XML 31 R15.htm IDEA: XBRL DOCUMENT

Fair Value Measurements

12 Months Ended

Dec. 31, 2020

Fair Value

The fair values of our financial instruments are based on published sources for pricing when possible. We rely on valuation models only when no other method is available to us. The fair value of our financial instruments represents estimates of possible value that may or may not be realized in the future.

The table below presents the fair value and cost of our non-derivative financial instruments at December 31, 2020 and 2019. See Note 6 – Derivative Instruments and Hedging Activities for the fair values of our derivative instruments.


	December 31, 2020				December 31, 2019
$ in millions	Cost		Fair Value		Cost		Fair Value
Assets
Money market funds	$	0.3	$	0.3	$	0.3	$	0.3
Equity securities	2.1		4.5		2.3		4.2
Debt securities	4.0		4.1		4.0		4.1
Hedge funds	—		—		0.1		0.1

Tangible assets	—		—		0.1		0.1
Total assets	$	6.4	$	8.9	$	6.8	$	8.8

	Carrying Value		Fair Value		Carrying Value		Fair Value
Liabilities
Long-term debt	$	1,393.6	$	1,571.6	$	1,363.1	$	1,404.0

Fair Value Hierarchy

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. These inputs are then categorized as:

•Level 1 (quoted prices in active markets for identical assets or liabilities);

•Level 2 (observable inputs such as quoted prices for similar assets or liabilities or quoted prices in markets that are not active); or

•Level 3 (unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability).

Valuations of assets and liabilities reflect the value of the instrument including the values associated with counterparty risk. We include our own credit risk and our counterparty’s credit risk in our calculation of fair value using global average default rates based on an annual study conducted by a large rating agency.

We did not have any transfers of the fair values of our financial instruments among Level 1, Level 2 or Level 3 of the fair value hierarchy during the years ended December 31, 2020 and 2019.

Debt

The fair value of debt is based on current public market prices for disclosure purposes only. Unrealized gains or losses are not recognized in the financial statements as debt is presented at the carrying value, net of unamortized premium or discount, in the financial statements. The debt amounts include the current portion payable in the next twelve months and have maturities that range from 2025 to 2061.

Master Trust Assets

DP&L established a Master Trust to hold assets that could be used for the benefit of employees participating in employee benefit plans and these assets are not used for general operating purposes. ASU 2016-01 “Recognition and Measurement of Financial Assets and Financial Liabilities” was effective as of January 1, 2018. This ASU requires the change in the fair value of equity instruments to be recorded in income rather than in OCI. Equity Instruments were defined to include all mutual funds, regardless of the underlying investments. Therefore, as of January 1, 2018, AOCI of $1.6 million ($1.0 million net of tax) was reversed to Accumulated Deficit and all future changes to fair value on the Master Trust Assets will be included in income in the period that the changes occur. These assets are primarily comprised of open-ended mutual funds, which are valued using the net asset value per unit. These investments are recorded at fair value within Other non-current assets on the consolidated balance sheets and classified as equity securities. Gains and losses on these assets were not material during the years ended December 31, 2020, 2019 or 2018.

The fair value of assets and liabilities at December 31, 2020 and 2019 and the respective category within the fair value hierarchy for DPL was determined as follows:


$ in millions	Fair Value at December 31, 2020 (a)								Fair Value at December 31, 2019 (a)
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Master trust assets
Money market funds	$	0.3	$	—	$	—	$	0.3	$	0.3	$	—	$	—	$	0.3
Equity securities	—		4.5		—		4.5		—		4.2		—		4.2
Debt securities	—		4.1		—		4.1		—		4.1		—		4.1
Hedge funds	—		—		—		—		—		0.1		—		0.1

Tangible assets	—		—		—		—		—		0.1		—		0.1
Total Master trust assets	0.3		8.6		—		8.9		0.3		8.5		—		8.8
Derivative assets
Interest rate hedge	—		—		—		—		—		0.1		—		0.1
Total Derivative assets	—		—		—		—		—		0.1		—		0.1

Total assets	$	0.3	$	8.6	$	—	$	8.9	$	0.3	$	8.6	$	—	$	8.9

Liabilities
Long-term debt	$	—	$	1,554.2	$	17.4	$	1,571.6	$	—	$	1,386.5	$	17.5	$	1,404.0


Total liabilities	$	—	$	1,554.2	$	17.4	$	1,571.6	$	—	$	1,386.5	$	17.5	$	1,404.0

(a)Includes credit valuation adjustment

Our financial instruments are valued using the market approach in the following categories:

•Level 1 inputs are used for money market accounts that are considered cash equivalents. The fair value is determined by reference to quoted market prices and other relevant information generated by market transactions.

•Level 2 inputs are used to value derivatives such as interest rate hedge contracts which are valued using a benchmark interest rate. Other Level 2 assets include open-ended mutual funds in the Master Trust, which are valued using the end of day NAV per unit.

