Allegheny Power 2015 Annual Report Download - page 85

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68
FIRSTENERGYCORP.ANDSUBSIDIARIES
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COMBINEDNOTESTOCONSOLIDATEDFINANCIALSTATEMENTS
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Note
Number
Page
Number
1 OrganizationandBasisofPresentation 69
2 AccumulatedOtherComprehensiveIncome 76
3 PensionandOtherPostemploymentBenefits 79
4 StockBasedCompensationPlans 86
5 Taxes 89
6 Leases 95
7 IntangibleAssets 96
8 VariableInterestEntities 96
9 FairValueMeasurements 99
10DerivativeInstruments 104
11Capitalization 109
12ShortTermBorrowingsandBankLinesofCredit 114
13AssetRetirementObligations 115
14RegulatoryMatters 116
15Commitments,GuaranteesandContingencies 124
16TransactionswithAffiliatedCompanies 130
17SupplementalGuarantorInformation 132
18SegmentInformation 141
19DiscontinuedOperations 143
20SummaryofQuarterlyFinancialData(Unaudited) 144
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69
COMBINEDNOTESTOCONSOLIDATEDFINANCIALSTATEMENTS
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1.ORGANIZATIONANDBASISOFPRESENTATION
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Unlessotherwiseindicated,definedtermsandabbreviationsusedhereinhavethemeaningssetforthintheaccompanyingGlossary
ofTerms.
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FirstEnergyCorp.wasorganizedunderthelawsoftheStateofOhioin1996.FE’sprincipalbusinessistheholding,directlyor
indirectly,ofalloftheoutstandingcommonstockofitsprincipalsubsidiaries:OE,CEI,TE,Penn(awhollyownedsubsidiaryofOE),
JCP&L,ME,PN,FESC,FESanditsprincipalsubsidiaries(FGandNG),AESupply,MP,PE,WP,FETanditsprincipalsubsidiaries
(ATSIandTrAIL),andAESC.Inaddition,FEholdsalloftheoutstandingcommonstockofotherdirectsubsidiariesincluding:
FirstEnergyProperties,Inc.,FEV,FENOC,FELHC,Inc.,GPUNuclear,Inc.,andAEVentures,Inc.
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FirstEnergyanditssubsidiariesareinvolvedinthegeneration,transmission,anddistributionofelectricity.FirstEnergy’stenutility
operatingcompaniescompriseoneofthenation’slargestinvestorownedelectricsystems,servingsixmillioncustomersinthe
MidwestandMidAtlanticregions.Itsgenerationsubsidiariescontrolnearly17,000MWofcapacityfromadiversemixofnonemitting
nuclear,scrubbedcoal,naturalgas,hydroelectricandotherrenewables.FirstEnergy’stransmissionoperationsincludeapproximately
24,000milesoflinesandtworegionaltransmissionoperationcenters.
FirstEnergyfollowsGAAPandcomplieswiththerelatedregulations,orders,policiesandpracticesprescribedbytheSEC,FERC,
and,asapplicable,thePUCO,thePPUC,theMDPSC,theNYPSC,theWVPSC,theVSCCandtheNJBPU.Thepreparationof
financialstatementsinconformitywithGAAPrequiresmanagementtomakeperiodicestimatesandassumptionsthataffectthe
reportedamountsofassets,liabilities,revenues,expensesanddisclosureofcontingentassetsandliabilities.Actualresultscould
differfromtheseestimates.Thereportedresultsofoperationsarenotnecessarilyindicativeofresultsofoperationsforanyfuture
period.FEanditssubsidiarieshaveevaluatedeventsandtransactionsforpotentialrecognitionordisclosurethroughthedatethe
financialstatementswereissued.
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FEanditssubsidiariesconsolidateallmajorityownedsubsidiariesoverwhichtheyexercisecontroland,whenapplicable,entitiesfor
which they have a controlling financial interest. Intercompany transactions and balances are eliminated in consolidation as
appropriate.FEanditssubsidiariesconsolidateaVIEwhenitisdeterminedthatitistheprimarybeneficiary(seeNote8,Variable
InterestEntities).InvestmentsinaffiliatesoverwhichFEanditssubsidiarieshavetheabilitytoexercisesignificantinfluence,butwith
respecttowhichtheyarenottheprimarybeneficiaryanddonotexercisecontrol,followtheequitymethodofaccounting.Underthe
equitymethod,theinterestintheentityisreportedasaninvestmentintheConsolidatedBalanceSheetsandthepercentageshareof
the entity’s earnings is reported in the Consolidated Statements of Income and Comprehensive Income. These Notes to the
ConsolidatedFinancialStatementsarecombinedforFirstEnergyandFES.
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Certainprioryearamountshavebeenreclassifiedtoconformtothecurrentyearpresentation.
ACCOUNTINGFORTHEEFFECTSOFREGULATION
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FirstEnergyaccountsfortheeffectsofregulationthroughtheapplicationofregulatoryaccountingtotheUtilities,AGC,ATSI,PATH
andTrAILsincetheirratesareestablishedbyathirdpartyregulatorwiththeauthoritytosetratesthatbindcustomers,arecostbased
andcanbechargedtoandcollectedfromcustomers.
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FirstEnergyrecordsregulatoryassetsandliabilitiesthatresultfromtheregulatedratemakingprocessthatwouldnotberecorded
under GAAP for nonregulated entities.These assets and liabilities are amortized in the Consolidated Statements of Income
concurrentwiththerecoveryorrefundthroughcustomerrates.FirstEnergybelievesthatitisprobablethatitsregulatoryassetsand
liabilitieswillberecoveredandsettled,respectively,throughfuturerates.FirstEnergyandtheUtilitiesnettheirregulatoryassetsand
liabilitiesbasedonfederalandstatejurisdictions.
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