Exelon 2015 Annual Report Download - page 254

Table of Contents
Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
a reporting entity’s related parties and de facto agents impact its consolidation conclusion, (4) clarifies how to determine whether equity holders (as
a group) have power over an entity, and (5) provides a scope exception for registered and similar unregistered money market funds. The guidance
is effective for the Registrants for the first interim period beginning on or after December 15, 2015. The guidance can be applied retrospectively to
each prior reporting period presented (full retrospective method) or retrospectively with a cumulative effect adjustment to retained earnings for
initial application of the guidance at the date of adoption (modified retrospective method). The Registrants are in the process of evaluating the
standard and have not identified any changes to consolidation conclusions as a result of the new guidance and therefore have not elected an
adoption method. Based on the analysis completed to date, a limited number of additional entities will be considered variable interest entities when
the guidance is adopted, and required disclosures will be included in the Variable Interest Entities footnote.
Revenue from Contracts with Customers
In May 2014, the FASB issued authoritative guidance that changes the criteria for recognizing revenue from a contract with a customer. The
new standard replaces existing guidance on revenue recognition, including most industry specific guidance, with a five step model for recognizing
and measuring revenue from contracts with customers. The objective of the new standard is to provide a single, comprehensive revenue
recognition model for all contracts with customers to improve comparability within industries, across industries and across capital markets. The
underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity
expects to be entitled to in exchange for those goods or services. The guidance also requires a number of disclosures regarding the nature,
amount, timing and uncertainty of revenue and the related cash flows. The guidance can be applied retrospectively to each prior reporting period
presented (full retrospective method) or retrospectively with a cumulative effect adjustment to retained earnings for initial application of the
guidance at the date of initial adoption (modified retrospective method). The Registrants are currently assessing the impacts this guidance may
have on their Consolidated Balance Sheets, Consolidated Statements of Operations and Comprehensive Income, Consolidated Statements of
Cash Flows and disclosures as well as the transition method that they will use to adopt the guidance. Exelon is considering the impacts of the new
guidance on our ability to recognize revenue for certain contracts where collectability is in question, our accounting for contributions in aid of
construction, bundled sales contracts and contracts with pricing provisions that may require us to recognize revenue at prices other than the
contract price (e.g., straight line or forward curve). In addition, the Registrants will be required to capitalize costs to acquire new contracts,
whereas Exelon currently expenses those costs as incurred. In August 2015, the FASB issued an amendment to provide a one year deferral of the
effective date to annual reporting periods beginning on or after December 15, 2017, as well as an option to early adopt the standard for annual
periods beginning on or after December 15, 2016. The Registrants do not plan to early adopt the standard.
2. Variable Interest Entities (Exelon, Generation, ComEd, PECO and BGE)
A VIE is a legal entity that possesses any of the following characteristics: an insufficient amount of equity at risk to finance its activities,
equity owners who do not have the power to direct the significant activities of the entity (or have voting rights that are disproportionate to their
ownership interest), or equity owners who do not have the obligation to absorb expected losses or the right to receive the expected residual returns
of the entity. Companies are required to consolidate a VIE if they are its primary beneficiary, which is the enterprise that has the power to direct
the activities that most significantly affect the entity’s economic performance.
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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