2017 Q2 Form 10-Q Financial Statement

#000119312517245630 Filed on August 02, 2017

View on sec.gov

Income Statement

Concept 2017 Q2 2017 Q1 2016 Q2
Revenue $7.665B $8.747B $6.910B
YoY Change 10.93% 15.5% 6.08%
Cost Of Revenue $2.803B $3.633B $2.454B
YoY Change 14.22% 11.65% 0.2%
Gross Profit $4.862B $5.114B $4.456B
YoY Change 9.11% 18.41% 9.59%
Gross Profit Margin 63.43% 58.47% 64.49%
Selling, General & Admin
YoY Change
% of Gross Profit
Research & Development
YoY Change
% of Gross Profit
Depreciation & Amortization $1.317B $754.0M $1.333B
YoY Change -1.2% 24.42% 58.88%
% of Gross Profit 27.09% 14.74% 29.91%
Operating Expenses $4.563B $3.810B $3.840B
YoY Change 18.83% -0.91% 30.7%
Operating Profit $300.0M $1.308B $647.0M
YoY Change -53.63% 170.81% -42.95%
Interest Expense $426.0M $363.0M $366.0M
YoY Change 16.39% 31.05% 152.41%
% of Operating Profit 142.0% 27.75% 56.57%
Other Income/Expense, Net -$259.0M -$116.0M -$232.0M
YoY Change 11.64% -32.95% 34.88%
Pretax Income $41.00M $1.192B $415.0M
YoY Change -90.12% 284.52% -56.86%
Income Tax -$62.00M $211.0M $102.0M
% Of Pretax Income -151.22% 17.7% 24.58%
Net Earnings $94.00M $971.0M $306.0M
YoY Change -69.28% 689.43% -51.66%
Net Earnings / Revenue 1.23% 11.1% 4.43%
Basic Earnings Per Share $0.10 $1.07 $0.29
Diluted Earnings Per Share $0.10 $1.06 $0.29
COMMON SHARES
Basic Shares Outstanding 934.0M shares 928.0M shares 924.0M shares
Diluted Shares Outstanding 936.0M shares 930.0M shares 926.0M shares

Balance Sheet

Concept 2017 Q2 2017 Q1 2016 Q2
SHORT-TERM ASSETS
Cash & Short-Term Investments $1.786B $1.859B $1.647B
YoY Change 8.44% 93.65% -72.61%
Cash & Equivalents $536.0M $609.0M $1.647B
Short-Term Investments $1.250B $1.250B
Other Short-Term Assets $1.600B $1.221B $1.101B
YoY Change 45.32% 12.43% 68.35%
Inventory $1.601B $1.561B $1.500B
Prepaid Expenses
Receivables $3.825B $3.886B $3.671B
Other Receivables $958.0M $1.133B $988.0M
Total Short-Term Assets $12.23B $12.19B $11.50B
YoY Change 6.41% 7.3% -25.48%
LONG-TERM ASSETS
Property, Plant & Equipment $72.75B $72.63B $70.69B
YoY Change 2.91% 4.65% 31.07%
Goodwill $6.677B $6.677B $6.696B
YoY Change -0.28% -0.16% 150.6%
Intangibles
YoY Change
Long-Term Investments $638.0M $648.0M $502.0M
YoY Change 27.09% 42.42% -17.3%
Other Assets $1.265B $1.440B $1.366B
YoY Change -7.39% 3.0% -1.59%
Total Long-Term Assets $104.9B $104.9B $101.3B
YoY Change 3.54% 4.48% 31.9%
TOTAL ASSETS
Total Short-Term Assets $12.23B $12.19B $11.50B
Total Long-Term Assets $104.9B $104.9B $101.3B
Total Assets $117.1B $117.1B $112.8B
YoY Change 3.84% 4.77% 22.3%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $3.134B $3.011B $2.826B
YoY Change 10.9% 4.77% 3.63%
Accrued Expenses $2.878B $3.007B $2.757B
YoY Change 4.39% 33.05% 101.83%
Deferred Revenue
YoY Change
Short-Term Debt $1.757B $2.048B $951.0M
YoY Change 84.75% -43.74% 75.14%
Long-Term Debt Due $3.619B $3.645B $2.693B
YoY Change 34.39% 77.11% 1091.59%
Total Short-Term Liabilities $13.97B $14.44B $11.89B
YoY Change 17.41% 4.84% 82.26%
LONG-TERM LIABILITIES
Long-Term Debt $30.32B $31.04B $31.54B
YoY Change -3.89% 5.9% 25.06%
Other Long-Term Liabilities $1.828B $1.853B $1.876B
YoY Change -2.56% -1.75% -25.79%
Total Long-Term Liabilities $32.14B $32.90B $33.42B
YoY Change -3.81% 5.44% 20.43%
TOTAL LIABILITIES
Total Short-Term Liabilities $13.97B $14.44B $11.89B
Total Long-Term Liabilities $32.14B $32.90B $33.42B
Total Liabilities $87.81B $88.78B $85.46B
YoY Change 2.76% 5.02% 27.27%
SHAREHOLDERS EQUITY
Retained Earnings $11.44B $12.72B $11.93B
YoY Change -4.06% 6.41% 1.9%
Common Stock $18.86B $18.81B $18.72B
YoY Change 0.74% 0.65% 11.74%
Preferred Stock
YoY Change
Treasury Stock (at cost) $2.300B -$123.0M $2.000B
YoY Change 15.0% -105.29% -14.05%
Treasury Stock Shares 2.000M shares 34.74M shares 35.00M shares
Shareholders Equity $27.55B $26.53B $25.76B
YoY Change
Total Liabilities & Shareholders Equity $117.1B $117.1B $112.8B
YoY Change 3.84% 4.77% 22.3%

