Progress Energy 2010 Annual Report Download - page 93

89
Progress Energy Annual Report 2010
observable or assets and liabilities previously classified
as Level 2 or 3 for which the lowest significant input
became more observable during the period. There were
no significant transfers in (out) of Levels 1 or 2 during
the period other than those reflected in the Level 3
reconciliations. Transfers into and out of each level are
measured at the end of the reporting period.
A reconciliation of changes in the fair value of our
commodity derivatives, net classified as Level 3 in the fair
value hierarchy for the years ended December 31 follows:
(in millions) 2010 2009 2008
Derivatives, net at beginning of period $39 $41 $(26)
Total฀losses฀(gains),฀realized฀and฀unrealized฀
deferred as regulatory assets and
liabilities, net 44 13 102
Transfers (out) in of Level 3, net (47) (15) (35)
Derivatives, net at end of period $36 $39 $41
Substantially฀ all฀ unrealized฀ gains฀ and฀ losses฀ on฀
derivatives are deferred as regulatory liabilities or assets
consistent with ratemaking treatment. There were no
Level 3 purchases, sales, issuances or settlements
during the period.
14. INCOME TAXES
We provide deferred income taxes for temporary
differences between book and tax carrying amounts
of assets and liabilities. Investment tax credits related
to regulated operations have been deferred and are
being฀ amortized฀ over฀ the฀ estimated฀ service฀ life฀ of฀ the฀
related properties. To the extent that the establishment
of deferred income taxes is different from the recovery of
taxes by the Utilities through the ratemaking process, the
differences are deferred pursuant to GAAP for regulated
operations. A regulatory asset or liability has been
recognized฀ for฀ the฀ impact฀ of฀ tax฀ expenses฀ or฀ benefits฀
that are recovered or refunded in different periods by the
Utilities pursuant to rate orders. We accrue for uncertain
tax positions when it is determined that it is more likely
than not that the benefit will not be sustained on audit
by the taxing authority based solely on the technical
merits of the associated tax position. If the recognition
threshold฀is฀met,฀the฀tax฀benefit฀recognized฀is฀measured฀
at the largest amount that, in our judgment, is greater
than฀50฀percent฀likely฀to฀be฀realized.
Accumulated deferred income tax assets (liabilities) at
December 31 were:
(in millions) 2010 2009
Deferred income tax assets
ARO liability $107 $127
Derivative instruments 204 159
Income taxes refundable through future rates 271 225
Pension and other postretirement benefits 447 508
Other 394 374
Tax credit carry forwards 839 712
Net operating loss carry forwards 105 66
Valuation allowance (60) (55)
Total deferred income tax assets 2,307 2,116
Deferred income tax liabilities
Accumulated depreciation and property cost differences (2,439) (1,889)
Income taxes recoverable through future rates (875) (782)
Other (386) (338)
Total deferred income tax liabilities (3,700) (3,009)
Total net deferred income tax liabilities $(1,393) $(893)