2016 Q4 Form 10-Q Financial Statement

#000162253616000174 Filed on November 10, 2016

View on sec.gov

Income Statement

Concept 2016 Q4 2016 Q3 2015 Q4
Revenue $1.238B $1.122B
YoY Change -6.21% -17.07%
Cost Of Revenue $564.0M $337.0M
YoY Change -4.24% -84.61%
Gross Profit $674.0M $714.0M
YoY Change -7.8% -3.25%
Gross Profit Margin 54.44% 63.64%
Selling, General & Admin $233.0M $309.0M
YoY Change -4.51% 13.19%
% of Gross Profit 34.57% 43.28%
Research & Development
YoY Change
% of Gross Profit
Depreciation & Amortization $181.0M $160.0M
YoY Change 12.42% 36.75%
% of Gross Profit 26.85% 22.41%
Operating Expenses $480.0M $541.0M
YoY Change -1.84% 15.85%
Operating Profit $193.0M $94.00M
YoY Change -155.78% -65.31%
Interest Expense $60.00M -$65.00M
YoY Change 9.09% 124.14%
% of Operating Profit 31.09% -69.15%
Other Income/Expense, Net $9.000M -$129.0M
YoY Change 800.0% -1942.86%
Pretax Income $142.0M -$199.0M
YoY Change -135.5% -179.92%
Income Tax $54.00M -$76.00M
% Of Pretax Income 38.03%
Net Earnings $88.00M -$62.00M
YoY Change -121.95% -117.13%
Net Earnings / Revenue 7.11% -5.53%
Basic Earnings Per Share $0.69 -$0.48
Diluted Earnings Per Share $0.68 -$0.48
COMMON SHARES
Basic Shares Outstanding 128.5M shares 128.5M shares 128.5M shares
Diluted Shares Outstanding 130.1M shares

Balance Sheet

Concept 2016 Q4 2016 Q3 2015 Q4
SHORT-TERM ASSETS
Cash & Short-Term Investments $1.358B $141.0M
YoY Change 109.57% -59.94%
Cash & Equivalents $1.358B $141.0M
Short-Term Investments
Other Short-Term Assets $10.00M $12.00M
YoY Change 11.11% -53.85%
Inventory $407.0M $508.0M
Prepaid Expenses $45.00M $52.00M
Receivables $211.0M $205.0M
Other Receivables $0.00 $0.00
Total Short-Term Assets $2.579B $2.762B
YoY Change -1.64% 2.26%
LONG-TERM ASSETS
Property, Plant & Equipment $8.481B $8.587B
YoY Change 5.08% 33.42%
Goodwill $0.00
YoY Change -100.0%
Intangibles $103.0M $310.0M
YoY Change -66.67% 20.62%
Long-Term Investments $16.00M $25.00M
YoY Change -36.0% -16.67%
Other Assets $44.00M $43.00M
YoY Change -50.0% -42.67%
Total Long-Term Assets $341.0M $484.0M
YoY Change -45.26% -24.73%
TOTAL ASSETS
Total Short-Term Assets $2.579B $2.762B
Total Long-Term Assets $341.0M $484.0M
Total Assets $12.43B $12.81B
YoY Change 1.43% 19.04%
SHORT-TERM LIABILITIES
YoY Change
Accounts Payable $260.0M $291.0M
YoY Change -6.47% -19.39%
Accrued Expenses $50.00M $43.00M
YoY Change -26.47% 168.75%
Deferred Revenue
YoY Change
Short-Term Debt $350.0M $608.0M
YoY Change -3.49%
Long-Term Debt Due $5.000M $399.0M
YoY Change -99.24% -25.42%
Total Short-Term Liabilities $1.276B $2.088B
YoY Change -30.95% -27.75%
LONG-TERM LIABILITIES
Long-Term Debt $3.894B $3.787B
YoY Change 15.34% 125.01%
Other Long-Term Liabilities $125.0M $91.00M
YoY Change -10.71% -26.02%
Total Long-Term Liabilities $2.692B $2.631B
YoY Change 2.44% 15.39%
TOTAL LIABILITIES
Total Short-Term Liabilities $1.276B $2.088B
Total Long-Term Liabilities $2.692B $2.631B
Total Liabilities $3.968B $4.719B
YoY Change -11.35% -8.72%
SHAREHOLDERS EQUITY
Retained Earnings -$137.0M -$373.0M
YoY Change -55.95%
Common Stock $4.710B $4.702B
YoY Change -0.19%
Preferred Stock
YoY Change
Treasury Stock (at cost)
YoY Change
Treasury Stock Shares
Shareholders Equity $4.567B $4.303B
YoY Change
Total Liabilities & Shareholders Equity $12.43B $12.81B
YoY Change 1.43% 19.04%

Cashflow Statement

Concept 2016 Q4 2016 Q3 2015 Q4
OPERATING ACTIVITIES
Net Income $88.00M -$62.00M
YoY Change -121.95% -117.13%
Depreciation, Depletion And Amortization $181.0M $160.0M
YoY Change 12.42% 36.75%
Cash From Operating Activities $342.0M $37.00M
YoY Change -9.04% -1333.33%
INVESTING ACTIVITIES
Capital Expenditures $83.00M $234.0M
YoY Change -6.74% 58.11%
Acquisitions
YoY Change
Other Investing Activities $12.00M -$508.0M
YoY Change -72.09% -151.37%
Cash From Investing Activities -$71.00M -$742.0M
YoY Change 54.35% -188.23%
FINANCING ACTIVITIES
Cash Dividend Paid
YoY Change
Common Stock Issuance & Retirement, Net
YoY Change
Debt Paid & Issued, Net
YoY Change
Cash From Financing Activities -4.000M 198.0M
YoY Change -88.24% -129.12%
NET CHANGE
Cash From Operating Activities 342.0M 37.00M
Cash From Investing Activities -71.00M -742.0M
Cash From Financing Activities -4.000M 198.0M
Net Change In Cash 267.0M -507.0M
YoY Change -9.8% -420.89%
FREE CASH FLOW
Cash From Operating Activities $342.0M $37.00M
Capital Expenditures $83.00M $234.0M
Free Cash Flow $259.0M -$197.0M
YoY Change -9.76% 30.46%

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CY2015Q4 us-gaap Derivative Collateral Right To Reclaim Cash
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20000000 USD
CY2015Q4 us-gaap Derivative Liability Not Offset Policy Election Deduction
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CY2016Q3 us-gaap Derivative Liability Not Offset Policy Election Deduction
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CY2015Q3 us-gaap Disposal Group Not Discontinued Operation Gain Loss On Disposal
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0 USD
us-gaap Disposal Group Not Discontinued Operation Gain Loss On Disposal
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CY2016Q3 us-gaap Disposal Group Not Discontinued Operation Gain Loss On Disposal
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0 USD
us-gaap Disposal Group Not Discontinued Operation Gain Loss On Disposal
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us-gaap Distribution Made To Limited Liability Company Llc Member Cash Distributions Declared
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us-gaap Earnings Per Share Basic
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CY2016Q3 us-gaap Earnings Per Share Basic
