Progress Energy 2010 Annual Report Download - page 64

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In this report, Progress Energy (which includes Progress
Energy, Inc. holding company [the Parent] and its regulated
and nonregulated subsidiaries on a consolidated basis,) is
at times referred to as “we,” “us” or “our.” Additionally,
we may collectively refer to our electric utility subsidiaries,
Progress Energy Carolinas (PEC) and Progress Energy
Florida (PEF), as the “Utilities.”
1. ORGANIZATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
A. Organization
The Parent is a public utility holding company
headquartered in Raleigh, N.C. As such, we are
subject to regulation by the Federal Energy Regulatory
Commission (FERC).
Our reportable segments are PEC and PEF, both of which
are primarily engaged in the generation, transmission,
distribution and sale of electricity. The Corporate and
Other segment primarily includes amounts applicable
to the activities of the Parent and Progress Energy
Service Company, LLC (PESC) and other miscellaneous
nonregulated businesses (Corporate and Other) that
do not separately meet the quantitative disclosure
requirements as a reportable business segment.
PEC is subject to the regulatory jurisdiction of the North
Carolina Utilities Commission (NCUC), Public Service
Commission of South Carolina (SCPSC), the United States
Nuclear Regulatory Commission (NRC) and the FERC.
PEF is subject to the regulatory jurisdiction of the
Florida Public Service Commission (FPSC), the NRC and
the FERC.
See Note 19 for further information about our segments.
B. Basis of Presentation
These financial statements have been prepared in
accordance with accounting principles generally
accepted in the United States of America (GAAP),
including GAAP for regulated operations. The financial
statements include the activities of the Parent and our
majority-owned and controlled subsidiaries. Significant
intercompany balances and transactions have been
eliminated in consolidation.
Noncontrolling interests in subsidiaries along with the
income or loss attributed to these interests are included in
noncontrolling interests in both the Consolidated Balance
Sheets and in the Consolidated Statements of Income.
The results of operations for noncontrolling interests are
reported on a net of tax basis if the underlying subsidiary
is structured as a taxable entity.
Unconsolidated investments in companies over which
we do not have control, but have the ability to exercise
influence over operating and financial policies, are
accounted for under the equity method of accounting.
These investments are primarily in limited liability
corporations and limited liability partnerships, and the
earnings from these investments are recorded on a pre-
tax basis. Other investments are stated principally at cost.
These equity and cost method investments are included
in miscellaneous other property and investments in the
Consolidated Balance Sheets. See Note 12 for more
information about our investments.
Our presentation of operating, investing and financing
cash flows combines the respective cash flows from
our continuing and discontinued operations as permitted
under GAAP.
These notes accompany and form an integral part of
Progress Energy’s consolidated financial statements.
Certain amounts for 2009 and 2008 have been reclassified
to conform to the 2010 presentation.
C. Consolidation of Variable Interest Entities
We consolidate all voting interest entities in which we
own a majority voting interest and all variable interest
entities (VIEs) for which we are the primary beneficiary.
We determine whether we are the primary beneficiary of
a VIE through a qualitative analysis that identifies which
variable interest holder has the controlling financial
interest in the VIE. The variable interest holder who has
both of the following has the controlling financial interest
and is the primary beneficiary: (1) the power to direct
the activities of the VIE that most significantly impact
the VIE’s economic performance and (2) the obligation
to absorb losses of, or the right to receive benefits from,
the VIE that could potentially be significant to the VIE. In
performing our analysis, we consider all relevant facts
and circumstances, including: the design and activities
of the VIE, the terms of the contracts the VIE has entered
into, the nature of the VIE’s variable interests issued and
how they were negotiated with or marketed to potential
investors, and which parties participated significantly in
the design or redesign of the entity.