ComEd 2003 Annual Report Download - page 102

Notes to Consolidated Financial Statements
EXELON CORPORATION AND SUBSIDIARY COMPANIES
NOTE 09 ‰SEVERANCE ACCOUNTING
Exelon provides severance and health and welfare benefits
to terminated employees pursuant to pre-existing severance
plans primarily based upon each individual employee’s years
of service with Exelon and compensation level. Exelon ac-
counts for its ongoing severance plans in accordance with
SFAS No. 112, “Employer’s Accounting for Postemployment
Benefits, an amendment of FASB Statements No. 5 and 43”
(SFAS No. 112) and SFAS No. 88, “Employers’ Accounting for
Settlements and Curtailments of Defined Benefit Pension
Plans and for Termination Benefits” and accrues amounts
associated with severance benefits that are considered
probable and that can be reasonably estimated.
As part of the implementation of Exelon’s new business
model referred to as The Exelon Way during 2003, Exelon
identified approximately 1,500 positions for elimination by
the end of 2004. The majority of the headcount reductions
are professional and managerial employees. Exelon recorded
a charge for salary continuance severance of $130 million
(before income taxes) associated with The Exelon Way dur-
ing 2003, which represented salary continuance costs that
were probable and could be reasonably estimated as of
December 31, 2003. During 2003, Exelon recorded a charge of
$48 million (before income taxes) associated with special
health and welfare severance benefits offered through The
Exelon Way. In addition to salary continuance and health
and welfare severance benefits, Exelon incurred curtailment
costs associated with its pension and postretirement benefit
plans of $80 million as a result of personnel reductions due
to The Exelon Way. In total, Exelon recorded charges of $258
million (before income taxes) in 2003 associated with The
Exelon Way. See Note 14 – Retirement Benefits for a descrip-
tion of the curtailment charges related to the pension and
postretirement benefit plans.
Exelon based its estimate of the number of positions to be
eliminated on management’s current plans and its ability to
determine the appropriate staffing levels to effectively oper-
ate the businesses. Exelon may incur further severance costs
associated with The Exelon Way if additional positions are
identified for elimination. These costs will be recorded in the
period in which the costs can be first reasonably estimated.
The following table details, by segment, Exelon’s total
salary continuance severance costs for the years ended
December 31, 2003, 2002 and 2001:
Salary continuance severance charges
Energy
Delivery Generation Enterprises
Corporate
and
Intersegment
Eliminations Consolidated
Costs recorded–2003(a) $77 $38 $9 $ 11 $135
Costs recorded–2002(b) – 2 (1) 7 8
Costs recorded–2001(b) –49 (6) 7
(a) Severance expense in 2003 reflects severance costs associated with The Exelon Way and other severance costs incurred in the normal course of business.
(b) Severance expense in 2002 and 2001 generally represents severance activity associated with the Merger and in the normal course of business.
The following table provides a roll forward of Exelon’s salary
continuance severance obligation from January 1, 2002
through December 31, 2003. The salary continuance sev-
erance obligation as of January 1, 2002 and amounts paid in
2002 relate to severance associated with the Merger.
Salary continuance severance obligation
Balance as of January 1, 2002 $124
Severance charges recorded 8
Cash payments (78)
Other adjustments (15)
Balance as of January 1, 2003 39
Severance charges recorded 135
Cash payments (39)
Other adjustments 4
Balance as of December 31, 2003 $139
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