New Accounting Standards

12 Months Ended

Dec. 31, 2016

2:New Accounting Standards

Implementation of New Accounting Standards

ASU 2014‑12, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period: This standard, which was effective on January 1, 2016 for CMS Energy and Consumers, addresses stock awards with performance targets that can be met after an employee has completed the required service period. The standard was issued to resolve diversity in practice regarding the accounting treatment for this type of award. Under the new guidance, the probability of the performance target being met should be factored into compensation expense each period. This guidance is consistent with the accounting that CMS Energy and Consumers already applied to awards of this type. Therefore, the standard had no impact on CMS Energy’s or Consumers’ consolidated financial statements.

ASU 2015‑02, Amendments to the Consolidation Analysis: This standard, which was effective on January 1, 2016 for CMS Energy and Consumers, provides amended guidance on whether reporting entities should consolidate certain legal entities, including limited partnerships. CMS Energy and Consumers determined that the standard did not change any of their consolidation conclusions or have any impact on their consolidated net income, cash flows, or financial position.

ASU 2015‑03, Simplifying the Presentation of Debt Issuance Costs: This standard, which was effective on January 1, 2016 for CMS Energy and Consumers, requires that debt issuance costs be presented as a direct deduction from the carrying amount of long-term debt on the balance sheet. Previously, debt issuance costs were reported as an asset. The new guidance aligns the presentation of debt issuance costs with debt discounts and premiums. In accordance with the standard, CMS Energy included $45 million and Consumers included $25 million of unamortized debt issuance costs in long-term debt on their consolidated balance sheets at December 31, 2016. In addition, this standard requires that entities apply the new guidance retrospectively to all prior periods presented. Accordingly, CMS Energy reclassified $41 million and Consumers reclassified $23 million of unamortized debt issuance costs from other non‑current assets to long-term debt on their consolidated balance sheets at December 31, 2015.

ASU 2016‑09, Improvements to Employee Share-Based Payment Accounting: This standard was issued to simplify and improve the accounting for employee share-based payment awards. The required effective date of the standard for CMS Energy and Consumers is January 1, 2017, but early adoption is permitted. CMS Energy and Consumers elected to adopt the standard early as of January 1, 2016. The standard requires all excess tax benefits and deficiencies that occur upon vesting of employee stock awards to be recognized in net income. Previously, CMS Energy and Consumers did not record excess tax benefits on restricted stock awards in net income but, under this standard, CMS Energy and Consumers recorded $7 million of excess tax benefits in net income for the year ended December 31, 2016. Also, in accordance with the standard, CMS Energy recorded a $33 million cumulative adjustment to its accumulated deficit at January 1, 2016. This amount represented excess federal tax benefits that CMS Energy had not recognized in prior periods due to the use of tax loss carryforwards. The implementation of this standard had no other major impacts on CMS Energy’s or Consumers’ consolidated financial statements.

ASU 2016‑15, Classification of Certain Cash Receipts and Cash Payments: This standard provides guidance on how certain cash receipts and cash payments should be classified in the statement of cash flows, with the objective of reducing diversity in practice. The required effective date of the standard for CMS Energy and Consumers is January 1, 2018, but early adoption is permitted. CMS Energy and Consumers elected to adopt the standard early for the year ended December 31, 2016. The standard addresses various cash flow issues, including debt prepayment and debt extinguishment costs. Under the new guidance, these costs, including premiums paid, should be classified as cash flows from financing activities. Previously, CMS Energy and Consumers classified premiums paid to retire debt early as cash flows from operating activities but, in accordance with this standard, they classified these payments as cash flows from financing activities for the year ended December 31, 2016. In addition, the standard requires that entities apply the new guidance retrospectively to all prior periods presented, unless impracticable. Accordingly, for the year ended December 31, 2014, CMS Energy reclassified $36 million and Consumers reclassified $16 million of debt retirement premium payments from operating activities to financing activities on their consolidated statements of cash flows. The standard had no other major impacts on CMS Energy’s or Consumers’ consolidated financial statements.

ASU 2016‑18, Restricted Cash: This standard requires restricted cash and cash equivalents to be included with cash and cash equivalents when reconciling beginning-of-period and end-of-period amounts shown on the statement of cash flows. Under this guidance, the statement of cash flows should explain the total change in cash balances, including amounts described as restricted. The required effective date of the standard for CMS Energy and Consumers is January 1, 2018, but early adoption is permitted. CMS Energy and Consumers elected to adopt the standard early for the year ended December 31, 2016. In accordance with the standard, CMS Energy and Consumers included restricted cash amounts in their reconciliations of cash balances on their consolidated statements of cash flows for the year ended December 31, 2016. Previously, restricted cash amounts were excluded from the reconciliations of cash balances and transfers between cash balances and restricted cash balances were presented as other investing activities. In addition, the standard requires that entities apply the new guidance retrospectively to all prior periods presented. Accordingly, CMS Energy and Consumers made the following adjustments to prior-period amounts on their consolidated statements of cash flows:



In Millions
Years Ended December 31	2015			2014
CMS Energy, including Consumers
Increase (decrease) in:
Cash and cash equivalents, including restricted amounts, beginning of period		$	42		$	32
Net cash used in investing activities			(20)			10
Cash and cash equivalents, including restricted amounts, end of period			22			42
Consumers
Increase (decrease) in:
Cash and cash equivalents, including restricted amounts, beginning of period		$	41		$	31
Net cash used in investing activities			(20)			10
Cash and cash equivalents, including restricted amounts, end of period			21			41

For further information on CMS Energy’s and Consumers’ cash balances, see Note 17, Cash and Cash Equivalents.

