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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | 6 Months Ended
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Mar. 31, 2021
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, 2020 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 2020 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, 2021. Intercompany transactions and accounts have been eliminated. Use of Estimates The preparation of financial statements in conformity with GAAP requires the Company to make estimates that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosure of contingencies during the reporting period. On a quarterly basis or more frequently whenever events or changes in circumstances indicate a need, the Company evaluates its estimates, including those related to the calculation of the fair value of derivative instruments, debt, equity method investments, unbilled revenues, allowance for doubtful accounts, provisions for depreciation and amortization, long-lived assets, regulatory assets and liabilities, income taxes, pensions and other postemployment benefits, contingencies related to environmental matters and litigation. ARO are evaluated as often as needed. The Company’s estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. The Company has legal, regulatory and environmental proceedings during the normal course of business that can result in loss contingencies. When evaluating the potential for a loss, the Company will establish a reserve if a loss is probable and can be reasonably estimated, in which case it is the Company’s policy to accrue the full amount of such estimates. Where the information is sufficient only to establish a range of probable liability, and no point within the range is more likely than any other, it is the Company’s policy to accrue the lower end of the range. In the normal course of business, estimated amounts are subsequently adjusted to actual results that may differ from estimates. In March 2020, COVID-19 was declared a pandemic by the World Health Organization and the Centers for Disease Control and Prevention and has spread globally, including throughout the United States. The Company’s Unaudited Condensed Consolidated Financial Statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities at the balance sheet date and reported amounts of revenue and expenses during the reporting periods presented. The Company considered the impacts of COVID-19 on the assumptions and estimates used and determined that there have been no material adverse impacts on the Company’s results of operations as of March 31, 2021. Acquisitions The Company follows the guidance in ASC 805, Business Combinations, for determining the appropriate accounting treatment for acquisitions. ASU No. 2017-01, Clarifying the Definition of a Business, provides an initial fair value screen to determine if substantially all of the fair value of the assets acquired is concentrated in a single asset or group of similar assets. If the initial screening test is not met, the set is considered a business based on whether there are inputs and substantive processes in place. Based on the results of this analysis and conclusion on an acquisition’s classification of a business combination or an asset acquisition, the accounting treatment is derived. If the acquisition is deemed to be a business, the acquisition method of accounting is applied. Identifiable assets acquired and liabilities assumed at the acquisition date are recorded at fair value. If the transaction is deemed to be an asset purchase, the cost accumulation and allocation model is used whereby the assets and liabilities are recorded based on the purchase price and allocated to the individual assets and liabilities based on relative fair values. The determination and allocation of fair values to the identifiable assets acquired and liabilities assumed are based on various assumptions and valuation methodologies requiring considerable management judgment. The most significant variables in these valuations are discount rates and the number of years on which to base the cash flow projections, as well as other assumptions and estimates used to determine the cash inflows and outflows. Management determines discount rates based on the risk inherent in the acquired assets, specific risks, industry beta and capital structure of guideline companies. The valuation of an acquired business is based on available information at the acquisition date and assumptions that are believed to be reasonable. However, a change in facts and circumstances as of the acquisition date can result in subsequent adjustments during the measurement period, but no later than one year from the acquisition date. Revenues Revenues from the sale of natural gas to NJNG customers are recognized in the period that natural gas is delivered and consumed by customers, including an estimate for unbilled revenue. NJNG records unbilled revenue for natural gas services. Natural gas sales to individual customers are based on meter readings, which are performed on a systematic basis throughout the month. At the end of each month, the amount