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us-gaap Earnings Per Share Basic
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us-gaap Earnings Per Share Diluted
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us-gaap Earnings Per Share Diluted
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us-gaap Effective Income Tax Rate Continuing Operations
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us-gaap Gain Loss On Sale Of Property Plant Equipment
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0 USD
us-gaap Gain Loss On Sale Of Property Plant Equipment
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CY2015Q3 us-gaap Goodwill Impairment Loss
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us-gaap Goodwill Impairment Loss
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466000000 USD
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0 USD
CY2016Q3 us-gaap Guarantee Obligations Current Carrying Value
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0 USD
CY2015Q3 us-gaap Income Loss From Continuing Operations Before Income Taxes Minority Interest And Income Loss From Equity Method Investments
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us-gaap Income Loss From Continuing Operations Before Income Taxes Minority Interest And Income Loss From Equity Method Investments
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us-gaap Income Loss From Continuing Operations Before Income Taxes Minority Interest And Income Loss From Equity Method Investments
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us-gaap Income Tax Expense Benefit
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us-gaap Increase Decrease In Accounts Payable Trade
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us-gaap Increase Decrease In Accounts Payable Trade
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us-gaap Increase Decrease In Accrued Taxes Payable
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us-gaap Increase Decrease In Customer Deposits
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us-gaap Increase Decrease In Inventories
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us-gaap Increase Decrease In Inventories
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us-gaap Increase Decrease In Other Operating Assets
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us-gaap Increase Decrease In Other Operating Capital Net
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us-gaap Increase Decrease In Receivables
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us-gaap Increase Decrease In Receivables
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us-gaap Increase Decrease In Restricted Cash
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us-gaap Increase Decrease In Restricted Cash
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CY2015Q3 us-gaap Incremental Common Shares Attributable To Share Based Payment Arrangements
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0 shares
CY2016Q3 us-gaap Incremental Common Shares Attributable To Share Based Payment Arrangements
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us-gaap Incremental Common Shares Attributable To Share Based Payment Arrangements
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55000000 USD
us-gaap Interest Expense
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146000000 USD
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60000000 USD
us-gaap Interest Expense
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180000000 USD
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CY2015Q4 us-gaap Inventory Net
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CY2016Q3 us-gaap Inventory Net
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CY2016Q3 us-gaap Liabilities And Stockholders Equity
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CY2016Q3 us-gaap Liabilities Current
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CY2016Q3 us-gaap Liabilities Noncurrent
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CY2015Q4 us-gaap Line Of Credit
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CY2016Q3 us-gaap Line Of Credit
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455000000 USD
CY2016Q3 us-gaap Line Of Credit Facility Maximum Borrowing Capacity
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2010000000 USD
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CY2016Q3 us-gaap Long Term Investments
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us-gaap Net Cash Provided By Used In Financing Activities
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us-gaap Net Cash Provided By Used In Financing Activities
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us-gaap Net Cash Provided By Used In Investing Activities
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us-gaap Net Cash Provided By Used In Investing Activities
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us-gaap Net Income Loss
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us-gaap Net Income Loss
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us-gaap Net Income Loss
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CY2016Q3 us-gaap Net Income Loss
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us-gaap Net Income Loss
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us-gaap Operating Income Loss
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us-gaap Operating Income Loss
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CY2016Q3 us-gaap Other Comprehensive Income Defined Benefit Plan Net Prior Service Costs Credit Arising During Period Net Of Tax
