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For the Year Ended September 30, 2005 <br />FMPA is subject to the accounting requirement of FASB Statement No. 71, Accounting for the <br />Effects of Ce Iain Types of Regulation. Billing rates are established by the Board of Directors <br />and are designed to fully recover each project's costs over the life of the project, but not <br />necessarily in the same year that costs are recognized under generally accepted accountina <br />principles (GAAP). Instead of GAAP costs, annual , participant billing rates are structured_ to <br />systematically recover current debt service requirements, operating costs and certain reserves <br />that provide a level rate structure over the life of the project which is equal to the amortization <br />period. Accordingly, certain project costs are classified as deferred on the accompanying <br />Statement of Net Assets as a regulatory asset titled "Net Costs Recoverable from Future <br />Participant Billings" until such time as they are recovered in future rates. Types of deferred <br />costs include depreciation and amortization in excess of bond principal payments, prior capital <br />construction interest cost, bond issuance costs and gains/losses resulting from debt <br />restructuring. <br />In addition, certain billings recovering costs of future periods have been recorded as a <br />regulatory liability or as a reduction of deferred assets on the accompanying Statement of Net <br />Assets. Types of deferred revenues include billings for certain reserve funds and related interest <br />earnings in excess of expenditures from those funds, and billings for nuclear fuel purchases in <br />advance of their use. <br />Bond resolutions require that certain designated amounts from bond proceeds and project <br />revenues be deposited into designated funds. These funds are to be used for specific purposes <br />and certain restrictions define the order in which available funds may be used. Other <br />restrictions require minimum balances or accumulation of balances for specific purposes. At <br />September 30, 2005, all FMPA projects were in compliance with requirements of the bond <br />resolutions. Two minor cash balance exceptions were remedied on October 3, 2005. <br />37 <br />