Page 44 - SWGas Annual Report 2015

Notes to Consolidated Financial Statements

Note 1 – Summary of Significant Accounting Policies
Nature of Operations. Southwest Gas Corporation and its subsidiaries (the “Company”) consist of two segments:
natural gas operations (“Southwest” or the “natural gas operations” segment) and construction services. Southwest
is engaged in the business of purchasing, distributing, and transporting natural gas for customers in portions of
Arizona, Nevada, and California. Public utility rates, practices, facilities, and service territories of Southwest are
subject to regulatory oversight. The timing and amount of rate relief can materially impact results of operations.
Natural gas purchases and the timing of related recoveries can materially impact liquidity. Centuri Construction
Group, Inc. (“Centuri” or the “construction services” segment), a 96.6% owned subsidiary, is a full-service
underground piping contractor that primarily provides utility companies with trenching and installation,
replacement, and maintenance services for energy distribution systems, and industrial construction solutions.
Centuri operations occur in 20 major markets in the U.S. and within the provinces of British Columbia and Ontario
in Canada, and are generally conducted under the business names of NPL Construction Co. (“NPL”), Link-Line
Contractors Ltd. (“Link-Line”), W.S. Nicholls Construction, Inc. and related companies (“W.S. Nicholls”), and Brigadier
Pipelines Inc. (“Brigadier”). The Company acquired Link-Line, W.S. Nicholls, and Brigadier in October 2014. See
Note 17 – Acquisition of Construction Services Businesses for more information.

Basis of Presentation. The Company follows generally accepted accounting principles in the United States (“U.S.
GAAP”) in accounting for all of its businesses. Unless specified otherwise, all amounts are in U.S. dollars.
Accounting for natural gas utility operations conforms with U.S. GAAP as applied to regulated companies and as
prescribed by federal agencies and commissions of the various states in which the utility operates. The preparation
of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements, and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

Consolidation. The accompanying financial statements are presented on a consolidated basis and include the
accounts of Southwest Gas Corporation and all subsidiaries (except those accounted for using the equity method
as discussed further below). All significant intercompany balances and transactions have been eliminated with the
exception of transactions between Southwest and Centuri in accordance with accounting treatment for rate-
regulated entities.

Centuri, through its subsidiaries, holds a 65% interest in a venture to market natural gas engine-driven heating,
ventilating, and air conditioning (“HVAC”) technology and products. Centuri consolidates the entity (IntelliChoice
Energy, LLC).

Centuri, through its subsidiaries, holds a 50% interest in W.S. Nicholls Western Construction LTD. (“Western”), a
Canadian construction services company that is a variable interest entity. Centuri determined that it is not the
primary beneficiary of the entity due to a shared-power structure; therefore, Centuri does not consolidate the entity
and has recorded its investment, and results related thereto, using the equity method. The Company’s investment
in Western totaled $14.7 million and $10.8 million at December 31, 2014 and 2015, respectively. Both periods
include the impacts of foreign currency exchange translation adjustments. No dividends were paid during 2015.
The equity method investment in Western is included in Other Property and Investments in the Consolidated
Balance Sheets. Centuri’s maximum exposure to loss as a result of its involvement with Western is estimated at

Southwest Gas Corporation