Company: EAI
Filing Date: 2025-02-18
Form Type: 10-K
Source: 0000065984-25-000012
Chunk: 426

Company: ENTERGY ARKANSAS, LLC
Filing Date: 2025-02-18
Form: 10-K
Item: Item 7
Chunk 426
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 line.Allowance for Funds Used During Construction (AFUDC)AFUDC represents the approximate net composite interest cost of borrowed funds and a reasonable return on the equity funds used for construction by the Registrant Subsidiaries.  AFUDC increases both the plant balance and earnings and is realized in cash through depreciation provisions included in the rates charged to customers.Certain large industrial customers make advance payments to provide Entergy and the Utility operating companies the return on their investment in utility plant that they would otherwise have received by the recognition of AFUDC.  When such advances are made, AFUDC is not added to the associated utility plant, which results in a lower amount of utility plant recovered through utility rates.  These advance payments are initially recorded as a current liability and then amortized to income over the construction period of the related plant.  As of December 31, 2024, Entergy and Entergy Louisiana have $152 million in such advances from customers recorded as current liabilities on their respective consolidated balance sheets.Income TaxesEntergy Corporation and the majority of its subsidiaries file a United States consolidated federal income tax return.  Each tax-paying entity records income taxes as if it were a separate taxpayer and consolidating adjustments are allocated to the tax filing entities in accordance with Entergy’s intercompany income tax allocation agreements.  Deferred income taxes are recorded for temporary differences between the book and tax basis of assets and liabilities, and for certain losses and credits available for carryforward.Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates in the period in which the tax or rate was enacted.  See the “Other Tax Matters - Tax Cuts and Jobs Act” section in Note 3 to the financial statements for discussion of the effects of the enactment of the Tax Cuts and Jobs Act in December 2017.The benefits of investment tax credits are deferred and amortized over the average useful life of the related property, as a reduction of income tax expense, for such credits associated with rate-regulated operations in accordance with ratemaking treatment.Accounting for the Effects of RegulationEntergy’s Utility operating companies and System Energy are rate-regulated entities that are required to reflect the effects of rate regulation in their financial statements, including the recording of regulatory assets and liabilities, as the Utility operating companies and System Energy have