Eversource 2002 Annual Report Download - page 44

The impact on previously reported amounts in 2001 is as follows:
(Millions of Dollars)
Operating Revenues:
As previously reported $6,873.8
Impact of reclassification (905.6)
As currently reported $5,968.2
Fuel, Purchased and Net Interchange
Power:
As previously reported $4,541.3
Impact of reclassification (905.6)
As currently reported $3,635.7
Operating revenues and fuel, purchased and net interchange power for
the year ended December 31, 2000 were not adjusted, as the impact of
net reporting was not material to NU’s consolidated results of operations
in 2000.
On October 25, 2002, the EITF reached additional consensuses in EITF
Issue No. 02-3. These consensuses supercede the consensuses the EITF
reached in June 2002. The first consensus rescinds EITF Issue No. 98-10,
“Accounting for Contracts Involved in Energy Trading and Risk
Management Activities for Energy Trading Activities,” under which
Select Energy previously accounted for energy trading activities. This
consensus requires companies engaged in energy trading activities to
discontinue fair value accounting effective January 1, 2003, for contracts
that do not meet the definition of a derivative in Statement of Financial
Accounting Standards (SFAS) No. 133, “Accounting for Derivative
Instruments and Hedging Activities,” as amended, effective January 1,
2003. NU adopted this consensus effective October 1, 2002. Management
determined that there were no trading contracts subject to fair value
accounting that did not meet the definition of a derivative in SFAS No. 133.
Accordingly, there was no cumulative effect of an accounting change.
The second consensus requires that companies engaged in energy
trading activities classify revenues and expenses associated with energy
trading contracts on a net basis in revenues effective January 1, 2003.
NU adopted net reporting effective July 1, 2002, before this consensus
was reached by the EITF.
Asset Retirement Obligations: In June 2001, the FASB issued SFAS No. 143,
“Accounting for Asset Retirement Obligations.” This statement requires
that legal obligations associated with the retirement of property, plant
and equipment be recognized as a liability at fair value when incurred
and when a reasonable estimate of the fair value of the liability can be
made. SFAS No. 143 is effective on January 1, 2003, for NU. Management
has completed its review process for potential asset retirement obligations
(AROs) and has not identified any material AROs which have been
incurred. However, management has identified certain removal obligations
which arise in the ordinary course of business that either have a low
probability of occurring or are not material in nature. These types of
obligations primarily relate to transmission and distribution lines and
poles, telecommunication towers, transmission cables and certain FERC
or state regulatory agency re-licensing issues.
A portion of NU’s regulated utilities’rates is intended to recover the
cost of removal of certain utility assets. The amounts recovered do not
represent AROs. At December 31, 2002, NU maintained approximately
$321 million in cost of removal regulatory liabilities, which are included
in the accumulated provision for depreciation.
Stock-Based Compensation: In December 2002, the FASB issued SFAS
No. 148, “Accounting for Stock-Based Compensation – Transition and
Disclosure.” This statement amends SFAS No. 123, “Accounting for
Stock-Based Compensation,” to provide alternative methods of transition
for a voluntary change to the fair value-based method of accounting for
stock-based employee compensation and requires prominent disclosures
in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of
the method used on reported results. SFAS No. 148 is effective for
2002, and NU included the disclosures required by SFAS No. 148 in
this annual report. For the required disclosures, see Note 1K, “Summary
of Significant Accounting Policies – Stock-Based Compensation”and
Note 4D, “Employee Benefits – Stock-Based Compensation” to the
consolidated financial statements. At this time, NU has not elected to
transition to the fair value-based method of accounting for stock-based
employee compensation.
Guarantees: In November 2002, the FASB issued Interpretation No. 45,
“Guarantor’s Accounting and Disclosure Requirements for Guarantees,
Including Indirect Guarantees of Indebtedness of Others.” Interpretation
No. 45 requires that disclosures be made by a guarantor in its interim
and annual financial statements about its obligations under certain
guarantees that it has issued and clarifies that a guarantor is required
to recognize, at the inception of a guarantee, a liability for the fair value
of the obligation undertaken in issuing the guarantee. Interpretation
No. 45 does not apply to certain guarantee contracts, such as residual
value guarantees provided by lessees in capital leases, guarantees that
are accounted for as derivatives, guarantees that represent contingent
consideration in a business combination, guarantees issued between
either parents and their subsidiaries or corporations under common
control, a parent’s guarantee of a subsidiary’s debt to a third party, and
a subsidiary’s guarantee of the debt owed to a third party by either its
parent or another subsidiary of that parent. The initial recognition and
initial measurement provisions of Interpretation No. 45 are applicable
to NU on a prospective basis to guarantees issued or modified after
January 1, 2003. Currently, management does not expect the adoption
of the initial recognition and initial measurement provisions of
Interpretation No. 45 to have a material impact on NU’s consolidated
financial statements. The disclosure requirements in Interpretation No.
45 are effective for 2002. For further information regarding these disclosures,
see Note 2, “Short-Term Debt” to the consolidated financial statements.
Consolidation of Variable Interest Entities: In January 2003, the FASB
issued Interpretation No. 46, “Consolidation of Variable Interest
Entities.” Interpretation No. 46 addresses the consolidation and disclosure
requirements for companies that hold an equity interest in a variable
interest entity (VIE), regardless of the date on which the VIE was created.
Interpretation No. 46 requires consolidation of a VIE’s assets, liabilities
and noncontrolling interests at fair value when a company is the primary
beneficiary, which is defined as a company that absorbs a majority of
the expected losses, risks and revenues from the VIE as a result of holding
a contractual or other financial interest in the VIE. Consolidation is not
required under Interpretation No. 46 for those companies that hold a
significant equity interest in a VIE but are not the primary beneficiary.
Interpretation No. 46 is effective for NU beginning in the third quarter
of 2003. At December 31, 2002, NU held equity interests in various
VIEs, for which NU was not the primary beneficiary, as NU does not
absorb a majority of the expected losses, risks and revenues from the
VIEs or provide a substantial portion of financial support. As a result,
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