2. SIGNIFICANT ACCOUNTING POLICIES

Our significant accounting policies are described in Note 2 of the 2013 Form 10-K. There were no material changes to those accounting policies during the six months ended June 30, 2014. The following are current updates to certain critical accounting policy estimates and new accounting standards in general.

Regulatory Accounting

In applying regulatory accounting in accordance with generally accepted accounting principles in the United States of America (GAAP), we capitalize or defer certain costs and revenues as regulatory assets and liabilities. These deferrals were as follows:



	Regulatory Assets
	June 30,				December 31,
In thousands	2014		2013		2013
Current:
Unrealized loss on derivatives⁽¹⁾	$	1,466	$	9,392	$	1,891
Gas costs	19,268		—		4,286
Other⁽²⁾	17,531		16,560		16,458
Total current	$	38,265	$	25,952	$	22,635
Non-current:
Unrealized loss on derivatives⁽¹⁾	$	191	$	1,754	$	615
Pension balancing⁽³⁾	28,997		20,327		25,713
Deferred income taxes	49,007		53,065		51,814
Pension and other postretirement benefit liabilities⁽³⁾	120,942		191,312		125,855
Environmental costs⁽⁴⁾	52,117		120,224		148,389
Gas costs	3,768		5,322		1,105
Other⁽²⁾	12,226		1,648		16,112
Total non-current	$	267,248	$	393,652	$	369,603



	Regulatory Liabilities
	June 30,				December 31,
In thousands	2014		2013		2013
Current:
Gas costs	$	6,423	$	6,353	$	7,510
Unrealized gain on derivatives⁽¹⁾	11,286		547		5,290
Other⁽²⁾	9,033		9,744		15,535
Total current	$	26,742	$	16,644	$	28,335
Non-current:
Gas costs	$	1,057	$	481	$	2,172
Unrealized gain on derivatives⁽¹⁾	1,202		1,054		1,880
Accrued asset removal costs	303,567		289,105		296,294
Other⁽²⁾	3,501		3,562		3,139
Total non-current	$	309,327	$	294,202	$	303,485


⁽¹⁾	Unrealized gains or losses on derivatives are non-cash items and, therefore, do not earn a rate of return or a carrying charge. These amounts are recoverable through utility rates as part of the annual Purchased Gas Adjustment (PGA) mechanism when realized at settlement.


⁽²⁾	These balances primarily consist of deferrals and amortizations under approved regulatory mechanisms. The accounts being amortized typically earn a rate of return or carrying charge.


⁽³⁾	Certain utility pension costs are approved for regulatory deferral, including amounts recorded to the pension balancing account, to mitigate the effects of higher and lower pension expenses. Pension costs that are deferred include an interest component when recognized in net periodic benefit costs; see Note 7 for further information.

⁽⁴⁾

Environmental costs relate to specific sites approved for regulatory deferral by the Public Utility Commission of Oregon (OPUC) and Washington Utilities and Transportation Commission (WUTC). In Oregon, we earn a carrying charge on cash amounts paid, whereas amounts accrued but not yet paid do not earn a carrying charge until expended. In Washington, a carrying charge related to deferred amounts will be determined in a future proceeding. For further information on environmental matters, see Note 13.

New Accounting Standards

Recent Accounting Pronouncements

REVENUE RECOGNITION. On May 28, 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09 accounting for revenue recognition. The underlying principle of the guidance requires entities to recognize revenue depicting the transfer of goods or services to customers at amounts expected to be entitled to in exchange for those goods or services. The model provides a five-step approach to revenue recognition: (1) identify the contract(s) with the customer; (2) identify the separate performance obligations in the contract; (3) determine the transaction price; (4) allocate the transaction price to separate performance obligations; and (5) recognize revenue when (or as) each performance obligation is satisfied. The new requirements are effective beginning January 1, 2017, and an entity may elect either a full retrospective or simplified transition adoption method; early adoption is not permitted. NW Natural is currently assessing the impact of this standard on its financial statements and disclosures.