Progress Energy 2007 Annual Report Download - page 79

Progress Energy Annual Report 2007
77
“Accounting for the Impairment or Disposal of Long-Lived
Assets” (SFAS No. 144). We review the recoverability
of long-lived tangible and intangible assets whenever
impairment indicators exist. Examples of these indicators
include current period losses, combined with a history of
losses or a projection of continuing losses, or a significant
decrease in the market price of a long-lived asset group.
If an impairment indicator exists for assets to be held and
used, then the asset group is tested for recoverability by
comparing the carrying value to the sum of undiscounted
expected future cash flows directly attributable to the
asset group. If the asset group is not recoverable through
undiscounted cash flows or the asset group is to be
disposed of, then an impairment loss is recognized for
the difference between the carrying value and the fair
value of the asset group.
We review our investments to evaluate whether or not a
decline in fair value below the carrying value is an other-
than-temporary decline. We consider various factors,
such as the investee’s cash position, earnings and revenue
outlook, liquidity and management’s ability to raise
capital in determining whether the decline is other-than-
temporary. If we determine that an other-than-temporary
decline in value exists, the investments are written down
to fair value with a new cost basis established.
SUBSIDIARY STOCK TRANSACTIONS
Gains and losses realized as a result of common stock
sales by our subsidiaries are recorded in the Consolidated
Statements of Income, except for any transactions
that must be credited directly to equity in accordance
with the provisions of Staff Accounting Bulletin No. 51,
“Accounting for Sales of Stock by a Subsidiary.”
2. NEW ACCOUNTING STANDARDS
FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes”
Refer to Note 14 for information regarding our first quarter
2007 implementation of FASB Interpretation No. 48,
“Accounting for Uncertainty in Income Taxes” (FIN 48).
SFAS No. 157, “Fair Value Measurements”
In September 2006, the FASB issued SFAS No. 157, “Fair
Value Measurements” (SFAS No. 157), which redefines fair
value as “the price that would be received to sell an asset or
paid to transfer a liability in an orderly transaction between
market participants at the measurement date.” SFAS No.
157 establishes a framework for measuring fair value
and a fair value hierarchy that categorizes and prioritizes
the inputs that should be used to estimate fair value. The
effective date of SFAS No. 157 for us is January 1, 2008.
In February 2008, the FASB issued FASB Staff Position (FSP)
No. FAS 157-2, which for us delays the effective date of
SFAS No. 157 for all nonfinancial assets and nonfinancial
liabilities, except for those that are recognized or disclosed
at fair value in the financial statements on a recurring
basis (at least annually), until January 1, 2009. We will
implement SFAS No. 157 as of January 1, 2008, and will
utilize the deferral provision of FSP No. FAS 157-2 for all
nonfinancial assets and liabilities within its scope. We do
not expect the adoption of SFAS No. 157 to have a material
impact on our financial position or results of operations.
SFAS No. 159, “The Fair Value Option for
Financial Assets and Financial Liabilities –
Including an amendment of FASB Statement
No. 115”
In February 2007, the FASB issued SFAS No. 159, “The
Fair Value Option for Financial Assets and Financial
Liabilities – Including an amendment of FASB Statement
No. 115” (SFAS No. 159), which permits entities to choose
to measure many financial instruments and certain other
items at fair value that are not currently required to be
measured at fair value. The decision about whether to
elect the fair value option is applied on an instrument by
instrument basis, is irrevocable (unless a new election
date occurs) and is applied to the entire financial
instrument. SFAS No. 159 is effective for us on January 1,
2008. We do not expect the adoption of SFAS No. 159 to
have a material impact on our financial position or results
of operations.
FASB Staff Position FIN No. 39-1,
An Amendment of FIN 39, Offsetting of
Amounts Related to Certain Contracts
FASB Interpretation No. 39, “Offsetting of Amounts Related
to Certain Contracts” (FIN 39), specifies what conditions
must be met for an entity to have the right to offset
assets and liabilities in the balance sheet and clarifies
when it is appropriate to offset amounts recognized for
forward interest rate swap, currency swap option, and
other conditional or exchange contracts. FIN 39 also
permits offsetting of fair value amounts recognized for
multiple contracts executed with the same counterparty
under a master netting arrangement. On April 30, 2007,
the FASB issued FASB Staff Position FIN No. 39-1, “An
Amendment of FIN 39, Offsetting of Amounts Related to
Certain Contracts” (FSP FIN 39-1), which amends portions
of FIN 39 to make certain terms consistent with those