(3)

NEWLY ADOPTED ACCOUNTING STANDARDS

Discontinued Operations (ASC 205)

In April 2014, the FASB issued new guidance on the reporting of discontinued operations that is effective for dispositions that occur after January 1, 2015. In order for dispositions to be presented as discontinued operations, the dispositions must represent a strategic shift that will have a major effect on an entity’s operations and financial results. Adoption of this guidance during the first quarter of 2015 did not have an impact on PHI’s consolidated financial statements.

Business Combinations (ASC 805)

In November 2014, the FASB issued new recognition and disclosure requirements related to pushdown accounting. The new recognition requirements grant an acquired entity (or its subsidiaries) the option to elect whether and when a new accounting and reporting basis (pushdown accounting) will be applied when an acquirer obtains control of the acquired entity. This election may be made by the acquired entity (or its subsidiaries) for future change-in-control events or for its most recent change-in-control event, and the acquired entity will be required to determine whether pushdown accounting will be applied in the reporting period in which the change-in-control event occurs or in a subsequent reporting period.

The new required disclosures include information that enables financial statement users to evaluate the effects of pushdown accounting. Disclosures are required to be made in the period in which pushdown accounting is applied and are expected to include both qualitative and quantitative information.

The new recognition and disclosure requirements became effective on a prospective basis on November 18, 2014. PHI currently anticipates it may be affected by the new guidance if its Merger with Exelon is consummated.

Fair Value Measurement (ASC 820)

In May 2015, the FASB issued new disclosure requirements for investment fair values. Under the new requirements, investment fair values based on net asset value (NAV) per share will continue to be disclosed, however, a level will not be assigned to those investment fair values. The new requirements are effective for PHI beginning January 1, 2016, and are required to be implemented on a retrospective basis for all periods presented; however, early adoption is permitted. PHI has elected to early adopt the new guidance and implement the change in accounting principle in the fourth quarter of 2015. The impact of this guidance effected the presentation of certain investments that use NAV per share as a practical expedient in Note (9), “Pension and Other Postretirement Benefits” and had no impact to Note (15), “Fair Value Disclosure,” as the financial instruments measured at fair value on a recurring basis and other financial instruments are not based on NAV.

Presentation of Debt Issuance Costs (ASC 835)

In April 2015, the FASB issued new guidance for the presentation of debt issuance costs on the balance sheet. Debt issuance costs are currently required to be presented on the balance sheet as assets. However, under the new requirements, these debt issuance costs will be offset against the debt to which the costs relate. The new requirements are effective for PHI beginning January 1, 2016, and are required to be implemented on a retrospective basis for all periods presented; however, early adoption is permitted. PHI has elected to early adopt the new guidance in the fourth quarter of 2015. The table below illustrates the effects of the retrospective application on reported balances in PHI’s consolidated balance sheet as of December 31, 2014.


	December 31, 2014 As Filed		Reclassification ASC 835			December 31, 2014 As Adjusted
	(millions of dollars)
Other (within other assets)	$	166	$	(45	)	$	121
Long-term debt		4,441		(44	)		4,397
Transition bonds issued by ACE Funding		171		(1	)		170

Balance Sheet Classification of Deferred Taxes (ASC 740)

In November 2015, the FASB issued new requirements for the balance sheet classification of deferred taxes. Entities are currently required to present a current and noncurrent deferred tax balance on the balance sheet. Under the new requirements, deferred taxes will only be presented as noncurrent. The new requirements are effective for PHI beginning January 1, 2017, and may be implemented on either a prospective or retrospective basis; however, early adoption is permitted. PHI has elected to early adopt the new guidance on a retrospective basis in the fourth quarter of 2015. The table below illustrates the effects of the retrospective application on reported balances in PHI’s consolidated balance sheet as of December 31, 2014.


