Significant accounting policies are described in Note 2 of the 2019 Form 10-K. There were no material changes to those accounting policies during the nine months ended September 30, 2020 other than those set forth in this Note 2. The following are current updates to certain critical accounting policy estimates and new accounting standards.

In applying regulatory accounting principles, NW Holdings and NW Natural capitalize or defer certain costs and revenues as regulatory assets and liabilities pursuant to orders of the Oregon Public Utilities Commission (OPUC), Washington Utilities and Transportation Commission (WUTC), Idaho Public Utilities Commission (IPUC) or Public Utility Commission of Texas (PUCT), which provide for the recovery of revenues or expenses from, or refunds to, utility customers in future periods, including a return or a carrying charge in certain cases.


	Regulatory Assets
	September 30,				December 31,
In thousands	2020		2019		2019
NW Natural:
Current:
Unrealized loss on derivatives(1)	$	1,459	$	4,156	$	2,000
Gas costs	5,207		21,094		20,140
Environmental costs(2)	4,440		5,100		4,762
Decoupling(3)	155		413		1,969
Pension balancing(4)	7,131		5,215		5,939
Income taxes	2,208		2,209		2,209
Other(5)	9,140		9,809		4,910
Total current	$	29,740	$	47,996	$	41,929
Non-current:
Unrealized loss on derivatives(1)	$	921	$	2,998	$	609
Pension balancing(4)	45,203		50,019		48,251
Income taxes	16,792		17,758		17,173
Pension and other postretirement benefit liabilities	159,207		164,709		173,262
Environmental costs(2)	84,567		69,250		87,624
Gas costs	110		921		2,866
Decoupling(3)	6		—		—
Other(5)	17,330		8,235		13,361
Total non-current	$	324,136	$	313,890	$	343,146
Other (NW Holdings)	40		—		—
Total non-current - NW Holdings	$	324,176	$	313,890	$	343,146


	Regulatory Liabilities
	September 30,				December 31,
In thousands	2020		2019		2019
NW Natural:
Current:
Gas costs	$	1,625	$	3,204	$	1,223
Unrealized gain on derivatives(1)	23,738		5,720		6,622
Decoupling(3)	12,702		2,007		4,831
Income taxes	6,900		7,763		8,435
Other(5)	14,271		18,879		23,546
Total current	$	59,236	$	37,573	$	44,657
Non-current:
Gas costs	$	69	$	50	$	2,013
Unrealized gain on derivatives(1)	12,921		1,610		3,337
Decoupling(3)	874		80		6,378
Income taxes(6)	196,558		206,572		198,219
Accrued asset removal costs(7)	421,353		396,418		401,893
Other(5)	16,876		11,083		13,877
Total non-current - NW Natural	$	648,651	$	615,813	$	625,717
Other (NW Holdings)	870		—		—
Total non-current - NW Holdings	$	649,521	$	615,813	$	625,717

(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 NGD rates as part of the annual Purchased Gas Adjustment (PGA) mechanism when realized at settlement.

We believe all costs incurred and deferred at September 30, 2020 are prudent. All regulatory assets and liabilities are reviewed annually for recoverability, or more often if circumstances warrant. If we should determine that all or a portion of these regulatory assets or liabilities no longer meet the criteria for continued application of regulatory accounting, then NW Holdings and NW Natural would be required to write-off the net unrecoverable balances in the period such determination is made.

COVID-19, which was declared a pandemic by the World Health Organization in March 2020, has resulted in widespread global, national and local effects. On March 23, 2020, the Governors of Oregon and Washington, the states in which NW Natural’s service territories are located, issued stay at home executive orders. These and subsequent executive orders required the closure of “non-essential” businesses and permitted the continuation of “essential services.” As a result of these measures, NW Natural issued a notification in mid-March that it would not charge late payment fees or disconnect customers for late payment. Furthermore, we suspended sending outstanding receivable balances to collections.

During 2020, our regulated utilities filed applications in their respective jurisdictions requesting authorization to defer certain financial impacts associated with COVID-19 such as bad debt expense, financing costs to secure liquidity, lost revenues related to late fees and reconnection fees, and other COVID-19 related costs, net of offsetting direct expense reductions associated with COVID-19. The OPUC has approved the regulatory deferral and issued other guidelines related to COVID-19 moratoriums and fees for NW Natural.

We consider the applicability and impact of all accounting standards updates (ASUs) issued by the Financial Accounting Standards Board (FASB). ASUs not listed below were assessed and determined to be either not applicable or are expected to have minimal impact on NW Holdings' or NW Natural's consolidated financial position or results of operations.

CREDIT LOSSES. On June 16, 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments," which applies to financial assets subject to credit losses and measured at amortized cost. The new standard requires financial assets measured at amortized cost to be presented at the net amount expected to be collected and the

allowance for credit losses is to be recorded as a valuation account that is deducted from the amortized cost basis. The amendments in this update were effective beginning January 1, 2020 and were applied with modified retrospective methodology. The adoption of this ASU did not materially affect the financial statements and disclosures of NW Holdings or NW Natural.

