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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended
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Mar. 31, 2018
Accounting Policies [Abstract] |
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying Unaudited Condensed Consolidated Financial Statements have been prepared by NJR in accordance with the rules and regulations of the SEC and GAAP. The September 30, 2017 Balance Sheet data is derived from the audited financial statements of the Company. These Unaudited Condensed Consolidated Financial Statements should be read in conjunction with the consolidated financial statements and the notes thereto included in NJR's 2017 Annual Report on Form 10-K. The Unaudited Condensed Consolidated Financial Statements include the accounts of NJR and its subsidiaries. In the opinion of management, the accompanying Unaudited Condensed Consolidated Financial Statements reflect all adjustments necessary for a fair presentation of the results of the interim periods presented. These adjustments are of a normal and recurring nature. Because of the seasonal nature of NJR's utility and wholesale energy services operations, in addition to other factors, the financial results for the interim periods presented are not indicative of the results that are to be expected for the fiscal year ending September 30, 2018. Intercompany transactions and accounts have been eliminated. Sales Tax Accounting Sales tax that is collected from customers is presented in both operating revenues and operating expenses on the Unaudited Condensed Consolidated Statements of Operations totaled $18.7 million and $31.9 million during the three and six months ended March 31, 2018, respectively, and $16.9 million and $28.1 million during the three and six months ended March 31, 2017, respectively. Effective January 1, 2017, the New Jersey sales tax rate decreased from 7 percent to 6.875 percent. Effective January 1, 2018, the New Jersey sales tax rate decreased again to 6.625 percent. Gas in Storage The following table summarizes gas in storage, at average cost by segment as of:
| March 31, 2018 | September 30, 2017
($ in thousands) | Gas in Storage |  | Bcf | Gas in Storage |  | Bcf
Energy Services |  | $ | 51,915 |  | 18.6 |  |  | $ | 122,884 |  | 53.9 |
Natural Gas Distribution |  | 19,254 |  | 4.7 |  |  | 79,179 |  | 21.8 |
Total |  | $ | 71,169 |  | 23.3 |  |  | $ | 202,063 |  | 75.7 |
Available for Sale Securities Available for sale securities are carried at fair value on the Unaudited Condensed Consolidated Balance Sheets. Total unrealized gains and losses associated are included as a part of accumulated other comprehensive income, a component of common stock equity. Reclassifications of realized gains or losses out of other comprehensive income into earnings are recorded in other income, net on the Unaudited Condensed Consolidated Statements of Operations based on average cost. Management evaluates its equity securities for other-than-temporary impairment on a quarterly basis, and more frequently when economic, market or other concerns warrant such evaluation. Consideration is given to the length of time and the extent to which the fair value has been less than cost; the financial condition and near term prospects of the issuer; whether the market decline was affected by macroeconomic conditions, changes in tax laws, regulations or other governmental policies; and whether the Company has the intent to sell the security or more likely than not will be required to sell the security before the recovery of its amortized cost basis. If the decline in value of our equity securities is determined to be other-than-temporary, an impairment is recognized through earnings within other income, net on the Unaudited Condensed Consolidated Statements of Operations. During the six months ended March 31, 2018, NJR sold shares of its available for sale securities and received proceeds of approximately $6.6 million and recognized a pre-tax gain of $5.3 million. There were no sales of available for sale securities during the three months ended March 31, 2018. During the three and six months ended March 31, 2017, NJR received proceeds of approximately $3.4 million and $6.6 million, and realized a pre-tax gain of $2.8 million and $5.4 million, respectively. In September 2015, the Company exchanged its ownership interest in Iroquois with DM for approximately 1.84 million DM Common Units. The investment in DM is included as part of the Company's equity investments in the Midstream segment. The exchange of ownership interests in Iroquois for DM was considered a contribution of real estate into another real estate venture. As a result, the Company recorded a deferred gain of $24.6 million on the Unaudited Condensed Consolidated Balance Sheets, based on the difference between the carrying amount of its investment in Iroquois and the fair value of the DM Common Units on the closing date of the transaction. The deferred gain will be recognized in other income, net on the Unaudited Condensed Consolidated Statements of Operations upon completion of the earnings process, typically through the sale of the related securities, or other earnings event. On March 15, 2018, the FERC issued a policy revision indicating that it no longer will allow interstate natural gas and oil pipelines held by a Master Limited Partnership to recover an income tax allowance in cost-of-service rates. The policy revision had a material negative impact on the value of NJR's investment in DM Common Units. As a result, the Company evaluated the decrease in fair value of its available-for-sale securities and determined that the decline was other-than-temporary. Accordingly, the Company recognized an other-than-temporary impairment of $17.8 million, $14.8 million, net of tax. Since the deferred gain was established based upon the difference in the fair value of the DM Common Units and the carrying value of the ownership of Iroquois, concurrent with the impairment charge to earnings, the Company reduced the amount of the deferred gain available upon the completion of the earnings process for the DM Common Units. This reduction of the deferred gain of $17.8 million was also recorded in other income, net on the Unaudited Condensed Consolidated Statements of Operations. As of March 31, 2018, the Company's available for sale securities had a fair value of $28.2 million and the remaining deferred gain associated with the Company’s investment in DM Common Units totaled $6.8 million. As of September 30, 2017, the Company's available for sale securities had a fair value of $65.8 million and total unrealized gains were $12.8 million, $7.7 million, net of deferred income tax expense. Customer Accounts Receivable Customer accounts receivable include outstanding billings from the following subsidiaries as of:
(Thousands) | March 31, 2018 |  | September 30, 2017
Energy Services | $ | 179,218 |  | 60 | % |  | $ | 150,322 |  | 77 | %
Natural Gas Distribution (1) | 112,884 |  | 38 |  |  | 37,432 |  | 19 |
Clean Energy Ventures | 2,834 |  | 1 |  |  | 2,655 |  | 1 |
NJRHS and other | 3,888 |  | 1 |  |  | 6,058 |  | 3 |
Total | $ | 298,824 |  | 100 | % |  | $ | 196,467 |  | 100 | %
(1) | Does not include unbilled revenues of $55.4 million and $7.2 million as of March 31, 2018 and September 30, 2017, respectively.
