ComEd 2003 Annual Report Download - page 107

Notes to Consolidated Financial Statements
EXELON CORPORATION AND SUBSIDIARY COMPANIES
The tax effects of temporary differences giving rise to
significant portions of Exelon’s deferred tax assets
and liabilities as of December 31, 2003 and 2002 are pre-
sented below:
2003 2002
Deferred tax liabilities:
Plant basis difference $ 3,932 $ 3,647
Stranded cost recovery 1,784 1,923
Deferred investment tax credits 288 301
Deferred debt refinancing costs 69 96
Total deferred tax liabilities 6,073 5,967
Deferred tax assets:
Deferred pension and postretirement obligations (901) (911)
Excess of tax value over book value of impaired assets(a) (501) –
Decommissioning and decontamination obligations (97) (607)
Unrealized loss on derivative financial instruments (70) (60)
Goodwill (29) (95)
Other, net (304) (297)
Total deferred tax assets (1,902) (1,970)
Deferred income tax liabilities (net) on the Consolidated Balance Sheets $ 4,171 $ 3,997
(a) Includes impairments related to Exelon’s investments in Sithe and Boston Generating and write-downs of certain Enterprises investments.
In accordance with regulatory treatment of certain tempo-
rary differences, Exelon has recorded a net regulatory asset
associated with deferred income taxes, pursuant to SFAS No.
71 and SFAS No. 109, “Accounting for Income Taxes,” (SFAS
No. 109) of $701 million and $661 million at December 31,
2003 and 2002, respectively. See Note 20 - Supplemental
Financial Information for further discussion of Exelon’s regu-
latory asset associated with deferred income taxes.
ComEd and PECO have certain tax returns that are under
review at the audit or appeals level of the IRS and certain
state authorities. These reviews by the governmental taxing
authorities are not expected to have an adverse impact on
the financial condition or result of operations of Exelon.
ComEd has taken certain tax positions, which have been
disclosed to the IRS, to defer the tax gain on the 1999 sale of
its fossil generating assets. As of December 31, 2003 and
2002, a deferred tax liability of approximately $848 million
and $860 million, respectively, related to the fossil plant sale
is reflected in deferred income taxes on Exelon’s Con-
solidated Balance Sheets. ComEd’s management believes an
adequate reserve for interest has been established in the
event that such positions are not sustained. Changes in IRS
interpretations of existing tax authority or challenges to
ComEd’s positions could have the impact of accelerating
future income tax payments and increasing interest expense
above amounts reserved related to the deferred tax gain that
becomes current. The Federal tax returns covering the period
of the 1999 fossil plant sale are expected to be under IRS au-
dit beginning in 2004. Final resolution of this matter is not
anticipated for several years.
As of December 31, 2003 and 2002, Exelon had recorded
valuation allowances of $22 million and $13 million, re-
spectively, with respect to deferred taxes associated with
separate company state taxes.
NOTE 13 ‰NUCLEAR DECOMMISSIONING
AND SPENT FUEL STORAGE
Nuclear Decommissioning
Exelon has an obligation to decommission its nuclear power
plants. Based on the extended license lives of the nuclear
plants, expenditures are expected to occur primarily during
the period 2029 through 2056. Exelon currently recovers
costs for decommissioning its nuclear generating stations,
excluding the AmerGen stations, through regulated rates.
See further discussion of AmerGen below. The amounts re-
covered from customers are deposited in trust accounts and
invested for funding of future decommissioning costs of
nuclear generating stations.
Exelon had decommissioning assets in trust accounts of
$4,721 million and $3,053 million as of December 31, 2003 and
2002, respectively, which are included as nuclear decom-
missioning trust funds on Exelon’s Consolidated Balance
Sheets. Exelon anticipates that all trust fund assets will
ultimately be used to decommission Exelon’s nuclear plants.
SFAS No. 143 provides accounting requirements for
retirement obligations (whether statutory, contractual or as
a result of principles of promissory estoppel) associated with
tangible long-lived assets. Exelon adopted SFAS No. 143 as of
January 1, 2003. After considering interpretations of the
transitional guidance included in SFAS No. 143, Exelon
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