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SEC Filings

TERRAFORM GLOBAL, INC. filed this Form 10-K on 12/21/2016
Entire Document

commencement of commercial operation. Deferred financing costs capitalized for the year ended December 31, 2015 were $42.7 million. Deferred financing costs capitalized during construction for the year ended December 31, 2014 and 2013 were not material. Amortization of deferred financing costs recorded as interest expense was $21.2 million, $1.1 million and $0.8 million during the years ended December 31, 2015, 2014 and 2013, respectively.
Asset Retirement Obligations
The Company operates under Power Purchase Agreements (“PPAs”) with a limited number of customers that include a requirement for the removal of the power plants at the end of the term of the agreement. Asset retirement obligations are recognized at fair value in the period in which they are incurred and the carrying amount of the related long-lived asset is correspondingly increased. Over time, the liability is accreted to its expected future value. The corresponding power plant is capitalized at inception and is depreciated over its useful life.
Revenue Recognition
Power Purchase Agreements
The Company’s revenues are obtained through the sale of energy (based on Megawatts "MW") pursuant to terms of PPAs or other contractual arrangements which have a weighted average remaining life of 17 years as of December 31, 2015. All PPAs are accounted for as operating leases, have no minimum lease payments and all of the rental income under these leases is recorded as revenue when the electricity is delivered.
Government Incentives
Certain revenue is the result of government incentives or tariffs. Chinese feed-in-tariff programs for both solar and wind energy consist of two components: a base tariff and a green tariff. These two components provide for a flat tariff of Chinese yuan renminbi 0.5521.0/kWh. The green tariff makes up the difference between the base tariff and the fixed tariff. The base tariff is calculated by the provincial power company on the basis of the prevailing cost of the desulfurized coal power supply in the province and is recognized as electricity is delivered. The green tariff is recognized as revenue when government payments are received. Revenue recognized as a result of these government incentives was $9.3 million, $11.6 million and $12.3 million for the year ended December 31, 2015. 2014 and 2013, respectively.
Income Taxes
The Company accounts for income taxes using the liability method in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 740, Income Taxes (“ASC 740”), which requires that it use the asset and liability method of accounting for deferred income taxes and provides deferred income taxes for all significant temporary differences.
The Company reports certain of its revenues and expenses differently for financial statement purposes than for income tax return purposes, resulting in temporary and permanent differences between the Company’s financial statements and income tax returns. The tax effects of such temporary differences are recorded as either deferred income tax assets or deferred income tax liabilities in the Company’s consolidated balance sheets. The Company measures its deferred income tax assets and deferred income tax liabilities using income tax rates that are currently in effect. The Company believes it is more likely than not that the results of future operations will generate sufficient taxable income which includes the future reversal of existing taxable temporary differences to realize deferred tax assets, net of valuation allowances. A valuation allowance is recorded to reduce the net deferred tax assets to an amount that is more-likely-than-not to be realized.
Tax benefits are recognized when it is more-likely-than-not that a tax position will be sustained upon examination by the authorities. The benefit recognized from a position that has surpassed the more-likely-than-not threshold is the largest amount of benefit that is more than 50% likely to be realized upon settlement. The Company recognizes interest and penalties accrued related to uncertain tax benefits as a component of income tax expense.
Changes to existing net deferred tax assets or valuation allowances or changes to uncertain tax benefits are recorded to income tax expense.
The Company is involved in conditions, situations or circumstances in the ordinary course of business with possible gain or loss contingencies that will ultimately be resolved when one or more future events occur or fail to occur. See Note 5 - Deposits for Acquisitions, which describes circumstances surrounding certain payments to SunEdison and the related provision