of natural gas delivered to each customer after the last meter reading through the end of the respective accounting period is estimated, and recognizes unbilled revenues related to these amounts. The unbilled revenue estimates are based on estimated customer usage by customer type, weather effects, unaccounted-for natural gas and the most current tariff rates. Clean Energy Ventures recognizes revenue when SRECs are transferred to counterparties. SRECs are physically delivered through the transfer of certificates as per contractual settlement schedules. The Clean Energy Act of 2018 established guidelines for the closure of the SREC registration program to new applicants in New Jersey. The SREC program officially closed to new qualified solar projects on April 30, 2020. In December 2019, the BPU established the TREC as the successor to the SREC program. TRECs provide a fixed compensation base multiplied by an assigned project factor in order to determine their value. The project factor is determined by the type and location of the project, as defined. All TRECs generated are required to be purchased monthly by a TREC program administrator as appointed by the BPU. In June 2020, Clean Energy Ventures began generating TRECs for qualified new residential and commercial solar projects placed into service following the close of the SREC program. TREC revenue is recognized when TRECs are generated and are transferred monthly based upon metered solar electricity activity. Revenues for Energy Services are recognized when the natural gas is physically delivered to the customer. In addition, changes in the fair value of derivatives that economically hedge the forecasted sales of the natural gas are recognized in operating revenues as they occur, as noted above. Energy Services also recognizes changes in the fair value of SREC derivative contracts as a component of operating revenues. The Storage and Transportation segment generates revenues from firm storage contracts and transportation contracts, related usage fees and hub services for the use of storage space, injections and withdrawals from their natural gas storage facility and the delivery of natural gas to customers. Demand fees are recognized as revenue over the term of the related agreement while usage fees and hub services revenues are recognized as services are performed. Revenues from all other activities are recorded in the period during which products or services are delivered and accepted by customers, or over the related contractual term. See Note 3. Revenue for further information. Cash and Cash Equivalents Cash and cash equivalents consist of cash on deposit and temporary investments with maturities of three months or less, and excludes restricted cash related to escrow balances for utility plant projects at NJNG and irrevocable letters of credit at Leaf River, which is recorded in other current and noncurrent assets on the Unaudited Condensed Consolidated Balance Sheets, respectively. The following table provides a reconciliation of cash and cash equivalents and restricted cash reported in the Unaudited Condensed Consolidated Balance Sheets to the total amounts in the Unaudited Condensed Consolidated Statements of Cash Flows as follows:
(Thousands) | March 31, 2021 | September 30, 2020 | March 31, 2020 | September 30, 2019
Balance Sheet |  |  |  |
Cash and cash equivalents | $ | 57,654 |  | $ | 117,012 |  | $ | 25,968 |  | $ | 2,676 |
Restricted cash in other noncurrent assets | $ | 1,321 |  | $ | 2,411 |  | $ | 2,422 |  | $ | 1,387 |
Statements of Cash Flow |  |  |  |
Cash, cash equivalents and restricted cash | $ | 58,975 |  | $ | 119,423 |  | $ | 28,390 |  | $ | 4,063 |
Allowance for Doubtful Accounts As of October 1, 2021, the Company adopted 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 Company segregates financial assets that fall within the scope of ASC 326, primarily trade receivables and unbilled revenues due in one year or less, into portfolio segments based on shared risk characteristics, such as geographical location and regulatory environment, for evaluation of expected credit losses. Historical and current information, such as average write-offs, are applied to each portfolio segment to estimate the allowance for losses on uncollectible receivables. Additionally, the allowance for losses on uncollectible receivables is adjusted for reasonable and supportable forecasts of future economic conditions, which can include changing weather, commodity prices, regulations, and macroeconomic factors, such as unemployment rates among others. In February 2021, severe winter weather affected the U.S. mid-continent and southern regions that resulted in increased demand for natural gas supply and increases in wholesale energy prices. As a result, at March 31, 2021, Energy Services evaluated its counterparties for credit deterioration, as well as the related receivables for the purchase and receipt of natural gas for amounts past due. The Company examined the credit characteristics of its counterparties, including the history of past due amounts for contractual settlements, counterparty credit ratings, and the likelihood