Cashflow Statement

Concept 2017 Q2 2017 Q1 2016 Q2
OPERATING ACTIVITIES
Net Income $94.00M $971.0M $306.0M
YoY Change -69.28% 689.43% -51.66%
Depreciation, Depletion And Amortization $1.317B $754.0M $1.333B
YoY Change -1.2% 24.42% 58.88%
Cash From Operating Activities $1.821B $1.074B $3.080B
YoY Change -40.88% -27.09% 24.24%
INVESTING ACTIVITIES
Capital Expenditures -$1.836B $2.009B -$2.287B
YoY Change -19.72% -8.76% 36.46%
Acquisitions
YoY Change
Other Investing Activities $138.0M $18.00M -$42.00M
YoY Change -428.57% 800.0% -64.71%
Cash From Investing Activities -$1.698B -$2.283B -$2.329B
YoY Change -27.09% -73.29% 29.75%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net $65.00M
YoY Change -43.97%
Cash From Financing Activities -201.0M $1.184B -64.00M
YoY Change 214.06% -22.77% -101.83%
NET CHANGE
Cash From Operating Activities 1.821B $1.074B 3.080B
Cash From Investing Activities -1.698B -$2.283B -2.329B
Cash From Financing Activities -201.0M $1.184B -64.00M
Net Change In Cash -78.00M -$25.00M 687.0M
YoY Change -111.35% -99.55% -83.6%
FREE CASH FLOW
Cash From Operating Activities $1.821B $1.074B $3.080B
Capital Expenditures -$1.836B $2.009B -$2.287B
Free Cash Flow $3.657B -$935.0M $5.367B
YoY Change -31.86% 28.26% 29.17%

