Company: TVC
Filing Date: 2025-11-13
Form Type: 10-K
Source: 0001376986-25-000056
Chunk: 480

Company: Tennessee Valley Authority
Filing Date: 2025-11-13
Form: 10-K
Item: Item 7
Chunk 480
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 managers’ valuation policies and procedures, as well as portfolio performance. To test the valuation of the alternative investments, our audit procedures included, among others, comparing fund returns to selected relevant benchmarks and understanding variations as well as comparing fair values from the most recent audited financial statements to the Company's estimated fair values. We obtained an understanding of the changes to the holdings in the investment portfolio and changes in investment strategies. We assessed the historical accuracy of management's estimates by comparing actual fair values to previous estimates. We evaluated for contrary evidence by confirming the fair values of the investments and ownership interest directly with the trustee and with a sample of investment managers.   

Valuation of Non-Nuclear Asset Retirement ObligationsDescription of the MatterAt September 30, 2025, the Company’s non-nuclear asset retirement obligations (ARO) totaled $6.4 billion. As more fully described in Note 11 and Note 14 to the consolidated financial statements, the Company’s initial obligation associated with the retirement of non-nuclear generating sites, ash impoundments, transmission substation and distribution assets, and certain general facilities is recognized at fair value at the time the obligation is incurred using various judgments and assumptions.  Revisions to the obligation are made whenever factors indicate that the timing or amounts of estimated cash flows have changed materially.Auditing the valuation of non-nuclear ARO was challenging because of the judgmental nature of the assumptions used in the Company’s measurement process.  In particular, the obligation’s fair value is determined using a discounted cash flow technique which includes significant estimations and assumptions, including the costs of decommissioning, the method of decommissioning, and the timing of related cash flows.        

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How We Addressed the Matter in Our AuditWe obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s valuation of its non-nuclear ARO. For example, we tested controls over management’s review of the significant estimations and assumptions described above and the relevant data inputs used in the calculations. To test the valuation of the non-nuclear ARO, our audit procedures included, among others, with the assistance of engineering specialists, evaluating the methodology used and testing the significant assumptions described above and the underlying data used by the Company in its estimates. To assess the costs of decommissioning, the method of decommissioning, and the timing of related cash flows, we evaluated changes from the prior estimate, if one existed, compared the consistency between timing of activities and the corresponding closure dates, evaluated the