ComEd 2013 Annual Report Download - page 126

ofOperationsandComprehensiveIncome.See Note 3—RegulatoryMattersandNote 23—Supplemental Financial Information for
additional information regardingGeneration’s nuclear fuel,Generation’s ARCandtheamortization ofComEd’s, PECO’s and BGE’s
regulatoryassets.
Asset Retirement Obligations
The authoritativeguidancefor accountingfor AROs requirestherecognition ofaliabilityfor a legal obligation to performan asset
retirement activityeven though thetimingand/or methodofsettlement maybeconditional on a future event.Toestimate its
decommissioningobligation relatedto itsnuclear generatingstations, Generation usesa probability-weighted, discountedcash flow
model which, on a unit-by-unitbasis, considersmultiple outcomescenariosthat includesignificant estimatesandassumptions, and
are basedon decommissioningcoststudies, costescalation rates, probabilistic cash flowmodelsand discount rates. Generation
generallyupdatesitsAROannuallyduringthethirdquarter,unless circumstanceswarrant more frequent updates, basedon its
reviewofupdatedcoststudiesanditsannual evaluation ofcostescalation factorsandprobabilitiesassignedto variousscenarios.
Decommissioningcoststudiesare updated, on a rotational basis, for each ofGeneration’s nuclear unitsat leastevery fiveyears.
TheliabilitiesassociatedwithExelon’s non-nuclear AROs are adjustedon an ongoingrotational basis, at leastonceevery fiveyears.
Changesto therecordedvalue ofan AROresult fromthepassageofnewlaws andregulations, revisionsto either thetimingor
amount ofestimatesofundiscountedcash flows, andestimatesofcostescalation factors. AROs are accretedeach year to reflect
thetimevalue ofmoneyfor these present value obligationsthrough acharge to operatingandmaintenanceexpenseinthe
ConsolidatedStatementsofOperationsor,inthecaseofthemajorityofComEd’s, PECO’s, and BGE’s accretion,through an
increasetoregulatoryassets. See Note 15—Asset Retirement Obligationsfor additional information.
Capitalized Interest and AFUDC
Duringconstruction,Exelon andGeneration capitalizethecostsofdebtfunds usedto finance non-regulatedconstruction projects.
Capitalization ofdebtfunds is recordedasachargetoconstruction workin progress andasa non-cash credittointerestexpense.
Exelon,ComEd, PECO and BGE applythe authoritativeguidancefor accountingfor certaintypesofregulation to calculate AFUDC,
which is thecost,duringthe periodofconstruction,ofdebtandequityfunds usedto financeconstruction projectsfor regulated
operations. AFUDC is recordedto construction workin progress andasa non-cash credittoAFUDC that is includedininterest
expensefor debt-relatedfunds andother incomeanddeductionsfor equity-relatedfunds. The ratesusedfor capitalizingAFUDC are
computedunder a methodprescribedbyregulatoryauthorities.
Thefollowingtable summarizestotal incurredinterest,capitalizedinterestandcreditsto AFUDC by year:
2013 (a) 2012 2011
Total incurredinterest(b) .................................................................... $1,423 $1,003 $783
Capitalizedinterest........................................................................ 54 67 49
Creditsto AFUDC debtandequity ............................................................ 352525
(a)Exelon activityfor theyear endedDecember 31,2012 includestheresultsofConstellation and BGE for March 12,2012—December 31,2012.
(b) Includesinterestexpensetoaffiliates.
Guarantees
Exelon recognizes, at theinception ofaguarantee,aliabilityfor thefairmarket value oftheobligationsithasundertaken inissuing
theguarantee,includingtheongoingobligation to performover the termoftheguarantee intheevent that thespecifiedtriggering
eventsor conditionsoccur.
Theliabilitythat is initiallyrecognizedat theinception oftheguarantee is reducedasExelon is releasedfromrisk under the
guarantee.Dependingon the nature oftheguarantee,the releasefromrisk ofExelon mayberecognizedonlyupon theexpiration or
settlement oftheguarantee or by asystematic andrational amortization methodover the termoftheguarantee.
See Note 22—CommitmentsandContingenciesfor additional information.
Asset Impairments
Long-Lived Assets. Exelon evaluatesthecarryingvalue ofitslong-livedassetsor asset groups, excludinggoodwill,when
circumstancesindicate thecarryingvalue ofthoseassetsmaynot berecoverable.Exelon determinesiflong-livedassetsandasset
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