	December 31, 2014 As Filed		Reclassification ASC 740			December 31, 2014 As Adjusted
	December 31, 2014 As Filed		Reclassification ASC 740			December 31, 2014 As Adjusted
	(millions of dollars)
Deferred income taxes, net (within current assets)	$	50	$	(50	)	$	—
Deferred income taxes, net (within other assets)		—		17			17
Other (within current liabilities)		314		(9	)		305
Deferred income tax liabilities, net		3,266		(24	)		3,242

Newly Adopted Accounting Standards

(3)

NEWLY ADOPTED ACCOUNTING STANDARDS

Business Combinations (ASC 805)

In November 2014, the FASB issued new recognition and disclosure requirements related to pushdown accounting. The new recognition requirements grant an acquired entity (or its subsidiaries) the option to elect whether and when a new accounting and reporting basis (pushdown accounting) will be applied when an acquirer obtains control of the acquired entity. This election may be made by the acquired entity (or its subsidiaries) for future change-in-control events or for its most recent change-in-control event, and the acquired entity will be required to determine whether pushdown accounting will be applied in the reporting period in which the change-in-control event occurs or in a subsequent reporting period.

The new required disclosures include information that enables financial statement users to evaluate the effects of pushdown accounting. Disclosures are required to be made in the period in which pushdown accounting is applied and are expected to include both qualitative and quantitative information.

The new recognition and disclosure requirements became effective on a prospective basis on November 18, 2014.

Presentation of Debt Issuance Costs (ASC 835)

In April 2015, the FASB issued new guidance for the presentation of debt issuance costs on the balance sheet. Debt issuance costs are currently required to be presented on the balance sheet as assets. However, under the new requirements, these debt issuance costs will be offset against the debt to which the costs relate. The new requirements are effective for Pepco beginning January 1, 2016, and are required to be implemented on a retrospective basis for all periods presented; however, early adoption is permitted. Pepco has elected to early adopt the new guidance in the fourth quarter of 2015. The table below illustrates the effects of the retrospective application on reported balances in Pepco’s balance sheet as of December 31, 2014.


	December 31, 2014 As Filed		Reclassification ASC 835			December 31, 2014 As Adjusted
	(millions of dollars)

Other (within other assets)	$	71	$	(28	)	$	43
Long-term debt		2,124		(28	)		2,096

Balance Sheet Classification of Deferred Taxes (ASC 740)

In November 2015, the FASB issued new requirements for the balance sheet classification of deferred taxes. Entities are currently required to present a current and noncurrent deferred tax balance on the balance sheet. Under the new requirements, deferred taxes will only be presented as noncurrent. The new requirements are be effective for PHI beginning January 1, 2017, and may be implemented on either a prospective or retrospective basis; however, early adoption is permitted. PHI has elected to early adopt the new guidance on a retrospective basis in the fourth quarter of 2015. The table below illustrates the effects of the retrospective application on reported balances in Pepco’s balance sheet as of December 31, 2014.


	December 31, 2014 As Filed		Reclassification ASC 740			December 31, 2014 As Adjusted
	(millions of dollars)

Deferred income taxes, net (within current assets)	$	14	$	(14	)	$	—
Other (within current liabilities)		102		(9	)		93
Deferred income tax liabilities, net		1,584		(5	)		1,579

Newly Adopted Accounting Standards

(3)

NEWLY ADOPTED ACCOUNTING STANDARDS

Business Combinations (ASC 805)

In November 2014, the FASB issued new recognition and disclosure requirements related to pushdown accounting. The new recognition requirements grant an acquired entity (or its subsidiaries) the option to elect whether and when a new accounting and reporting basis (pushdown accounting) will be applied when an acquirer obtains control of the acquired entity. This election may be made by the acquired entity (or its subsidiaries) for future change-in-control events or for its most recent change-in-control event, and the acquired entity will be required to determine whether pushdown accounting will be applied in the reporting period in which the change-in-control event occurs or in a subsequent reporting period.

The new required disclosures include information that enables financial statement users to evaluate the effects of pushdown accounting. Disclosures are required to be made in the period in which pushdown accounting is applied and are expected to include both qualitative and quantitative information.

The new recognition and disclosure requirements became effective on a prospective basis on November 18, 2014.

Presentation of Debt Issuance Costs (ASC 835)

In April 2015, the FASB issued new guidance for the presentation of debt issuance costs on the balance sheet. Debt issuance costs are currently required to be presented on the balance sheet as assets. However, under the new requirements, these debt issuance costs will be offset against the debt to which the costs relate. The new requirements are effective for DPL beginning January 1, 2016, and are required to be implemented on a retrospective basis for all periods presented; however, early adoption is permitted. DPL has elected to early adopt the new guidance in the fourth quarter of 2015. The table below illustrates the effects of the retrospective application on reported balances in DPL’s balance sheet as of December 31, 2014.


