ComEd 2013 Annual Report Download - page 119

Combined Notes to Consolidated Financial Statements
(Dollars in millions, except per share data unless otherwise noted)
1. Significant Accounting Policies
Description of Business
Exelon is autilityservicesholdingcompanyengagedthrough itsprincipal subsidiariesinthe energy generation andenergy
distribution businesses. Prior to March 12,2012,Exelon’s principal subsidiariesincludedComEd, PECO andGeneration.On
March 12,2012,Constellation mergedinto Exelon withExelon continuingasthesurvivingcorporation pursuant to the transactions
contemplatedbytheAgreement andPlan ofMerger (“Merger Agreement”). Asaresult ofthemerger transaction,Generation now
includestheformer Constellation generation andcustomer supplyoperations. BGE, formerlyConstellation’s regulatedutility
subsidiary, is nowasubsidiaryofExelon.Refer to Note 4—Merger andAcquisitionsfor further information regardingthemerger
transaction.
Basis of Presentation
Through itsbusiness servicessubsidiary, BSC, Exelon providesitssubsidiarieswithavarietyofsupport servicesat cost,including
legal,human resources, financial,information technology andsupplymanagement services. Thecostsof BSC, includingsupport
services, are directlychargedor allocatedto the applicable subsidiariesusingacost-causative allocation method. Corporate
governance-type coststhat cannot bedirectlyassignedare allocatedbasedon a ModifiedMassachusettsFormula, which is a
methodthat utilizesacombination ofgross revenues, total assetsanddirectlabor costsfor the allocation base.Theresultsof
Exelon’s corporate operationsare presentedas“Other”withintheconsolidatedfinancial statementsandincludeintercompany
eliminationsunless otherwisedisclosed.
Exelon owns100%ofall ofits significant consolidatedsubsidiaries, either directlyor indirectly, except for ComEd, of which Exelon
ownsmore than 99%, and BGE, of which Exelon owns100%ofthecommon stock but none of BGE’s preferencestock. Exelon
ownednone of PECO’s preferredsecurities, which PECO redeemedin 2013.Exelon hasreflectedthethird-partyinterestsin
ComEd, which totaledless than $1million at December 31,2013 andDecember 31,2012,asequity, PECO’s preferredsecuritiesas
preferredsecuritiesofsubsidiarythrough theirredemption in 2013,and BGE’s preferencestock as BGE preferencestock not subject
to mandatoryredemption initsconsolidatedfinancial statements. BGE is subjecttosomering-fencingmeasuresestablishedby
order oftheMDPSC. Aspart ofthis arrangement, BGE common stock is helddirectlybyRFHoldcoLLC, which is an indirect
subsidiaryofExelon. GSS Holdings (BGE Utility), an unrelatedparty, holds anominal non-economic interestinRFHoldcoLLC with
limitedvotingrightson specifiedmatters.
Generation owns100%ofall ofits significant consolidatedsubsidiaries, either directlyor indirectly, except for certainExelon Wind
projects, of which Generation holds amajorityinterest rangingfrom 94% to 99% for certain periods oftime,andtheremaining
interestsare includedin non-controllinginterestonExelon’s andGeneration’s ConsolidatedBalanceSheets. See Note 2 for further
discussion ofExelon’s andGeneration’s VIEs andthereversionaryinterestsofthe non-controllingmembersfor certainofthese
projects.
ComEd owns100%ofall ofits significant consolidatedsubsidiaries, either directlyor indirectly, except for RITELine Illinois, LLC, of
which ComEd owns 75% andan additional 12.5% is indirectlyownedbyExelon.Exelon andComEd havereflectedthethird-party
interestsof12.5% and25%, respectively, inRITELine Illinois, LLC, which bothtotaledless than $1million at December 31,2013
andDecember 31,2012,asequity.
Exelon consolidatestheaccountsofentitiesinwhich Exelon hasacontrollingfinancial interest,after theelimination ofintercompany
transactions. Acontrollingfinancial interestis evidencedbyeither a votinginterestgreater than 50%inwhich Exelon can exercise
control over the operationsandpoliciesoftheinvestee,or theresultsofamodel that identifiesExelon or one ofitssubsidiariesas
theprimarybeneficiaryofaVIE. Where Exelon doesnot haveacontrollingfinancial interestin an entity, it appliesproportional
consolidation,equitymethodaccountingor costmethodaccounting. Exelon appliesproportionate consolidation when ithasan
undividedinterestinanasset andisproportionatelyliable for itsshare ofeach liabilityassociatedwiththeasset.Exelon
proportionatelyconsolidatesitsundividedownershipinterestsinjointlyownedelectric plantsandtransmission facilities, aswell asits
undividedownershipinterestsinupstreamnatural gasexploration andproduction activities. Under proportionate consolidation,
Exelon separatelyrecords itsproportionate share oftheassets, liabilities, revenuesandexpensesrelatedto theundividedinterestin
theasset.Exelon appliesequitymethodaccountingwhen ithas significant influenceover an investee through an ownershipin
common stock, which generallyapproximatesa20%to 50%votinginterest.Exelon appliesequitymethodaccounting
113