Loans Receivable NJNG currently provides loans, with terms ranging from three to 10 years, to customers that elect to purchase and install certain energy efficient equipment in accordance with its BPU-approved SAVEGREEN program. The loans are recognized at net present value on the Unaudited Condensed Consolidated Balance Sheets. The Company recorded $9.9 million and $8.9 million in other current assets and $40.3 million and $40.4 million in other noncurrent assets as of March 31, 2018 and September 30, 2017, respectively, on the Unaudited Condensed Consolidated Balance Sheets, related to the loans. NJNG's policy is to establish an allowance for doubtful accounts when loan balances are in arrears for more than 60 days. As of March 31, 2018 and September 30, 2017, there was no allowance for doubtful accounts established for the SAVEGREEN loans. Assets Held for Sale On March 2, 2018, Clean Energy Ventures entered into an agreement with NorthWestern Energy to sell its membership interest in its 9.7 MW wind farm in Two Dot, Montana for a total purchase price of $18.5 million and submitted a joint filing for authorization with FERC. The transaction is expected to close following FERC approval. The Company expects the transaction to generate a pre-tax gain of approximately $1 million, which will be recognized as a reduction to O&M on the Unaudited Condensed Consolidated Statements of Operations. In March 2018, Clean Energy Ventures committed to a plan to pursue the sale of its remaining wind assets and it is probable that these sales will be completed within the next 12 months. Accordingly, the Company classified its wind assets and related liabilities as held for sale, as of March 31, 2018, on the Unaudited Condensed Consolidated Balance Sheets. The wind assets classified as held for sale are measured at the lower of their carrying value or fair value less cost to sell. The major classes of assets and liabilities included within the disposal group as held for sale are as follows:
(Thousands) | March 31, 2018 |
Assets held for sale: |  |
Property, plant and equipment - wind equipment, at cost |  | $ | 244,972 |
Property, plant and equipment - accumulated depreciation, wind equipment |  | (21,561 | )
Prepaid and accrued taxes |  | 1,226 |
Other noncurrent assets |  | 261 |
|  | $ | 224,898 |
Liabilities held for sale: |  |
Asset retirement obligation |  | $ | 4,262 |
Recently Adopted Updates to the Accounting Standards Codification Inventory In July 2015, the FASB issued ASU No. 2015-11, an amendment to ASC 330, Inventory, which requires entities to measure most inventory “at the lower of cost or net realizable value,” thereby simplifying the current guidance under which an entity must measure inventory at the lower of cost or market. The Company adopted the new guidance in the first quarter of fiscal 2018 and applied the new provisions on a prospective basis, which did not impact its financial position, results of operations or cash flows upon adoption. Tax In March 2018, the FASB issued ASU No. 2018-05, an amendment to ASC 840, Income Taxes, which provides relief to entities in their calculation of the effects of the Tax Act by allowing them to record provisional amounts for certain income tax effects to address circumstances in which an entity does not have the necessary information available, prepared or analyzed to complete the accounting. These provisional amounts are subject to change as information and assumptions are updated throughout the measurement period, which may not extend beyond one year from the enactment date. The new guidance was effective immediately upon issuance and thus, the Company adopted the new guidance in the second quarter of fiscal 2018 and applied the new provision on a prospective basis. Other Recent Updates to the Accounting Standards Codification Revenue In May 2014, the FASB issued ASU No. 2014-09, and added Topic 606, Revenue from Contracts with Customers, to the ASC. ASC 606 supersedes ASC 605, Revenue Recognition, as well as most industry-specific guidance, and prescribes a single, comprehensive revenue recognition model designed to improve financial reporting comparability across entities, industries, jurisdictions and capital markets. In August 2015, the FASB issued ASU No. 2015-14, which defers the implementation of the new guidance for one year. The new guidance will not be early adopted and will be effective for the Company’s fiscal year ending September 30, 2019, and interim periods within that year. The Company has concluded that its tariff based sales of natural gas will be within the scope of the new guidance. However, it does not anticipate any modification to the pattern of revenue recognition from such sales. The Company has also evaluated its renewable asset PPA arrangements and does not anticipate any modification to the pattern of revenue recognition of the related electricity, capacity and REC sales. Revenues from RECs sold as part of a bundled arrangement will be recognized in the same period as the related generation, consistent with current practice. Based on the review of customer contracts to date, the Company is not anticipating a material impact to its financial position, results of operations or cash flows upon adoption. The Company anticipates significant new disclosures as a result of the implementation of ASC 606 and currently expects to transition to the new guidance using the modified retrospective approach. Financial Instruments In January 2016, the FASB issued ASU No. 2016-01, an amendment to ASC 825, Financial