Page 13 - Microsoft Word - {0F7FAA1B-FD7E-4F4D-8339-6B60C1918B39}.docx

Associated Electric Cooperative, Inc.

Notes to Consolidated Financial Statements
December 31, 2022 and 2021
(In Thousands of Dollars)

Nonutility Property

Nonutility property consists of land not currently used for utility purposes. In 2022 and 2021, there
were no material purchases or sales of nonutility property.

Asset Retirement Obligations

Associated has asset retirement obligations arising from regulatory requirements to perform asset
retirement activities at the time certain property is disposed. A liability is initially measured at fair
value and is subsequently adjusted for accretion expense and changes in the amount and timing of
the estimated cash flows. The corresponding asset retirement costs are capitalized as part of the
carrying amount of the long-lived asset and depreciated over the asset’s useful life. Associated’s
asset retirement obligations include the costs associated with asbestos removal and disposal,
reclamation of ash disposal areas, reclamation of landfill sites, reclamation of a biosolids lagoon
site, removal of fuel oil tanks, and removal of certain water lines contained in Associated’s
generating plants (see Note 4).

Capitalized Interest

Interest incurred in connection with the construction of capital assets is capitalized and totaled
$1,403 and $3,106 in 2022 and 2021, respectively. The average capitalization rates for 2022 and
2021 were 2.872 percent and 2.941 percent, respectively, which is based on Associated’s cost of
financing. Associated calculates capitalized interest based on a formula prescribed by RUS.

Restricted and Designated Assets

Restricted and designated assets consist of assets pledged for specific purposes including
investments in patronage allocations from various membership cooperatives, deferred
compensation, support of borrowings and to satisfy various contractual requirements. The
classification between current and noncurrent assets is determined by the maturity of the
underlying asset.

10