CenterPoint Energy 2014 Annual Report Download - page 89

(d) Long-lived Assets and Intangibles
CenterPoint Energy records property, plant and equipment at historical cost. CenterPoint Energy expenses repair and maintenance costs as
incurred.
CenterPoint Energy periodically evaluates long-
lived assets, including property, plant and equipment, and specifically identifiable
intangibles, when events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. The determination
of whether an impairment has occurred is based on an estimate of undiscounted cash flows attributable to the assets compared to the carrying
value of the assets.
(e) Regulatory Assets and Liabilities
CenterPoint Energy applies the guidance for accounting for regulated operations to the Electric Transmission & Distribution business
segment and the Natural Gas Distribution business segment. CenterPoint Energy’s rate-
regulated subsidiaries may collect revenues subject to
refund pending final determination in rate
proceedings. In connection with such revenues, estimated rate refund liabilities are recorded which
reflect management’s current judgment of the ultimate outcomes of the proceedings.
CenterPoint Energy’s rate-
regulated businesses recognize removal costs as a component of depreciation expense in accordance with
regulatory treatment. As of December 31, 2014 and 2013 , these removal costs of $958 million and $941 million
, respectively, are classified as
regulatory liabilities in CenterPoint Energy’
s Consolidated Balance Sheets. In addition, a portion of the amount of removal costs that relate to
asset retirement obligations has been reclassified from a regulatory liability to an asset retirement liability in accordance with accounting
guidance for asset retirement obligations.
(f) Depreciation and Amortization Expense
Depreciation and amortization is computed using the straight-line method based on economic lives or regulatory-
mandated recovery
periods. Amortization expense includes amortization of regulatory assets and other intangibles.
(g) Capitalization of Interest and Allowance for Funds Used During Construction
Interest and allowance for funds used during construction (AFUDC) are capitalized as a component of projects under construction and are
amortized over the assets’
estimated useful lives once the assets are placed in service. AFUDC represents the composite interest cost of
borrowed funds and a reasonable return on the equity funds used for construction for subsidiaries that apply the guidance for accounting for
regulated operations. During 2014 , 2013 and 2012 , CenterPoint Energy capitalized interest and AFUDC of $11 million , $11 million and
$9
million , respectively. During 2014 , 2013 and 2012 , CenterPoint Energy recorded AFUDC equity of $14 million , $8 million and $6 million
,
respectively, which is included in Other Income in its Statements of Consolidated Income.
(h) Income Taxes
CenterPoint Energy uses the asset and liability method of accounting for deferred income taxes. Deferred income tax assets and liabilities
are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. A valuation allowance is established against deferred tax assets for which management believes
realization is not considered to be more likely than not. CenterPoint Energy recognizes interest and penalties as a component of income tax
expense.
(i) Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the invoiced amount and do not bear interest. It is the policy of management to review the outstanding
accounts receivable monthly, as well as the bad debt write-
offs experienced in the past, and establish an allowance for doubtful accounts.
Account balances are charged off against the allowance when management determines it is probable the receivable will not be recovered. The
provision for doubtful accounts in CenterPoint Energy’s Statements of Consolidated Income for 2014 , 2013 and 2012 was $22 million ,
$21
million and $16 million , respectively.
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