Exelon 2014 Annual Report Download - page 192

Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
Recurring Fair Value Measurements
Exelon records the fair value of assets and liabilities in accordance with the hierarchy established by the authoritative guidance for
fair value measurements. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels as
follows:
• Level 1—quoted prices (unadjusted) in active markets for identical assets or liabilities that the Registrants have the ability to
access as of the reporting date.
• Level 2—inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly
observable through corroboration with observable market data.
• Level 3—unobservable inputs, such as internally developed pricing models or third-party valuations for the asset or liability due
to little or no market activity for the asset or liability.
Transfers in and out of levels are recognized as of the end of the reporting period when the transfer occurred. Given derivatives
categorized within Level 1 are valued using exchange-based quoted prices within observable periods, transfers between Level 2 and
Level 1 were not material. Transfers into Level 2 from Level 3 generally occur when the contract tenure becomes more observable.
Transfers into Level 3 from Level 2 generally occur due to changes in market liquidity or assumptions for certain commodity
contracts. There were no transfers between Level 1 and Level 2 during the year ended December 31, 2014 for cash equivalents,
nuclear decommissioning trust fund investments, pledged assets for Zion Station decommissioning, Rabbi trust investments, and
deferred compensation obligations.
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