Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2013

Summary of Significant Accounting Policies

Cash and Cash Equivalents

(a) Cash and Cash Equivalents

Cash and cash equivalents consist of all cash balances. As of December 31, 2013 and 2012, $6,500 in cash was subject to certain provisions under credit agreements with a financial institution, as more fully described in Note 5.

Trade Accounts Receivable

(b) Trade Accounts Receivable

Trade accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts of $246,410 and $259,638 at December 31, 2013 and 2012, respectively, is the Partnership’s best estimate of the amount of probable credit losses in the Partnership’s existing accounts receivable. The Partnership determines the allowance based upon historical write-off experience and specific identification. The Partnership does not have any off-balance-sheet credit exposure related to its customers.

Inventories

(c) Inventories

Inventories are valued at the lower of cost or market using the first-in, first-out method. Inventory consists of parts used in the assembly of compression units. Purchases of these assets are considered operating activities in the consolidated statement of cash flows.

Property and Equipment

(d) Property and Equipment

Property and equipment are carried at cost. Overhauls and major improvements that increase the value or extend the life of compressor units are capitalized and depreciated over 3 to 5 years. Ordinary maintenance and repairs are charged to income. Depreciation is calculated using the straight-line method of accounting over the estimated useful lives of the assets as follows:

Compression equipment	25 years
Furniture and fixtures	7 years
Vehicles and computer equipment	3 - 7 years
Leasehold improvements	5 years

Depreciation expense for the years ended December 31, 2013, 2012 and 2011 was $49.7 million, $38.9 million and $29.7 million, respectively.

Impairments of Long-Lived Assets

(e) Impairments of Long-Lived Assets

Long-lived assets with recorded values that are not expected to be recovered through future cash flows are written-down to estimated fair value. An asset shall be tested for impairment when events or circumstances indicate that its carrying value may not be recoverable. The carrying value of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. If the carrying value exceeds the sum of the undiscounted cash flows, an impairment loss equal to the amount of the carrying value exceeding the fair value of the asset is recognized. The fair value of the asset is measured using quoted market prices or, in the absence of quoted market prices, is based on an estimate of discounted cash flows. In 2013, the Partnership recorded $203,149 related to the impairment of a certain group of its compression equipment. The Partnership did not record impairment of long-lived assets in 2012 or 2011.

Revenue Recognition

(f) Revenue Recognition

Revenue from compression service and equipment rental operations is recorded when earned over the period of service, rental and maintenance contracts, which generally range from one month to five years. Parts and service revenue is recorded as parts are delivered or services are performed for the customer.

Income Taxes

(g) Income Taxes

The Partnership elected to be treated under SubChapter K of the Internal Revenue Code. Under SubChapter K, a partnership return is filed annually reflecting each partner’s share of the partnership’s income or loss. Therefore, no provision has been made for federal income tax. Partnership net income (loss) is allocated to the partners in proportion to their respective interest in the Partnership.

As a partnership, all income, gains, losses, expenses, deductions and tax credits generated by the Partnership generally flow through to its unitholders. However, Texas imposes an entity-level income tax on partnerships.

The State of Texas’ margin tax became effective for tax reports originally due on or after January 1, 2008. This margin tax requires partnerships and other forms of legal entities to pay a tax of 1.0% on its ‘‘margin,’’ as defined in the law, based on 2013, 2012 and 2011 results. The margin tax base to which the tax rate will be applied is either the lesser of 70% of total revenues for federal income tax purposes, total revenue less cost of goods sold or compensation for federal income tax purposes. For the years ended December 31, 2013, 2012 and 2011, the Partnership recorded expense related to the Texas margin tax of $279,972, $196,040 and $154,872, respectively.

Recognized tax positions are initially and subsequently measured as the largest amount of tax benefit that is more likely than not of being realized upon ultimate settlement with a taxing authority. Interest and penalties related to unrecognized tax benefits are included in income tax expense.

Fair Value Measurements

(h) Fair Value Measurements

The accounting standard for fair value measurements and disclosures establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into the following three broad categories:

Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the Partnership has the ability to access at the measurement date.

Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly.

Level 3 inputs are unobservable inputs for the asset or liability.

At December 31, 2013 and 2012, the Partnership’s financial instruments consist primarily of cash and cash equivalents, trade accounts receivable, trade accounts payable and long-term debt. The book values of cash and cash equivalents, trade accounts receivable, and trade accounts payable are representative of fair value due to their short-term maturity. The carrying amount of long-term debt approximates fair value based on the interest rates charged on instruments with similar terms and risks.

Pass Through Taxes

(i) Pass Through Taxes

Taxes incurred on behalf of, and passed through to, customers are accounted for on a net basis.

Use of Estimates

(j) Use of Estimates

The preparation of the consolidated financial statements of the Partnership in conformity with accounting principles generally accepted in the United States of America requires the management of the Partnership to make estimates and assumptions that affect the amounts reported in these consolidated financial statements and the accompanying results. Actual results could differ from these estimates.

Intangible Assets

(k) Intangible Assets

As of December 31, 2013, intangible assets consisted of the following (in thousands):

	Customer Relationships			Trade Names			Non-compete			Total
Balance at December 31, 2012	$	67,200		$	14,352		$	—		$	81,552
Additions — S&R Acquisition	6,700			—			900			7,600
Amortization	(2,512		)	(624		)	(75		)	(3,211		)
Balance at December 31, 2013	$	71,388		$	13,728		$	825		$	85,941

Intangible assets are amortized on a straight-line basis over their estimated useful lives, which is the period over which the assets are expected to contribute directly or indirectly to the Partnership’s future cash flows. The estimated useful lives range from 4 to 30 years. The expected amortization of the intangible assets for each of the five succeeding years is as follows (in thousands):

Year Ending December 31,	Total
2014	$	3,584
2015	3,584
2016	3,584
2017	3,509
2018	3,359

The Partnership assesses long-lived assets, including intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is assessed by comparing the carrying amount of an asset to undiscounted future net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amounts exceed the fair values of the assets. The Partnership did not record any impairment of intangible assets in 2013, 2012 or 2011.

Goodwill

(l) Goodwill

Goodwill represents consideration paid in excess of the fair value of the identifiable assets acquired in a business combination. Goodwill is not amortized, but is reviewed for impairment annually based on the carrying values as of October 1, or more frequently if impairment indicators arise that suggest the carrying value of goodwill may not be recovered.

As of October 1, 2013, a qualitative assessment was performed to determine whether it is more likely than not that the fair value of the reporting unit is impaired. Management used all available information to make these determinations, including evaluating the macroeconomic environment, industry specific conditions, cost factors, overall financial performance and unit price, at the assessment date of October 1, 2013.

As a result of the qualitative assessment, the Partnership has determined that it is not more likely than not that the fair value of the reporting unit is less than its carrying amount. The Partnership did not record any impairment of goodwill for the years ended December 31, 2013, 2012 or 2011.