of recovering amounts owed. As of March 31, 2021, the Company recorded a reserve for expected credit losses for Energy Services totaling $5.2 million within operations and maintenance expense on the Unaudited Condensed Consolidated Statement of Operations, representing management’s best estimate of expected credit losses at this time. It is possible that future developments could occur that could result in impairment of a portion or all of the remaining amounts owed to Energy Services, which would result in an additional charge to earnings. Loans Receivable NJNG currently provides loans, with terms ranging from two 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 fair value on the Unaudited Condensed Consolidated Balance Sheets. The Company recorded $14.3 million and $13.7 million in other current assets and $33.9 million and $35.3 million in other noncurrent assets as of March 31, 2021 and September 30, 2020, respectively, on the Unaudited Condensed Consolidated Balance Sheets, related to the loans. The Company regularly evaluates the credit quality and collection profile of its customers. If NJNG determines a loan is impaired, the basis of the loan would be subject to regulatory review for recovery. As of March 31, 2021 and September 30, 2020, the Company has not recorded any impairments for SAVEGREEN loans. Natural Gas in Storage The following table summarizes natural gas in storage, at average cost by segment as of:
| March 31, 2021 | September 30, 2020
($ in thousands) | Natural Gas in Storage | Bcf | Natural Gas in Storage | Bcf
Natural Gas Distribution |  | $ | 40,083 |  | 9.4 |  |  | $ | 110,037 |  | 27.2 |
Energy Services |  | 34,439 |  | 13.3 |  |  | 57,352 |  | 34.3 |
Storage and Transportation |  | 331 |  | 0.1 |  |  | 115 |  | 0.02 |
Total |  | $ | 74,853 |  | 22.8 |  |  | $ | 167,504 |  | 61.52 |
Software Costs The Company capitalizes certain costs, such as software design and configuration, coding, testing and installation, that are incurred to purchase or create and implement computer software for internal use. Capitalized costs include external costs of materials and services utilized in developing or obtaining internal-use software and payroll and payroll-related costs for employees who are directly associated with and devote time to the internal-use software project. Maintenance costs are expensed as incurred. Upgrades and enhancements are capitalized if it is probable that such expenditures will result in additional functionality. Amortization is recorded on the straight-line basis over the estimated useful lives. The following table presents the software costs included in the Unaudited Condensed Consolidated Financial Statements:
(Thousands) | March 31, 2021 | September 30, 2020
Balance Sheets |  |
Utility plant, at cost | $ | 14,011 |  | $ | 13,452 |
Nonutility plant and equipment, at cost | $ | 334 |  | $ | 316 |
Accumulated depreciation and amortization, utility plant | $ | (790) |  | $ | (279) |
Accumulated depreciation and amortization, nonutility plant and equipment | $ | (17) |  | $ | (5) |
Software costs | $ | 5,485 |  | $ | 4,707 |
| Three Months Ended | Six Months Ended
| March 31, | March 31,
Statements of Operations | 2021 | 2020 | 2021 | 2020
Operation and maintenance (1) | $ | 2,847 |  | $ | 1,109 |  | $ | 4,770 |  | $ | 2,596 |
Depreciation and amortization | $ | 270 |  | $ | — |  | $ | 523 |  | $ | — |
(1)During the three and six months ended March 31, 2021, $111,000 and $188,000 was amortized from software costs into O&M. There were no amounts amortized for the three and six months ended March 31, 2020. Sale Leasebacks NJNG utilizes sale leaseback arrangements as a financing mechanism to fund certain of its capital expenditures related to natural gas meters, whereby the physical asset is sold concurrent with an agreement to lease the asset back. These agreements include options to renew the lease or repurchase the asset at the end of the term. Proceeds from sale leaseback transactions are accounted for as financing arrangements and are included in long-term debt on the Unaudited Condensed Consolidated Balance Sheets. NJNG received $4.0 million in December 2019, in connection with the sale leaseback of its natural gas meters. There were no natural gas meter sale leasebacks recorded during the six months ended March 31, 2021. In addition, for certain of its commercial solar energy projects, the Company enters into lease agreements that provide for the sale of commercial solar energy assets to third parties and the concurrent leaseback of the assets. For sale leaseback transactions where the Company has concluded that the terms of the arrangement does not qualify as a sale as the Company retains control of the underlying assets and, as such, the Company uses the financing method to account for the transaction. Under the financing method, the Company recognizes the proceeds received from the buyer-lessor that constitute a payment to acquire the solar energy asset as a financing arrangement, which is recorded as a component of debt on the Unaudited Condensed Consolidated Balance Sheets. The Company continues to operate the solar assets and is