Summary
This 8-K filing from Exelon Corp (EXC) on August 30, 2002, reports a significant development concerning ComEd's accounting treatment of goodwill. The Federal Energy Regulatory Commission (FERC) has issued a letter order directing ComEd to remove goodwill associated with its former generating assets and power marketing business from its books. This goodwill arose from the October 2000 merger that formed Exelon, where ComEd's assets were revalued under purchase accounting. ComEd plans to contest the FERC's decision by requesting a rehearing within 30 days. The company maintains that its accounting practices for goodwill are in line with Generally Accepted Accounting Principles (GAAP) and have been fully disclosed in its SEC filings. However, if the FERC's directive is ultimately upheld and requires an amendment to financial statements filed with the FERC, it could materially and adversely affect Exelon's and ComEd's financial results, particularly given that their earnings cap is based on these FERC financial statements. The specific amount of goodwill to be removed and the method for its calculation were not detailed in the FERC's order.
Key Highlights
- 1FERC has ordered ComEd to remove goodwill related to transferred generation and power marketing assets from its books.
- 2The goodwill in question arose from the October 2000 merger that created Exelon.
- 3ComEd plans to request a rehearing from the FERC within the next 30 days.
- 4Exelon and ComEd believe their accounting for goodwill complies with Generally Accepted Accounting Principles (GAAP).
- 5An adverse ruling by the FERC could require amendments to financial statements filed with the FERC.
- 6Potential amendments could have a material adverse effect on Exelon's and ComEd's financial results due to an earnings cap based on FERC financials.
- 7The specific amount of goodwill to be removed and the calculation method were not specified by the FERC.