•Level 3 inputs such as certain debt balances are considered a Level 3 input because the notes are not publicly traded. Our long-term debt is fair valued for disclosure purposes only.

All of the inputs to the fair value of our derivative instruments are from quoted market prices.

Our long-term debt is fair valued for disclosure purposes only and most of the fair values are determined using quoted market prices in inactive markets. These fair value inputs are considered Level 2 in the fair value hierarchy. As the Wright-Patterson Air Force Base note is not publicly traded, fair value is assumed to equal carrying value. These fair value inputs are considered Level 3 in the fair value hierarchy as there are no observable inputs. Additional Level 3 disclosures are not presented since our long-term debt is not recorded at fair value.

THE DAYTON POWER AND LIGHT COMPANY [Member]

Entity Information [Line Items]

Fair Value Measurements

Fair ValueThe fair values of our financial instruments are based on published sources for pricing when possible. We rely on valuation models only when no other method is available to us. The fair value of our financial instruments represents estimates of possible value that may or may not be realized in the future.

The table below presents the fair value and cost of our non-derivative instruments at December 31, 2020 and 2019. See also Note 6 – Derivative Instruments and Hedging Activities for the fair values of our derivative instruments.


	December 31, 2020				December 31, 2019
$ in millions	Cost		Fair Value		Cost		Fair Value
Assets
Money market funds	$	0.3	$	0.3	$	0.3	$	0.3
Equity securities	2.1		4.5		2.3		4.2
Debt securities	4.0		4.1		4.0		4.1
Hedge funds	—		—		0.1		0.1

Tangible assets	—		—		0.1		0.1
Total assets	$	6.4	$	8.9	$	6.8	$	8.8

	Carrying Value		Fair Value		Carrying Value		Fair Value
Liabilities
Long-term debt	$	574.1	$	656.0	$	574.4	$	600.5

Fair Value Hierarchy

•Level 1 (quoted prices in active markets for identical assets or liabilities);

•Level 2 (observable inputs such as quoted prices for similar assets or liabilities or quoted prices in markets that are not active); or

•Level 3 (unobservable inputs reflecting management’s own assumptions about the inputs used in pricing the asset or liability).

We did not have any transfers of the fair values of our financial instruments among Level 1, Level 2 or Level 3 of the fair value hierarchy during the years ended December 31, 2020 and 2019.

Debt

Master Trust Assets

DP&L established a Master Trust to hold assets that could be used for the benefit of employees participating in employee benefit plans and these assets are not used for general operating purposes. ASU 2016-01 “Recognition and Measurement of Financial Assets and Financial Liabilities” was effective as of January 1, 2018. This ASU requires the change in the fair value of equity instruments to be recorded in income rather than in OCI. Equity Instruments were defined to include all mutual funds, regardless of the underlying investments. Therefore, as of January 1, 2018, AOCI of $1.7 million ($1.1 million net of tax) was reversed to Accumulated Deficit and all future changes to fair value on the Master Trust Assets will be included in income in the period that the changes occur. December 31, 2020, 2019 or 2018. These assets are primarily comprised of open-ended mutual funds, which are valued using the net asset value per unit. These investments are recorded at fair value within Other non-current assets on the consolidated balance sheets and classified as equity securities. Gains and losses on these assets were not material during the years ended December 31, 2020, 2019 or 2018.

The fair value of assets and liabilities at December 31, 2020 and 2019 and the respective category within the fair value hierarchy for DP&L was determined as follows:


$ in millions	Fair Value at December 31, 2020 (a)								Fair Value at December 31, 2019 (a)
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Master trust assets
Money market funds	$	0.3	$	—	$	—	$	0.3	$	0.3	$	—	$	—	$	0.3
Equity securities	—		4.5		—		4.5		—		4.2		—		4.2
Debt securities	—		4.1		—		4.1		—		4.1		—		4.1
Hedge funds	—		—		—		—		—		0.1		—		0.1

Tangible assets	—		—		—		—		—		0.1		—		0.1
Total Master trust assets	0.3		8.6		—		8.9		0.3		8.5		—		8.8
Derivative assets
Interest rate hedges	—		—		—		—		—		0.1		—		0.1
Total derivative assets	—		—		—		—		—		0.1		—		0.1

Total assets	$	0.3	$	8.6	$	—	$	8.9	$	0.3	$	8.6	$	—	$	8.9

Liabilities


Long-term debt	$	—	$	638.6	$	17.4	$	656.0	$	—	$	583.0	$	17.5	$	600.5


Total liabilities	$	—	$	638.6	$	17.4	$	656.0	$	—	$	583.0	$	17.5	$	600.5

(a) Includes credit valuation adjustment

Our financial instruments are valued using the market approach in the following categories:

•Level 3 inputs such as certain debt balances are considered a Level 3 input because the notes are not publicly traded. Our long-term debt is fair valued for disclosure purposes only.

All of the inputs to the fair value of our derivative instruments are from quoted market prices.

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details