Section 407-720-2 - DefinitionsA. Deferral period. Accounting intervals during which expenditures awaiting final disposition are capitalized on a company's books of account, rather than being charged to expense as would normally be required.B. External funding. The term "external trust fund" or "external funding" means a fund created by a utility which is under the direction of a trustee independent of the utility. The management of cash or other assets placed in such a trust are outside the control of the utility.C. FASB. The Financial Accounting Standards Board (FASB) is the private sector organization designated to establish standards for financial accounting and reporting. FASB is officially recognized as the authoritative standard setting body by the Securities and Exchange Commission (Accounting Series Release No. 150).D. GAAP. Accounting standards are formally embodied in a hierarchical set of rules and procedures known as Generally Accepted Accounting Principles (GAAP).E. Internal Funding. A method of providing for the payment of a liability through the creation of a reserve account on the books of a company. The company may or may not, at its discretion, segregate cash or other specific assets to meet the established liability, but control of those assets remains within the purview of the utility.F. Least-Cost Option. Regarding the choice between external and internal funding, the least-cost option is that option that is more likely to achieve the lowest present value revenue requirements given a reasonable range of possible futures. Risk and other appropriate factors must be considered in determining what is the least-cost option.G. Other Post-Employment Benefits (OPEBs). Benefits other than pensions provided to retired employees and their dependents. These may include, but are not limited to, benefits such as health care, life insurance and housing allowances. OPEBs are sometimes also referred to as Postretirement Benefits Other than Pensions (PBOPs).H. Pay-as-you-go approach. A method of accounting whereby entries are made to the books of account only when the cash account is affected.I. SFAS 106. SFAS 106, Employer's Accounting for Postretirement Benefits Other Than Pensions is a pronouncement of the Financial Accounting Standards Board that establishes accounting rules and procedures to be used in recognizing the effects of the costs of OPEBs for financial reporting purposes. This pronouncement requires an "accrual" approach whereby the present value of the OPEB obligation is estimated through the use of actuarial techniques, with the income statement reflecting both annual accruals and changes in the balance sheet accounts from year to year.J. Regulatory Asset. An asset established on a company's books, pursuant to a directive from a regulatory body having jurisdiction over the company, resulting from the capitalization of an expenditure that would be expensed under standard accounting procedures.K. Transition Obligation. The transition obligation is the actuarial present value of the OPEB costs attributable to employee service rendered up to the date of adoption of SFAS 106 (that is, prior service costs representing the OPEBs already earned by existing and retired employees). The transition obligation is also known as the Accumulated Postretirement Benefit Obligation (APBO).65-407 C.M.R. ch. 720, § 2