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us-gaap Other Comprehensive Income Defined Benefit Plan Net Prior Service Costs Credit Arising During Period Net Of Tax
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us-gaap Other Comprehensive Income Defined Benefit Plans Net Unamortized Gain Loss Arising During Period Net Of Tax
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CY2016Q3 us-gaap Other Comprehensive Income Defined Benefit Plans Net Unamortized Gain Loss Arising During Period Net Of Tax
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0 USD
us-gaap Other Comprehensive Income Defined Benefit Plans Net Unamortized Gain Loss Arising During Period Net Of Tax
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CY2015Q3 us-gaap Other Comprehensive Income Defined Benefit Plans Net Unamortized Gain Loss Arising During Period Tax
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us-gaap Other Comprehensive Income Defined Benefit Plans Net Unamortized Gain Loss Arising During Period Tax
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CY2016Q3 us-gaap Other Comprehensive Income Defined Benefit Plans Net Unamortized Gain Loss Arising During Period Tax
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us-gaap Other Comprehensive Income Defined Benefit Plans Net Unamortized Gain Loss Arising During Period Tax
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CY2015Q3 us-gaap Other Comprehensive Income Loss Amortization Adjustment From Aoci Pension And Other Postretirement Benefit Plans For Net Prior Service Cost Credit Net Of Tax
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us-gaap Other Comprehensive Income Loss Amortization Adjustment From Aoci Pension And Other Postretirement Benefit Plans For Net Prior Service Cost Credit Net Of Tax
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CY2016Q3 us-gaap Other Comprehensive Income Loss Amortization Adjustment From Aoci Pension And Other Postretirement Benefit Plans For Net Prior Service Cost Credit Net Of Tax
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us-gaap Other Comprehensive Income Loss Amortization Adjustment From Aoci Pension And Other Postretirement Benefit Plans For Net Prior Service Cost Credit Net Of Tax
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CY2015Q3 us-gaap Other Comprehensive Income Loss Amortization Adjustment From Aoci Pension And Other Postretirement Benefit Plans For Net Prior Service Cost Credit Tax
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0 USD
us-gaap Other Comprehensive Income Loss Amortization Adjustment From Aoci Pension And Other Postretirement Benefit Plans For Net Prior Service Cost Credit Tax
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0 USD
CY2016Q3 us-gaap Other Comprehensive Income Loss Amortization Adjustment From Aoci Pension And Other Postretirement Benefit Plans For Net Prior Service Cost Credit Tax
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0 USD
us-gaap Other Comprehensive Income Loss Amortization Adjustment From Aoci Pension And Other Postretirement Benefit Plans For Net Prior Service Cost Credit Tax
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us-gaap Other Comprehensive Income Loss Net Of Tax
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us-gaap Other Comprehensive Income Loss Net Of Tax
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CY2015Q3 us-gaap Other Comprehensive Income Loss Pension And Other Postretirement Benefit Plans Benefit Plan Improvement Tax Effect
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us-gaap Other Comprehensive Income Loss Pension And Other Postretirement Benefit Plans Benefit Plan Improvement Tax Effect
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CY2016Q3 us-gaap Other Comprehensive Income Loss Pension And Other Postretirement Benefit Plans Benefit Plan Improvement Tax Effect
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us-gaap Other Comprehensive Income Loss Pension And Other Postretirement Benefit Plans Benefit Plan Improvement Tax Effect
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CY2015Q3 us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci For Sale Of Securities Net Of Tax
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us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci For Sale Of Securities Net Of Tax
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CY2016Q3 us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci For Sale Of Securities Net Of Tax
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us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci For Sale Of Securities Net Of Tax
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CY2015Q3 us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci For Sale Of Securities Tax
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0 USD
us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci For Sale Of Securities Tax
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CY2016Q3 us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci For Sale Of Securities Tax
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3000000 USD
us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci For Sale Of Securities Tax
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5000000 USD
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4000000 USD
us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci On Derivatives Net Of Tax
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us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci On Derivatives Net Of Tax
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us-gaap Payments For Proceeds From Other Investing Activities