Facts In Submission

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470000000 USD
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us-gaap Restructuring Costs
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us-gaap Revenues
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CY2017Q2 us-gaap Sales Revenue Services Gross
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us-gaap Sales Revenue Services Gross
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us-gaap Description Of New Accounting Pronouncements Not Yet Adopted
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<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-weight:bold;">New Accounting Standards (All Registrants)</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:32px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;font-weight:bold;">New Accounting Standards Issued and Not Yet Adopted:</font><font style="font-family:Arial;font-size:10pt;"> The following new authoritative accounting guidance issued by the FASB has not yet been adopted and reflected by the Registrants in their consolidated financial statements. Unless otherwise indicated, the Registrants are currently assessing the impacts such guidance may have (which could be material) on their Consolidated Balance Sheets, Consolidated Statements of Operations and Comprehensive Income, Consolidated Statements of Cash Flows and disclosures, as well as the potential to early adopt where applicable. The Registrants have assessed other FASB issuances of new standards which are not listed below given the current expectation such standards will not significantly impact the Registrants' financial reporting.</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:32px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">Revenue from Contracts with Customers (Issued May 2014 and subsequently amended to address implementation questions):</font><font style="font-family:Arial;font-size:10pt;"> Changes the criteria for recognizing revenue from a contract with a customer. The new revenue recognition guidance, including subsequent amendments, is effective for annual reporting periods beginning on or after December 15, 2017, with the option to early adopt the standard for annual periods beginning on or after December 15, 2016. Exelon has not early adopted this standard.</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:32px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">The new standard replaces existing guidance on revenue recognition, including most industry specific guidance, with a five step model for recognizing and measuring revenue from contracts with customers. The objective of the new standard is to provide a single, comprehensive revenue recognition model for all contracts with customers to improve comparability within industries, across industries, and across capital markets. The underlying principle is that an entity will recognize revenue to depict the transfer of goods or services to customers at an amount that the entity expects to be entitled to in exchange for those goods or services. The guidance also requires a number of disclosures regarding the nature, amount, timing, and uncertainty of revenue and the related cash flows. In addition, the Registrants will be required to capitalize costs to acquire new contracts, and amortize such costs in a manner consistent with the transfer to the customer of the associated goods or services. The Registrants currently expense those costs as incurred. These expenses are not expected to be material to the Registrants&#8217; financial statements. The guidance can be applied retrospectively to each prior reporting period presented (full retrospective method) or retrospectively with a cumulative effect adjustment to retained earnings for initial application of the guidance at the date of initial adoption (modified retrospective method).</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:32px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">The Registrants continue to assess the impacts this guidance may have on their Consolidated Balance Sheets, Consolidated Statements of Operations and Comprehensive Income, Consolidated Statements of Cash Flows and disclosures. In conducting this assessment, the Registrants have performed the following key activities:</font></div><table cellpadding="0" cellspacing="0" style="font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">Actively participate in the AICPA Power and Utilities Industry Task Force (Industry Task Force) process to identify implementation issues and support the development of related implementation guidance;</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">Evaluate existing contracts and revenue streams for potential changes in the amounts and timing of recognizing revenues under the new guidance;</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">Evaluate and select the transition method; and</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">Develop and implement the approach and process for complying with the new revenue recognition disclosure requirements.</font></div></td></tr></table><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:32px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">While there continues to be some ongoing activities in all of these areas, the Registrants have substantially completed the evaluation of their collective contracts and revenue streams, as well as the evaluation of the transition method. Based on the work completed thus far, the Registrants have reached the following preliminary conclusions:</font></div><table cellpadding="0" cellspacing="0" style="font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">The Registrants expect to apply the new guidance using the full retrospective method;</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">During the second quarter 2017, certain previously open implementation issues have been substantially resolved, including the collectability of utility tariff sale contracts and the accounting for bundled sales contracts.&#160; The Utility Registrants&#8217; tariff sale contracts, including those with lower credit quality customers, are generally deemed to be probable of collection under the guidance and, thus, the timing of revenue recognition will continue to be based on the electricity or natural gas supplied in the period, consistent with current practice.