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In October 2002, TXU Corp. made a determination to discontinue its operations in Europe. The results of TXU Europe are reported as discontinued operations for all periods presented. See Note 3 regarding events related to TXU Europe.
TXU Corp. has adopted a new income statement format. Certain previously reported amounts have been reclassified to conform to current classifications. The following summarizes the components of the new line items: Cost of energy sold and delivery fees Includes costs of nuclear, coal and gas fuel used by generation plants, energy purchased for resale and delivery fees paid to electricity delivery businesses. Operating costs Includes all labor and overhead costs incurred to perform activities directly related to power generation and the transmission and distribution of electricity and gas. Selling, general and administrative expenses Includes all labor and related overhead costs incurred to perform support services such as finance, accounting, portfolio management, meter reading, customer billing, customer service, collections, marketing, information technology, legal, regulatory, environmental and corporate facilities. Franchise and revenue-based taxes Includes state and local gross receipts tax and franchise taxes. Presentation of Revenues In June 2002, the EITF reached a consensus on certain aspects of EITF Issue No. 02-3 regarding the presentation of trading activities in the statement of income. The new rules were effective on July 1, 2002, and required that all trading contracts (as defined by EITF Issue No. 98-10, “Accounting for Contracts Involved in Energy Trading and Risk Management Activities”), whether or not physically settled, be recorded net upon settlement, rather than gross as a sale and cost of sale. TXU Corp. has historically recorded financial contracts net, but has recorded those contracts that provide for physical delivery gross upon settlement. Prior period amounts have been reclassified to conform to this new reporting requirement. Transactions affected by the new reporting requirements represent contracts that provided for physical delivery but were settled financially without delivery, as well as contracts physically settled but classified as trading activities. With the rescission of EITF Issue No. 98-10 (see discussion below under “Financial Instruments and Mark-to-Market Accounting”), the EITF modified Issue No. 02-3 to apply to financial instruments that are derivatives and entered into for trading purposes effective January 1, 2003. The new reporting requirements have no impact on TXU Corp.’s gross margin, net income or cash provided by operating activities. (Also see “Changes in Accounting Standards” below.) The table below summarizes the impact on TXU Corp.’s operating revenues and cost of energy sold and delivery fees for prior years of the new reporting rules under EITF Issue No. 02-3 and the discontinuance of TXU Europe operations.
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