AI-generated summary
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Nova Scotia Power filed an annual hedge accounting report and a proposed amendment to Accounting Policy 6960 to align with US GAAP ahead of its 2011 transition, with external auditor Grant Thornton confirming the treatment as appropriate.
AI summary
- Pursuant to a Board direction in its October 5, 2007 Decision, NSPI filed its annual report (N-1, June 11, 2010) on Fuel Adjustment Mechanism hedge accounting practices, noting that parent company Emera had chosen to adopt US GAAP rather than IFRS effective January 1, 2011, primarily due to uncertainty around rate-regulated accounting standards under IFRS.
- NSPI reported that US GAAP hedge accounting under ASC 815 is more stringent than Canadian GAAP and could produce greater ineffectiveness charges; to address this, the company proposed extending the regulatory deferral treatment — previously approved for Tuft's Cove hedges in December 2009 — to all fuel and foreign exchange hedges under the Fuel Adjustment Mechanism.
- On June 30, 2010, NSPI filed redlined and final versions of the amended Accounting Policy 6960 (N-2), which eliminates quarterly effectiveness testing by assuming all hedges to be 100% effective and requires deferral of fair value changes to regulatory assets or liabilities, with gains and losses recognized only when the hedged item settles.
- External auditors Grant Thornton confirmed in a June 28, 2010 letter (N-3) that the proposed accounting treatment under the revised Policy 6960 is appropriate under US GAAP, providing independent support for the amendment.
- NSPI requested Board approval of the amended policy by September 1, 2010 to allow implementation before the January 1, 2011 US GAAP transition date; transitional provisions specify that prior-period net earnings will not be restated and that any ineffectiveness recorded before 2011 will be deferred and expensed over the weighted average life of related derivatives.
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What was filed
Documents filed on this day
- N-1 Report - NSPI Accounting Policy and Procedures Manual - Policy 6960 6/11/2010
- N-2 NSPI Amendment to Accounting Policy 6960 for financial instruments and hedges 6/30/2010
- N-3 Letter from Grant Thornton regarding proposed hedging accounting policy 6060 6/30/2010