&#160; Revenues recognized from bundled sales contracts are generally expected to be recognized based on the invoice price, consistent with current practice; and</font></div></td></tr></table><table cellpadding="0" cellspacing="0" style="font-family:Times New Roman; font-size:10pt;"><tr><td style="width:48px;" rowspan="1" colspan="1"></td><td rowspan="1" colspan="1"></td></tr><tr><td style="vertical-align:top" rowspan="1" colspan="1"><div style="line-height:120%;font-size:10pt;padding-left:24px;"><font style="font-family:Arial;font-size:10pt;">&#8226;</font></div></td><td style="vertical-align:top;" rowspan="1" colspan="1"><div style="line-height:120%;text-align:justify;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">Contributions in aid of construction are expected to be outside of the scope of the standard and, therefore, will continue to be accounted for as a reduction to Property, Plant, and Equipment.</font></div></td></tr></table><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:30px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">The Registrants generally anticipate that the implementation of the new standard will not have a material impact on the amount and timing of revenue recognition. However, certain implementation issues continue to be evaluated through the Industry Task Force process that could have an impact on the Registrants&#8217; Consolidated Balance Sheets, Consolidated Statements of Operations and Comprehensive Income, Consolidated Statements of Cash Flows and disclosures.</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:30px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (Issued March 2017): </font><font style="font-family:Arial;font-size:10pt;">The new standard will require significant changes to the accounting and presentation of pension and OPEB costs at the plan sponsor (i.e., Exelon) level. This guidance requires plan sponsors to separate net periodic pension cost and net periodic OPEB cost (together, net benefit cost) into the service cost component and other components; service cost will be presented as part of income from operations and the other components will be classified outside of income from operations on the Consolidated Statements of Operations and Comprehensive Income. Additionally, service cost is the only component eligible for capitalization (whereas under current GAAP, all components of net benefit cost are eligible for capitalization).</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:30px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">Exelon is currently evaluating the impact of this standard on its consolidated financial statements, including coordinating with its industry group and advisors. Generation, ComEd, PECO, BGE, BSC, PHI, Pepco, DPL, ACE and PHISCO participate in Exelon&#8217;s single employer plans and apply multi-employer accounting. Multi-employer accounting is not impacted by this standard, so there is no impact on Exelon's subsidiary financial statements.</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:30px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;">The standard is effective January 1, 2018 and requires retrospective application for the presentation of the service cost component and the other components of net benefit cost and prospective application for the capitalization of only the service cost component of net benefit cost. Exelon will not early adopt this standard.</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:30px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">Leases (Issued February 2016):</font><font style="font-family:Arial;font-size:10pt;"> Increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The guidance requires lessees to recognize both the right-of-use assets and lease liabilities in the balance sheet for most leases, whereas today only financing type lease liabilities (capital leases) are recognized in the balance sheet. This is expected to require significant changes to systems, processes and procedures in order to recognize and measure leases recorded on the balance sheet that are currently classified as operating leases. In addition, the definition of a lease has been revised in regards to when an arrangement conveys the right to control the use of the identified asset under the arrangement which may result in changes to the classification of an arrangement as a lease. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from current GAAP. The accounting applied by a lessor is largely unchanged from that applied under current GAAP. The standard is effective January 1, 2019. Early adoption is permitted, however the Registrants do not expect to early adopt the standard. Lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. Refer to Note </font><font style="font-family:Arial;font-size:10pt;">24</font><font style="font-family:Arial;font-size:10pt;"> &#8212; </font><font style="font-family:Arial;font-size:10pt;">Commitments and Contingencies</font><font style="font-family:Arial;font-size:10pt;"> of the Combined Notes to the Consolidated Financial Statements in the Exelon </font><font style="font-family:Arial;font-size:10pt;">2016</font><font style="font-family:Arial;font-size:10pt;"> Form 10-K for additional information regarding operating leases.</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:32px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">Impairment of Financial Instruments (Issued June 2016):</font><font style="font-family:Arial;font-size:10pt;font-style:italic;font-weight:bold;"> </font><font style="font-family:Arial;font-size:10pt;">Provides for a new Current Expected Credit Loss (CECL) impairment model for specified financial instruments including loans, trade receivables, debt securities classified as held-to-maturity investments and net investments in leases recognized by a lessor. Under the new guidance, on initial recognition and at each reporting period, an entity is required to recognize an allowance that reflects the entity&#8217;s current estimate of credit losses expected to be incurred over the life of the financial instrument. The standard does not make changes to the existing impairment models for non-financial assets such as fixed assets, intangibles and goodwill. The standard will be effective January 1, 2020 (with early adoption as of January 1, 2019 permitted) and, for most debt instruments, requires a modified retrospective transition approach through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption.