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Summary of Significant Accounting Policies | 6 Months Ended
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Jun. 30, 2023
Accounting Policies [Abstract] |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Vivint Smart Home Flex Pay Under the Flex Pay plan (“Flex Pay”), offered by Vivint Smart Home, subscribers pay separately for smart home products and smart home and security services. The subscriber has the ability to pay for Vivint Smart Home products in the following three ways: (i) qualified subscribers may finance the purchase through third-party financing providers ("Consumer Financing Program" or “CFP”), (ii) Vivint Smart Home generally offers a limited number of subscribers not eligible for the CFP, but who qualify under Vivint Smart Home underwriting criteria, the option to enter into a retail installment contract directly with Vivint Smart Home or (iii) subscribers may conduct purchases by check, automatic clearing house payments, credit or debit card or by obtaining short term financing (generally no more than six-month installment terms) through Vivint Smart Home. Although subscribers pay separately for products and services under Flex Pay, the Company has determined that the sale of products and services are one single performance obligation resulting in deferred revenue for the gross amount of products sold. For products financed through the CFP, gross deferred revenues are reduced by (i) any fees the third-party financing provider (“Financing Provider”) is contractually entitled to receive at the time of loan origination, and (ii) the present value of expected future payments due to the Financing Providers. Loans are issued on either an installment or revolving basis with repayment terms ranging from 6 to 60 months. For certain Financing Provider loans: •Vivint Smart Home pays a monthly fee based on either the average daily outstanding balance of the installment loans, or the number of outstanding loans. •Vivint Smart Home incurs fees at the time of the loan origination and receives proceeds that are net of these fees. •Vivint Smart Home also shares liability for credit losses, with Vivint Smart Home being responsible for between 2.6% and 100% of lost principal balances. Due to the nature of these provisions, the Company records a derivative liability at its fair value when the Financing Provider originates loans to subscribers, which reduces the amount of estimated revenue recognized on the provision of the services. The derivative liability is reduced as payments are made by Vivint Smart Home to the Financing Provider. Subsequent changes to the fair value of the derivative liability are realized through other income, net in the consolidated statements of operations. For further discussion, see Note 7, Accounting for Derivative Instruments and Hedging Activities. Capitalized Contract Costs Capitalized contract costs represent the costs directly related and incremental to the origination of new contracts, modification of existing contracts or to the fulfillment of the related subscriber contracts. These costs include installed products, commissions, other compensation and cost of installation of new or upgraded customer contracts. The Company calculates amortization by accumulating all deferred contract costs into separate portfolios based on the initial month of service and amortizes those deferred contract costs on a straight-line basis over the expected period of benefit, consistent with the pattern in which the Company provides services to its customers. The expected period of benefit for customers is approximately five years. The Company updates its estimate of the period of benefit periodically and whenever events or circumstances indicate that the period of benefit could change significantly. Such changes, if any, are accounted for prospectively as a change in estimate. Amortization of capitalized contract costs are included in cost of operations and selling, general and administrative costs on the consolidated statements of operations. Contract costs not directly related and incremental to the origination of new contracts, modification of existing contracts or to the fulfillment of the related subscriber contracts are expensed as incurred. Other Balance Sheet Information The following table presents the accumulated depreciation included in property, plant and equipment, net and accumulated amortization included in customer relationships, net and other intangible assets, net:
(In millions) | June 30, 2023 |  | December 31, 2022
Property, plant and equipment accumulated depreciation | $ | 1,351 |  |  | $ | 1,478 |
Customer relationships and other intangible assets accumulated amortization | 2,394 |  |  | 2,112 |