New Accounting Standards Not Yet Effective

ASU 2014‑09, Revenue from Contracts with Customers: This standard provides new guidance for recognizing revenue from contracts with customers. A primary objective of the standard is to provide a single, comprehensive revenue recognition model that will be applied across entities, industries, and capital markets. The new guidance will replace most of the existing revenue recognition requirements in GAAP, although certain guidance specific to rate-regulated utilities will be retained. The standard will be effective on January 1, 2018 for CMS Energy and Consumers, but early adoption in 2017 is permitted. Entities will have the option to apply the standard retrospectively to all prior periods presented, or to apply it retrospectively only to contracts existing at the effective date, with the cumulative effect of the standard recorded as an adjustment to beginning retained earnings. CMS Energy and Consumers have determined that they will not elect to adopt the standard early, but they are still assessing how they will apply the standard upon adoption.

CMS Energy and Consumers are continuing to evaluate the impact of this standard on their consolidated financial statements; however, they have determined that the standard will have no impact on a majority of their revenues. The standard may require utility contributions in aid of construction to be treated as revenue, rather than as a reduction to the cost of plant, property, and equipment. Also, the standard may not permit revenue to be recognized for certain accounts for which collection is not deemed probable, which would represent a change from the existing practice of recognizing revenue at the billing rates, with associated expenses for uncollectible accounts. CMS Energy and Consumers do not presently expect that these two issues will have a material impact on their consolidated net income, cash flows, or financial position, but they are still assessing these issues and other requirements of the standard.

ASU 2016‑01, Recognition and Measurement of Financial Assets and Financial Liabilities: This standard, which will be effective January 1, 2018 for CMS Energy and Consumers, is intended to improve the accounting for financial instruments. The standard will require investments in equity securities to be measured at fair value, with changes in fair value recognized in net income, except for certain investments such as those that qualify for equity-method accounting. The standard will no longer permit unrealized gains and losses for certain equity investments to be recorded in AOCI. CMS Energy and Consumers presently record unrealized gains and losses on certain equity investments, including the mutual funds in the DB SERP and Consumers’ investment in CMS Energy common stock, in AOCI, except that unrealized losses determined to be other than temporary are reported in earnings. For further details on these investments, see Note 7, Financial Instruments. Entities will apply the standard using a modified retrospective approach, with a cumulative-effect adjustment recorded to beginning retained earnings on the effective date.

ASU 2016‑02, Leases: This standard establishes a new accounting model for leases. The standard will require entities to recognize lease assets and liabilities on the balance sheet for all leases with a term of more than one year, including operating leases, which are not recorded on the balance sheet under existing standards. As a result, CMS Energy and Consumers expect to recognize additional lease assets and liabilities for their operating leases under this standard. The new guidance will also amend the definition of a lease to require that a lessee control the use of a specified asset, and not simply control or take the output of the asset. On the income statement, leases that meet existing capital lease criteria will generally be accounted for under a financing model, while operating leases will generally be accounted for under a straight-line expense model. The standard will be effective on January 1, 2019 for CMS Energy and Consumers, but early adoption is permitted. CMS Energy and Consumers are continuing to evaluate the impact of the standard on their consolidated financial statements and do not presently expect to adopt the standard early. See Note 10, Leases and Palisades Financing, for more information on CMS Energy’s and Consumers’ operating lease obligations.

ASU 2016‑13, Measurement of Credit Losses on Financial Instruments: This standard, which will be effective January 1, 2020 for CMS Energy and Consumers, provides new guidance for estimating and recording credit losses on financial instruments. The standard will apply to the recognition of loan losses at EnerBank as well as to the recognition of uncollectible accounts expense at Consumers. Entities will apply the standard using a modified retrospective approach, with a cumulative-effect adjustment recorded to beginning retained earnings on the effective date. CMS Energy and Consumers are evaluating the impact of the standard on their consolidated financial statements.

Consumers Energy Company [Member]

New Accounting Standards

2:New Accounting Standards

Implementation of New Accounting Standards



In Millions
Years Ended December 31	2015			2014
CMS Energy, including Consumers
Increase (decrease) in:
Cash and cash equivalents, including restricted amounts, beginning of period		$	42		$	32
Net cash used in investing activities			(20)			10
Cash and cash equivalents, including restricted amounts, end of period			22			42
Consumers
Increase (decrease) in:
Cash and cash equivalents, including restricted amounts, beginning of period		$	41		$	31
Net cash used in investing activities			(20)			10
Cash and cash equivalents, including restricted amounts, end of period			21			41

For further information on CMS Energy’s and Consumers’ cash balances, see Note 17, Cash and Cash Equivalents.

New Accounting Standards Not Yet Effective