Entergy 2009 Annual Report Download - page 75

Entergy Corporation and Subsidiaries
Notes to Financial Statements
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criteria and are not recognized on the balance sheet. Revenues and expenses from these contracts are reported on a
gross basis in the appropriate revenue and expense categories as the commodities are received or delivered.
For other contracts for commodities in which Entergy is hedging the variability of cash flows related to a
variable-rate asset, liability, or forecasted transactions that qualify as cash flow hedges, the changes in the fair value
of such derivative instruments are reported in other comprehensive income. To qualify for hedge accounting, the
relationship between the hedging instrument and the hedged item must be documented to include the risk management
objective and strategy and, at inception and on an ongoing basis, the effectiveness of the hedge in offsetting the
changes in the cash flows of the item being hedged. Gains or losses accumulated in other comprehensive income are
reclassified as earnings in the periods in which earnings are affected by the variability of the cash flows of the hedged
item. The ineffective portions of all hedges are recognized in current-period earnings.
Entergy has determined that contracts to purchase uranium do not meet the definition of a derivative under
the accounting standards for derivative instruments because they do not provide for net settlement and the uranium
markets are not sufficiently liquid to conclude that forward contracts are readily convertible to cash. If the uranium
markets do become sufficiently liquid in the future and Entergy begins to account for uranium purchase contracts as
derivative instruments, the fair value of these contracts would be accounted for consistent with Entergy's other
derivative instruments.
Fair Values
The estimated fair values of Entergy's financial instruments and derivatives are determined using bid prices
and market quotes. Considerable judgment is required in developing the estimates of fair value. Therefore, estimates
are not necessarily indicative of the amounts that Entergy could realize in a current market exchange. Gains or losses
realized on financial instruments held by regulated businesses may be reflected in future rates and therefore do not
accrue to the benefit or detriment of stockholders. Entergy considers the carrying amounts of most financial
instruments classified as current assets and liabilities to be a reasonable estimate of their fair value because of the
short maturity of these instruments. See Note 16 to the financial statements for further discussion of fair value.
Impairment of Long-Lived Assets
Entergy periodically reviews long-lived assets held in all of its business segments whenever events or changes
in circumstances indicate that recoverability of these assets is uncertain. Generally, the determination of
recoverability is based on the undiscounted net cash flows expected to result from such operations and assets.
Projected net cash flows depend on the future operating costs associated with the assets, the efficiency and
availability of the assets and generating units, and the future market and price for energy over the remaining life of
the assets.
River Bend AFUDC
The River Bend AFUDC gross-up is a regulatory asset that represents the incremental difference imputed by
the LPSC between the AFUDC actually recorded by Entergy Gulf States Louisiana on a net-of-tax basis during the
construction of River Bend and what the AFUDC would have been on a pre-tax basis. The imputed amount was
only calculated on that portion of River Bend that the LPSC allowed in rate base and is being amortized through
August 2025.
Reacquired Debt
The premiums and costs associated with reacquired debt of Entergy's Utility operating companies and
System Energy (except that portion allocable to the deregulated operations of Entergy Gulf States Louisiana) are
included in regulatory assets and are being amortized over the life of the related new issuances, in accordance with
ratemaking treatment.
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