[PDF] Company December 31 2014 AEP $ 88.5 APCo 21.6 1&M 7.8

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PUC Project No 18688

Page 300

The new accounting guidance is effective for interim and annual periods beginning after December 15, 2015 with early adoption

permitted. Management adopted ASU 2015-03 in October 2015 and applied the new standard retrospectively for all periods presented.

Prior to adoption, the Registrants included debt issuance costs in Deferred Charges and Other Noncurrent Assets on the balance sheets.

The effect of the reclassification between assets and liabilities for each Registrant as of December 31, 2014 is disclosed in the table

below.

CompanyDecember31, 2014

(in millions)

AEP$88.5

APCo21.6

1&M7.8

OPCo10.3

PSO4.3

SWEPCo8.1

ASU 2015-05"Accountingfor FeesPaid in a Cloud Computing Arrangement"(ASU 2015-05)

In April 2015, the FASB issued ASU 2015-05 providing guidance to customers about whether a cloud computing arrangement includes

a software license. The new accounting guidance is effective for interim and annual periods beginning after December 15, 2015 with

early adoption permitted. Management adopted ASU 2015-05 prospectively, effective January 1, 2016, with no impact on results of

operations, financial position or cash flows. ASU 2015-11 "Simplifyingthe Measurementof Inventory" (ASU 2015-11)

In July 2015, the FASB issued ASU 2015-11 simplifying the guidance on the subsequent measurement of inventory, excluding

inventory measured using last-in, first out or the retail inventory method. Under the new standard, inventory should be at the lower of

cost and net realizable value. The new accounting guidance is effective for interim and annual periods beginning after December 15,

2016 with early adoption permitted. Management does not expect the new standard to impact its results of operations, financial position

or cash flows. Management plans to adopt ASU 2015-11 prospectively, effective January 1, 2017.

ASU 2015-13"Application of the Normal Purchases and Normal Sales Scope Exception to Certain Electricity Contracts within Nodal

EnergyMarkets"(ASU 2015-13)

In August 2015, the FASB issued ASU 2015-13 clarifying whether a contract for the purchase or sale of electricity on a forward basis

should be eligible to meet the physical delivery criterion of the normal purchases and normal sales scope exception when either the

delivery location is within a nodal energy market or the contract necessitates transmission through a nodal energy market and one of the

contracting parties incurs charges (or credits) for the transmission of electricity based in part on locational marginal pricing differences

payable to (or receivable from) an independent system operator. Under the new standard, the use of locational marginal pricing by an

independent system operator does not cause a contract to fail to meet the physical delivery criterion of the normal purchases and normal

sales scope exception. As a result, an entity may elect to designate that contract as a normal purchase or normal sale.

The new accounting guidance is effective upon issuance and applied prospectively.Management has analyzed the impact of this new

standard and determined that it had no impact on the accounting of the Registrants' contracts. Additionally, adoption had no impact on

net income.Management adopted ASU 2015-13 upon its issuance date. 150
300

PUC Project No 18688

Page 301

ASU 2015-17"Balance Sheet Classificationof DeferredTaxes"(ASU 2015-17)

In November 2015, the FASB issued ASU 2015-17 simplifying the presentation of deferred income taxes on the balance sheets. Under

the new standard, deferred tax assets and liabilities are classified as noncurrent on the balance sheets. The new accounting guidance is

effective for annual periods beginning after December 15, 2016 with early adoption permitted. Management adopted ASU 2015-17

upon its issuance date and applied the new standard prospectively. As a result, the new standard impacted the December 31, 2015

presentation of deferred tax assets and liabilities on the balance sheet. ASU 2016-01"Recognition and Measurementof Financial Assetsand Financial Liabilities"(ASU 2016-01)

In January 2016, the FASB issued ASU 2016-01 enhancing the reporting model for financial instruments. Under the new standard,

equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the

investee) are required to be measured at fair value with changes in fair value recognized in net income. The new standard also amends

disclosure requirements and requires separate presentation of financial assets and liabilities by measurement category and form of

financial asset (that is, securities or loans and receivables) on the balance sheet or the accompanying notes to the financial statements.

The amendments also clarify that an entity should evaluate the need for a valuation allowance on a deferred tax asset related to

available-for sale securities in combination with the entity's other deferred tax assets.

