ComEd 2002 Annual Report Download - page 88

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 the current accounting, the timing of those
charges will change and in the near-term period subsequent to
adoption, the depreciation of the asset and the interest on the
liability 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 guaran-
tor. Exelon has adopted the disclosure requirements under FIN
No. 45, (see Note 19—Commitments and Contingencies) which
were effective for financial statements for periods ended after
December 15, 2002.The recognition and measurement provisions
of FIN No.45 are effective,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.
See Note 4—Adoption of New Accounting Pronouncements
and Accounting Changes for discussion of the impact of new
accounting pronouncements adopted by Exelon.
Reclassifications
Certain prior year amounts have been reclassified for compara-
tive purposes.The reclassifications did not affect net income or
shareholders’equity.
note 02 • merger
On October 20, 2000, Exelon became the parent corporation of
PECO and ComEd as a result of the completion of the transac-
tions contemplated by an Agreement and Plan of Exchange and
Merger,as amended (Merger Agreement),among PECO,Unicom
and Exelon. Pursuant to the Merger Agreement, Unicom
merged with and into Exelon. In the Merger, each share of
the outstanding common stock of Unicom was converted into
0.875 shares of common stock of Exelon plus $3.00 in cash. As
a result of the Share Exchange, Exelon became the owner of all
of the common stock of PECO.As a result of the Merger,Unicom
ceased to exist and its subsidiaries, including ComEd, became
subsidiaries of Exelon.
The Merger was accounted for using the purchase method
of accounting. The total purchase price was $6,014 million. In
connection with the Merger,Exelon issued 148 million shares of
common stock in the amount of $5,310 million and paid $507
million in cash to Unicom shareholders pursuant to the terms
of the Merger Agreement. The source of the cash consideration
was borrowings under an Exelon term loan. In addition, the
Merger consideration included $113 million of fair value of stock
options and awards for certain Unicom employees and $84 mil-
lion of direct acquisition costs. The cost in excess of net assets
acquired was $5,150 million as adjusted to reflect final purchase
price allocations. Exelon’s results of operations include Unicom’s
results of operations since October 20, 2000. The fair value of
the assets acquired, including the cost in excess of net assets
acquired, and liabilities assumed in the Merger are as follows:
Current Assets (including cash of $974) $ 2,744
Property, Plant and Equipment 7,641
Deferred Debits and Other Assets 5,535
Cost in excess of net assets acquired 5,150
Current Liabilities (2,390)
Long-Term Debt (7,419)
Deferred Credits and Other Liabilities (4,919)
Preferred Securities of Subsidiaries (328)
Total Purchase Price $ 6,014
Goodwill associated with the Merger increased by $14 million
and $262 million in 2002 and 2001,respectively,as a result of the
finalization of the purchase price allocation.The adjustment
resulted primarily from the after-tax effects of the reduction
of the regulatory asset for decommissioning retired nuclear
plants, as discussed in Note 11—Nuclear Decommissioning and
Notes To Consolidated Financial Statements
exelon corporation and subsidiary companies
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