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9.7 Investments in power plant entities – presentation and disclosure
Publication date: 22 Nov 2023
us Utilities guide
Presentation and disclosure requirements with respect to investments in single power plant entities depend on the nature of the investment. Both investors and single power plant entities are required by the applicable accounting literature to provide certain disclosures.
9.7.1 Single power plant entities
Many single power plant entities are in the form of limited liability companies. ASC 272-10-45 and ASC 272-10-50 provide specific and extensive presentation and disclosure requirements for these entities. Refer to FSP 32 for the presentation and disclosure considerations for limited liability companies. Regardless of the legal form of the single power plant entity, it should determine how to record the funds received from its investors (see UP 9.5). If it is determined that the entity is issuing financial instruments recognized under the guidance in ASC 480-10-50, these are the required disclosures.
Entities that issue financial instruments recognized under the guidance in Section 480-10-25 shall disclose both of the following:
- The nature and terms of the financial instruments
- The rights and obligations embodied in those instruments including both:
- Settlement alternatives, if any, in the contract
- The entity that controls the settlement alternatives.
Additionally, for all outstanding financial instruments recognized under the guidance in Section 480-10-25 and for each settlement alternative, issuers shall disclose all of the following:
- The amount that would be paid, or the number of shares that would be issued and their fair value, determined under the conditions specified in the contract if the settlement were to occur at the reporting date
- How changes in the fair value of the issuer’s equity shares would affect those settlement amounts (for example, “the issuer is obligated to issue an additional X shares or pay an additional Y dollars in cash for each $1 decrease in the fair value of one share”)
- The maximum amount that the issuer could be required to pay to redeem the instrument by physical settlement, if applicable
- The maximum number of shares that could be required to be issued, if applicable
- That a contract does not limit the amount that the issuer could be required to pay or the number of shares that the issuer could be required to issue, if applicable
- For a forward contract or an option indexed to the issuer’s equity shares, all of the following:
- The forward price or option strike price
- The number of issuer’s shares to which the contract is indexed
- The settlement date or dates of the contract, as applicable.
Paragraph 505-10-50-3 requires additional disclosures for actual issuances and settlements that occurred during the accounting period.
9.7.2 Investors in single power plant entities
Investors may record their interests in single power plant entities under multiple models, assuming consolidation is not required. Each of these models contains specific presentation and disclosure requirements. Figure UP 9-7 provides references to the applicable presentation and disclosure requirements in PwC’s Financial statement presentation guide.
Figure UP 9-6
Investments presentation and disclosure guidance within FSP
Investments presentation and disclosure guidance within FSP
Nature of investment |
Accounting model |
FSP chapter |
|---|---|---|
Equity investment
|
||
PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
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