Impact of New Accounting Standards and Interpretations

The following are accounting standard updates issued by the Financial Accounting Standards Board ("FASB") that TVA adopted during the first quarter of 2017.

The following accounting standards have been issued, but as of December 31, 2016, were not effective and had not been adopted by TVA.



Standard	Description	Effective Date for TVA	Effect on the Financial Statements or Other Significant Matters
Revenue Recognition	This guidance applies to revenue from contracts with customers. The standard requires that an entity recognize revenue to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued a one-year deferral of the effective date. The new effective date allows for either a full retrospective or a modified retrospective application. Early adoption is permitted.	October 1, 2018	TVA is currently evaluating the potential impact of these changes on its consolidated financial statements and related disclosures and the application method to be used.
Inventory Valuation	This guidance changes the model used for the subsequent measurement of inventory from the previous lower of cost or market model to the lower of cost or net realizable value. The guidance applies only to inventory valued using methods other than last-in, first out or the retail inventory method (for example, first-in, first-out or average cost). This amendment is intended to simplify the subsequent measurement of inventory. When the standard becomes effective, it includes interim periods within the fiscal year that begins on that date, and is required to be applied prospectively. Early adoption is permitted.	October 1, 2017	TVA is currently evaluating the potential impact of these changes on its consolidated financial statements.
Lease Accounting	This guidance changes the provisions of recognition in both the lessee and lessor accounting models. The standard requires entities that lease assets — referred to as “lessees” — to recognize on the balance sheet the assets and liabilities for the rights and obligations created by leases with terms of more than 12 months. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification as a finance (similar to current capital leases) or operating lease. However, unlike current lease accounting rules — which require only capital leases to be recognized on the balance sheet — the new standard will require both types of leases to be recognized on the balance sheet. Operating leases will result in straight-line expense, while finance leases will result in recognition of interest on the lease liability separate from amortization expense. The accounting for the owner of the assets leased by the lessee — also known as lessor accounting — will remain largely unchanged from current lease accounting rules. When the standard becomes effective, it will include interim periods within that fiscal year, and will be required to be applied using a modified retrospective transition. Early adoption is permitted.	October 1, 2019	TVA is currently evaluating the potential impact of these changes on its consolidated financial statements and related disclosures.

Description

Effective Date for TVA

Effect on the Financial Statements or Other Significant Matters

Consolidation

This guidance amends the consolidation analysis for VIEs as well as voting interest entities. The standard reduces the number of consolidation models through the elimination of the indefinite deferral for certain entities that was previously allowed and places more emphasis on risk of loss when determining a controlling financial interest. This guidance allows for either a full retrospective or a modified retrospective application.

October 1, 2016

The adoption of the standard did not materially impact TVA's financial condition, results of operations, or cash flows.