SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

General

Ameren, headquartered in St. Louis, Missouri, is a public utility holding company under PUHCA 2005. Ameren’s primary assets are its equity interests in its subsidiaries. Ameren’s subsidiaries are separate, independent legal entities with separate businesses, assets, and liabilities. Dividends on Ameren’s common stock and the payment of expenses by Ameren depend on distributions made to it by its subsidiaries. Ameren’s principal subsidiaries, Ameren Missouri, Ameren Illinois, and ATXI, are described below. Ameren also has other subsidiaries that conduct other activities, such as the provision of shared services. Ameren is also evaluating competitive electric transmission investment opportunities outside of MISO as they arise.


•	Union Electric Company, doing business as Ameren Missouri, operates a rate-regulated electric generation, transmission, and distribution business and a rate-regulated natural gas distribution business in Missouri.


•	Ameren Illinois Company, doing business as Ameren Illinois, operates rate-regulated electric transmission, electric distribution, and natural gas distribution businesses in Illinois.


•	ATXI operates a FERC rate-regulated electric transmission business. ATXI is developing MISO-approved electric transmission projects, including the Illinois Rivers, Spoon River, and Mark Twain projects.

Ameren’s financial statements are prepared on a consolidated basis and therefore include the accounts of its majority-owned subsidiaries. All intercompany transactions have been eliminated. Ameren Missouri and Ameren Illinois have no subsidiaries. All tabular dollar amounts are in millions, unless otherwise indicated. Also see the Glossary of Terms and Abbreviations at the front of this report and in the Form 10-K.

Our accounting policies conform to GAAP. Our financial statements reflect all adjustments (which include normal, recurring adjustments) that are necessary, in our opinion, for a fair statement of our results. The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions. Such estimates and assumptions affect reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the dates of financial statements, and the reported amounts of revenues and expenses during the reported periods. Actual results could differ from those estimates. The results of operations of an interim period may not give a true indication of results that may be expected for a full year. See Note 2 – Rate and Regulatory Matters for information regarding the 2017 change in Ameren Illinois' method used to recognize interim period revenue in connection with the revenue decoupling provisions of the FEJA. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Form 10-K.

Discontinued operations were immaterial to all periods presented in Ameren’s financial statements. As such, the “Assets of discontinued operations” and “Liabilities of discontinued operations” included on the December 31, 2016 balance sheet have been reclassified in this report to “Other current assets” and “Other current liabilities,” respectively. See Note 1 – Summary of Significant Accounting Policies under Part II, Item 8, of the Form 10-K for additional information.

Asset Retirement Obligations

The following table provides a reconciliation of the beginning and ending carrying amount of AROs for the six months ended June 30, 2017:



	Ameren Missouri				Ameren Illinois^(a)			Ameren
Balance at December 31, 2016	$	644		^(b)	$	6		$	650		^(b)
Liabilities settled	(1		)		(c)			(1		)
Accretion^(d)	13				(c)			13
Change in estimates^(e)	(12		)		(1		)	(13		)
Balance at June 30, 2017	$	644		^(b)	$	5		$	649		^(b)


(a)	Included in “Other deferred credits and liabilities” on the balance sheet.


(b)	Balance included $15 million in “Other current liabilities” on the balance sheet as of December 31, 2016 and June 30, 2017, respectively.


(c)	Less than $1 million.


(d)	Accretion expense was recorded as a decrease to regulatory liabilities.


(e)	Ameren Missouri changed its fair value estimate primarily related to extending the remediation period of certain CCR storage facilities.

Share-based Compensation

A summary of nonvested performance share units at June 30, 2017, and changes during the six months ended June 30, 2017, under the 2014 Incentive Plan are presented below:



	Performance Share Units
	Share Units		Weighted-average Fair Value per Share Unit
Nonvested at January 1, 2017	1,059,639		$	48.04
Granted^(a)	498,940		59.16
Forfeitures	(38,521	)	52.40
Vested^(b)	(5,992	)	52.88
Nonvested at June 30, 2017	1,514,066		$	51.57


(a)	Performance share units granted to certain executive and nonexecutive officers and other eligible employees under the 2014 Incentive Plan.


(b)	Performance share units vested due to the attainment of retirement eligibility by certain employees. Actual shares issued for retirement-eligible employees vary depending on actual performance over the three-year measurement period.

The fair value of each performance share unit awarded in 2017 under the 2014 Incentive Plan was determined to be $59.16, which was based on Ameren’s closing common share price of $52.46 at December 31, 2016, and lattice simulations. Lattice simulations are used to estimate expected share payout based on Ameren’s total shareholder return for a three-year performance period beginning January 1, 2017, relative to the designated peer group. The simulations can produce a greater fair value for the performance share unit than the December 31 applicable closing common share price because they include the weighted payout scenarios in which an increase in the share price has occurred. The significant assumptions used to calculate fair value also included a three-year risk-free rate of 1.47%, volatility of 15% to 21% for the peer group, and Ameren’s attainment of a three-year average earnings per share threshold during the performance period.