The new accounting guidance is effective for interim and annual periods beginning after December 15, 2017 with early adoption

permitted. The amendments should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of

the fiscal year of adoption. Management is analyzing the impact of this new standard and, at this time, cannot estimate the impact of

adoption on net income. Management plans to adopt ASU 2016-01 effective January 1, 2018. 151
301

PUC ProjectNo 18688

3.COMPREHENSIVE INCOMEPage 302

The disclosures in this note apply to all Registrants unless indicated otherwise.

Presentation of Comprehensive Income

The following tables providethe components of changesinAOCI forthe years ended December31, 2015, 2014 and 2013. Allamounts in the following tables are presented net of related income taxes.

AEP Changes in Accumulated Other Comprehensive Income(Loss) by Component

For the Year Ended December 31, 2015

Cash Flow HedgesPension and OPEB

Interest RateSecuritiesAmortizationChangesand ForeignAvailable forof Deferredin FundedCommodityCurrencySaleCostsStatusTotal

(inmillions)Balancein A(X' I asof December 31, 2014$1.6$(19.1)$77$13$7ChiF,.$(232.0)$(103.1)angenair Value RecognizedinAOCI56

Amounts Reclassified from AOCI

(124 -(0.6)(25.7)(20.7).)19^12-(93)Net CurrentPeriodOther ComprehensiveIncome(Loss)(68)19PenidOPFB ..(0.6)1.2(25.7)(30.0)son anIAdjusfiicnt Related to MitchellPlant-

Balance in AOCI as of December 31, 2015$(5.2)

_ $(172) _ $71$

6,06.0

..139.9$(251.7)$(127.1) AEP Changes in Accumulated Other Comprehensive Income (Loss) by Component

For the Year Ended December 31, 2014

Cash Flow HedgesPension and OPEB

Interest RateSecuritiesAmortizationChangesand ForeignAvailable forof Deferredin FundedCommodityCurrencySaleCostsStatusTotal

(inmillions)Balance in AOCI as of December 31, 2013$02$23^

Change in Fair Value Recognized in AOCI

.(.0) (98)

6.8$13195(233.1)^S75.^)

Amounts Rcdassificd from AOCI

.-0.9-1.1(7.8)

Net Current Period Other Comprehensive Income

11.23.9

14_4.8-19.9

Balance in AOCI as of December 31, 2014

.3.9 $16$

0.94.81.112.1.(19.1)b77138 7$(232.0)$(103.1)

AEP Changes in Accumulated Other Comprehensive Income(Loss) by Component

For theYearEnded December 31, 2013

Cash now HedgesPension and OPEB

Interest RateSecuritiesAmortizationChangesand ForeignAvailable forof Deferredin FundedCommodityCurrencySaleCostsStatusTotal

(inmillions)Balance in AGCIas of December 31, 2012$(8.1$(30.2)^42$1120Change in Fair Value Recognized in AOCI104

..$(414.9)D(337.0)

Amounts Reclassified from AOCI

.2.6

1)46(2

2.6176.6192.2

Net Current Period Other Comprehensive Income

83

21"9244

.7.22.621.9176.6216.6 Pension and OPEB Adjustment Related to Mitchell Plant- Balance in AOCI as of December31, 2013$0.2$(230)$68$133

5,25.2

...9$(233.1)$(115.2) 152
302
APCo Changes in Accumulated Other ComprehensiveIncome(Loss) by Component

For the Year Ended December 31, 2015

PUC Project No 18688

Page 303

Cash Flow HedgesPension and OPEB

Interest RateAmortizationChangesand Foreign

CommodityCurrency

of Deferred Cost in Funded sStatusTotal

Balance in AOCI as of December 312014$

(in millions),

Change in lair %'alue Recognized in AOCI

- $3.9$19.2$(I8.1)S5.0

Amounts Reclassified from AOCI(5.7)(5.7)

Net Current Period Other Comprehensive Loss

^(0.3)(1_8)(2.1)

Balancein AOCI as ofDecember 31,2015$

(0.3)(1.8)(57)7.8)

3.6$17.4$(-'3.8)S(2 8)

