N-2NSPI Amendment to Accounting Policy 6960 for financial instruments and hedges 6/30/2010
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Introduction of the Fuel Adjustment Mechanism The Fuel Adjustment Mechanism ("FAM") which came into effect January 1, 2009, governs the recovery of NSPI's fuel related costs. Subsequently, the Board approved an amendment to NSPI's Accounti...
AI summary The Fuel Adjustment Mechanism (FAM) governs NSPI's fuel cost recovery since 2009. An amendment to Accounting Policy 6960 aligns fuel expense recognition with hedge settlements, reducing volatility. NSPI proposes extending this approach to all hedges, removing quarterly effectiveness testing. The company requests Board approval by September 1, 2010, to align US GAAP reporting with FAM.
POLICY 11 The Company engages in risk management activities to manage the Company's exposure to changes in the market prices of commodities, foreign exchange and interest rates. Deleted: price Deleted: at TUC 12 The Company does not use de...
AI summary The Company manages commodity, foreign exchange, and interest rate risks through risk management policies and derivative instruments for hedging, not trading. Derivatives' impacts are deferred to regulatory assets/liabilities, and physical contracts are accounted for as fuel is consumed. Effectiveness of hedges is not tested, assuming 100% effectiveness.
- a. The front office should ensure the hedging activity is in compliance with the appropriate risk management policy; - b. The front office should document the specific risk exposure being hedged in accordance with its risk management obj...
AI summary The text outlines procedures for hedging activities, including compliance with risk management policies, documentation requirements, and accounting treatment of derivative instruments. It specifies how gains/losses on derivatives should be amortized, linked to hedged items like fuel purchases, capital projects, and interest rates, with foreign currency translations and regulatory asset/liability classifications.
POLICY - 11 The Company engages in risk management activities to manage the Company's exposure to changes in the market prices of commodities, foreign exchange and interest rates. - 12 The Company does not use derivative instruments for tr...
AI summary The Company employs risk management policies to address commodity price, foreign exchange, and interest rate risks. Derivative instruments are used solely for hedging, not trading, with gains/losses deferred to regulatory assets/liabilities. Physical contracts are recognized through net earnings as fuel is consumed. Effectiveness of hedges is not tested, assuming 100% effectiveness.
- a. The front office should ensure the hedging activity is in compliance with the appropriate risk management policy; - b. The front office should document the specific risk exposure being hedged in accordance with its risk management obj...
AI summary The text outlines procedures for hedging activities, emphasizing compliance with risk management policies, documentation requirements, and accounting treatment of derivative instruments. It specifies balance sheet recognition, foreign exchange translation, and amortization of gains/losses on derivatives used for fuel, capital projects, and interest rate hedging.