</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:32px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">Goodwill Impairment (issued January 2017):</font><font style="font-family:Arial;font-size:10pt;"> Simplifies the accounting for goodwill impairment by removing Step 2 of the current test, which requires calculation of a hypothetical purchase price allocation. Under the revised guidance, goodwill impairment will be measured as the amount by which a reporting unit&#8217;s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill (currently Step 1 of the two step impairment test). Entities will continue to have the option to perform a qualitative assessment to determine if a quantitative impairment test is necessary. Exelon, Generation, ComEd, PHI, and DPL have goodwill as of June 30, 2017. This updated guidance is not currently expected to impact the Registrants&#8217; financial reporting. The standard is effective January 1, 2020, with early adoption permitted, and must be applied on a prospective basis. </font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:32px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">Clarifying the Definition of a Business (issued January 2017): </font><font style="font-family:Arial;font-size:10pt;">Clarifies the definition of a business with the objective of addressing whether acquisitions should be accounted for as acquisitions of assets or as acquisitions of businesses.&#160;If substantially all the fair value of the assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets, the set of transferred assets and activities is not a business.&#160;If the fair value of the assets acquired is not concentrated in a single identifiable asset or a group of similar identifiable assets, then an entity must evaluate whether an input and a substantive process exist, which together significantly contribute to the ability to produce outputs.&#160;The standard also revises the definition of outputs to focus on goods and services to customers.&#160;The standard could result in more acquisitions being accounted for as asset acquisitions.&#160;The standard is effective January 1, 2018, with early adoption permitted, and will be applied prospectively.&#160; </font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:32px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">Intra-Entity Transfers of Assets Other Than Inventory (Issued October 2016): </font><font style="font-family:Arial;font-size:10pt;">Requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs (current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party). The standard is effective January 1, 2018 with early adoption permitted. The guidance is required to be applied on a modified retrospective basis through a cumulative-effect adjustment to retained earnings as of the beginning of the period of adoption.</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:32px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">Statement of Cash Flows: Classification of Certain Cash Receipts and Cash Payments (Issued August 2016) and Restricted Cash (Issued November 2016): </font><font style="font-family:Arial;font-size:10pt;">In 2016, the FASB issued two standards impacting the Statement of Cash Flows. The first adds or clarifies guidance on the classification of certain cash receipts and payments on the statement of cash flows as follows: debt prepayment or extinguishment costs, settlement of zero-coupon bonds, contingent consideration payments made after a business combination, proceeds from the settlement of insurance claims, proceeds from the settlement of corporate-owned life insurance policies and bank-owned life insurance policies, distributions received from equity method investees, beneficial interest in securitization transactions, and the application of the predominance principle to separately identifiable cash flows. The second states that amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows (instead of being presented as cash flow activities). Exelon will adopt both standards on January 1, 2018 on a retrospective basis. Adoption of the second standard will result in a change in presentation of restricted cash on the face of the Statement of Cash Flows; otherwise the Registrants expect that adoption of the guidance will have insignificant impacts on the Registrants&#8217; Consolidated Statements of Cash Flows and disclosures.</font></div><div style="line-height:120%;padding-top:12px;text-align:justify;text-indent:32px;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;font-style:italic;">Recognition and Measurement of Financial Assets and Financial Liabilities (Issued January 2016):</font><font style="font-family:Arial;font-size:10pt;"> (i) Requires all investments in equity securities, including other ownership interests such as partnerships, unincorporated joint ventures and limited liability companies, to be carried at fair value through net income, (ii) requires an incremental recognition and disclosure requirement related to the presentation of fair value changes of financial liabilities for which the fair value option has been elected, (iii) amends several disclosure requirements, including the methods and significant assumptions used to estimate fair value or a description of the changes in the methods and assumptions used to estimate fair value, and (iv) requires disclosure of the fair value of financial assets and liabilities measured at amortized cost at the amount that would be received to sell the asset or paid to transfer the liability. The standard is effective January 1, 2018 with early adoption permitted. The guidance is required to be applied retrospectively with a cumulative effect adjustment to retained earnings for initial application of the guidance at the date of adoption (modified retrospective method).</font></div></div>

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