APCo Changes in Accumulated Other Comprehensive Income(Loss) by Component

For the Year Ended December 31, 2014

Cash Flow HedgesPension andOPEB

InterestRateAmortizationChangesand Foreign

CommodityCurrenc

of Deferredin FundedyCostsStatusTotal

Balance inAOCI as ofDecember 31, 2013(in millions)$0(S3.1S20.^S(20.8) S2.91.7in Fair Value Recognized in AOCI1.7_Amounts Reclassified from AU( 12.74.4(1.8)0.8(1.3)(2.3)Net Current Period OtherComprehensive Income-

(Loss)(0.1)0.8(1.3)2.72.1Balance inAO£7 as of DeccmTier 31, 2014$3.9S19?$(18.f)SS.Q APCo Changes in Accumulated Other Comprehensive Income (Loss) by Component

For the Year Ended December 31, 2013

Cash Flow HedgesPension and OPEB

Interest RateAmortizationChanges

Commodity

and Foreign

Currency

of Deferred C in Funded ostsStatusTotal

Balancein AOCIas ofDecember312012$(in millions),

Change in Fair Value Recognized in AOCI

(06)SIS19.1S(50.5)S(29.9)

Amounts Reclassified from ACK'I0.7_

29.730.4

Net Current Pcnod Other Comprehensive income

07

1.0.42.4

Balancein:1OC1 as of DecembCr 31, 2013

$01$

1.01.429.732.8,3.120.5y(20.3)S2.9

153
303
I&M Changes in Accumulated Other ComprehensiveIncome(Loss) by Component

For the Year Ended December 31, 2015

PUC Project No 18688

Page 304

Cash Flow HedgesPension and OPEB

Interest RateAmortizationChangesand Foreignof Deferredin FundedCommodityCurrencyCostsStatusTotal

Balancein AOCIas of December 31, 2014$$'14^

(in millions) Ch(.4)S5,1$(5.0)$(14.3)ange in Pair Value Recognized in AOCI

Amounts Reclassified from AOCI--(3.5)(3.5)

Net Current Period OthC

--II eromprehensive Income(Loss) Bl

11(3.5)(2.4)aance inAOCIasofDecember31,2015$- $(133)^.5.1$(8.5)$(16.7)

I&M Changes in Accumulated Other Comprehensive Income (Loss) by Component

For the Year Ended December 31, 2014

Cash Flow HedgesPension and OPEB

Interest RateAmortizationChangesand Foreignof Deferredin FundedCommodityCurrencyCostsStatusTotal

Balance in AOCI as of December 31,2013$01$16

(in millions) Chi' .(.0)$.}_y(4.5)ti(155)angenFair Naluc Rcco,nized in AOCI11

Amounts Reclassified from AOCI

(12) --(0.5)0.6

Net Current Pid Oh

.I60.20.5eroter Comprehensive Income(Loss)(0.1)1.60.2(0.5)12Balance in AOCI as ofDecember 31, 2014$--$(144)$

.5.1$(5,0)^(14.3) I&M Changes in Accumulated Other ComprehensiveIncome(Loss) by Component

For the Year Ended December 31, 2013

Cash Flow HedgesPension and OPEB

Interest RateAmortizationChangesand ForeignofDeferredin FundedCommodityCurrencyCostsStatusTotal

Balancein AOCIas of December 37,2012$(04)$

(in millions)

Change in lair Value Recognized in AOCI

05 (19.7)$4,3S(13.0)$^(^8.9)

Amounts Reclassified from AOCI

.2.3-8.511.3

Net Current Period Other Comprehensive income

05

1.40.7_-1

Balancein AOCIas of llecember31,2013

$0.1 3.7 $(160) 0.7

8513.4

.4.9(4.5)$,(155) 154
304
OPCo Changes in Accumulated Other Comprehensive Income (Loss) by Component

For the Year Ended December 31, 2015

PUC Project No 18688

Page 305

Cash Flow HedgesPension and OPEB

Interest RateAmortizationChangesand Foreignof DeferredCommodityCurrencyCot in Funded ssStatusTotal

Balance inAOCI as ofDecember312014(in millions)

Change in Fair Value Recognized in AOCI

^56_$58.4$(58.4) ^5,6 Amounts Reclassified from AOCt--(13)Net Current Period Other Comprehensive Loss

Balance inAOCI as of December 3121115

(1.3) $,4.3$58.4$(58.4)$4.3 OPCo Changes in Accumulated Other Comprehensive Income(Loss) by Component