responsible for related expenses and entitled to retain the revenue generated from SRECs, TRECs and energy sales. The ITCs and other tax benefits associated with these solar projects transfer to the buyer; however, the payments are structured so that Clean Energy Ventures is compensated for the transfer of the related tax attributes. Accordingly, Clean Energy Ventures recognizes the equivalent value of the tax attributes in other income on the Unaudited Condensed Consolidated Statements of Operations over the respective five-year ITC recapture periods, starting with the second year of the lease. In December 2020, Clean Energy Ventures received proceeds of $12.1 million in connection with the sale leaseback of two commercial solar projects. The proceeds received were recognized as a financing obligation on the Unaudited Condensed Consolidated Balance Sheets. Clean Energy Ventures did not receive proceeds related to the sale leaseback of commercial solar assets during the three and six months ended March 31, 2020. Accumulated Other Comprehensive Loss The following table presents the changes in the components of accumulated other comprehensive (loss) income, net of related tax effects during the three months ended March 31, 2021 and 2020:
(Thousands) | Cash Flow Hedges | Postemployment Benefit Obligation | Total
Balance at December 31, 2020 | $ | (10,166) |  |  | $ | (33,106) |  |  | $ | (43,272) |
Other comprehensive income, net of tax |  |  |  |  |
Amounts reclassified from accumulated other comprehensive income, net of tax of $(79), $(244), $(323), respectively | 263 |  |  | 813 |  | (1) | 1,076 |
Balance at March 31, 2021 | $ | (9,903) |  |  | $ | (32,293) |  |  | $ | (42,196) |
Balance at December 31, 2019 | $ | — |  |  | $ | (31,028) |  |  | $ | (31,028) |
Other comprehensive income, net of tax |  |  |  |  |
Other comprehensive (loss) income, before reclassifications, net of tax of $2,781, $(1,681), $1,100 | (9,711) |  |  | 5,378 |  |  | (4,333) |
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $(72), $(72) | — |  |  | 722 |  | (1) | 722 |
Net current-period other comprehensive income, net of tax of $2,781, $(1,753), $1,028 | (9,711) |  |  | 6,100 |  |  | (3,611) |
Balance at March 31, 2020 | $ | (9,711) |  |  | $ | (24,928) |  |  | $ | (34,639) |
(1)Included in the computation of net periodic pension cost, a component of operations and maintenance expense on the Unaudited Condensed Consolidated Statements of Operations. The following table presents the changes in the components of accumulated other comprehensive (loss) income, net of related tax effects during the six months ended March 31, 2021 and 2020:
(Thousands) | Cash Flow Hedges | Postemployment Benefit Obligation | Total
Balance at September 30, 2020 | $ | (10,397) |  |  | $ | (33,918) |  |  | $ | (44,315) |
Other comprehensive income, net of tax |  |  |  |  |
Amounts reclassified from accumulated other comprehensive income, net of tax of $(191), $(489), $(680), respectively | 494 |  |  | 1,625 |  | (1) | 2,119 |
Balance at March 31, 2021 | $ | (9,903) |  |  | $ | (32,293) |  |  | $ | (42,196) |
Balance at September 30, 2019 | $ | — |  |  | $ | (31,787) |  |  | $ | (31,787) |
Other comprehensive income, net of tax |  |  |  |  |
Other comprehensive (loss) income, before reclassifications, net of tax of $2,781, $(1,681), $1,100 | (9,711) |  |  | 5,378 |  |  | (4,333) |
Amounts reclassified from accumulated other comprehensive income, net of tax of $0, $(289) and $(289) | — |  |  | 1,481 |  | (1) | 1,481 |
Net current-period other comprehensive income, net of tax of $2,781, $(1,970), $811 | (9,711) |  |  | 6,859 |  |  | (2,852) |
Balance at March 31, 2020 | $ | (9,711) |  |  | $ | (24,928) |  |  | $ | (34,639) |
(1)Included in the computation of net periodic pension cost, a component of operations and maintenance expense on the Unaudited Condensed Consolidated Statements of Operations. Change in Accounting Policy Effective October 1, 2020, the Company changed its method of accounting for ITCs at Clean Energy Ventures from the flow through method to the deferral method. Prior to the change, the Company recognized ITCs as a reduction of income tax expense in the period that the qualified solar energy property, to which it relates, was placed in service. Effective with the accounting change, the Company records ITCs as a reduction to the carrying value of the related asset when placed in service and recognizes ITCs in earnings as a reduction to depreciation expense over the productive life of the related property. The deferral method is considered the preferred method per the authoritative guidance as described in ASC 740 - Income Taxes. The change to the deferral method is also consistent with the application of authoritative accounting guidance throughout other reporting segments and promotes proper matching of the benefits of the recognition of the ITC with the expected use of the asset. The Company applied the change in accounting method retrospectively to all prior periods presented. The impact of the change in accounting policy on the Unaudited Condensed Consolidated Statements of Operations during the three months ended March 31, 2020 is as follows:
