pledged as collateral, net," $0.6 million of "Other assets, net" and $47.0 million of "Collateralized notes payable," derecognized $44.9 million of "Notes receivable from Ferrellgas Receivables" and $15.3 million of "Retained interest in Ferrellgas Receivables" and recorded a $1.3 million "Cumulative effect of a change in accounting principle."

Subsequent to adoption, expenses associated with these transactions are now recorded in "Interest expense" and are no longer recorded in "Loss on transfer of accounts receivable related to the accounts receivable securitization" or "Service income related to the accounts receivable securitization" in the condensed consolidated statements of earnings. Additionally, borrowings and repayments associated with these transactions are now recorded in "Cash flows from financing activities" and no longer recorded in "Cash flows from operating activities" in the condensed consolidated statements of cash flows. The adoption of these amendments did not have a significant impact on Ferrellgas, L.P.'s debt covenant agreements.