Operating Revenue

The Ameren Companies record operating revenue for electric or natural gas service when it is delivered to customers. We accrue an estimate of electric and natural gas revenues for service rendered but unbilled at the end of each accounting period. For certain regulatory recovery mechanisms qualifying as alternative revenue programs, such as revenue requirement reconciliations, the Ameren Companies recognize revenues that have been authorized for rate recovery, are objectively determinable and probable of recovery, and are expected to be collected from customers within two years from the end of the year.

Excise Taxes

Ameren Missouri and Ameren Illinois collect certain excise taxes from customers that are levied on the sale or distribution of natural gas and electricity. Excise taxes are levied on Ameren Missouri’s electric and natural gas businesses and on Ameren Illinois’ natural gas business and are recorded gross in “Operating Revenues – Electric,” “Operating Revenues – Natural gas” and “Operating Expenses – Taxes other than income taxes” on the statement of income or the statement of income and comprehensive income. Excise taxes for electric service in Illinois are levied on the customer and therefore are not included in Ameren Illinois’ revenues and expenses. The following table presents excise taxes recorded in “Operating Revenues – Electric,” “Operating Revenues – Natural gas” and “Operating Expenses – Taxes other than income taxes” for the three and six months ended June 30, 2017 and 2016:



	Three Months				Six Months
	2017		2016		2017		2016
Ameren Missouri	$	40	$	40	$	71	$	70
Ameren Illinois	11		11		30		31
Ameren	$	51	$	51	$	101	$	101

Earnings Per Share

There were no material differences between Ameren’s basic and diluted earnings per share amounts for the three and six months ended June 30, 2017 and 2016. The assumed settlement of dilutive performance share units had an immaterial impact on earnings per share. There were no potentially dilutive securities excluded from the earnings per diluted share calculations for the three and six months ended June 30, 2017 and 2016.

Income Taxes

In July 2017, the Illinois legislature passed a bill that increased the state's corporate income tax rate from 7.75% to 9.5% as of July 1, 2017. The bill made the increase in the state’s corporate income tax rate, which was previously scheduled to decrease to 7.3% in 2025, permanent. Ameren's consolidated 2017 net income is expected to decrease by $15 million, including an expense of $14 million at Ameren (parent), due to the revaluation of accumulated deferred taxes and the estimated state apportionment of such taxes. Beyond this decrease, Ameren does not expect this tax increase to have a material impact on its consolidated net income prospectively. The tax increase is not expected to materially impact the earnings of the Ameren Illinois Electric Distribution, Ameren Transmission, nor Ameren Illinois Transmission segments since these businesses operate under formula ratemaking frameworks. The tax increase is expected to unfavorably affect 2017 net income of the Ameren Illinois Natural Gas segment by less than $1 million. In addition, in the third quarter of 2017, Ameren’s and Ameren Illinois’ accumulated deferred tax balances will be revalued using the state’s new corporate income tax rate, which is expected to result in a net increase to the liability balances of $97 million and $79 million, respectively. These increased liabilities will be offset by a regulatory asset, as well as income tax expense, as discussed above.

Accounting and Reporting Developments

Below is a summary of updates related to our adoption of recently issued authoritative accounting standards. See Note 1 – Summary of Significant Accounting Policies under Part II, Item 8, of the Form 10-K for additional information about recently issued authoritative accounting standards relating to leases, financial instruments, and restricted cash.

Revenue from Contracts with Customers

In May 2014, the FASB issued authoritative guidance that changes the criteria for recognizing revenue from a contract with a customer. The underlying principle of the guidance is that an entity will recognize revenue for the transfer of promised 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 requires additional disclosures to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers, as well as separate presentation of alternative revenue programs on the income statement. Entities can apply the guidance to each reporting period presented (the full retrospective method) or by recording a cumulative effect adjustment to retained earnings in the period of initial adoption (the modified retrospective method).

We have substantially completed the evaluation of our contracts and do not expect material changes to the amount or timing of revenue recognition. We currently plan to apply the guidance using the full retrospective method and to include disaggregated revenue disclosures by segment and customer class in the combined notes to the financial statements in the first quarter of 2018. We will finalize our contract assessments and our selection of transition method by the end of 2017.

Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost

In March 2017, the FASB issued authoritative guidance that requires an entity to retrospectively report the service cost component of net benefit cost in the same line item(s) as other compensation costs arising from services rendered by employees during the period and to present the other components of net benefit cost in the income statement separately from the service cost component, and outside of operating income. The guidance also requires that an entity only capitalize the service cost component as part of an asset such as inventory or property, plant, and equipment on a prospective basis. Previously, all of the net benefit cost components were eligible for capitalization. The adoption of this guidance in the first quarter of 2018 may result in the recognition of new regulatory assets or liabilities related to the recovery or return of the non-service cost components of net benefit cost. See Note 11 – Retirement Benefits for the components of net benefit cost. We are currently assessing the impacts of this guidance on our results of operations, financial position, and disclosures.