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CY2015Q3 us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci On Derivatives Tax
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2000000 USD
us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci On Derivatives Tax
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9000000 USD
CY2016Q3 us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci On Derivatives Tax
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us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci On Derivatives Tax
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6000000 USD
CY2015Q3 us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci Pension And Other Postretirement Benefit Plans For Net Gain Loss Net Of Tax
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us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci Pension And Other Postretirement Benefit Plans For Net Gain Loss Net Of Tax
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CY2016Q3 us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci Pension And Other Postretirement Benefit Plans For Net Gain Loss Net Of Tax
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us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci Pension And Other Postretirement Benefit Plans For Net Gain Loss Net Of Tax
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CY2015Q3 us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci Pension And Other Postretirement Benefit Plans For Net Gain Loss Tax
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us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci Pension And Other Postretirement Benefit Plans For Net Gain Loss Tax
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CY2016Q3 us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci Pension And Other Postretirement Benefit Plans For Net Gain Loss Tax
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us-gaap Other Comprehensive Income Loss Reclassification Adjustment From Aoci Pension And Other Postretirement Benefit Plans For Net Gain Loss Tax
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CY2015Q3 us-gaap Other Comprehensive Income Unrealized Holding Gain Loss On Securities Arising During Period Net Of Tax
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us-gaap Other Comprehensive Income Unrealized Holding Gain Loss On Securities Arising During Period Net Of Tax
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13000000 USD
us-gaap Other Comprehensive Income Unrealized Holding Gain Loss On Securities Arising During Period Net Of Tax
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24000000 USD
CY2015Q3 us-gaap Other Comprehensive Income Unrealized Holding Gain Loss On Securities Arising During Period Tax
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us-gaap Other Comprehensive Income Unrealized Holding Gain Loss On Securities Arising During Period Tax
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14000000 USD
us-gaap Other Comprehensive Income Unrealized Holding Gain Loss On Securities Arising During Period Tax
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CY2015Q3 us-gaap Other Cost And Expense Operating
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us-gaap Other Cost And Expense Operating
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CY2016Q3 us-gaap Other Cost And Expense Operating
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us-gaap Other Cost And Expense Operating
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CY2015Q3 us-gaap Other Cost Of Services
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us-gaap Other Cost Of Services
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760000000 USD
CY2016Q3 us-gaap Other Cost Of Services
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us-gaap Other Cost Of Services
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780000000 USD
CY2015Q4 us-gaap Other Investments
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CY2016Q3 us-gaap Other Investments
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CY2016Q3 us-gaap Other Liabilities Current
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CY2015Q4 us-gaap Other Liabilities Noncurrent
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CY2016Q3 us-gaap Other Liabilities Noncurrent
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us-gaap Other Noncash Income Expense
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us-gaap Other Noncash Income Expense
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CY2015Q3 us-gaap Other Nonoperating Income Expense
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us-gaap Other Nonoperating Income Expense
OtherNonoperatingIncomeExpense
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CY2016Q3 us-gaap Other Nonoperating Income Expense
OtherNonoperatingIncomeExpense
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us-gaap Other Nonoperating Income Expense
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CY2015Q3 us-gaap Other Sales Revenue Net
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156000000 USD
us-gaap Other Sales Revenue Net
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404000000 USD
CY2016Q3 us-gaap Other Sales Revenue Net
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143000000 USD
us-gaap Other Sales Revenue Net
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376000000 USD
us-gaap Payments For Proceeds From Other Investing Activities
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us-gaap Payments To Acquire Available For Sale Securities
PaymentsToAcquireAvailableForSaleSecurities
154000000 USD
