ComEd 2006 Annual Report Download - page 267

Exelon Corporation and Subsidiary Companies
Exelon Generation Company, LLC and Subsidiary Companies
Commonwealth Edison Company and Subsidiary Companies
PECO Energy Company and Subsidiary Companies
Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
cash flows was calculated using credit-adjusted, risk-free rates in order to determine the fair value of
the conditional AROs at the time of adoption of FIN 47.
Conditional AROs of $231 million, $61 million, $150 million, and $20 million were recorded as of
December 31, 2005 for Exelon, Generation, ComEd, and PECO, respectively. Changes in
management’s assumptions regarding settlement dates, settlement methods or assigned probabilities
could have had a material effect on the liabilities recorded as well as the associated cumulative effect
of a change in accounting principle and associated regulatory assets recorded.
Effect of Adopting FIN 47
FIN 47 required that the Registrants recognize the following amounts within its financial
statements upon the adoption of FIN 47: (i) a liability for any existing conditional AROs adjusted for
cumulative accretion to December 31, 2005; (ii) an ARC capitalized as an increase to the carrying
amount of the associated long-lived assets; and (iii) cumulative depreciation on the ARC. The transition
guidance in FIN 47 required that its adoption be effected through a cumulative change in accounting
principle measured as the difference between the amounts recognized in the financial statements prior
to the adoption of FIN 47 for conditional AROs and the amounts recognized as of December 31, 2005
pursuant to FIN 47. Exelon and ComEd had previously recognized $39 million as removal costs within
regulatory liabilities associated with conditional AROs that were reclassified to a conditional ARO
liability upon the adoption of FIN 47.
After considering the transitional guidance included in FIN 47, Exelon, Generation, ComEd, and
PECO recorded charges of $42 million (net of income taxes of $27 million), $30 million (net of income
taxes of $19 million), $9 million (net of income taxes of $6 million), and $3 million (net of income taxes
of $2 million), respectively, as cumulative effects of a change in accounting principle in connection with
its adoption. In addition, due to the application of SFAS No. 71, which is further described in Note 1—
Significant Accounting Policies, Exelon, ComEd and PECO recorded regulatory assets of $104 million,
$91 million and $13 million, respectively, associated with the adoption of FIN 47.
The following table presents the line items within the Registrants’ Consolidated Statements of
Operations for the year ended December 31, 2005 and the Consolidated Balance Sheets at
December 31, 2005 that were affected by the adoption of FIN 47:
Exelon Generation ComEd PECO
Consolidated statements of operations line item:
Cumulative effect of a change in accounting principle (net of
income taxes of $(27), $(19), $(6), $(2) ) (a) .............. $(42) $(30) $ (9) $ (3)
Consolidated balance sheets line items—increase (decrease):
Property, plant and equipment, net (b) ..................... $ 19 $ 12 $ 5 $ 2
Regulatory assets (c) ................................... 104 — 91 13
Deferred income taxes (noncurrent liability) ................ (27) (19) (6) (2)
Asset retirement obligations (d) .......................... 231 61 150 20
Regulatory liabilities (e) ................................. (39) — (39) —
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