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when the text of the account also indicates inclusion, inasmuch as the same item frequently appears in more than one list. The proper entry in each instance must be determined by the texts of the accounts.*†
20.01-7 Submission of questions. To the end that uniformity of accounting may be maintained, the carrier shall submit all questions of doubtful interpretation of the accounting rules to this Commission for consideration and decision.*†
20.01-8 Depreciation accounting-(a) Computing and filing of depreciation rates. (1) The carrier shall file with this Commission composite annual percentage rates estimated to be applicable to the book cost (note § 20.01-2 (d)) of each class of depreciable carrier property owned or used by it. These percentage rates shall be based on the estimated service values (note § 20.01-2 (cc)) and service lives (note § 20.01-2 (bb)) developed by a study of the carrier's history and experience and such engineering and other information as may be available with respect to prospective future conditions. These percentage rates shall be computed in conformity with the group plan (note § 20.01-2 (n)) of accounting for depreciation and shall be such that the loss in service value of the property, except for losses excluded under the definition of depreciation (note § 20.01-2 (1)) may be distributed under the straight-line method (note § 20.01-2 (ee)) during the service life of the property. Such percentage rates shall for each primary account comprised of more than one class of property, produce a charge to operating expenses for that account equal to the sum of the amounts that would otherwise be chargeable for each of the various classes of property included in the account. The annual percentage rates so filed shall be accompanied by a sworn statement showing the bases therefor and the methods employed in their computation. A carrier subject to the provisions of this system of accounts on January 1, 1935, shall file such percentage rates not later than September 1, 1935. A carrier which becomes subject to the provisions of this system of accounts after January 1, 1935, shall file such percentage rates within 6 months after the provisions of this system of accounts become applicable to it. The carrier shall be prepared at any time, upon direction of this Commission, to compute and submit for its approval revised percentage rates in cases where existing rates are deemed inapplicable.
(2) In the event any composite percentage rate prescribed by this Commission, in the judgment of the carrier, becomes no longer currently applicable, it shall in like manner file annual percentage rates which in its judgment should be established.
(3) The carrier shall keep such records of property and property retirements as will reflect the service life of property which has been retired, or will permit the determination of service-life indications by mortality, turn over, or other appropriate methods, and also such records as will reflect the percentage of value of the salvage (note § 20.01-2 (jj)) for property retired from each class of depreciable carrier property (note paragraph (e) of this section).
(b) Depreciation charges. Charges for currently accruing depreciation shall be made monthly to accounts Nos. 613, 663, 763, "Depre
*For statutory citation, see note to § 20.00-1.
ciation," and corresponding credits shall be made to account No. 74, "Accrued depreciation-Carrier property." In computing the current monthly charges, one-twelfth of the composite annual percentage rate applicable to each primary account covering depreciable carrier property shall be applied to the balances as of the first of the current month in each such primary account.
(c) Pipe-line construction. The percentage rates estimated to be applicable to the book cost of accounts Nos. 105, 155, "Pipe-line construction," shall be based on an estimate of the period between which the pipe line is constructed and its ultimate retirement. The current cost of removing and replacing less than units of pipe lines shall be included in accounts Nos. 602, 652, 752, "Repairs of pipe lines," and 603, 653, 753, "Changing of line construction." (Note § 20.1-38 (c).)
(d) Depreciation rates. A separate composite annual percentage rate for each account covering depreciable carrier property shall be used in computing depreciation charges. Such composite rates shall be those which are from time to time prescribed by this Commission, except that where no rates previously have been prescribed for the carrier's use by this Commission, the carrier's estimates of composite annual percentage rates computed in accordance with paragraph (a) of this section shall be used prior to the dates rates prescribed by this Commission become effective.
NOTE: Where the composite rate as prescribed by this Commission has been developed by the application of a component rates to the various subclasses of property within a primary account and a segregation of the property to which they are applicable is maintained or is available, such component rates may be used in computing the current depreciation charges (as long as the property to which they apply is in service and the estimated service lives, etc., upon which they are based remain the same) without a supplemental order, regardless of the fact that the amount of the various classes of property has so changed as to make possible the computation of a slightly different composite rate.
