Allegheny Power 2015 Annual Report Download - page 77

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financialstatements.Inaddition,inAugust2015,theFASBissuedASU201515,"PresentationandSubsequentMeasurementof
DebtIssuanceCostsAssociatedwithLineofCreditArrangements",whichstatesgiventheabsenceofauthoritativeguidancewithin
ASU201503fordebtissuancecostsrelatedtothelineofcreditarrangements,theSECstaffwouldnotobjecttopresentingthose
deferreddebtissuancecostsasanassetandsubsequentlyamortizingthecostsratablyoverthetermofthearrangement,regardless
ofwhether there areany outstandingborrowingson thelineofcredit. FirstEnergy willadoptASU201515 andASU201503
beginningJanuary1,2016.AsofDecember31,2015,FirstEnergyandFESdebtissuancecostsincludedinDeferredChargesand
OtherAssetswere$93millionand$17million,respectively.FirstEnergywillelecttocontinuepresentingdebtissuancecostsrelating
toitsrevolvingcreditfacilitiesasanasset.
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InAugust2015,theFASBissuedASU201513,"ApplicationoftheNPNSScopeExceptiontoCertainElectricityContractswithin
NodalEnergyMarkets",whichconfirmedthatforwardphysicalcontractsforthesaleorpurchaseofelectricitymeetthephysical
deliverycriterionwithintheNPNSscopeexceptionwhentheelectricityistransmittedthroughagridmanagedbyanISO.Asaresult,
anentitycanelecttheNPNSexceptionwithinthederivativeaccountingguidanceforsuchcontracts,providedthattheotherNPNS
criteriaarealsomet.TheASUwaseffectiveonissuanceandrequiresprospectiveapplication.Therewasnomaterialeffecton
FirstEnergy'sfinancialstatementsresultingfromtheissuanceofASU201513.
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InNovember2015,theFASBissuedASU201517,"BalanceSheetClassificationofDeferredTaxes",whichrequiresalldeferredtax
assetsandliabilities,alongwithanyrelatedvaluationallowance,beclassifiedasnoncurrentonthebalancesheet.Thenewguidance
willbeeffectiveforfiscalyearsbeginningafterDecember15,2016,andinterimperiodswithinthosefiscalyears.Earlyadoptionis
permitted for all entities as of the beginning of an interim or annual reporting period.  The guidance may be applied either
prospectively,foralldeferredtaxassetsandliabilities,orretrospectively.FirstEnergyearlyadoptedASU201517asofDecember
2015,andappliedthenewguidanceretrospectivelytoallpriorperiodspresentedinthefinancialstatements.Therewasnoimpact
fromtheearlyadoptionofASU201517ontheConsolidatedStatementsofIncome.OntheConsolidatedBalanceSheetasof
December31,2014,FirstEnergyandFESreclassified$518million and$27million ofAccumulatedDeferredIncomeTaxesfrom
CurrentAssetstoNoncurrentLiabilities.
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InJanuaryof2016,theFASBissuedASU201601,"FinancialInstrumentsOverall:RecognitionandMeasurementofFinancial
AssetsandFinancialLiabilities".ChangestothecurrentGAAPmodelprimarilyaffecttheaccountingforequityinvestments,financial
liabilitiesunderthefairvalueoption,andthepresentationanddisclosurerequirementsforfinancialinstruments.Inaddition,theFASB
clarifiedguidancerelatedtothevaluationallowanceassessmentwhenrecognizingdeferredtaxassetsresultingfromunrealized
lossesonavailableforsaledebtsecurities.TheASUwillbeeffectiveinfiscalyearsbeginningafterDecember15,2017,including
interimperiodswithinthosefiscalyears.Earlyadoptioncanbeelectedforallfinancialstatementsoffiscalyearsandinterimperiods
thathavenotyetbeenissuedorthathavenotyetbeenmadeavailableforissuance.FirstEnergyiscurrentlyevaluatingtheimpacton
itsfinancialstatementsofadoptingthisstandard.
