Progress Energy 2010 Annual Report Download - page 69

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Progress Energy Annual Report 2010
assets. Recoveries of environmental remediation costs
from฀ other฀ parties฀ are฀ recognized฀ when฀ their฀ receipt฀
is deemed probable or on actual receipt of recovery.
Environmental expenditures that have future economic
benefits฀ are฀ capitalized฀ in฀ accordance฀ with฀ our฀ asset฀
capitalization฀policy.฀
IMPAIRMENT OF LONG-LIVED ASSETS AND
INVESTMENTS
We review the recoverability of long-lived tangible and
intangible assets whenever impairment indicators exist.
Examples of these indicators include current period
losses, combined with a history of losses or a projection
of continuing losses, or a significant decrease in the
market price of a long-lived asset group. If an impairment
indicator exists for assets to be held and used, then the
asset group is tested for recoverability by comparing the
carrying value to the sum of undiscounted expected future
cash flows directly attributable to the asset group. If the
asset group is not recoverable through undiscounted
cash flows or the asset group is to be disposed of, then an
impairment฀loss฀is฀recognized฀for฀the฀difference฀between฀
the carrying value and the fair value of the asset group.
We review our equity investments to evaluate whether
or not a decline in fair value below the carrying value is
an other-than-temporary decline. We consider various
factors, such as the investee’s cash position, earnings
and revenue outlook, liquidity and management’s ability
to raise capital in determining whether the decline is
other-than-temporary. If we determine that an other-
than-temporary decline in value exists, the investments
are written down to fair value with a new cost basis
established.
2. NEW ACCOUNTING STANDARDS
A. Consolidations
In June 2009, the FASB issued SFAS No. 167,
“Amendments to FASB Interpretation No. 46(R),
Consolidation of Variable Interest Entities.”
Subsequently, the FASB issued Accounting Standards
Update (ASU) 2009-17, “Consolidations (Topic 810):
Improvements to Financial Reporting by Enterprises
Involved with Variable Interest Entities,” which
codified SFAS No. 167 in the ASC. This guidance made
significant changes to the model for determining
who should consolidate a VIE, addressed how often
this assessment should be performed, required all
existing arrangements with VIEs to be evaluated, and
was adopted through a cumulative effect of change
in accounting principle adjustment. This guidance
was effective for us on January 1, 2010. See Note 1C
for information regarding our implementation of ASU
2009-17 and its impact on our financial position and
results of operations.
B. Fair Value Measurement and Disclosures
In January 2010, the FASB issued ASU 2010-06, “Fair
Value Measurements and Disclosures (Topic 820):
Improving Disclosures about Fair Value Measurements,”
which amends ASC 820 to clarify certain existing
disclosure requirements and to require a number of
additional disclosures, including amounts and reasons for
significant transfers between the three levels of the fair
value hierarchy, and presentation of certain information
in the reconciliation of recurring Level 3 measurements
on a gross basis. ASU 2010-06 was effective for us on
January 1, 2010, with certain disclosures effective
January 1, 2011. The adoption of ASU 2010-06 resulted in
additional disclosure but did not have an impact on our
financial position or results of operations.
3. DIVESTITURES
We have completed our business strategy of divesting
nonregulated businesses to reduce our business risk
and focus on core operations of the Utilities. Included in
discontinued operations, net of tax are amounts related to
adjustments of our prior sales of diversified businesses.
These adjustments are generally due to guarantees
and indemnifications provided for certain legal, tax
and environmental matters. See Note 22C for further
discussion of our guarantees. The ultimate resolution
of these matters could result in additional adjustments
in future periods. The information below presents the
impacts of the divestitures on net income attributable to
controlling interests.
A. Terminals Operations and Synthetic Fuels
Businesses
Prior to 2008, we had substantial operations associated
with the production of coal-based solid synthetic fuels
as defined under Section 29 (Section 29) of the Code
and as redesignated effective 2006 as Section 45K of the
Code (Section 45K and, collectively, Section 29/45K). The
production and sale of these products qualified for federal
income tax credits so long as certain requirements were
satisfied. As a result of the expiration of the tax credit
program, all of our synthetic fuels businesses were
abandoned and all operations ceased as of December 31,
2007. The accompanying consolidated statements of
income reflect the abandoned operations of our synthetic
fuels businesses as discontinued operations.