| As Previously | Effect of | As
(Thousands) | Reported | Change | Adjusted
Depreciation and amortization | $ | 30,784 |  | (3,268) |  | $ | 27,516 |
Total operating expenses | $ | 544,399 |  | (3,268) |  | $ | 541,131 |
Operating income | $ | 95,215 |  | 3,268 |  | $ | 98,483 |
Income before income taxes and equity in earnings of affiliates | $ | 83,273 |  | 3,268 |  | $ | 86,541 |
Income tax (benefit) expense | $ | (1,643) |  | 17,927 |  | $ | 16,284 |
Net income | $ | 88,505 |  | (14,659) |  | $ | 73,846 |
Earnings per common share |  |  |
Basic | $ | 0.93 |  | (0.15) |  | $ | 0.78 |
Diluted | $ | 0.92 |  | (0.15) |  | $ | 0.77 |
The impact of the change in accounting policy on the Unaudited Condensed Consolidated Statements of Operations during the six months ended March 31, 2020 is as follows:
| As Previously | Effect of | As
(Thousands) | Reported | Change | Adjusted
Depreciation and amortization | $ | 58,542 |  | (6,389) |  | $ | 52,153 |
Total operating expenses | $ | 1,057,938 |  | (6,389) |  | $ | 1,051,549 |
Operating income | $ | 196,712 |  | 6,389 |  | $ | 203,101 |
Income before income taxes and equity in earnings of affiliates | $ | 168,986 |  | 6,389 |  | $ | 175,375 |
Income tax (benefit) expense | $ | (1,902) |  | 34,657 |  | $ | 32,755 |
Net income | $ | 177,866 |  | (28,268) |  | $ | 149,598 |
Earnings per common share |  |  |
Basic | $ | 1.90 |  | (0.30) |  | $ | 1.60 |
Diluted | $ | 1.89 |  | (0.30) |  | $ | 1.59 |
The cumulative effect of the change in accounting policy on the Unaudited Condensed Consolidated Balance Sheets as of September 30, 2020 is as follows:
| As Previously | Effect of | As
(Thousands) | Reported | Change | Adjusted
Assets |  |  |
Nonutility plant and equipment, at cost | $ | 1,430,723 |  | (322,211) |  | $ | 1,108,512 |
Accumulated depreciation and amortization, nonutility plant and equipment | $ | (202,507) |  | 61,945 |  | $ | (140,562) |
Property, plant and equipment, net | $ | 3,983,035 |  | (260,266) |  | $ | 3,722,769 |
Other noncurrent assets | $ | 78,716 |  | 6,941 |  | $ | 85,657 |
Total noncurrent assets | $ | 964,435 |  | 6,941 |  | $ | 971,376 |
Total assets | $ | 5,569,802 |  | (253,325) |  | $ | 5,316,477 |
Capitalization |  |  |
Retained earnings | $ | 1,148,297 |  | (200,796) |  | $ | 947,501 |
Common stock equity | $ | 1,844,692 |  | (200,796) |  | $ | 1,643,896 |
Total capitalization | $ | 4,104,158 |  | (200,796) |  | $ | 3,903,362 |
Liabilities |  |  |
Deferred income taxes | $ | 190,610 |  | (52,529) |  | $ | 138,081 |
Total noncurrent liabilities | $ | 931,922 |  | (52,529) |  | $ | 879,393 |
Total capitalization and liabilities | $ | 5,569,802 |  | (253,325) |  | $ | 5,316,477 |
The impact of the change in accounting policy on the Unaudited Condensed Consolidated Statements of Cash Flows as of March 31, 2020 is as follows:
| As Previously | Effect of | As
(Thousands) | Reported | Change | Adjusted
Depreciation and amortization | $ | 58,542 |  | (6,389) |  | $ | 52,153 |
Deferred income taxes | $ | 318 |  | 34,657 |  | $ | 34,975 |
The impact of the change in accounting policy on the Unaudited Condensed Consolidated Statements of Common Stock Equity as of March 31, 2020 is as follows:
| As Previously | Effect of | As
(Thousands) | Reported | Change | Adjusted
Retained Earnings |  |  |
Balance at September 30, 2019 | $ | 1,075,960 |  | (206,102) |  | $ | 869,858 |
Net income | $ | 89,361 |  | (13,609) |  | $ | 75,752 |
Balance at December 31, 2019 | $ | 1,135,475 |  | (219,711) |  | $ | 915,764 |
Net income | $ | 88,505 |  | (14,659) |  | $ | 73,846 |
Balance at March 31, 2020 | $ | 1,194,092 |  | (234,370) |  | $ | 959,722 |
Total |  |  |
Balance at September 30, 2019 | $ | 1,551,717 |  | (206,102) |  | $ | 1,345,615 |
Net income | $ | 89,361 |  | (13,609) |  | $ | 75,752 |
Balance at December 31, 2019 | $ | 1,827,803 |  | (219,711) |  | $ | 1,608,092 |
Net income | $ | 88,505 |  | (14,659) |  | $ | 73,846 |
Balance at March 31, 2020 | $ | 1,889,107 |  | (234,370) |  | $ | 1,654,737 |
Recently Adopted Updates to the Accounting Standards Codification Financial Instruments 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 Company assessed the impact of the guidance on NJR's reserve methodologies and credit policies and procedures for any assets that could be impacted, noting the majority of NJR's financial assets are short-term in nature, such as trade receivables and unbilled revenues. The Company completed its evaluation of this amendment and all subsequent amendments related to this topic and adopted this guidance on October 1, 2020 using the modified retrospective method. The adoption did not result in a cumulative effect adjustment to retained earnings as the current expected lifetime loss estimates were not materially different from the reserves already in place. The Company segregates financial assets that fall within the scope of ASC 326, primarily trade receivables and unbilled revenues due in one year or less, into portfolio segments based on shared risk characteristics, such as geographical location and regulatory environment, for evaluation of expected credit losses. Historical