Allowance for trade receivables. Accounts receivable consist primarily of amounts due for natural gas sales and transportation services to NGD customers and amounts due for gas storage services. The payment term of these receivables is generally 15 days. NW Holdings and NW Natural establish allowances for uncollectible accounts (allowance) for trade receivables, including accrued unbilled revenue, based on customer types that share similar risk characteristics: residential, commercial, and industrial. For these short-term receivables, it is not expected that forecasted economic conditions would significantly affect the loss estimates under stable economic conditions. For extreme situations like a financial crisis, natural disaster, and the economic slowdown caused by pandemics like COVID-19, we enhance our review and analysis.

After considering the significant exposure to quarantine-related job losses in Oregon and Washington state, NW Holdings and NW Natural expanded our standard review procedures for our allowance for uncollectible accounts calculation, including analyzing the significant indications of unemployment rate and comparing to historic economic data during the 2007-2009 time period when the country experienced an economic recession. We then considered other qualitative information including recent customer interactions related to payment plans and credit issues, statistics from our website related to credit inquiries, and economic stimulus provided by the federal government which could have a beneficial impact on residential and commercial customers' abilities to ultimately make payment on their accounts. Taking all of these factors into consideration, our enhanced methods of evaluating the potential for uncollectable accounts resulted in an increase to our provision. Our provision calculation for residential and commercial accounts was estimated net write-offs as a percentage of gas sales. For industrial accounts we continue to analyze those accounts on an account-by-account basis with specific reserves taken as necessary.


	As of						As of
	December 31, 2019		Nine Months Ended September 30, 2020				September 30, 2020
In thousands	Beginning Balance		Provision recorded		Write-offs recognized, net of recoveries		Ending Balance
Allowance for uncollectible accounts
related to accounts receivable:
Residential	$	432	$	506	$	179	$	1,117
Commercial	57		145		260		462
Industrial	72		26		(40)		58
Accrued unbilled and other	112		57		(20)		149
Total	$	673	$	734	$	379	$	1,786

Allowance for net investments in sales-type leases. NW Natural currently holds two net investments in sales-type leases, with substantially all of the net investment balance related to the North Mist natural gas storage agreement with Portland General Electric (PGE) which is billed under an OPUC-approved rate schedule. See Note 6 for more information on the North Mist lease. Due to the nature of this service, PGE may recover the costs of the lease through general rate cases. Therefore, we expect the risk of loss due to the credit of this lessee to be remote. As such, no allowance for uncollectibility was recorded for our sales-type lease receivables. NW Natural will continue monitoring the credit health of the lessees and the overall economic environment, including the economic factors closely tied to the financial health of our current and future lessees.

FAIR VALUE MEASUREMENT. On August 28, 2018, the FASB issued ASU 2018-13, "Changes to the Disclosure Requirements for Fair Value Measurement." The purpose of the amendment is to modify the disclosure requirements for fair value measurements. The amendments in this update were effective for us beginning January 1, 2020. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements and the narrative description of measurement uncertainty should be applied prospectively. All other amendments should be applied retrospectively. NW Holdings and NW Natural do not have either Level 3 fair value measurements or transfers between Level 1 or Level 2 in their current portfolios. The adoption did not have an impact on the financial statements or disclosures of NW Holdings or NW Natural.

RETIREMENT BENEFITS. On August 28, 2018, the FASB issued ASU 2018-14, "Changes to the Disclosure Requirements for Defined Benefit Plans." The purpose of the amendment is to modify the disclosure requirements for defined benefit pension and other postretirement plans. The amendments in this update were effective for us beginning January 1, 2020 and were applied retrospectively. The adoption of this ASU did not materially affect the financial statements and disclosures of NW Holdings or NW Natural.

CLOUD COMPUTING. On August 29, 2018, the FASB issued ASU 2018-15, "Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract." The purpose of the amendment is to align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The amendments in this update are effective for us beginning January 1, 2020. Early adoption is permitted, and NW Holdings and NW Natural early adopted ASU 2018-15 in the quarter ended March 31, 2019 utilizing the prospective application methodology. The adoption of this ASU did not materially affect the financial statements and disclosures of NW Holdings or NW Natural.

GOODWILL. On January 26, 2017, the FASB issued ASU 2017-04, "Simplifying the Test for Goodwill Impairment." The ASU removes Step 2 from the goodwill impairment test and under the amended guidance an entity should perform its annual goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount and recognize an impairment charge for the amount in which the carrying amounts exceed the fair value of the reporting unit. The amendments in this standard are effective for us beginning January 1, 2020 and early adoption is permitted for interim or annual goodwill impairment tests performed after January 1, 2017. NW Natural early adopted ASU 2017-04 in the quarter ended September 30, 2018. The adoption of this ASU did not materially affect the financial statements and disclosures of NW Holdings or NW Natural.

INCOME TAXES. On December 18, 2019, the FASB issued ASU 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes." The purpose of the amendment is to reduce cost and complexity related to accounting for income taxes by removing certain exceptions to the general principles and improving consistent application for other areas in Topic 740. The amendments in this update are effective for us beginning January 1, 2021. Early adoption is permitted. The amended presentation and disclosure guidance should be applied retrospectively. We do not expect this ASU to materially affect the financial statements and disclosures of NW Holdings or NW Natural.

REFERENCE RATE REFORM. On March 12, 2020, the FASB issued ASU 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting." The purpose of the amendment is to provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this Update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments in this Update are effective for all entities as of March 12, 2020 through December 31, 2022. We do not expect this ASU to materially affect the financial statements and disclosures of NW Holdings or NW Natural.