Minimum expectation of tax position to be realized

[Table of Contents](#i0fa971ac9e834218957059819155291f_10)Combined Notes to Consolidated Financial Statements(Dollars in millions, except per share data unless otherwise noted)  
Note 1 — Significant Accounting Policiesarrangements are generally not leases. The Registrants do not account for secondary use pole attachments as leases.See Note 11 — Leases for additional information.Income Taxes (All Registrants)Deferred federal and state income taxes are recorded on significant temporary differences between the book and tax basis of assets and liabilities and for tax benefits carried forward. Investment tax credits have been deferred in the Registrants’ Consolidated Balance Sheets and are recognized in book income over the life of the related property. The Registrants account for uncertain income tax positions using a benefit recognition model with a two-step approach; a more-likely-than-not recognition criterion; and a measurement approach that measures the position as the largest amount of tax benefit that is greater than 50% likely of being realized upon ultimate settlement. If it is not more-likely-than-not that the benefit of the tax position will be sustained on its technical merits, no benefit is recorded. Uncertain tax positions that relate only to timing of when an item is included on a tax return are considered to have met the recognition threshold. The Registrants recognize accrued interest related to unrecognized tax benefits in Interest expense, net or Other, net (interest income) and recognize penalties related to unrecognized tax benefits in Other, net in their Consolidated Statements of Operations and Comprehensive Income.Cash and Cash Equivalents (All Registrants)The Registrants consider investments purchased with an original maturity of three months or less to be cash equivalents.Restricted Cash and Cash Equivalents (All Registrants)Restricted cash and cash equivalents represent funds that are restricted to satisfy designated current liabilities. As of December 31, 2021 and 2020, the Registrants' restricted cash and cash equivalents primarily represented the following items:

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| --- | --- | --- | --- | --- | --- |
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| Registrant | Description |
| Exelon | Payment of medical, dental, vision, and long-term disability benefits and Generation project-specific nonrecourse financing structures for debt service and financing of operations of the underlying entities, in addition to the items listed below for the Utility Registrants. |
| ComEd | Collateral held from suppliers associated with energy and REC procurement contracts, any over-recovered RPS costs and alternative compliance payments received from RES pursuant to FEJA, and costs for the remediation of an MGP site. |
| PECO | Proceeds from the sales of assets that were subject to PECO’s mortgage indenture. |
| BGE | Proceeds from the loan program for the completion of certain energy efficiency measures and collateral held from energy suppliers. |
| PHI | Payment of merger commitments, collateral held from its energy suppliers associated with procurement contracts, and repayment of Transition Bonds. |
| Pepco | Payment of merger commitments and collateral held from energy suppliers. |
| DPL | Collateral held from energy suppliers. |
| ACE | Repayment of Transition Bonds and collateral held from energy suppliers. |

Restricted cash and cash equivalents not available to satisfy current liabilities are classified as noncurrent assets. As of December 31, 2021 and 2020, the Registrants' noncurrent restricted cash and cash equivalents primarily represented ComEd’s over-recovered RPS costs and alternative compliance payments received from RES pursuant to FEJA and costs for the remediation of an MGP site, and ACE’s repayment of Transition Bonds. See Note 17 — Debt and Credit Agreements and Note 24 — Supplemental Financial Information for additional information.Allowance for Credit Losses on Accounts Receivables (All Registrants)The allowance for credit losses reflects the Registrants’ best estimates of losses on the customers' accounts receivable balances based on historical experience, current information, and reasonable and supportable forecasts. 195