and current information, such as average write-offs, are applied to each portfolio segment to estimate the allowance for losses on uncollectible receivables. Additionally, the allowance for losses on uncollectible receivables is adjusted for reasonable and supportable forecasts of future economic conditions, which can include changing weather, commodity prices, regulations, and macroeconomic factors, such as unemployment rates among others. Fair Value In August 2018, the FASB issued ASU No. 2018-13, an amendment to ASC 820, Fair Value Measurement, which removes, modifies and adds to certain disclosure requirements of fair value measurements. Disclosure requirements removed include the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels and the valuation processes for Level 3 fair value measurements. Modifications include considerations around the requirement to disclose the timing of liquidation of an investee’s assets and the date when restrictions from redemption might lapse. The additions include the requirement to disclose changes in unrealized gains and losses for the period in other comprehensive income for recurring Level 3 fair value measurements held and the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The Company adopted this guidance on October 1, 2020 on a prospective basis. The Company does not have either Level 3 fair value measurements or transfers between Level 1 or Level 2 in its current portfolios, and therefore, this ASU did not have an impact to the Company's financial position, results of operations or cash flows. Compensation - Retirement Benefits In August 2018, the FASB issued ASU No. 2018-14, an amendment to ASC 715, Compensation - Retirement Benefits, which removes disclosures that no longer are considered cost-beneficial, clarifies the specific requirements of certain disclosures and adds new disclosure requirements identified as relevant. The Company adopted this guidance on October 1, 2020. There was no impact to the Company's financial position, results of operations or cash flows. Reference Rate Reform In January 2021, the FASB issued ASU 2021-01, which refines the scope of ASC 848, Reference Rate Reform, and clarifies some of its guidance of global reference rate reform activities. The amendments in this update permits entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, for computing variation margin settlements, and for calculating price alignment interest in connection with reference rate reform activities under way in global financial markets (the “discounting transition”). The amendments in this update are effective upon the ASU issuance through December 31, 2022. There was no impact to the Company's financial position, results of operations or cash flows as a result of its adoption. Other Recent Updates to the Accounting Standards Codification Income Taxes In December 2019, the FASB issued ASU No. 2019-12, an amendment to ASC 740, Income Taxes, which simplifies the accounting for income taxes and changes the accounting for certain income tax transactions, among other minor improvements. The guidance is effective for the Company beginning October 1, 2021, with early adoption permitted. Upon adoption, the amendments will be applied on a prospective basis. The Company is currently evaluating the amendments to understand the impact on its financial position, results of operations, cash flows and disclosures upon adoption. Investments - Equity Method and Derivatives and Hedging In January 2020, the FASB issued ASU No. 2020-01, Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815. The update requires an entity to evaluate observable transactions that necessitate applying or discontinuing the equity method of accounting when applying the measurement alternative in Topic 321. This evaluation occurs prior to applying or upon ceasing the equity method. The update also states that when applying paragraph 815-10-15-141(a) for forward contracts and purchased options, an entity is not required to assess whether the underlying securities will be accounted for under the equity method in accordance with Topic 323 or fair value method under Topic 825 upon settlement or exercise. The guidance is effective for the Company beginning October 1, 2021, with early adoption permitted. The Company is currently evaluating the impact of the adoption of these amendments but does not expect that its pending adoption will have a material effect on its consolidated financial statements. Other In October 2020, the FASB issued ASU 2020-10, which clarifies application of various provisions in the ASC by amending and adding new headings, cross referencing to other guidance, and refining or correcting terminology. It also improves the consistency by amending the ASC to include all disclosure guidance in the appropriate section. The guidance is effective for the Company on October 1, 2021, with early adoption permitted. The Company is currently evaluating the impact of the adoption of these amendments but does not expect that its pending adoption will have a material effect on its consolidated financial statements.

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