Impact of New Accounting Standards and Interpretations

The following are accounting standard updates issued by the Financial Accounting Standards Board ("FASB") that TVA adopted during 2016.



Standard	Description	Effective Date for TVA	Effect on the Financial Statements or Other Significant Matters
Debt Issuance Costs	This guidance changes the presentation of debt issuance costs in financial statements. This standard requires that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct reduction of that debt liability, consistent with debt discounts, including retrospectively adjusting all prior periods presented. The guidance does not change the recognition and measurement of debt issuance costs.	Early adopted on October 1, 2015	In the consolidated balance sheets, TVA reclassified $80 million of debt issuance costs previously presented in Other long-term assets on the September 30, 2015 Consolidated Balance Sheet and presented these amounts as a reduction to Long-term power bonds, net and Long-term debt of variable interest entities, net.
Derivatives and Hedging	This guidance clarifies that the novation of a derivative contract in a hedge accounting relationship does not, in and of itself, require dedesignation of that hedge accounting relationship. Hedge accounting relationships could continue as long as all other hedge accounting criteria continue to be met, including the expectation that the hedge will be highly effective when the creditworthiness of the new counterparty to the derivative contracts is considered.	Prospectively early adopted on April 1, 2016	The adoption of the standard did not materially impact TVA's financial condition, results of operations, or cash flows.

The following accounting standards have been issued, but as of June 30, 2016, were not effective and had not been adopted by TVA.



Standard	Description	Effective Date for TVA	Effect on the Financial Statements or Other Significant Matters
Revenue Recognition	This guidance applies to revenue from contracts with customers. The standard requires that an entity recognize revenue to depict the transfer of 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 August 2015, the FASB issued a one-year deferral of the effective date. The new effective date allows for either a full retrospective or a modified retrospective application. Early adoption is permitted.	October 1, 2018	TVA is currently evaluating the potential impact of these changes on its consolidated financial statements and related disclosures and the application method to be used.
Consolidation	This guidance amends the consolidation analysis for VIEs as well as voting interest entities. The standard reduces the number of consolidation models through the elimination of the indefinite deferral for certain entities that was previously allowed and places more emphasis on risk of loss when determining a controlling financial interest. This guidance allows for either a full retrospective or a modified retrospective application.	October 1, 2016	TVA has evaluated the impact of adopting this guidance and expects no material impact on TVA's financial condition, results of operations, or cash flows.
Inventory Valuation	This guidance changes the model used for the subsequent measurement of inventory from the previous lower of cost or market model to the lower of cost or net realizable value. The guidance applies only to inventory valued using methods other than last-in, first out or the retail inventory method (for example, first-in, first-out or average cost). This amendment is intended to simplify the subsequent measurement of inventory. When the standard becomes effective, it includes interim periods within the fiscal year that begins on that date, and is required to be applied prospectively. Early adoption is permitted.	October 1, 2017	TVA is currently evaluating the potential impact of these changes on its consolidated financial statements.
Lease Accounting	This guidance changes the provisions of recognition in both the lessee and lessor accounting models. The standard requires entities that lease assets — referred to as “lessees” — to recognize on the balance sheet the assets and liabilities for the rights and obligations created by leases with terms of more than 12 months. 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 current capital leases) or operating lease. However, unlike current lease accounting rules — which require only capital leases to be recognized on the balance sheet — the new standard will require both types of leases to be recognized on the balance sheet. Operating leases will result in straight-line expense, while finance leases will result in recognition of interest on the lease liability separate from amortization expense. The accounting for the owner of the assets leased by the lessee — also known as lessor accounting — will remain largely unchanged from current lease accounting rules. When the standard becomes effective, it will include interim periods within that fiscal year, and will be required to be applied using a modified retrospective transition. Early adoption is permitted.	October 1, 2019	TVA is currently evaluating the potential impact of these changes on its consolidated financial statements and related disclosures.