expenses. Con Edison of New York’s pending petitions for gas and steam rate increases include, and the company anticipates that its petition for an electric rate increase will include, a pro- posal for deferred accounting treatment of such expenses. See “Regulatory Matters”, below. Long-Lived Assets” requires that certain long-lived assets must be tested for recoverability whenever events or changes in cir- cumstances indicate their carrying amounts may not be recov- erable. The carrying amount of a long-lived asset is deemed not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Under SFAS No. 144 an impairment loss is recog- nized if the carrying amount is not recoverable from such cash flows, and exceeds its fair value, which approximates market value. Pension benefits are provided through a pension plan main- tained by Con Edison to which Con Edison of New York, O&R and the unregulated subsidiaries make contributions for their participating employees. Pension accounting by the Utilities includes an allocation of plan assets. An actuarial valuation of the plan’s funded status as of December 31, 2003, showed that the fair value of the plan’s assets exceeded, by $712 mil- lion, the plan’s accumulated benefit obligation (ABO) at that date. However, the fair market value of the plan assets could fall below the plan’s ABO in future years. In that event, each of the Utilities would be required, under SFAS No. 87, to accrue a liability equal in amount to the difference between its share of the fair value of the plan assets and its portion of the ABO, plus, in the case of Con Edison of New York, its total prepaid pension costs, through a non-cash charge to other compre- hensive income (OCI). The charge to OCI, which would be net of taxes, would not affect net income for common stock.  The adverse market conditions affecting Con Edison’s unregu- lated telecommunications and generation businesses led to the testing of their assets for impairment in 2003. A critical ele- ment of this test is the forecast of future undiscounted cash flows to be generated from the long-lived assets. Forecast of these cash flows requires complex judgments about future operations, which are particularly difficult to make with respect to evolving industries such as the energy-related and telecom- munications businesses. Under SFAS No. 144, if alternative courses of action are under consideration or if a range is esti- mated for the amount of possible future cash flows, the proba- bility of those possible outcomes must be weighted. As a result of the tests performed in 2003, Con Edison recognized impair- ment charges of $159 million ($94 million after-tax) for the assets of its unregulated telecommunications and generation businesses. See Note H to the financial statements. The Companies were not required to make cash contributions to their pension plans in 2003 under funding regulations and tax laws. O&R made a discretionary contribution of $18 million to the plan in 2003. In 2004, O&R and Con Edison’s unregulat- ed subsidiaries expect to make discretionary contributions of $22 million and $2 million, respectively. The Companies’ policy is to fund its accounting cost to the extent it is tax deductible.  The Companies apply SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities,” as amended, and other related accounting pronouncements to their deriva- tive financial instruments. The Companies use derivative finan- cial instruments to hedge market price fluctuations in related underlying transactions for the physical purchase and sale of electricity and gas and interest rate risk on certain debt securi- ties. See “Financial and Commodity Market Risks” below and Note P to the financial statements. SFAS No. 5, “Accounting for Contingencies,” applies to an existing condition, situation or set of circumstances involving uncertainty as to possible loss that will ultimately be resolved when one or more future events occur or fail to occur. Known material contingencies include the Utilities’ responsibility for hazardous substances, such as asbestos, polychlorinated biphenyls (PCBs) and coal tar that have been used or generat- ed in the course of operations, workers’ compensation claims and Con Edison’s legal proceedings relating to its October 1999 merger agreement with Northeast Utilities. See Notes G, K, Q, R, S, T and W to the financial statements. In accordance with SFAS No. 5, the Companies have accrued estimates of losses relating to the contingencies as to which loss is proba- ble and can be reasonably estimated and no liability has been accrued for contingencies as to which loss is not probable or cannot be reasonably estimated. Con Edison adopted SFAS No. 142, “Goodwill and Other Intangible Assets” on January 1, 2002. In accordance with this standard, Con Edison ceased amortizing goodwill and began testing remaining goodwill balances for impairment on an annual basis. Con Edison completed initial goodwill impairment tests and recorded a loss of $34.1 million ($20.2 million after tax) as of January 1, 2002, relating to certain generation assets owned by an unregulated subsidiary. The unamortized goodwill of $405.8 million, relating to the acquisition of O&R, was tested for impairment and determined not to be impaired. See Note L to the financial statements.  SFAS No. 144, “Accounting for the Impairment or Disposal of Accounting for Long-Lived Assets Accounting for Goodwill Accounting for Derivative Instruments Accounting for Contingencies Con Edison Annual Report 2003 25