Vectren 2008 Annual Report Download - page 74

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J. Goodwill
Goodwill arising from business combinations is accounted for in accordance with SFAS No. 142, “Goodwill and
Other Intangible Assets” (SFAS 142). SFAS 142 requires a portion of goodwill be charged to expense only when it
is impaired. The Company tests its goodwill for impairment at a reporting unit level at least annually and that test
is performed at the beginning of each year. Impairment reviews consist of a comparison of the fair value of a
reporting unit to its carrying amount. If the fair value of a reporting unit is less than its carrying amount, an
impairment loss is recognized in operations. Through December 31, 2008, no goodwill impairments have been
recorded. Approximately $205.0 million of the Company’s goodwill is included in the Gas Utility Services
operating segment. The remaining $35.2 million is attributable to the Nonutility Group.
K. Intangible Assets
Intangible assets consist of the following:
(In millions) At December 31,
2008 2007
Amortizing Non-amortizing Amortizing Non-amortizing
Customer-related assets 8.9$ -$ 8.9$ -$
Market-related assets - 7.0 0.1 7.0
Intangible assets, net 8.9$ 7.0$ 9.0$ 7.0$
As of December 31, 2008, the weighted average remaining life for amortizing customer-related assets and all
amortizing intangibles is 23 years. These amortizing intangible assets have no significant residual values.
Intangible assets are presented net of accumulated amortization totaling $2.6 million for customer-related assets and
$0.2 million for market-related assets at December 31, 2008 and $2.0 million for customer-related assets and $0.2
million for market-related assets at December 31, 2007. In 2008, 2007, and 2006, amortization associated with
intangible assets was $0.6 million, $0.7 million and $0.5 million, respectively. Amortization should approximate
that incurred in 2008 in each of the next five years. Intangible assets are primarily in the Nonutility Group.
The Company also has emission allowances relating to its wholesale power marketing operations totaling $1.6
million and $2.6 million at December 31, 2008 and 2007, respectively. The value of the emission allowances are
recognized as they are consumed or sold on the open market.
L. Regulation
Retail public utility operations affecting Indiana customers are subject to regulation by the IURC, and retail public
utility operations affecting Ohio customers are subject to regulation by the PUCO. The Company’s accounting
policies give recognition to the rate-making and accounting practices of these agencies and to accounting principles
generally accepted in the United States, including the provisions of SFAS No. 71 “Accounting for the Effects of
Certain Types of Regulation” (SFAS 71).
Refundable or Recoverable Gas Costs and Cost of Fuel & Purchased Power
All metered gas rates contain a gas cost adjustment clause that allows the Company to charge for changes in the
cost of purchased gas. Metered electric rates contain a fuel adjustment clause that allows for adjustment in charges
for electric energy to reflect changes in the cost of fuel. The net energy cost of purchased power, subject to a
variable benchmark based on NYMEX natural gas prices, is also recovered through regulatory proceedings. The
Company records any under-or-over-recovery resulting from gas and fuel adjustment clauses each month in
revenues. A corresponding asset or liability is recorded until the under or over-recovery is billed or refunded to
utility customers. The cost of gas sold is charged to operating expense as delivered to customers, and the cost of
fuel for electric generation is charged to operating expense when consumed.
Regulatory Assets and Liabilities
Regulatory assets represent probable future revenues associated with certain incurred costs, which will be recovered
from customers through the ratemaking process. Regulatory liabilities represent probable expenditures by the
Company for removal costs or future reductions in revenues associated with amounts that are to be credited to
customers through the ratemaking process. The Company assesses the recoverability of costs recognized as