Exelon 2014 Annual Report Download - page 135

Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
based on historical average charge-offs as a percentage of accounts receivable in each risk segment. ComEd, PECO and BGE
customers’ accounts are generally considered delinquent if the amount billed is not received by the time the next bill is issued, which
normally occurs on a monthly basis. ComEd, PECO and BGE customer accounts are written off consistent with approved regulatory
requirements. ComEd’s, PECO’s and BGE’s provisions for uncollectible accounts will continue to be affected by changes in volume,
prices and economic conditions as well as changes in ICC, PAPUC and MDPSC regulations, respectively. See Note 3—Regulatory
Matters for additional information regarding the regulatory recovery of uncollectible accounts receivable at ComEd.
Variable Interest Entities
Exelon accounts for its investments in and arrangements with VIEs based on the authoritative guidance which includes the following
specific requirements:
• requires an entity to qualitatively assess whether it should consolidate a VIE based on whether the entity (1) has the power to
direct matters that most significantly impact the activities of the VIE, and (2) has the obligation to absorb losses or the right to
receive benefits of the VIE that could potentially be significant to the VIE,
• requires an ongoing reconsideration of this assessment instead of only upon certain triggering events, and
• requires the entity that consolidates a VIE (the primary beneficiary) to disclose (1) the assets of the consolidated VIE, if they can
be used to only settle specific obligations of the consolidated VIE, and (2) the liabilities of a consolidated VIE for which creditors
do not have recourse to the general credit of the primary beneficiary.
Based on the above accounting guidance, Exelon has adopted the following policies related to variable interest entities:
• Exelon has disclosed, to the extent material, the assets of its consolidated VIEs that can only be used to settle specific
obligations of the consolidated VIE, and the liabilities of Exelon’s consolidated VIEs for which creditors do not have recourse to
Exelon’s general credit.
• Exelon has qualitatively assessed whether the equity holders of the entity have the power to direct matters that most significantly
impact the entity.
See Note 2—Variable Interest Entities for additional information.
Inventories
Inventory is recorded at the lower of weighted average cost or market. Provisions are recorded for excess and obsolete inventory.
Fossil Fuel. Fossil fuel inventory includes the weighted average costs of stored natural gas, propane, coal and oil. The costs of
natural gas, propane, coal and oil are generally included in inventory when purchased and charged to fuel expense when used or
sold.
Materials and Supplies. Materials and supplies inventory generally includes the weighted average costs of transmission,
distribution and generating plant materials. Materials are generally charged to inventory when purchased and expensed or
capitalized to property, plant and equipment, as appropriate, when installed or used.
Emission Allowances. Emission allowances are included in inventory (for emission allowances exercisable in the current year) and
other deferred debits (for emission allowances that are exercisable beyond one year) and are carried at the lower of weighted
average cost or market and charged to fuel expense as they are used in operations.
Marketable Securities
All marketable securities are reported at fair value. Marketable securities held in the NDT funds, certain Generation Rabbi trust
investments and BGE’s Rabbi trust investments are classified as trading securities and all other securities are classified as available-
for-sale securities. Realized and unrealized gains and losses, net of tax, on Generation’s NDT funds associated with the Regulatory
Agreement Units are included in regulatory liabilities at Exelon, ComEd and PECO and in noncurrent payables to affiliates at
Generation and in noncurrent receivables from affiliates at ComEd and PECO. Realized and unrealized gains and losses, net of tax,
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