Xcel Energy 2007 Annual Report Download - page 93

RECs and record the cost of RECs to satisfy future compliance requirements that are recoverable in future rates as
regulatory assets under the criteria of SFAS No. 71.
Emission Allowances — Emission allowances are recorded at cost, including the annual SO2 and NOx emission
allowance entitlement received at no cost from the EPA. Xcel Energy follows the inventory model for all allowances.
The sales of allowances are reported in the operating activities section of the consolidated statements of cash flows. The
net margin on sales of emission allowances is included in electric utility operating revenues as it is integral to the
production process of energy and our revenue optimization strategy for our utility operations.
Reclassifications — Certain amounts in the consolidated statements of cash flows have been reclassified from prior-
period presentation. The reclassifications reflect the presentation of unbilled revenues, recoverable purchased natural gas
and electric energy costs and regulatory assets and liabilities and share-based compensation expense as separate items
rather than components of other assets and other liabilities within net cash provided by operating activities. In addition,
activity related to derivative transactions have been combined into net realized and unrealized hedging and derivative
transactions. These reclassifications did not affect total net cash provided by (used in) operating, investing or financing
activities within the consolidated statements of cash flows.
2. Recently Issued Accounting Pronouncements
Fair Value Measurements (SFAS No. 157) — In September 2006, the FASB issued SFAS No. 157, which provides a
single definition of fair value, together with a framework for measuring it, and requires additional disclosure about the
use of fair value to measure assets and liabilities. SFAS No. 157 also emphasizes that fair value is a market-based
measurement, and sets out a fair value hierarchy with the highest priority being quoted prices in active markets. Fair
value measurements are disclosed by level within that hierarchy. SFAS No. 157 is effective for financial statements
issued for fiscal years beginning after Nov. 15, 2007. Xcel Energy is evaluating the impact of SFAS No. 157 on its
consolidated financial statements and does not expect the impact of implementation to be material.
The Fair Value Option for Financial Assets and Financial Liabilities — Including an Amendment of FASB Statement
No. 115 (SFAS No. 159) — In February 2007, the FASB issued SFAS No. 159, which provides companies with an
option to measure, at specified election dates, many financial instruments and certain other items at fair value that are
not currently measured at fair value. A company that adopts SFAS No. 159 will report unrealized gains and losses on
items, for which the fair value option has been elected, in earnings at each subsequent reporting date. This statement
also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose
different measurement attributes for similar types of assets and liabilities. This statement is effective for fiscal years
beginning after Nov. 15, 2007, effective Jan. 1, 2008. Xcel Energy adopted SFAS No. 159 and the adoption did not
have a material impact on its consolidated financial statements.
Business Combinations (SFAS No. 141 (revised 2007)) — In December 2007, the FASB issued SFAS No. 141R, which
establishes principles and requirements for how an acquirer in a business combination recognizes and measures in its
financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest; recognizes
and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines
what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of
the business combination. SFAS No. 141R is to be applied prospectively to business combinations for which the
acquisition date is on or after the beginning of an entity’s fiscal year that begins on or after Dec. 15, 2008. Xcel Energy
will evaluate the impact of SFAS No. 141R on its consolidated financial statements for any potential business
combinations subsequent to Jan. 1, 2009.
Noncontrolling Interests in Consolidated Financial Statements, an Amendment of ARB No. 51(SFAS No. 160) — In
December 2007, the FASB issued SFAS No. 160, which establishes accounting and reporting standards that require the
ownership interest in subsidiaries held by parties other than the parent be clearly identified and presented in the
consolidated balance sheets within equity, but separate from the parent’s equity; the amount of consolidated net income
attributable to the parent and the noncontrolling interest be clearly identified and presented on the face of the
consolidated statement of earnings; and changes in a parent’s ownership interest while the parent retains its controlling
financial interest in its subsidiary be accounted for consistently. This statement is effective for fiscal years beginning on
or after Dec. 15, 2008. Xcel Energy is evaluating the impact of SFAS No. 160 on its consolidated financial statements.
3. Discontinued Operations
Xcel Energy classified and accounted for certain assets as held for sale at Dec. 31, 2007 and 2006. Assets held for sale
are valued on an asset-by-asset basis at the lower of carrying amount or fair value less costs to sell. In applying those
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