us-gaap Payments To Acquire Available For Sale Securities
PaymentsToAcquireAvailableForSaleSecurities
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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-style:normal;font-weight:bold;text-decoration:none;">New Accounting Guidance Pending Adoption</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;text-decoration:underline;">Accounting for Revenue from Contracts with Customers</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">In May 2014, the FASB issued accounting guidance that establishes a comprehensive new model for the recognition of revenue from contracts with customers.&#160;&#160;This model is based on the core principle that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In March 2016, the FASB issued guidance to clarify the implementation of principal versus agent considerations, and in April 2016, the FASB issued guidance to clarify the identification of performance obligations contained within the original standard. </font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">This guidance can be applied using either a full retrospective or modified retrospective transition method. In August 2015, the FASB issued guidance that defers the effective date of the standard by one year, which for public business entities, results in initial application of this guidance in annual reporting periods beginning after December 15, 2017 and interim periods within those years. Entities may early adopt the guidance as of the original effective date of the standard, which for public business entities is annual reporting periods beginning after December 15, 2016. Talen Energy expects to adopt this guidance effective January 1, 2018.</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Talen Energy is currently assessing the impact of adopting this guidance on its consolidated financial statements, as well as the transition method it will use.</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;text-decoration:underline;">Reporting Uncertainties about an Entity's Ability to Continue as a Going Concern</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">In August 2014, the FASB issued accounting guidance which will require management to assess, for each interim and annual period, whether there are conditions or events that raise substantial doubt about an entity's ability to continue as a going concern.&#160;&#160;Substantial doubt about an entity's ability to continue as a going concern exists when relevant conditions and events, considered in the aggregate, indicate that it is probable that the entity will be unable to meet its obligations as they become due within one year after the date the financial statements are issued.</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">When management identifies conditions or events that raise substantial doubt about an entity's ability to continue as a going concern, management is required to disclose information that enables users of the financial statements to understand the principal conditions or events that raised substantial doubt about the entity's ability to continue as a going concern and management's evaluation of the significance of those conditions or events.&#160;&#160;If substantial doubt about the entity's ability to continue as a going concern has been alleviated as a result of management's plan, the entity should disclose information that allows the users of the financial statements to understand those plans.&#160;&#160;If the substantial doubt about the entity's ability to continue as a going concern is not alleviated by management's plans, management's plans to mitigate the conditions or events that gave rise to the substantial doubt about the entity's ability to continue as a going concern should be disclosed, as well as a statement that there is substantial doubt the entity's ability to continue as a going concern within one year after the date the financial statements are issued.</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">This guidance should be applied prospectively within the annual reporting periods ending after December 15, 2016, and for annual periods and interim periods thereafter.&#160;&#160;Early adoption is permitted.</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Talen Energy will adopt this guidance for the annual period ending December 31, 2016 and the adoption of this guidance is not expected to have a significant impact on its consolidated financial statements.&#160;</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">&#160;</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;text-decoration:underline;">Recognition of Measurement of Financial Assets and Financial Liabilities</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">In January 2016, the FASB issued accounting guidance that affects the accounting for equity investments, financial liabilities under the fair value option, and the disclosure requirements for financial instruments. This guidance generally requires entities to measure equity investments that are not accounted for under the equity method of accounting and do not result in consolidation at fair value and recognize any changes in fair value in net income. Entities may elect to record equity investments without readily determinable fair values at cost, less impairment, adjusted for observable price changes. The impairment model for equity investments subject to this election is a single-step qualitative assessment performed each quarter. For financial liabilities measured using the fair value option, changes in fair value related to instrument-specific credit risk to be presented separately within OCI.