ComEd 2002 Annual Report Download - page 77

As it relates to nuclear decommissioning, the effect of a
cumulative adjustment will be to decrease the decommission-
ing liability to reflect the fair value of the decommissioning
obligation at the balance sheet date. Additionally, SFAS No. 143
will require the recognition of an asset related to the decom-
missioning obligation, which will be amortized over the
remaining lives of the plants. The net difference, between the
asset recognized and the change in the liability to reflect fair
value recorded upon adoption of SFAS No. 143, will be recorded
in earnings and recognized as a cumulative effect of a change
in accounting principle,net of expected regulatory recovery and
income taxes.The decommissioning liability will then represent
an obligation for the future decommissioning of the plants and,
as a result, accretion expense will be accrued on this liability
until the obligation is satisfied.
Currently, Generation records the obligation for decommis-
sioning ratably over the lives of the plants.Based on the current
information and the credit-adjusted risk-free rate, we estimate
the increase in 2003 non-cash expense to impact earnings
before the cumulative effect of a change in accounting principle
for the adoption of SFAS No. 143 by approximately $24 million,
after income taxes. Additionally, the adoption of SFAS No. 143 is
expected to result in a large, non-cash, one-time cumulative
effect of a change in accounting principle gain of at least $1.5
billion, after income taxes.The $1.5 billion gain and the $24 mil-
lion charge includes our share of the impact of the SFAS No.143
adoption related to AmerGen’s nuclear plants. These impacts
are based on our current interpretation of SFAS No. 143 and are
subject to continued refinement based on the finalization of
assumptions and interpretation at the time of adopting the
standard, including the determination of the credit-adjusted
risk-free rate. Under SFAS No. 143, the fair value of the nuclear
decommissioning obligation will continue to be adjusted on an
ongoing basis as these model input factors change.
The final determination of the 2003 earnings impact and
the cumulative effect of adopting SFAS No. 143 is in part a
function of the credit adjusted risk-free rate at the time of the
adoption of SFAS No. 143. Additionally, although over the life of
the plant the charges to earnings for the depreciation of the
asset and the interest on the liability will be equal to the
amounts that would have been recognized as decommissioning
expense under current accounting, the timing of those charges
will change and in the near-term period subsequent to adop-
tion,the depreciation of the asset and the interest on the liabil-
ity is expected to result in an increase in expense.
In July 2002, the FASB issued SFAS No. 146, “Accounting for
Costs Associated with Exit or Disposal Activities” (SFAS No. 146).
SFAS No. 146 requires that the liability for costs associated with
exit or disposal activities be recognized when incurred, rather
than at the date of a commitment to an exit or disposal plan.
SFAS No. 146 is to be applied prospectively to exit or disposal
activities initiated after December 31, 2002.
In November 2002,the FASB released FASB Interpretation No.
(FIN) 45,“Guarantor’s Accounting and Disclosure Requirements
for Guarantees, Including Indirect Guarantees of Indebtedness
of Others” (FIN No. 45), providing for expanded disclosures and
recognition of a liability for the fair value of the obligation
undertaken by the guarantor. Under FIN No. 45, guarantors are
required to disclose the nature of the guarantee,the maximum
amount of potential future payments, the carrying amount of
the liability and the nature and amount of recourse provisions
or available collateral that would be recoverable by the guar-
antor. As of December 31, 2002, we have adopted disclosure
requirements under FIN No. 45, which were effective for finan-
cial statements for periods ended after December 15, 2002. The
recognition and measurement provisions of FIN No.45 are effec-
tive, on a prospective basis, for guarantees issued or modified
after December 31, 2002.
In January 2003, the FASB issued FIN No. 46,“Consolidation
of Variable Interest Entities” (FIN No. 46). FIN No. 46 addresses
consolidating certain variable interest entities and applies
immediately to variable interest entities created after January
31, 2003. The impact, if any, of adopting FIN 46 on our consoli-
dated financial position, results of operations and cash flows,
has not been fully determined.
forward-looking statements
Except for the historical information contained in this report,
certain of the matters discussed in this Report are forward-
looking statements that are subject to risks and uncertainties.
The factors that could cause actual results to differ materially
include those we have discussed in this report as well as those
listed in Note 19 of the Notes to Consolidated Financial
Statements and other factors discussed in our filings with the
SEC.Readers should not place undue reliance on these forward-
looking statements, which speak only as of the date of this
Report. We undertake no obligation to publicly release any
revision to these forward-looking statements to reflect events
or circumstances after the date of this Report.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
exelon corporation and subsidiary companies
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