Exelon 2014 Annual Report Download - page 134

Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. If it is not more-likely-than-not that
the benefit of the tax position will be sustained on its technical merits, no benefit is recorded. Uncertain tax positions that relate only
to timing of when an item is included on a tax return are considered to have met the recognition threshold. The Registrants recognize
accrued interest related to unrecognized tax benefits in Interest expense or Other income and deductions (interest income) on their
Consolidated Statements of Operations and Comprehensive Income.
Pursuant to the IRC and relevant state taxing authorities, Exelon and its subsidiaries file consolidated or combined income tax
returns for Federal and certain state jurisdictions where allowed or required. See Note 14—Income Taxes for further information.
Taxes Directly Imposed on Revenue-Producing Transactions
Exelon collects certain taxes from customers such as sales and gross receipts taxes, along with other taxes, surcharges, and fees
that are levied by state or local governments on the sale or distribution of gas and electricity. Some of these taxes are imposed on
the customer, but paid by the Registrants, while others are imposed on the Registrants. Where these taxes are imposed on the
customer, such as sales taxes, they are reported on a net basis with no impact to the Consolidated Statements of Operations and
Comprehensive Income. However, where these taxes are imposed on the Registrants, such as gross receipts taxes or other
surcharges or fees, they are reported on a gross basis. Accordingly, revenues are recognized for the taxes collected from customers
along with an offsetting expense. See Note 23—Supplemental Financial Information for Generation’s, ComEd’s, PECO’s and BGE’s
utility taxes that are presented on a gross basis.
Cash and Cash Equivalents
Exelon considers investments purchased with an original maturity of three months or less to be cash equivalents.
Restricted Cash and Cash Equivalents
Restricted cash and cash equivalents represent funds that are restricted to satisfy designated current liabilities. As of December 31,
2014 and 2013, Exelon Corporate’s restricted cash and cash equivalents primarily represented restricted funds for payment of
medical, dental, vision and long-term disability benefits. Additionally, as of December 31, 2014 and 2013, Generation’s restricted
cash and cash equivalents primarily included cash at Antelope Valley required for debt service and construction and cash at
Continental Wind and ExGen Texas Power, which is required for debt service and financing of operation and maintenance of the
underlying entities. As of December 31, 2014 and 2013, ComEd’s restricted cash primarily represented cash collateral held from
suppliers associated with ComEd’s energy and REC procurement contracts. As of December 31, 2014, PECO’s restricted cash
primarily represented funds from the sales of assets that were subject to PECO’s mortgage indenture. As of December 31, 2014 and
2013, BGE’s restricted cash primarily represented funds restricted at its consolidated variable interest entity for repayment of rate
stabilization bonds and cash collateral held from suppliers.
Restricted cash and cash equivalents not available to satisfy current liabilities are classified as noncurrent assets. As of
December 31, 2014 and 2013, Exelon’s and Generation’s NDT funds, which are designated to satisfy future decommissioning
obligations, were classified as noncurrent assets. As of December 31, 2014, Exelon, Generation, ComEd, PECO and BGE had
investments in Rabbi trusts classified as noncurrent assets.
Allowance for Uncollectible Accounts
The allowance for uncollectible accounts reflects the Registrants’ best estimates of losses on the accounts receivable balances. For
Generation, the allowance is based on accounts receivable aging, historical experience and other currently available information.
ComEd and PECO estimate the allowance for uncollectible accounts on customer receivables by applying loss rates developed
specifically for each company to the outstanding receivable balance by customer risk segment. At December 31, 2013, BGE
estimated the allowance for uncollectible accounts on customer receivables by assigning a reserve factor for each aging bucket.
These percentages were derived from a study of billing progression which determined the reserve factors by aging bucket. At
December 31, 2014, BGE changed to a methodology for estimating the allowance for uncollectible accounts, which was consistent
with ComEd and PECO, as described above. For additional information regarding the change in estimate, refer to Note 6—Accounts
Receivable. Risk segments represent a group of customers with similar credit quality indicators that are computed based on various
attributes, including delinquency of their balances and payment history. Loss rates applied to the accounts receivable balances are
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