Credit Losses Retail trade receivables are reported on the balance sheet net of the allowance for credit losses within accounts receivables, net. Long-term receivables are recorded net in other non-current assets in the consolidated balance sheets. The Company accrues a provision for current expected credit losses based on (i) estimates of uncollectible revenues by analyzing accounts receivable aging and current and reasonable forecasts of expected economic factors including, but not limited to, unemployment rates and weather-related events, (ii) historical collections and delinquencies, and (iii) counterparty credit ratings for commercial and industrial customers. The following table represents the activity in the allowance for credit losses for the three and six months ended June 30, 2023 and 2022:
| Three months ended June 30, |  | Six months ended June 30,
(In millions) | 2023 |  | 2022 |  | 2023 |  | 2022
Beginning balance | $ | 121 |  |  | $ | 666 |  |  | $ | 133 |  |  | $ | 683 |
Acquired balance from Vivint Smart Home | — |  |  | — |  |  | 22 |  |  | — |
Provision for credit losses | 45 |  |  | 26 |  |  | 80 |  |  | 51 |
Write-offs | (66) |  |  | (71) |  |  | (144) |  |  | (121) |
Recoveries collected | 12 |  |  | 6 |  |  | 21 |  |  | 14 |
Other | 8 |  |  | — |  |  | 8 |  |  | — |
Ending balance | $ | 120 |  |  | $ | 627 |  |  | $ | 120 |  |  | $ | 627 |
Cash and Cash Equivalents, Funds Deposited by Counterparties and Restricted Cash The following table provides a reconciliation of cash and cash equivalents, restricted cash and funds deposited by counterparties reported within the consolidated balance sheets that sum to the total of the same such amounts shown in the statements of cash flows:
(In millions) | June 30, 2023 |  | December 31, 2022
Cash and cash equivalents | $ | 422 |  |  | $ | 430 |
Funds deposited by counterparties | 365 |  |  | 1,708 |
Restricted cash | 26 |  |  | 40 |
Cash and cash equivalents, funds deposited by counterparties and restricted cash shown in the statement of cash flows | $ | 813 |  |  | $ | 2,178 |
Funds deposited by counterparties consist of cash held by the Company as a result of collateral posting obligations from its counterparties related to NRG's hedging program. The decrease in funds deposited by counterparties is driven by the significant decrease in forward positions as a result of decreases in natural gas and power prices compared to December 31, 2022. Though some amounts are segregated into separate accounts, not all funds are contractually restricted. Based on the Company's intention, these funds are not available for the payment of general corporate obligations; however, they are available for liquidity management. Depending on market fluctuations and the settlement of the underlying contracts, the Company will refund this collateral to the counterparties pursuant to the terms and conditions of the underlying trades. Since collateral requirements fluctuate daily and the Company cannot predict if any collateral will be held for more than twelve months, the funds deposited by counterparties are classified as a current asset on the Company's balance sheet, with an offsetting liability for this cash collateral received within current liabilities. Restricted cash consists primarily of funds held to satisfy the requirements of certain financing agreements and funds held within the Company's projects that are restricted in their uses. Goodwill The following table represents the changes in goodwill during the six months ended June 30, 2023:
(In millions) | Texas |  | East |  | West/Services/Other |  | Vivint Smart Home |  | Total
Balance as of December 31, 2022 | $ | 710 |  |  | $ | 723 |  |  | $ | 217 |  |  | $ | — |  |  | $ | 1,650 |
Goodwill resulting from the acquisition of Vivint Smart Home | — |  |  | — |  |  | — |  |  | 3,492 |  |  | 3,492 |
Sale of business | — |  |  | (2) |  |  | — |  |  | — |  |  | (2) |
Foreign currency translation adjustments | — |  |  | — |  |  | 3 |  |  | — |  |  | 3 |
Balance as of June 30, 2023 | $ | 710 |  |  | $ | 721 |  |  | $ | 220 |  |  | $ | 3,492 |  |  | $ | 5,143 |
Recent Accounting Developments - Guidance Adopted in 2023 ASU 2021-08 — In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, or ASU 2021-08, which requires that an entity recognize and measure contract assets and contract liabilities acquired in a business combination as if it had originated the contracts in accordance with ASC 606, Revenue from Contracts with Customers. As a result, an acquirer should recognize and measure the acquired contract assets and contract liabilities consistently with how they were recognized and measured in the acquiree’s financial statements. The amendments per ASU 2021-08 apply only to contract assets and contract liabilities from contracts with customers, as defined in Topic 606, such as refund liabilities and upfront payments to customers. Assets and liabilities under related Topics, such as deferred costs under Subtopic 340-40, Other Assets and Deferred Costs — Contracts with Customers, are not within the scope of amendments per ASU 2021-08. The Company adopted ASU 2021-08 prospectively effective January 1, 2023 and applied the amended requirements to the acquisition of Vivint Smart Home.

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