Progress Energy 2007 Annual Report Download - page 80

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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used in SFAS No. 133. FSP FIN 39-1 also amends FIN 39
to allow for the offsetting of fair value amounts for the
right to reclaim collateral assets or liabilities arising from
the same master netting arrangement as the derivative
instruments. We will implement the FSP as of January 1,
2008, as a retrospective change in accounting principle
for all financial statements presented. We currently offset
fair value amounts recognized for derivative instruments
under master netting arrangements. As allowed under FSP
FIN 39-1, we will change our accounting policy effective
January 1, 2008, and discontinue the offset of fair value
amounts for such derivatives. We expect this change
in policy to result in increases to total derivative assets
and liabilities and accounts receivables and payables of
$64 million as of adoption on January 1, 2008, but will
have no impact on our results of operations or equity.
SFAS No. 141R, “Business Combinations”
In December 2007, the FASB issued SFAS Statement
No. 141R, “Business Combinations” (SFAS No. 141R),
which introduces significant changes in the accounting
for business acquisitions. SFAS No. 141R considerably
broadens the definition of a “business” and a “business
combination,” which will result in an increased number
of transactions or other events that will qualify as
business combinations. This will affect us primarily in
our assessment of variable interest entities (“VIEs”).
SFAS No. 141R amends FIN 46R to clarify that the initial
consolidation of a business that is a VIE is a business
combination in which the acquirer should recognize
and measure the fair value of the acquiree as a whole,
and the assets acquired and liabilities assumed at
their full fair values as of the date control is obtained,
regardless of the percentage ownership in the acquiree
or how the acquisition was achieved. Other significant
changes include the expensing of all acquisition-
related transaction costs and most acquisition-related
restructuring costs, the fair value remeasurement of
certain earn-out arrangements and the discontinuance
of the expense at acquisition of acquired-in-process
research and development. SFAS No. 141R is effective
for us for business combinations for which the acquisition
date is on or after January 1, 2009. Earlier application
is prohibited. We do not expect the adoption of
SFAS No. 141R to have a material impact on our financial
position or results of operations.
SFAS No. 160, “Noncontrolling Interests
in Consolidated Financial Statements, an
amendment of ARB No. 51”
In conjunction with the issuance of SFAS No. 141R,
in December 2007, the FASB issued SFAS No. 160,
“Noncontrolling Interests in Consolidated Financial
Statements, an amendment of ARB No. 51” (SFAS No. 160)
which introduces significant changes in the accounting for
noncontrolling interests in a partially owned consolidated
subsidiary. SFAS No. 160 also changes the accounting
for and reporting for the deconsolidation of a subsidiary.
SFAS No. 160 requires that a noncontrolling interest in a
consolidated subsidiary be displayed in the consolidated
statement of financial position as a separate component
of equity rather than as a “mezzanine” item between
liabilities and equity. SFAS No. 160 also requires that
earnings attributed to the noncontrolling interests be
reported as part of consolidated earnings, and requires
disclosure of the attribution of consolidated earnings to
the controlling and noncontrolling interests on the face of
the consolidated income statement. SFAS No. 160 must be
adopted concurrently with the effective date of SFAS No.
141R, which for us is January 1, 2009. We do not expect
the adoption of SFAS No. 160 to have a material impact on
our financial position or results of operations.
3. DIVESTITURES
A. CCO – Georgia Operations
On March 9, 2007, our subsidiary, Progress Ventures,
Inc. (PVI), entered into a series of transactions to sell
or assign substantially all of its Competitive Commercial
Operations (CCO) physical and commercial assets
and liabilities. Assets divested include approximately
1,900 MW of gas-fired generation assets in Georgia.
The sale of the generation assets closed on June 11,
2007, for a net sales price of $615 million. We recorded
an estimated after-tax loss of $226 million in December
2006. Based on the terms of the final agreement and post-
closing adjustments, during the year ended December 31,
2007, we reversed $18 million after-tax of the impairment
recorded in 2006.
Additionally, on June 1, 2007, PVI closed the transaction
involving the assignment of a contract portfolio consisting
of full-requirements contracts with 16 Georgia electric
membership cooperatives (the Georgia Contracts),
forward gas and power contracts, gas transportation,
structured power and other contracts to a third party.
This represents substantially all of our nonregulated
energy marketing and trading operations. As a result