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FAIR VALUE | 9 Months Ended
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Jun. 30, 2020
Fair Value Disclosures [Abstract] |
FAIR VALUE | 6. FAIR VALUE Fair Value of Assets and Liabilities The fair value of cash and cash equivalents, accounts receivable, current loan receivables, accounts payable, commercial paper and borrowings under revolving credit facilities are estimated to equal their carrying amounts due to the short maturity of those instruments. Non-current loan receivables are recorded at fair value in other noncurrent assets on the Unaudited Condensed Consolidated Balance Sheets. The estimated fair value of long-term debt, including current maturities, excluding capital leases, debt issuance costs and solar asset financing obligations, is as follows:
(Thousands) | June 30, 2020 | September 30, 2019
Carrying value (1) (2) (3) (4) | $ | 1,492,845 |  | $ | 1,442,845 |
Fair market value | $ | 1,719,734 |  | $ | 1,568,864 |
(1) | Excludes finance leases of $77.6 million and $35.4 million as of June 30, 2020 and September 30, 2019, respectively.
(2) | Excludes solar asset financing obligations of $130.8 million and $91.4 million as of June 30, 2020 and September 30, 2019, respectively.
(3) | Excludes NJNG's debt issuance costs of $9.2 million and $9 million as of June 30, 2020 and September 30, 2019, respectively.
(4) | Excludes NJR's debt issuance costs of $1.5 million and $2 million as of June 30, 2020 and September 30, 2019, respectively.
Clean Energy Ventures enters into transactions to sell certain commercial solar assets and lease the assets back for a term specified in the lease. These transactions are considered financing obligations for accounting purposes and are recorded within long-term debt on the Unaudited Condensed Consolidated Balance Sheets. The estimated fair value of solar asset financing obligations as of June 30, 2020 and September 30, 2019 was $148.3 million and $98.6 million, respectively. The Company utilizes a discounted cash flow method to determine the fair value of its debt. Inputs include observable municipal and corporate yields, as appropriate for the maturity of the specific issue and the Company's credit rating. As of June 30, 2020, NJR discloses its debt within Level 2 of the fair value hierarchy. Fair Value Hierarchy NJR applies fair value measurement guidance to its financial assets and liabilities, as appropriate, which include financial derivatives and physical commodity contracts qualifying as derivatives, investments in equity securities and other financial assets and liabilities. In addition, authoritative accounting literature prescribes the use of a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based on the source of the data used to develop the price inputs. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to inputs that are based on unobservable market data and include the following:
Level 1 | Unadjusted quoted prices for identical assets or liabilities in active markets. NJR's Level 1 assets and liabilities include exchange traded natural gas futures and options contracts, listed equities and money market funds. Exchange traded futures and options contracts include all energy contracts traded on the NYMEX, CME and ICE that NJR refers to internally as basis swaps, fixed swaps, futures and financial options that are cleared through a FCM.
Level 2 | Other significant observable inputs such as interest rates or price data, including both commodity and basis pricing that is observed either directly or indirectly from publications or pricing services. NJR's Level 2 assets and liabilities include over-the-counter physical forward commodity contracts and swap contracts, SREC forward sales or derivatives that are initially valued using observable quotes and are subsequently adjusted to include time value, credit risk or estimated transport pricing components for which no basis price is available. Level 2 financial derivatives consist of transactions with non-FCM counterparties (basis swaps, fixed swaps and/or options). NJNG's treasury lock is also considered Level 2 as valuation is based on quoted market interest and swap rates as inputs to the valuation model. Inputs are verifiable and do not require significant management judgment. For some physical commodity contracts the Company utilizes transportation tariff rates that are publicly available and that it considers to be observable inputs that are equivalent to market data received from an independent source. There are no significant judgments or adjustments applied to the transportation tariff inputs and no market perspective is required. Even if the transportation tariff input were considered to be a “model,” it would still be considered to be a Level 2 input as the data is:
• | widely accepted and public;
• | non-proprietary and sourced from an independent third party; and
• | observable and published.
These additional adjustments are generally not considered to be significant to the ultimate recognized values.
Level 3 | Inputs derived from a significant amount of unobservable market data. These include NJR's best estimate of fair value and are derived primarily through the use of internal valuation methodologies.
Assets and liabilities measured at fair value on a recurring basis are summarized as follows:
| Quoted Prices in Active Markets for Identical Assets | Significant Other Observable Inputs | Significant Unobservable Inputs |
(Thousands) | (Level 1) | (Level 2) | (Level 3) | Total
As of June 30, 2020: |  |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |
Physical commodity contracts |  | $ | — |  |  |  | $ | 8,177 |  |  |  | $ | — |  |  | $ | 8,177 |
Financial commodity contracts |  | 25,349 |  |  |  | 2,150 |  |  |  | — |  |  | 27,499 |
Financial commodity contracts - foreign exchange |  | — |  |  |  | 38 |  |  |  | — |  |  | 38 |
Money market funds |  | 36,172 |  |  |  | — |  |  |  | — |  |  | 36,172 |
Other (1) |  | 1,814 |  |  |  | — |  |  |  | — |  |  | 1,814 |
Total assets at fair value |  | $ | 63,335 |  |  |  | $ | 10,365 |  |  |  | $ | — |  |  | $ | 73,700 |
Liabilities: |  |  |  |  |  |  |  |  |  |
Physical commodity contracts |  | $ | — |  |  |  | $ | 39,823 |  |  |  | $ | — |  |  | $ | 39,823 |
Financial commodity contracts |  | 14,766 |  |  |  | — |  |  |  | — |  |  | 14,766 |
Financial commodity contracts - foreign exchange |  | — |  |  |  | 253 |  |  |  | — |  |  | 253 |
Interest rate contracts |  | — |  |  |  | 15,852 |  |  |  | — |  |  | 15,852 |
Total liabilities at fair value |  | $ | 14,766 |  |  |  | $ | 55,928 |  |  |  | $ | — |  |  | $ | 70,694 |
As of September 30, 2019: |  |  |  |  |  |  |  |  |  |
Assets: |  |  |  |  |  |  |  |  |  |
Physical commodity contracts |  | $ | — |  |  |  | $ | 8,624 |  |  |  | $ | — |  |  | $ | 8,624 |
Financial commodity contracts |  | 20,028 |  |  |  | 3,876 |  |  |  | — |  |  | 23,904 |
Financial commodity contracts - foreign exchange |  | — |  |  |  | 1 |  |  |  | — |  |  | 1 |
Other (1) |  | 1,706 |  |  |  | — |  |  |  | — |  |  | 1,706 |
Total assets at fair value |  | $ | 21,734 |  |  |  | $ | 12,501 |  |  |  | $ | — |  |  | $ | 34,235 |
Liabilities: |  |  |  |  |  |  |  |  |  |
Physical commodity contracts |  | $ | — |  |  |  | $ | 40,426 |  |  |  | $ | — |  |  | $ | 40,426 |
Financial commodity contracts |  | 35,732 |  |  |  | — |  |  |  | — |  |  | 35,732 |
Financial commodity contracts - foreign exchange |  | — |  |  |  | 286 |  |  |  | — |  |  | 286 |
Total liabilities at fair value |  | $ | 35,732 |  |  |  | $ | 40,712 |  |  |  | $ | — |  |  | $ | 76,444 |

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 820 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=117815213&loc=d3e19207-110258 + Details
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