Opening of Proposals - WWTP Solar Guaranteed Energy Savings Contract Proj. No. 124-015 - Ameresco

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Table of Contents AMERESCO, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands, except per share amounts) the carrying value exceeds the fair value of the asset group. Impairment losses are reflected in selling, general, and administrative expenses in the consolidated statements of income. See Note 7. for disclosure on our long-lived asset impairment during the year ended December 31, 2023. Government Grants From time to time, we have applied for and received cash grant awards from the U.S. Treasury Department (the "Treasury") under Section 1603 of the American Recovery and Reinvestment Act of 2009 (the "Act'). The Act authorized the Treasury to make payments to eligible persons who place in service qualifying renewable energy projects. The grants are paid in lieu of investment tax credits. All of the cash proceeds from the grants were used and recorded as a reduction in the cost basis of the applicable energy assets. For tax purposes, the Section 1603 payments are not included in federal and certain state taxable income and the basis of the property is reduced by 50% of the payment received. We last received a Section 1603 grant during the year ended December 31, 2014. No further Section 1603 grant payments are expected to be received as the program has expired and no repayments will be required. We received grant proceeds from the Canadian government in connection with the construction of our energy assets in Canada during the years ended December 31, 2019 and 2020. We have a contribution agreement in place with Natural Resources Canada to fund 50% of the construction costs on a specific pilot project in Ontario. Cash proceeds are recorded as a deferred grant liability. Following commercial operation, the grant is subject to repayment to the government for a five-year period. Deferred grant income of $6,974 and $7,590 in the accompanying consolidated balance sheets as of December 31, 2023 and 2022, respectively, represents the benefit of the basis difference to be amortized to depreciation expense over the life of the related property. Non-refundable Transferable Credits Policy Elections We elect to apply government grant accounting, outside of income taxes, to the portion of the transferable Investment Tax Credit ("ITC') that we intend to sell. We have an existing policy to account for government grants by analogy to International Accounting Standard ("IAS") 20 and shall present the credit as a reduction in the cost of the related energy asset and shall measure the grant of the nonmonetary asset at fair value. Based on these policy elections, the benefit of the grant in the amount of $20,970 will be recognized in profit or loss as a reduction to depreciation expense over the life of the energy asset. We elect to account for credits we intend to use to offset our tax liability under Topic 740. For the initial recognition of the ITC that was not sold in the amount ot`3�618, we recognized a deferred tax asset for an allowable carryforward as we benefited in the year the credit was generated. Possible limitations on the carryforward were considered and it was determined that no valuation allowance was required. We also utilized the flow -through method regarding the presentation in the consolidated statements of income, which resulted in a reduction in the income tax provision. Acquisitions For acquisitions that meet the definition of a business combination, we apply the acquisition method of accounting in accordance with ASC 805, Businescombinations, where assets acquired and liabilities assumed are recorded at fair value at the date of each acquisition. Any excess of the consideration we transferred over the amounts recognized for assets acquired and liabilities assumed is recorded as goodwill. Intangible assets, if identified, are also recorded. Determining the fair value of certain assets and liabilities assumed is judgmental in nature, often involves the use of significant estimates and assumptions, and is calculated using level 3 inputs per the fair value hierarchy as defined in Note 18. We continue to evaluate acquisitions for a period not to exceed one year after the acquisition date of each transaction to determine whether any additional adjustments are needed to the allocation of the purchase price. The results of the acquired companies are included in our consolidated statements of income, comprehensive income, and cash flows from the date of the respective acquisition. The consideration for our acquisitions often includes future payments that are contingent upon the occurrence of a particular event. We record a contingent consideration obligation for such contingent consideration payments at fair value on the acquisition date. We estimate the fair value of contingent consideration obligations through valuation models that incorporate probability adjusted assumptions related to the achievement of the milestones and the likelihood of making related payments. Each reporting period we revalue the contingent consideration obligations associated with our acquisitions to fair value and record changes in the fair value within the selling, general, and administrative expenses in our consolidated statements of income. Increases or decreases in the fair value of the contingent consideration obligations can result from changes in assumed discount periods and 57