TVA, the nation’s largest public power provider, said it will restate its financial statements for fiscal 2006 and 2007, as well as for some recent quarterly periods, to correct errors in the way it estimated unbilled revenues.
“These revisions do not change our financial health,” CFO Kim Greene said, noting that there will be no impact on TVA’s operations or net cash flow from operating activities. “The restatements involve accounting estimates that have no impact on TVA’s cash position or its ability to meet obligations to creditors, customers, investors, or other stakeholders.”
Also known as the Tennessee Valley Association, Knoxville-based TVA is completely self-financing. It provides power to large industries and 159 power distributors that serve approximately 8.8 million consumers in seven southeastern states. TVA also manages the Tennessee River and its tributaries to provide multiple benefits, including flood damage reduction, navigation, water quality and recreation.
Because of the delay between TVA’s delivery of power to distributors and the reporting by distributors of their subsequent sales, TVA must estimate unbilled revenue at the end of each financial reporting period. It explained that in September 2006 it implemented a new estimating procedure for unbilled revenue. This new procedure resulted in an increase of $232 million in unbilled revenue for fiscal 2006.
TVA said that it has now determined that the procedure overestimated the number days of revenue outstanding, and therefore the estimate of unbilled revenue.
Its initial estimate is that the errors resulted in an overstatement of net income for the fiscal year ended Sept. 30, 2006, and understatements of net income for the fiscal year ended Sept. 30, 2007, and the six months ended March 31, 2008. TVA said it will perform additional analysis on unbilled revenue estimates, expand management review of the assumptions that go into the estimates, and further document procedures for managing changes to the process for estimating unbilled revenue.