Instruments, to address certain aspects of the recognition, measurement, presentation and disclosure of financial instruments. The standard affects investments in equity securities that do not result in consolidation and are not accounted for under the equity method and the presentation of certain fair value changes for financial liabilities measured at fair value. It also simplifies the impairment assessment of equity investments without a readily determinable fair value by requiring a qualitative assessment. The guidance is effective for the Company’s fiscal year ending September 30, 2019, and interim periods within that year. Upon adoption, the amendment will be applied on a modified retrospective basis. The Company evaluated the amendment and noted that, upon adoption, subsequent changes to the fair value of the Company’s available for sale securities will be recorded in the Consolidated Statement of Operations as opposed to other comprehensive income. Upon adoption, any amounts recorded in accumulated other comprehensive income related to available for sale securities will be reclassified to the opening balance of retained earnings in the year of adoption. The Company does not expect any other material impacts to its financial position, results of operations or cash flows upon adoption. In June 2016, the FASB issued ASU No. 2016-13, an amendment to ASC 326, Financial Instruments - Credit Losses, which changes the impairment model for certain financial assets that have a contractual right to receive cash, including trade and loan receivables. The new model requires recognition based upon an estimation of expected credit losses rather than recognition of losses when it is probable that they have been incurred. An entity will apply the amendment through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The guidance is effective for the Company’s fiscal year ending September 30, 2021, and interim periods within that year, with early adoption permitted. The Company is currently evaluating the amendment to understand the impact on its financial position, results of operations and cash flows upon adoption and will apply the new guidance to its trade and loan receivables on a modified retrospective basis. Leases In February 2016, the FASB issued ASU No. 2016-02, an amendment to ASC 842, Leases, which provides for a comprehensive overhaul of the lease accounting model and changes the definition of a lease within the accounting literature. Under the new standard, all leases with a term greater than one year will be recorded on the balance sheet. Amortization of the related asset will be accounted for using one of two approaches prescribed by the guidance. Additional disclosures will be required to allow the user to assess the amount, timing and uncertainty of cash flows arising from leasing activities. A modified retrospective transition approach is required for leases existing at the time of adoption. In January 2018, the FASB issued ASU No. 2018-01, a further amendment to ASC 842, Leases, which was introduced by ASC No. 2016-02, as discussed above. This update provides an optional practical expedient that allows companies to not evaluate existing or expired land easements that were not previously accounted for under Topic 840 as leases. The Company expects to elect this practical expedient upon adoption. The guidance is effective for the Company’s fiscal year ending September 30, 2020, and interim periods within that year, with early adoption permitted. The Company continues to evaluate the provisions of ASC 842 and is actively monitoring the outcome of the exposure draft issued by the FASB that would provide an optional transition method to ASC 842. At this time, the Company does not plan to early adopt the new guidance and expects to elect the practical expedient package in the new guidance during transition. While the Company is currently evaluating the full impact of the standard, it expects to recognize additional assets and liabilities arising from current operating leases to its financial position upon adoption. Statement of Cash Flows In August 2016, the FASB issued ASU No. 2016-15, an amendment to ASC 230, Statement of Cash Flows, which addresses eight specific cash flow issues for which there has been diversity in practice. The guidance is effective for the Company’s fiscal year ending September 30, 2019, and interim periods within that year with early adoption permitted. Upon adoption, the amendment will be applied on a retrospective basis. The Company does not expect any material impacts to its cash flows upon adoption. In November 2016, the FASB issued ASU No. 2016-18, an amendment to ASC 230, Statement of Cash Flows, which requires that any amounts that are deemed to be restricted cash or restricted cash-equivalents be included in cash and cash-equivalent balances on the cash flow statement and, therefore, transfers between cash and restricted cash accounts will no longer be recognized within the statement of cash flows. The guidance is effective for the Company’s fiscal year ending September 30, 2019, with early adoption permitted. Upon adoption, the amendment will be applied on a retrospective basis. Based on the Company's historical restricted cash balances, it does not expect any material impacts to its financial position, results of operations or cash flows upon adoption. Business Combinations In January 2017, the FASB issued ASU No. 2017-01, an amendment to ASC 805, Business Combinations, clarifying the definition of a business in the ASC, which is