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Brown, Williams, Moorhead & Quinn, Inc.

Brown, Williams, Moorhead & Quinn, Inc. has prepared a report comparing the Federal Energy Regulatory Commission's (FERC) financial accounting and related regulations for natural gas companies with Generally Accepted Accounting Principles (GAAP) for such entities.

The FERC's accounting requirements for natural gas companies are contained primarily in the Uniform System of Accounts (USoA) prescribed for Natural Gas Companies under the Natural Gas Act (NGA). The USoA can be found at 18 CFR Part 201.  The USoA is a comprehensive basis of accounting other than GAAP that is promulgated by the FERC under authorities granted to it by the NGA.  The objective of the USoA and FERC's related financial reporting requirements, is to make financial accounting information about Natural Gas Companies available to it and others that will assist the FERC in carrying out its broad responsibilities under the NGA.

Generally Accepted Accounting Principles (GAAP) are a common set of accounting principles, standards and procedures used to prepare financial statements and handle specific accounting situations.  In the United States, authoritative accounting standards are established by the Financial Accounting Standards Board under authorities granted to it by the United States Securities and Exchange Commission (SEC).  Other sources of GAAP include pronouncements of the SEC, accounting textbooks/literature and generally accepted industry practice for recognizing and reporting the economic effect of transactions events and circumstances.  All of the various sources of GAAP are relied upon by the accounting profession based upon a hierarchy established by the FASB in its Statement of Financial Accounting Standards No. 168.  A focal point of GAAP is general purpose financial reporting.  The objective of general purpose financial reporting is to provide current and potential investors and creditors with useful information that can guide them in making decisions on investments, lending and other resource allocation matters.

Differences exists between USoA and GAAP because FERC information needs, and the information needs of potential investors and creditors may not be the same in some instances.  This report attempts to identify the majority of those key differences, while acknowledging that given the comprehensive nature of the USoA and GAAP, additional differences beyond those identified in this report may exist.  Furthermore, many of the differences identified in this report involve areas in which FERC requirements are simply more prescriptive than GAAP or vice versa.  These differences therefore should not be construed as conflicts between FERC requirements and GAAP.

If you would like to obtain a copy of this comprehensive report, please contact:

Barry E. Sullivan, President or Alan Lovinger, Vice President of BWMQ at 202-775-8994.