</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">This guidance should generally be applied prospectively for financial statements issued for fiscal years beginning after December 15, 2017 and interim periods within those fiscal years. Early adoption is generally not permitted, although entities may early adopt the provision related to financial liabilities under the fair value option.</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Talen Energy expects to adopt this guidance effective January 1, 2018. Upon adoption, an entity will record a cumulative-effect adjustment to beginning retained earnings as of the beginning of the first reporting period in which the guidance is adopted, with the exception that the amendments related to equity securities with readily determined fair values should be applied prospectively. Talen Energy is currently assessing the impact of adopting this guidance on its consolidated financial statements, which may be significant for equity securities held in the NDT funds.</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;text-decoration:underline;">Accounting for Leases</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">In February 2016, the FASB issued accounting guidance that updates the accounting for leases.&#160; The updated guidance will require lessees to recognize assets and liabilities for the rights and obligations created by their leases with lease terms of more than 12 months.&#160; Consistent with current accounting guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance (similar to the current capital lease) or an operating lease.&#160; However, unlike current accounting guidance, which requires only capital leases to be recognized on the balance sheet, the new accounting guidance will require both types of leases to be recognized on the balance sheet.</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The new accounting guidance also will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. These disclosures include qualitative and quantitative requirements, providing additional information about the amounts recorded in the financial statements.</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The accounting by lessors will remain largely unchanged.&#160; However, the new accounting guidance contains some targeted improvements that are intended to align, where necessary, lessor accounting with the lessee accounting model and with the updated revenue recognition guidance issued in 2014 and discussed above.</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">This guidance is effective for annual reporting periods beginning after December 15, 2018 and interim periods within those years.&#160; Early application is permitted.&#160; In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach.&#160; The modified retrospective approach includes a number of optional practical expedients that entities may elect to apply.&#160; These practical expedients relate to the identification and classification of leases that commenced before the effective date, initial direct costs for leases that commenced before the effective date, and the ability to use hindsight in evaluating lessee options to extend or terminate a lease or to purchase the underlying asset.&#160; An entity that elects to apply the practical expedients will, in effect, continue to account for leases that commence before the effective date in accordance with previous accounting guidance unless the lease is modified, except that lessees are required to recognize a right-of-use asset and a lease liability for all operating leases at each reporting date based on the present value of the remaining minimum rental payments that were tracked and disclosed under previous accounting guidance.</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Talen Energy is currently assessing the impact of adopting this guidance on its consolidated financial statements and expects to adopt this guidance effective January 1, 2019.</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;text-decoration:underline;">Share-Based Payment Accounting</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">In March 2016, the FASB issued accounting guidance that changes the accounting for certain aspects of share-based payments to employees. This guidance requires the income tax effects of awards to be recognized in the income statement when the awards vest or are settled. For interim reporting purposes, excess tax benefits and tax deficiencies will be accounted for as discrete items in the period in which they occur and are excluded from the estimated annual effective tax rate. These amendments are applied prospectively. Excess tax benefits will be presented as an operating activity on the statement of cash flows, and this amendment can be applied retrospectively or prospectively.</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">In addition, the requirement that excess tax benefits be realized before companies can recognize them will be eliminated; and this amendment will be applied using a modified retrospective transition method with a cumulative effect adjustment in retained earnings for excess tax benefits that have not previously been recognized. The guidance also requires an assessment of the realizability of any deferred tax assets it records upon adoption as a result of recognizing excess tax benefits and a valuation allowance will be recorded in retained earnings, if necessary.