	December 31, 2014 As Filed		Reclassification ASC 835			December 31, 2014 As Adjusted
	December 31, 2014 As Filed		Reclassification ASC 835			December 31, 2014 As Adjusted
	(millions of dollars)

Other (within other assets)	$	12	$	(8	)	$	4
Long-term debt		971		(8	)		963

Balance Sheet Classification of Deferred Taxes (ASC 740)

In November 2015, the FASB issued new requirements for the balance sheet classification of deferred taxes. Entities are currently required to present a current and noncurrent deferred tax balance on the balance sheet. Under the new requirements, deferred taxes will only be presented as noncurrent. The new requirements are effective for PHI beginning January 1, 2017, and may be implemented on either a prospective or retrospective basis; however, early adoption is permitted. PHI has elected to early adopt the new guidance on a retrospective basis in the fourth quarter of 2015. The table below illustrates the effects of the retrospective application on reported balances in DPL’s balance sheet as of December 31, 2014.


	December 31, 2014 As Filed		Reclassification ASC 740			December 31, 2014 As Adjusted
	December 31, 2014 As Filed		Reclassification ASC 740			December 31, 2014 As Adjusted
	(millions of dollars)

Deferred income taxes, net (within current assets)	$	16	$	(16	)	$	—
Other (within current liabilities)		42		(1	)		41
Deferred income tax liabilities, net		893		(15	)		878

Newly Adopted Accounting Standards

(3)

NEWLY ADOPTED ACCOUNTING STANDARDS

Business Combinations (ASC 805)

In November 2014, the FASB issued new recognition and disclosure requirements related to pushdown accounting. The new recognition requirements grant an acquired entity (or its subsidiaries) the option to elect whether and when a new accounting and reporting basis (pushdown accounting) will be applied when an acquirer obtains control of the acquired entity. This election may be made by the acquired entity (or its subsidiaries) for future change-in-control events or for its most recent change-in-control event, and the acquired entity will be required to determine whether pushdown accounting will be applied in the reporting period in which the change-in-control event occurs or in a subsequent reporting period.

The new required disclosures include information that enables financial statement users to evaluate the effects of pushdown accounting. Disclosures are required to be made in the period in which pushdown accounting is applied and are expected to include both qualitative and quantitative information.

The new recognition and disclosure requirements became effective on a prospective basis on November 18, 2014.

Presentation of Debt Issuance Costs (ASC 835)

In April 2015, the FASB issued new guidance for the presentation of debt issuance costs on the balance sheet. Debt issuance costs are currently required to be presented on the balance sheet as assets. However, under the new requirements, these debt issuance costs will be offset against the debt to which the costs relate. The new requirements are effective for ACE beginning January 1, 2016, and are required to be implemented on a retrospective basis for all periods presented; however, early adoption is permitted. ACE has elected to early adopt the new guidance in the fourth quarter of 2015. The table below illustrates the effects of the retrospective application on reported balances in ACE’s consolidated balance sheet as of December 31, 2014.


	December 31, 2014 As Filed		Reclassification ASC 835			December 31, 2014 As Adjusted
	(millions of dollars)

Other (within other assets)	$	12	$	(7	)	$	5
Long-term debt		888		(6	)		882
Transition bonds issued by ACE Funding		171		(1	)		170

Balance Sheet Classification of Deferred Taxes (ASC 740)

In November 2015, the FASB issued new requirements for the balance sheet classification of deferred taxes. Entities are currently required to present a current and noncurrent deferred tax balance on the balance sheet. Under the new requirements, deferred taxes will only be presented as noncurrent. The new requirements are effective for PHI beginning January 1, 2017, and may be implemented on either a prospective or retrospective basis; however, early adoption is permitted. PHI has elected to early adopt the new guidance on a retrospective basis in the fourth quarter of 2015. The table below illustrates the effects of the retrospective application on reported balances in ACE’s consolidated balance sheet as of December 31, 2014.


	December 31, 2014 As Filed		Reclassification ASC 740			December 31, 2014 As Adjusted
	(millions of dollars)

Prepaid expenses and other	$	13	$	(10	)	$	3
Deferred income tax liabilities, net		865		(10	)		855