For the Year Ended December 31, 2014

Cash Flow HedgesPension and OPEB

Interest RateAmortizationChangesand Foreignof DeferredCommodityCurrencyCost in Funded sStatusTotal Balance inAOCfas of December 31, 2013(in millions)

Change in Fair Value Rccoenized in AOCI

0.1$7.0SS8.4

-S'(5 8.4)Q7.1

AjnoantsRcclassitied fi-om A(KI-

Net Current Peri od Other Co mprehensive Loss

(0.1)(1 .4) (01)1Balance inAOCI asof December31, 2014 .(.4)-$- $5 -(1.5) .6S5, 8.4S(>8.a)S5.6 OPCo Changes in Accumulated Other Comprehensive Income(Loss) by Component

For the Year Ended December 31, 2013

Cash Flow HedgesPension andOPEB

Interest RateAmortizationChangesand Foreignof DeferredCommodityCurrencyCost in Funded sStatusTotal

Balance inAOC1 asof December312012(inmillions)

$09,

Change in Fair Value Recognized in AOCI

(.)4i8.1S45.9 10 $(218.8)S(165.7)

Amounts Rcclassitied fiotietAOCl-65.46,4664

Net Current Period Other Comprehensive Income( 1 . 3 )1 2 . 5--1 1 . 2 (Loss)

Distribution of Cook Coal Terminal to Parent

1.0(1.3)12.5

-65.477.6 Distribution ofOPCo Gcncration to Parent^"19.619,t,

Balance in AOCI as of December31, 2013

0.2 $01$

75.475.6.7.0$58 4$(584)^7.1

155
305
PSO Changes in Accumulated Other ComprehensiveIncome(Loss) by Component

For the Year Ended December 31, 2015

Balancein AOCI as ofDccember 31, 2014

Change in Fair Value Recognized in AOCI

Amounts Reclassified from AOCI

Net Current Period Other Comprehensive Loss

Balance inAOCIas ofpecennber 31, 2015

PSO

PUC Project No 18688

Page 306

Cash Flow Hedges

Interest Rate

and Foreign

CommodityCurrencyTotal

(in millions) $5.0S5.0 ^(0.8)(0.8) (0.8)(0.8)$^ $4.2$4.2 Changes in Accumulated Other Comprehensive Income(Loss) by Component

For theYearEnded December 31, 2014

Balance in;tOCI as of December 31, 2013

Chancc irnFair Value Recognized in AOCI

Amounts ReclassifiedI

Net CurrentPciiod Other Comprehensive Loss

Balance in AOCI as of December 31, 2014

PSO

Cash Flow Hedges

Interest Rate

and Foreign

CommodityCurrencyTotal

(in millions) $0.1$5.7$5:8 (0.7)(0.8) (0.1)(0.7)(0.8)$^ $5.0$5;0 Changes in Accumulated Other Comprehensive Income (Loss) by Component

For the Year Ended December 31, 2013

Balance inAOCI as of December 31, 2012

Change inFair Value Recognized in AOCI

AmountsReclassificd from ACC1

Net CurrentPchod Othcr ComprehensiveIncome (Loss)

Balance inAOCI asof December 31, 2013

Cash Flow Hedges

Interest Rate

and Foreign

CommodityCurrencyTotal

(in millions) $- $6:i$6:5

0.1-0.1-(0.8)(0.8)

0.1(0.8)(0.7)

0.1$5.7$5.8

156
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PUC Project No 18688

Page 307

SWEPCo

Changes in Accumulated Other ComprehensiveIncome(Loss) by Component

For the Year Ended December 31, 2015

Cash Flow HedgesPension and OPEB

Interest RateAmortizationChangesand Foreignof Deferredin FundedCommodityCurrencyCostsStatusTotal

(in millions)Balance inAOCI as ofDecember31, 2014$^ $( I ll )S.3.6$--$(7.5)Change in Fair Value Recognized in AOCI-

Amounts Reclassified from AOCI,-.20

(2.9)(2.9) NeC .(1.0)1.0turrent Period Other Comprehensive Income (Loss)-2.0(1.0)(2.9)(1.9)Balance in AOCI as of December31, 2015$- $(9. I)S26$29.(.)S(9.4)

SWEPCo

Changes in Accumulated Other Comprehensive Income (Loss) by Component

For the Year Ended December 31, 2014

Cash Flow HedgesPension and OPEB

Interest RateAmortizationChangesand Foreignof Deferredin FundedCommodityCurrencyCostsStatusTotal

