Exelon 2015 Annual Report Download - page 316

Table of Contents
Combined Notes to Consolidated Financial Statements—(Continued)
(Dollars in millions, except per share data unless otherwise noted)
 The carrying amount of Generation’s SNF obligation (Level 2) is derived from a contract with the DOE to provide for disposal
of SNF from Generation’s nuclear generating stations. When determining the fair value of the obligation, the future carrying amount of the SNF
obligation estimated to be settled in 2025 is calculated by compounding the current book value of the SNF obligation at the 13-week Treasury rate.
The compounded obligation amount is discounted back to present value using Generation’s discount rate, which iscalculated using the same
methodology as described above for the taxable debt securities, and an estimated maturity date of 2025.
 Exelon’s long-term debt to financing trusts is valued based on publicly traded securities issued by the
financing trusts. Due to low trading volume of these securities, qualitative factors, such as market conditions, investor demand, and
circumstances related to each issue, this debt is classified as Level 3.
Recurring Fair Value Measurements
Exelon records the fair value of assets and liabilities in accordance with the hierarchy established by the authoritative guidance for fair value
measurements. The hierarchy prioritizes the inputs to valuation techniques used to measure fair value into three levels as follows:
• Level 1—quoted prices (unadjusted) in active markets for identical assets or liabilities that the Registrants have the ability to liquidate as
of the reporting date.
• Level 2—inputs other than quoted prices included within Level 1 that are directly observable for the asset or liability or indirectly
observable through corroboration with observable market data.
• Level 3—unobservable inputs, such as internally developed pricing models or third-party valuations for the asset or liability due to little or
no market activity for the asset or liability.
Transfers in and out of levels are recognized as of the end of the reporting period when the transfer occurred. Given derivatives categorized
within Level 1 are valued using exchange-based quoted prices within observable periods, transfers between Level 2 and Level 1 were not material.
Transfers into Level 2 from Level 3 generally occur when the contract tenure becomes more observable. Transfers into Level 3 from Level 2
generally occur due to changes in market liquidity or assumptions for certain commodity contracts. There were no transfers between Level 1 and
Level 2 during the year ended December 31, 2015 for cash equivalents, nuclear decommissioning trust fund investments, pledged assets for Zion
Station decommissioning, Rabbi trust investments, and deferred compensation obligations.
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Source: BALTIMORE GAS & ELECTRIC CO, 10-K, February 10, 2016 Powered by Morningstar® Document Research℠
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