UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
August 27, 2002
(Date of earliest
event reported)
Commission File Name of Registrant; State of Incorporation; Address of IRS Employer
Number Principal Executive Offices; and Telephone Number Identification Number
- --------------------- --------------------------------------------------------- -------------------------
1-16169 EXELON CORPORATION 23-2990190
(a Pennsylvania corporation)
10 South Dearborn Street - 37th Floor
P.O. Box 805379
Chicago, Illinois 60680-5379
(312) 394-7398
1-1839 COMMONWEALTH EDISON COMPANY 36-0938600
(an Illinois corporation)
10 South Dearborn Street - 37th Floor
P.O. Box 805379
Chicago, Illinois 60680-5379
(312) 394-4321
Item 5. Other Events
On August 27, 2002 ComEd received a letter order from the Deputy Executive
Director and Chief Accountant of the Federal Energy Regulatory Commission (FERC)
directing ComEd to remove from its books the amount of goodwill associated with
the generating assets and power marketing business that it transferred in
January 2001 as part of an Exelon corporate restructuring to separate generation
assets from transmission and distribution assets. The letter was in response to
a request made by ComEd in July 2001 for approval by FERC of accounting entries
related to that corporate restructuring. ComEd plans to request the FERC to
rehear the matter and has 30 days to file the request for rehearing.
Exelon was formed on October 20, 2000 as a result of the merger of PECO Energy
Company and Unicom Corporation, ComEd's parent. As a result of the application
of purchase accounting, the assets and liabilities of ComEd were recorded at
their estimated fair value as of the October 20, 2000 merger date. At that time
the fair value of ComEd's generating stations was determined to be $2 billion,
or $4.7 billion less than their book value. ComEd recorded the $4.7 billion
reduction in its plant accounts as an acquisition adjustment, consistent with
FERC accounting requirements. Separately, as part of the application of purchase
accounting for the merger transaction, goodwill of $4.8 billion was recorded as
an asset based on the difference between the merger purchase price and the fair
value of all of ComEd's assets and liabilities.
Subsequently, on January 1, 2001 Exelon effected a corporate restructuring. As
part of the January 1, 2001 corporate restructuring, ComEd's generating assets
were transferred to Exelon Generation based on the new cost basis of the assets
which reflects the $4.8 billion fair value writedown recorded at the October 20,
2000 merger date as an acquisition adjustment. Under Generally Accepted
Accounting Principles, goodwill is the unidentified intangible value of an
acquired business and as such cannot be ascribed to particular assets. Since the
goodwill arose out of the merger transaction and did not relate to the
generating stations, no goodwill was transferred to Exelon Generation.
ComEd looks forward to further discussion with the FERC on this matter. ComEd
and Exelon believe that the accounting for goodwill is in accordance with
Generally Accepted Accounting Principles and has been fully disclosed and
properly reflected in its audited 2000 and 2001 financial statements filed with
the Securities and Exchange Commission. ComEd also believes that the financial
statements filed with the FERC have been prepared consistent with the FERC's
Uniform System of Accounts. However, if the FERC ultimately determines that the
goodwill should have been treated in a manner different than it is treated under
GAAP, ComEd could be required to amend its financial statements filed with the
FERC accordingly. The FERC letter order did not indicate how much goodwill FERC
believes should be removed from ComEd's books, or how such an amount would be
determined, and as a result ComEd cannot estimate what the impact of such an
amendment might be. Because ComEd is subject to an earnings cap that is based on
the FERC financial statements, an amendment to those financial statements could
have a material adverse effect on Exelon's and ComEd's financial results.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
EXELON CORPORATION
COMMONWEALTH EDISON COMPANY
/S/ J. Barry Mitchell
--------------------------------------
J. Barry Mitchell
Senior Vice President
Exelon Corporation
August 30, 2002