intended to reduce the complexity surrounding the assessment of a transaction as an asset acquisition or business combination. The amendment provides an initial fair value screen to reduce the number of transactions that would fit the definition of a business, and when the screen threshold is not met, provides an updated model that further clarifies the characteristics of a business. The guidance is effective for the Company’s fiscal year ending September 30, 2019, and interim periods within that year, with early adoption permitted. Upon adoption, the amendment will be applied on a prospective basis. The amendment could potentially have material impacts on future transactions that the Company may enter into by altering the Company’s conclusion on the accounting applied to acquisitions. Gains and Losses from the Derecognition of Nonfinancial Assets In February 2017, the FASB issued ASU No. 2017-05, an amendment to ASC 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets, which clarifies the scope and accounting related to the derecognition of nonfinancial assets, including partial sales and contributions of nonfinancial assets to a joint venture or other non-controlled investee. The guidance is effective concurrently with ASC 606, which is effective for the Company’s fiscal year ending September 30, 2019, and interim periods within that year with early adoption permitted. ASU No. 2017-05 may be applied retrospectively for all periods presented or retrospectively with a cumulative-effect adjustment at the date of adoption. The Company has determined that to the extent a deferred gain exists related to nonfinancial assets on the balance sheet upon adoption, it would be recognized under the new accounting guidance as a cumulative effect adjustment to the opening balance of retained earnings for the first quarter of fiscal 2019. Compensation - Retirement Benefits In March 2017, the FASB issued ASU No. 2017-07, an amendment to ASC 715, Compensation - Retirement Benefits, which changes the presentation of net periodic benefit cost on the income statement by requiring companies to present all components of net periodic benefit cost, other than service cost, outside a subtotal of income from operations. The amendment also states that only the service cost component of net periodic benefits costs is eligible for capitalization, when applicable. The guidance is effective for the Company’s fiscal year ending September 30, 2019, and interim periods within that year, with early adoption permitted. Upon adoption, the amendment will be applied on a retrospective basis for presentation and changes to capitalization of costs will be applied on a prospective basis. The Company is continuing to evaluate the amendment to fully understand the impact on its financial position, results of operations and cash flows upon adoption. The Company is also monitoring industry specific developments on the new guidance to determine the appropriate treatment of these changes in a rate regulated environment. Stock Compensation In May 2017, the FASB issued ASU No. 2017-09, an amendment to ASC 718, Compensation - Stock Compensation, which clarifies the accounting for changes to the terms or conditions of share-based payments. The guidance is effective for the Company’s fiscal year ending September 30, 2019, and interim periods within that year, with early adoption permitted. Upon adoption, the amendments will be applied prospectively to awards modified on or after the adoption date. The Company is currently evaluating the amendments to understand the impact on its financial position, results of operations and cash flows upon adoption. Derivatives and Hedging In August 2017, the FASB issued ASU No. 2017-12, an amendment to ASC 815, Derivatives and Hedging, which is intended to make targeted improvements to the accounting for hedging activities by better aligning an entity’s risk management activities and financial reporting for hedging relationships. These amendments modify the accounting for both nonfinancial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. Additionally, the amendments are intended to simplify the application of the hedge accounting guidance and provide relief to companies by easing certain hedge documentation requirements. The guidance is effective for the Company’s fiscal year ending September 30, 2020, and interim periods within that year, with early adoption permitted. Upon adoption, the transition requirements and elections will be applied to hedging relationships existing on the date of adoption. The Company does not currently apply hedge accounting to any of its risk management activities and thus does not expect the amendments to have any impact on its financial position, results of operations and cash flows upon adoption. Reporting Comprehensive Income In February 2018, the FASB issued ASU No. 2018-02, an amendment to ASC 220, Income Statement - Reporting Comprehensive Income, which allows for the reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects of the Tax Act. The guidance is effective for the Company’s fiscal year ending September 30, 2020, and interim periods within that year, with early adoption permitted. Upon adoption, the amendments will be applied either in the period of adoption, or retrospectively to each period in which the effects of the Tax Act are recognized. The Company is currently evaluating the amendments to understand the impact on its financial position and results of operations upon adoption.

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