CenterPoint Energy 2008 Annual Report Download - page 94

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72
(n) Statements of Consolidated Cash Flows
For purposes of reporting cash flows, the Company considers cash equivalents to be short-term, highly liquid
investments with maturities of three months or less from the date of purchase. In connection with the issuance of
transition bonds in October 2001, December 2005 and February 2008, the Company was required to establish
restricted cash accounts to collateralize the bonds that were issued in these financing transactions. These restricted
cash accounts are not available for withdrawal until the maturity of the bonds. Cash and cash equivalents does not
include restricted cash of $49 million and $60 million at December 31, 2007 and 2008, respectively, which is
included in other current assets in the Company’s Consolidated Balance Sheets. For additional information
regarding transition bonds, see Notes 3(b) and 8(b). Cash and cash equivalents includes $128 million and
$166 million at December 31, 2007 and 2008, respectively, that is held by the Company’s transition bond
subsidiaries solely to support servicing the transition bonds.
(o) New Accounting Pronouncements
In April 2007, the FASB issued Staff Position No. FIN 39-1, ―Amendment of FASB Interpretation No. 39‖ (FIN
39-1), which permits companies that enter into master netting arrangements to offset cash collateral receivables or
payables with net derivative positions under certain circumstances. The Company adopted FIN 39-1 effective
January 1, 2008 and began netting cash collateral receivables and payables and also its derivative assets and
liabilities with the same counterparty subject to master netting agreements.
In February 2007, the FASB issued Statement of Financial Accounting Standard (SFAS) No. 159, ―The Fair
Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115‖
(SFAS No. 159). SFAS No. 159 permits the Company to choose, at specified election dates, to measure eligible
items at fair value (the ―fair value option‖). The Company would report unrealized gains and losses on items for
which the fair value option has been elected in earnings at each subsequent reporting period. This accounting
standard is effective as of the beginning of the first fiscal year that begins after November 15, 2007 but is not
required to be applied. The Company currently has no plans to apply SFAS No. 159.
In December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business Combinations‖ (SFAS No.
141R). SFAS No. 141R will significantly change the accounting for business combinations. Under SFAS No. 141R,
an acquiring entity will be required to recognize all the assets acquired and liabilities assumed in a transaction at the
acquisition date fair value with limited exceptions. SFAS No. 141R also includes a substantial number of new
disclosure requirements and applies prospectively to business combinations for which the acquisition date is on or
after the beginning of the first annual reporting period beginning on or after December 15, 2008. As the provisions
of SFAS No. 141R are applied prospectively, the impact to the Company cannot be determined until applicable
transactions occur.
In December 2007, the FASB issued SFAS No. 160, “Noncontrolling Interests in Consolidated Financial
Statements - An Amendment of ARB No. 51‖ (SFAS No. 160). SFAS No. 160 establishes new accounting and
reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. This
accounting standard is effective for fiscal years, and interim periods within those fiscal years, beginning on or after
December 15, 2008. The Company will adopt SFAS No. 160 as of January 1, 2009. The Company expects that the
adoption of SFAS No. 160 will not have a material impact on its financial position, results of operations or cash
flows.
In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging
Activities - an amendment of FASB Statement No. 133‖ (SFAS No. 161). SFAS No. 161 amends SFAS No. 133,
―Accounting for Derivative Instruments and Hedging Activities‖ (SFAS No. 133) and requires enhanced disclosures
of derivative instruments and hedging activities such as the fair value of derivative instruments and presentation of
their gains or losses in tabular format, as well as disclosures regarding credit risks and strategies and objectives for
using derivative instruments. SFAS No. 161 is effective for fiscal years and interim periods beginning after
November 15, 2008. The Company expects that the adoption of SFAS No. 161 will not have a material impact on its
financial position, results of operations or cash flows.