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Significant Accounting Matters
 9 Months Ended
Sep. 30, 2022
Significant Accounting Matters SIGNIFICANT ACCOUNTING MATTERS
The disclosures in this note apply to all Registrants unless indicated otherwise.

General

The unaudited condensed financial statements and footnotes were prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the SEC.  Accordingly, they do not include all of the information and footnotes required by GAAP for complete annual financial statements.

In the opinion of management, the unaudited condensed interim financial statements reflect all normal and recurring accruals and adjustments necessary for a fair statement of the net income, financial position and cash flows for the interim periods for each Registrant.  Net income for the three and nine months ended September 30, 2022 is not necessarily indicative of results that may be expected for the year ending December 31, 2022.  The condensed financial statements are unaudited and should be read in conjunction with the audited 2021 financial statements and notes thereto, which are included in the Registrants’ Annual Reports on Form 10-K as filed with the SEC on February 24, 2022.

AEP System Tax Allocation

The Registrant Subsidiaries join in the filing of a consolidated tax return. Historically, the allocation of the AEP System’s current consolidated federal income tax to the AEP System companies allocated the benefit of current tax loss of the parent company (Parent Company Loss Benefit) to the AEP System subsidiaries through a reduction of current tax expense. In the first quarter of 2022, AEP and subsidiaries changed accounting for the Parent Company Loss Benefit from a reduction of current tax expense to an allocation through equity. The impact of this change was immaterial to the Registrant Subsidiaries’ financial statements.

Deferred Fuel Costs (Applies to all Registrants except AEP Texas, AEPTCo and OPCo)

The cost of purchased electricity, fuel and related emission allowances and emission control chemicals/consumables is charged to Purchased Electricity, Fuel and Other Consumables Used for Electric Generation expense when the fuel is burned or the allowance or consumable is utilized. The cost of fuel also includes the cost of nuclear fuel burned which is computed primarily using the units-of-production method. In regulated jurisdictions with an active FAC, fuel cost over-recoveries (the excess of fuel-related revenues over applicable fuel costs incurred) are generally deferred as current regulatory liabilities and under-recoveries (the excess of applicable fuel costs incurred over fuel-related revenues) are generally deferred as current regulatory assets. Fuel cost over-recovery and under-recovery balances are classified as noncurrent when there is an expectation that refunds or recoveries will extend beyond a one year period, based on a company’s filing with a commission or a commission directive. These deferrals are amortized when refunded or when billed to customers in later months with the state regulatory commissions’ review and approval. The amount of an over-recovery or under-recovery can also be affected by actions of the state regulatory commissions. On a routine basis, state regulatory commissions review and/or audit the Registrants’ fuel procurement policies and practices, the fuel cost calculations and FAC deferrals. FAC deferrals are adjusted when costs are no longer probable of recovery or when refunds of fuel reserves are probable. The Registrants share the majority of their Off-system Sales margins to customers either through an active FAC or other rate mechanisms. Where the FAC or Off-system Sales sharing mechanism is capped, frozen or non-existent, changes in fuel costs or sharing of off-system sales impact earnings.

Earnings Per Share (EPS) (Applies to AEP)

Basic EPS is calculated by dividing net earnings available to common shareholders by the weighted-average number of common shares outstanding during the period.  Diluted EPS is calculated by adjusting the weighted-average outstanding common shares, assuming conversion of all potentially dilutive stock awards.
The following table presents AEP’s basic and diluted EPS calculations included on the statements of income:
Three Months Ended September 30,
20222021
(in millions, except per share data)
 $/share$/share
Earnings Attributable to AEP Common Shareholders
$683.7  $796.0  
Weighted-Average Number of Basic AEP Common Shares Outstanding513.7 $1.33 501.2 $1.59 
Weighted-Average Dilutive Effect of Stock-Based Awards1.6 — 1.4 (0.01)
Weighted-Average Number of Diluted AEP Common Shares Outstanding515.3 $1.33 502.6 $1.58 

Nine Months Ended September 30,
20222021
(in millions, except per share data)
 $/share$/share
Earnings Attributable to AEP Common Shareholders
$1,922.9  $1,949.2  
Weighted-Average Number of Basic AEP Common Shares Outstanding511.2 $3.76 499.4 $3.90 
Weighted-Average Dilutive Effect of Stock-Based Awards1.5 (0.01)1.2 (0.01)
Weighted-Average Number of Diluted AEP Common Shares Outstanding512.7 $3.75 500.6 $3.89 

Equity Units are potentially dilutive securities and were excluded from the calculation of diluted EPS for the three and nine months ended September 30, 2022 and 2021, as the dilutive stock price threshold was not met. See Note 12 - Financing Activities for more information related to Equity Units.

There were 0 and 377 thousand antidilutive shares outstanding as of September 30, 2022 and 2021, respectively.
Restricted Cash (Applies to AEP, AEP Texas and APCo)

Restricted Cash primarily includes funds held by trustees for the payment of securitization bonds.

Reconciliation of Cash, Cash Equivalents and Restricted Cash

The following tables provide a reconciliation of Cash, Cash Equivalents and Restricted Cash reported within the balance sheets that sum to the total of the same amounts shown on the statements of cash flows:
September 30, 2022
AEPAEP TexasAPCo
(in millions)
Cash and Cash Equivalents
$522.2 $0.1 $6.7 
Restricted Cash
55.1 47.7 7.4 
Total Cash, Cash Equivalents and Restricted Cash
$577.3 $47.8 $14.1 

December 31, 2021
AEPAEP TexasAPCo
(in millions)
Cash and Cash Equivalents
$403.4 $0.1 $2.5 
Restricted Cash
48.0 30.4 17.6 
Total Cash, Cash Equivalents and Restricted Cash
$451.4 $30.5 $20.1 

Supplementary Cash Flow Information (Applies to AEP)

Nine Months Ended September 30,
Cash Flow Information20222021
(in millions)
Cash Paid for:
Interest, Net of Capitalized Amounts$856.8 $775.2 
Income Taxes104.1 9.3 
Noncash Investing and Financing Activities:
Acquisitions Under Finance Leases22.3 23.0 
Construction Expenditures Included in Current Liabilities as of September 30,985.8 764.1 
Acquisition of Nuclear Fuel Included in Current Liabilities as of September 30,8.5 0.3 
Noncash Contribution of Assets to Cedar Creek Project— (9.3)
Noncontrolling Interest Assumed - Dry Lake Solar Project— 35.0