(e) Classes of depreciable carrier property. The classes of depreciable carrier property and the accounts covering such property are as follows:
(f) Depreciation reserve. Except as provided in paragraph (g), upon the retirement of a unit of depreciable property the service value shall be charged in its entirety to account No. 74, "Accrued depreciation-Carrier property." The depreciation reserve shall be credited with the full amount of any insurance recovered.
(g) Special accounting for depreciation. Upon proof by the carrier that the charge to the depreciation reserve in connection with the retirement of depreciable property will result in undue depletion thereof, with the approval of this Commission, it may charge to account No. 312, "Debits from retired carrier property", or to account No. 27, "Extraordinary maintenance suspense" (note text thereof), such part of the service value of the retired property which it is authorized to charge thereto. In case the amount of insurance recovered by the carrier, creditable to account No. 74, "Accrued depreciation-Carrier property", would unduly inflate that account, the carrier may credit to account No. 302, "Credits from retired carrier property", such part of the insurance recovered as it may be specifically authorized by this Commission to so credit. The application to this Commission for such special accounting shall give full particulars concerning the situation, and shall indicate the carrier's reason for the accounting proposed.**
20.0-21 Purpose of balance sheet accounts. The balance sheet accounts (1 to 82, inclusive) are designed to show the assets, liabilities, capital stock, and surplus or deficit of the carrier.*††
††In §§ 20.0-21 to 20.0-29, inclusive, the numbers to the right of the dash correspond with the respective instruction numbers in Uniform system of accounts for pipe-line companies (balance-sheet accounts), Interstate Commerce Commission, Nov. 16, 1934. Cross references to accounts are made by citing the account number, e. g., account No. 28, instead of the corresponding section number (§ 20.28).
20.0-22 Current assets. (a) In the group of accounts designated as current assets (accounts Nos. 9 to 20, inclusive) there shall not be included any item the book value of which is not reasonably assured except that items of current character but of doubtful value may be written down and for record purposes carried in these accounts at a nominal value. If not thus written down, they shall be included in account No. 28, "Other deferred debits", at book cost or nominal value or written off, as may be appropriate, but they shall not be so included at book cost unless there is a reasonable prospect of future substantial value.
(b) The difference between the amount of any item charged off and such nominal value shall be accounted for as provided in the text of account No. 415, "Miscellaneous income charges", and account No. 314, "Miscellaneous debits", or included in the appropriate operating-revenue or expense accounts.*++
20.0-23 Book value of securities owned. (a) This system of accounts requires that the securities of others shall be recorded at the current money value, at time of acquisition, of the consideration given therefor by the carrier. The book value of such securities
*For statutory citation, see note to § 20.00-1. For source citation, see note to § 20.01-1.
shall be adjusted to cover the proportion of premiums paid or discount realized which are extinguished through income.
(b) The carrier is allowed the option of writing down such book cost in recognition of depreciation in the value of the securities. If there is not a reasonable prospect of future substantial value in securities held, they should be written down to a nominal amount or written off. The amount of such adjustment shall be debited to account No. 314, "Miscellaneous debits." The carrier shall maintain a complete record of the facts on which it bases such adjustment.** 20.0-24 Company securities owned. (a) The book value (note § 20.01-2 (d)) of nominally issued (note § 20.01-2 (q)) and nominally outstanding (note § 20.01-2 (r)) stocks and funded debt securities issued or assumed by the carrier shall be shown in the short columns only of the balance-sheet statement of the carrier to this Commission. Such securities having a par value shall be so shown at their par value and for stocks having no par value there shall be shown the number of shares and any nominal value assigned thereto.