</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The guidance will increase the amount an employer can withhold to cover income taxes on awards and still qualify for the liability exception for shares used to satisfy the employer's statutory income tax withholding obligation. The amendments related to outstanding liability awards at the date of adoption will be applied using a modified retrospective transition method, with a cumulative-effect adjustment to retained earnings. Cash paid to a tax authority when shares are withheld to satisfy its statutory income tax withholding obligation will be recorded as a financing activity on the statement of cash flows.</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Companies will have to elect how to account for forfeitures of share-based payments by either recognizing forfeitures of awards as they occur or estimating the number of awards expected to be forfeited and adjusting the estimate when it is likely to change, as is currently required. This election is required at the entity level using a modified retrospective transition method, with a cumulative-effect adjustment to retained earnings.</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">This guidance is effective for fiscal years beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted. Talen Energy is currently assessing the impact of adopting this guidance on its consolidated financial statements and expects to adopt this guidance effective January 1, 2017.</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;color:#000000;text-decoration:underline;">Accounting for Credit Losses on Financial Instruments</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">In June 2016, the FASB issued accounting guidance that changes the impairment model for most financial assets and certain other instruments. The standard will replace today's incurred loss approach with an expected loss model for instruments measured at amortized cost and will require allowances for available-for-sale debt securities rather than reduce the carry amount, as they do today under the other-than-temporary impairment model. The guidance will also simplify the accounting model for purchased credit-impaired debt securities and loans. </font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The new expected credit loss model will apply to most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance-sheet credit exposures. The existing loss contingency model will apply to instruments outside the scope of these models. The guidance also eliminates today's accounting model for purchased credit impaired loans and debt securities. Instead, the initial amortized cost for purchased assets will equal the purchase price plus the estimated allowance for credit loss at the date of acquisition. </font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The new expected credit loss model requires an estimate of expected credit loss to be made and recorded as an allowance. When deducted from the amortized cost basis of the financial asset, it will present the net amount expected to be collected on the financial asset. An expected credit loss estimate should be based on the asset's amortized cost, reflect losses expected over the remaining contractual life, consider available information about collectability of cash flows, and reflect the risk of loss even when remote. </font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The amendment to the impairment model for available-for-sale debt securities will measure credit losses in a manner similar to current guidance, except that losses will be recognized as allowances rather than reductions in the amortized cost of securities. This will result in a remeasurement of credit losses on available-for-sale debt securities in each reporting period. </font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">This guidance is effective for fiscal years beginning after December 15, 2019, and interim periods therein. The guidance's provisions will be applied as a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. Early adoption is permitted for annual periods beginning after December 15, 2018. Talen Energy is currently assessing the impact of adopting this guidance on its consolidated financial statements and expects to adopt this guidance effective January 1, 2020.</font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:Arial;font-size:10pt;text-decoration:underline;">Classification of Certain Cash Receipts and Cash Payments</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">In August 2016, the FASB issued accounting guidance related to how an entity classifies certain cash receipts and cash payments on its statement of cash flows. The guidance clarifies eight specific cash flow presentation issues that have developed due to diversity in practice, including debt prepayment or extinguishment costs; settlement of zero-coupon debt; contingent consideration payments made after a business combination; proceeds from the settlement of insurance claims; proceeds from the settlement of corporate-owned life insurance; distributions received from equity method investees; and cash receipts from payments on beneficial interests in securitization transactions; and separately identifiable cash flows and application of the predominance principle.&#160;</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">This guidance is effective for fiscal years beginning after December 15, 2017, and interim periods therein. Early adoption is permitted and the guidance's provisions are required to be applied retrospectively. Talen Energy is currently assessing the impact and timing of adopting this guidance on its consolidated financial statements and expects to adopt this guidance effective January 1, 2018.</font></div></div>

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