Xcel Energy 2011 Annual Report Download - page 99

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Environmental Costs — Environmental costs are recorded when it is probable Xcel Energy is liable for the costs and the liability
can be reasonably estimated. Costs are deferred as a regulatory asset if it is probable that the costs will be recovered from
customers in future rates. Otherwise, the costs are expensed. If an environmental expense is related to facilities currently in use,
such as emission-control equipment, the cost is capitalized and depreciated over the life of the plant.
Estimated remediation costs, excluding inflationary increases, are recorded. The estimates are based on experience, an assessment
of the current situation and the technology currently available for use in the remediation. The recorded costs are regularly adjusted
as estimates are revised and remediation proceeds. If other participating PRPs exist and acknowledge their potential involvement
with a site, costs are estimated and recorded only for Xcel Energy’s expected share of the cost. Any future costs of restoring sites
where operation may extend indefinitely are treated as a capitalized cost of plant retirement. The depreciation expense levels
recoverable in rates include a provision for removal expenses, which may include final remediation costs. Removal costs
recovered in rates are classified as a regulatory liability.
See Note 13 for further discussion of environmental costs.
Benefit Plans and Other Postretirement Benefits — Xcel Energy maintains pension and postretirement benefit plans for eligible
employees. Recognizing the cost of providing benefits and measuring the projected benefit obligation of these plans under
applicable accounting guidance requires management to make various assumptions and estimates.
Based on the regulatory recovery mechanisms of Xcel Energy Inc.’s utility subsidiaries, certain unrecognized actuarial gains and
losses and unrecognized prior service costs or credits are recorded as regulatory assets and liabilities, rather than OCI.
See Note 9 for further discussion of benefit plans and other postretirement benefits.
Guarantees — Xcel Energy recognizes, upon issuance or modification of a guarantee, a liability for the fair market value of the
obligation that has been assumed in issuing the guarantee. This liability includes consideration of specific triggering events and
other conditions which may modify the ongoing obligation to perform under the guarantee.
The obligation recognized is reduced over the term of the guarantee as Xcel Energy is released from risk under the guarantee. See
Note 13 for specific details of issued guarantees.
Subsequent Events — Management has evaluated the impact of events occurring after Dec. 31, 2011 up to the date of issuance of
these consolidated financial statements. These statements contain all necessary adjustments and disclosures resulting from that
evaluation.
2. Accounting Pronouncements
Recently Adopted
Multiemployer Plans — In September 2011, the FASB issued Multiemployer Plans (Subtopic 715-80) — Disclosures about an
Employer’s Participation in a Multiemployer Plan (ASU No. 2011-09), which updates the Codification to require certain
disclosures about an entity’s involvement with multiemployer pension and other postretirement benefit plans. These updates do
not affect recognition and measurement guidance for an employer’s participation in multiemployer plans, but rather require
additional disclosure such as the nature of multiemployer plans and the employer’s participation, contributions to the plans and
details regarding any significant plans. These updates to the Codification are effective for annual periods ending after Dec. 15,
2011. Xcel Energy implemented the annual disclosure guidance effective Jan. 1, 2011, and the implementation did not have a
material impact on its consolidated financial statements. For further information and required disclosures, see Note 9.
Recently Issued
Fair Value Measurement — In May 2011, the FASB issued Fair Value Measurement (Topic 820) — Amendments to Achieve
Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS (ASU No. 2011-04), which provides
additional guidance for fair value measurements. These updates to the Codification include clarifications regarding existing fair
value measurement principles and disclosure requirements, and also specific new guidance for items such as measurement of
instruments classified within stockholders’ equity. These updates to the Codification are effective for interim and annual periods
beginning after Dec. 15, 2011. Xcel Energy does not expect the implementation of this guidance to have a material impact on its
consolidated financial statements.