Images de page
PDF
ePub
[graphic][subsumed][subsumed][subsumed]
[blocks in formation]

URANIUM ENRICHMENT ACTIVITY NOTES TO FINANCIAL STATEMENTS

I. Description of Entity and Significant Accounting
Policies

A. Description of Entity. Uranium Enrichment
Activity (UEA) is a segment of the U.S. Depart
ment of Energy (DOE) devoted to the enrich
ment of uranium hexafluoride in the isotope
U-235 for commercial power reactor operators
and for Government program users. UEA is part
of the DOE and does not exist as a separate
legal entity. For financial reporting purposes,
the entity is defined as those activities which
provide enriching services to its customers.
DOE prepares its financial statements by
extracting and adjusting UEA-related data from
the financial records of DOE and its contractors.
UEA is authorized by section 161v of the
Atomic Energy Act of 1954, as amended,
which requires the establishment of criteria set-
ting forth the general terms and conditions
applicable to the provision of uranium enrich-
ment services. These criteria have been estab-
lished by DOE. The Act requires UEA to
recover the Government's costs over a reason-
able period of time, which DOE has established
to be a 10-year period.

B. Pricing Policy. The pricing methodology arrives at a charge that will recover the cost over the 10-year pricing period. This methodology will result in losses in some years and profits in other years. In order to ensure compliance with the law, whenever an operating loss occurs, future charges include this loss as a cost. Conversely, whenever a profit is realized, the amount of the profit is included as a negative cost in future charges. As of September 30, 1985, and 1984, amounts to be carried over for future pricing are approximately a $295 million loss to be charged and a $525 million profit to be credited, respectively. These amounts are a function of the pricing pol icy and are not specifically identified in the Statement of Operations.

DOE has determined that capital investment of $2.9 billion in FY 1985 and $1.2 billion in FY

1984 is not recoverable and is therefore excluded from the pricing calculation. While the exclusion of these costs has been challenged as being inconsistent with the Atomic Energy Act. DOE management believes these exclusions are proper and consistent with the UEA criteria and the Atomic Energy Act.

C. Related Parties. UEA sells separative work to
other DOE programs at a price which is less
than sales to commercial customers. The differ-
ence, representing depreciation and imputed
interest, reduces UEA's invested capital. For the
years ended September 30, 1985, and 1984,
UEA recorded revenue of $143 million and
$140 million for separative work sold to other
DOE programs and reduced UEA's invested
capital by $53 million and $94 million, respec-
tively.

UEA receives annual congressional appropria
tions for operating and capital expenses which
are offset by UEA revenue collections. For the
year ended September 30, 1985, unexpended
appropriations decreased by $147 million to
$1,080 million, and invested capital increased
by $329 million. For the year ended September
30, 1984, unexpended appropriations increased
by $394 million to $1,227 million, and invested
capital increased by $79 million.

The year-end fund balance in the U.S. Treasury.
representing UEA unpaid obligations and other
unexpended appropriations, is reported on the
UEA Balance Sheet (Exhibit I) as "Funds in U.S.
Treasury."

D. Inventories. UEA inventories consist of the following:

1. Separative work units (SWU) are a measure
of the separation achieved in a uranium
enrichment facility after separating a given
quantity of uranium containing 0.7110 per-
cent U-235 (normal) into two components,
one having a higher percentage of U-235
(enriched) and one having a lower percent.
age U-235 (depleted).

Customer-owned normal assay uranium is delivered to UEA enrichment facilities where it is processed (enriched). Unit costs of SWU in inventory and cost of sales are determined based on average costs.

2. A change in SWU measurement was effected
in FY 1985. UEA adopted a standard SWU
quantity measurement of 0.2 percent ref:r-
ence tails assay for SWU in inventory and
transactions. The new measurement satisfies
the accounting objectives of reasonable valu-
ation of inventories and the matching of
costs and revenues. Also, the change in
SWU measurement does not alter the nonfi-
nancial accounting for uranium. From FY
1974 through FY 1984, the specific identifi-
cation (SID) procedures were used to track
inventory quantities throughout the inven-
tory cycle at the actual operating tails assay.
The SID inventory procedures are no longer
practical to administer due to management's
decision to vary the operating tails
frequently in order to economically optimize
the enrichment process.