(in millions)Balancein AOCI as of December 31, 2013$$( j 3.3)$45S.0.3S(8_5)Change in Fair Value Rec.ogii ircd in AOCI-

Amounts Rcclassificd from AOCI^ ^(0.3)(0.3)

NtC^._((19)

1.3eurrent Period Other Comprehensive Income

(Loss)2.2(0.9)(0.3)1.0Balance in \OC I as ofDeternbet 31 2014$---$71)$3.6$$(75)

SWEPCo

Changes in Accumulated Other Comprehensive Income (Loss) by Component

For the Year Ended December 31, 2013

Cash Flow HedgesPension and OPEB

Interest RateAmortizationChangesand Foreignof Deferredin FundedCommodityCurrencyCostsStatusTotal (in millions) Balance in AOCI as of December 31, 2012$-:$(15.6)$4$$71Change in FairValue Rccognircd in AOCI01 .(.)$(17.9)

Amounts Reclassified li-om AO CI

(0.1)233)(0

7.47.5

Net Current Period Other Comprehensive Income.-19

(Loss)-2.3(0.3)7.494Balance in AOCI as of IJetember 31, 2013$-$ (13.3)$45S03$

8.,(.5)

157
307
Reclassifications from AccumulatedOther Comprehensive Income

PUC ProjectNo. 18688

Page 308

The following tables provide details of reclassificationsfrom AOCI forthe years ended December 31, 2015, 2014 and 2013. The

amortization of pension and OPEBAOCIcomponents are included in the computation of net periodic pension and OPEB costs. See

Note 8 for additional details.

AEP Reclassifications fromAccumulated Other ComprehensiveIncome (Loss)

Amount of(Gain) Loss

Reclassifiedfrom AOCI

Gains and Losses on Cash Flow Hedges

Commodity:

VerticallyIntegratedUtilitiesRevenues

Generation &MarketintRevenues

PurchasedElectricityfor Resale

RegulatoryAsSets/(Liabilities), Net (a)

Subtotal- Commodity

Interest Rate and Foreign Currency:

Interest Expense

Subtotal- Interest Rate and Foreign Currency

Years Ended December 31,

201520142013

(in millions) $$- $ (1.1) (48.1)59.1(9.7)

29'.1(39.1)7.6

(2.8)- (19.0)17.2(3,2) Reclassificationsfrom AOC1,before Income Tax(Expense) Credit

Income Tax (Expense) Credit

Reclassificationsfrom AOCI, Net ofIncomeTax (Expense) Credit

Pension and OPEB

Amortization of Prior Service Cost (Credit)

Amortization of Actuarial (Gams)-'Losses

Reclassificationsfrom AOCI,before Income Tax(Expense) Credit

IncomeTax (Expense) Credit

Reclassifications from AOCI, Net of Income Tax(Expense) Credit Total Reclassifications from AOCI, Net of Income Tax (Expense) Credit 158

2.96.17.1

2.96.17.1

(16.1)23.33.9 (5.6)8.21.4 (10.5)15.12.5 (19.5)(20.6)(21.0)

21.328.054.7

1.87.433.7

0.62.611.8

1.24.821.9

$(9.3)$19.9$24.4 308

PUC ProjectNo 18688

Page 309

APCo Reclassifications from Accumulated Other Comprehensive Income (Loss)

Amount of(Gain) Loss

Reclassified from AOCI

Years Ended December 31,

201520142013

Gains and Losses on Cash Flow Hedges(in millions)

Commodity:

Electric Generation, Transmission and DistributionRevenues$_$$(0.1)

Purchased Electricity for Resale(0.5)0.1

Regulatory Assetsl(Liabilities), Net (a)(2.2)-

Subtotal-Commodity-(2.7)-

Interest Rate and Foreign Currency:

Interest Expense(0.4)1.21.5

Subtotal-Interest Rate and Foreign Currency(0.4)1.21.5

Reclassificationsfrom AOCI,before Income Tax(Expense) Credit(0.4)(1.5)1.5Income Tax (Expense) Credit(0.1)(0.5)0.5

Reclassifications from AOCI, Net of Income Tax(Expense) Credit(0.3)(1.0)1.0

Pension and OPEB

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