(b) The necessary adjustments of the difference between book liability for securities reacquired and the amounts actually paid for them shall be included when a debit, in account No. 314, "Miscellaneous debits", and when a credit in account No. 304, "Miscellaneous credits."*+ 20.0-25 Income from sinking, insurance, and other reserve funds. When interest and other income arising from reserve funds (note account No. 407, "Income from insurance and other reserve funds") are required by the mortgage or other provisions to be held in the funds, such income shall be charged as appropriate to account No. 4, "Sinking funds", or account No. 22, "Insurance and other funds." If such funds are represented by a reserve established through reservations of income or surplus, amounts so set aside shall be charged to account No. 420, "Miscellaneous reservations of income", or account No. 315, "Miscellaneous reservations of surplus", as may be appropriate, and credited to account No. 81, "Miscellaneuos reserves."**
20.0-26 Discount and premium on capital stock. (a) All discounts suffered and premiums realized at the sale, resale, or exchange of each particular class of par stock issued or assumed by the carrier shall be included in a separate discount and premium account. (Note § 20.01-2 (m), (x).)
(b) Surplus appropriated to extinguish all or any part of the debit balance in any premium and discount on capital-stock account shall be charged to account No. 316, "Stock discount extinguished through surplus", and credited to the appropriate premium and discount accounts. Similar appropriations of income shall be included in account No. 421, "Stock discount extinguished through income."
(c) In case the carrier is permitted and elects to distribute all or any part of the credit balance in any particular discount and premium account to its stockholders, the amount thus distributed shall be charged to that account.
(d) Except as provided in paragraphs (b), (c), (g), balances in these accounts shall be carried until the reacquirement of the securities to which they relate, at which time the pro rata proportion (based on the relation of the amount of stock reacquired to the total
*For statutory citation, see note to $20.00-1.
amount outstanding before its reacquirement) of the balance in the account for the particular class of stock reacquired shall be closed to account No. 304, "Miscellaneous credits", or account No. 314, “Miscellaneous debits", as may be appropriate.
(e) In no case shall discount on capital stock be charged to or included in any account as a part of the cost of acquiring any property, or as a part of the cost of operation.
(f) If the net of the balances in the discount and premium accounts for all classes of capital stock outstanding is a debit balance, the amount shall be included in the balance sheet in account No. 25, "Discount on capital stock", and, if a credit balance, the amount shall be included in account No. 53, "Premium on capital stock."
(g) Assessments against stockholders shall be credited to the discount and premium account of the particular class of capital stock so assessed, except that assessments with respect to nonpar stock shall be credited to account No. 51, "Capital stock."**
20.0-27 Discount, premium, and expense on funded debt. (a) All discounts suffered, premiums realized, and expense incurred at the sale, resale, or exchange of each particular class of funded debt issued or assumed by the carrier shall be included in a separate discount, premium, and expense on funded-debt account. (Note § 20.01-2 (i), (m), (x).)
(b) The carrier is allowed the option of extinguishing at any time through charges to account No. 314, "Miscellaneous debits", all or any part of the debit balance remaining in any particular discount, premium, and expense account, provided that the amount thus charged to account No. 314 shall not be in excess of the credit balance in account No. 82, "Unappropriated surplus."
(c) Each month or other accounting period there shall be credited to each particular discount, premium, and expense on funded-debt account in which there is a debit balance, the proportion (based upon the ratio of the period to the life of the security remaining at the beginning of each such accounting period) of the debit balance in the accounts as is applicable to the period. The amounts thus credited shall be concurrently charged to account No. 418, "Amortization of discount on funded debt." (See also § 20.1-36 (k) (2).) Correspondingly each month or other accounting period there shall be charged to each account in which there is a credit balance the proportion of each of the credit balances therein as is applicable to the period. The amounts thus charged shall be concurrently credited to account No. 408. "Release of premium on funded debt." (See also § 20.1–36 (k) (2).)
(d) Except as provided in § 20.1–36 (k) (2) no part of the balance in any account for discount, premium, and expense on funded debt shall be included in any account as a part of the cost of acquiring any property or part of the cost of operation.
(e) Except as provided in the foregoing sections of this instruction the balance in each of these accounts shall be carried until the reacquirement of the securities to which they relate, at which time the proportion (based on the relation of the amount of funded debt reacquired to the actual outstanding before its reacquirement) of the
*For statutory citation, see note to § 20.00-1.