QUANTITATIVEANDQUALITATIVEDISCLOSURESABOUTMARKETRISK
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TheinformationrelatingtomarketriskissetforthinManagement'sDiscussionandAnalysisofFinancialConditionandResultsof
Operations.
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FINANCIALSTATEMENTSANDSUPPLEMENTARYDATA
MANAGEMENTREPORTS
Management’sResponsibilityforFinancialStatements
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TheconsolidatedfinancialstatementsofFirstEnergyCorp.(Company)werepreparedbymanagement,whotakesresponsibilityfor
theirintegrityandobjectivity.ThestatementswerepreparedinconformitywithaccountingprinciplesgenerallyacceptedintheUnited
Statesandareconsistentwithotherfinancialinformationappearingelsewhereinthisreport.PricewaterhouseCoopersLLP,an
independentregisteredpublicaccountingfirm,hasexpressedanunqualifiedopinionontheCompany’s2015consolidatedfinancial
statementsasstatedintheirauditreportincludedherein.
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TheCompany’sinternalauditors,whoareresponsibletotheAuditCommitteeoftheCompany’sBoardofDirectors,reviewtheresults
andperformanceofoperatingunitswithintheCompanyforadequacy,effectivenessandreliabilityofaccountingandreporting
systems,aswellasmanagerialandoperatingcontrols.
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TheCompany’sAuditCommitteeconsistsoffiveindependentdirectorswhosedutiesinclude:considerationoftheadequacyofthe
internalcontrolsoftheCompanyandtheobjectivityoffinancialreportinginquiryintothenumber,extent,adequacyandvalidityof
regularandspecialauditsconductedbyindependentauditorsandtheinternalauditorsandreportingtotheBoardofDirectorsthe
Committee’s findings and any recommendation for changes in scope, methods or procedures of the auditing functions.The
CommitteeisdirectlyresponsibleforappointingtheCompany’sindependentregisteredpublicaccountingfirmandischargedwith
reviewingandapprovingallservicesperformedfortheCompanybytheindependentregisteredpublicaccountingfirmandfor
reviewingandapprovingtherelatedfees.TheCommitteereviewstheindependentregisteredpublicaccountingfirm’sreporton
internalqualitycontrolandreviewsallrelationshipsbetweentheindependentregisteredpublicaccountingfirmandtheCompany,in
ordertoassesstheindependentregisteredpublicaccountingfirm’sindependence.TheCommitteealsoreviewsmanagement’s
programstomonitorcompliancewiththeCompany’spoliciesonbusinessethicsandriskmanagement.TheCommitteeestablishes
procedurestoreceiveandrespondtocomplaintsreceivedbytheCompanyregardingaccounting,internalaccountingcontrols,or
auditingmattersandallowsfortheconfidential,anonymoussubmissionofconcernsbyemployees.TheAuditCommitteeheldeight
meetingsin2015.
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Management’sReportonInternalControlOverFinancialReporting
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Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in
Rules13a15(f)and15d15(f)oftheSecuritiesExchangeActof1934.UsingthecriteriasetforthbytheCommitteeofSponsoring
OrganizationsoftheTreadwayCommissioninInternalControlIntegratedFrameworkpublishedin2013,managementconductedan
evaluationoftheeffectivenessoftheCompany’sinternalcontroloverfinancialreportingunderthesupervisionoftheChiefExecutive
OfficerandtheChiefFinancialOfficer.Basedonthatevaluation,managementconcludedthattheCompany’sinternalcontrolover
financial reporting was effective as of December31, 2015.The effectiveness of the Company’s internal control over financial
reporting,asofDecember31,2015,hasbeenauditedbyPricewaterhouseCoopersLLP,anindependentregisteredpublicaccounting
firm,asstatedintheirreportwhichappearsherein.