In order to implement the new inventory
measurement system, inventory of SWU
quantities as of September 30, 1984, has
been restated to the 0.2 percent reference
tails assay level.

3. Uranium includes amounts required to sup port the continuity of the enrichment process and preproduced enriched product. Also included are customer-provided uranium and DOE uranium required to supplement the customers' uranium in production at tails assays higher than that selected by the cus

tomer.

Government-owned uranium available to UEA from the DOE stockpile may be utilized to produce enriched uranium at tails assays higher than contracted for by the customer. The Government-owned uranium utilized in this manner is referred to as "supplemental feed." During FY 1985, all uranium included

in product deliveries to customers was supplied by the customers, and during FY 1984, supplemental feed revenues amounted to $27 million and related costs amounted to $19 million.

On February 6, 1985, the Secretary of Energy approved a policy, effective October 1, 1984, whereby 50 percent of the Government-owned uranium inventory will be reserved for defense needs. As a result, 26,500 metric tons of uranium with a cost of $689 million, less FY 1985 defense program deliveries of $44 million, are included in the inventory and classified as a liability on the Balance Sheet (Exhibit (). Government-owned uranium of $1.1 billion in FY 1985 and $1.0 billion in FY 1984, in excess of current production needs but stockpiled at the UEA facilities for future use, is reported as an "Other Asset" on the Balance Sheet (Exhibit I). UEA's Balance Sheet also includes customer-supplied uranium valued at $1.2 billion in FY 1985 and $1.0 billion in FY 1984. UEA is committed to return equivalent material to its trade cus tomers after enrichment services are performed.

4. Production stores and process spare parts consist of items normally required to operate and maintain a large industrial complex. Process spare parts are those items which are unique, require long lead times for reorder, and are critical to the continuity of plant operations. A reserve for obsolescence is established, and the costs of these items are charged to operations over a period representing the useful life of the process.

E. Plant and Equipment.

1. Gas centrifuge technology was discontinued
as a uranium enrichment effort as of June 5,
1985, based on a decision announced by the
Secretary of Energy. Accordingly, a loss of
$3.6 billion was recognized on the FY 1985

Statement of Operations (Exhibit II), includ ing $300 million cost for contract termina

tions.

2. A loss on capital investment of $1.2 billion was recognized in FY 1984. Because of the international forces of supply and demand, DOE determined that it could not sell enriching services at a price which would recover the total remaining net investment in the enriching facilities and the associated imputed interest. Accordingly, a reserve for unrecoverable capital cost was established during FY 1984 as a reduction in plant and capital investment. Effective April 1, 1984, a portion of depreciation expense determined to be representive of the unrecoverable costs was charged to the reserve and is, therefore, not included in the operating results for the period as presented on the Statement of Operations. For FY 1985 and FY 1984, these allocations were $50 million and $27 million, respectively. In FY 1985, the reserve balance of $1,123 million was reclas. sified to accumulated depreciation to decrease the net book value of the gaseous diffusion plants.

On June 5, 1985, the Secretary of Energy announced major decisions about the UEA's future, including placing the Oak Ridge Gaseous Diffusion Plant (ORGDP) in a standby status prior to the end of FY 1985. ORGDP's production ended in July 1985. Also, current operating plans show that only partial capacity utilization will continue at the Paducah and Portsmouth Gaseous Diffusion Plants through FY 2005, when new technologies are scheduled to begin produc tion. The accounting for these activities is a part of the $1.2 billion described in the preceding paragraph.

F. Depreciation. Depreciation expense is calculated on a straight-line basis in accordance with estab lished standard service lives. Buildings have service lives of 10 to 50 years, and equipment has service lives of 5 to 40 years. Economic service lives for the diffusion production facilities do not extend beyond the year 2005 when other technologies are scheduled to begin pro duction.

G. Advances from Customers. Under the terms of toll enriching contracts, customers are required

to make a part of the SWU payment in advance

[blocks in formation]
« PrécédentContinuer »