Valuation of Railroads. Under the valuation clause the commission is charged with the important duty of ascertaining and reporting the value of all property owned or used by the common carriers subject to the act. The law provides for ascertaining the following information:

1. The original cost to date, the cost of reproduction new, the cost of reproduction less depreciation, of each piece of property owned or used by the carrier for its purposes as a common carrier. 2. The methods by which these several costs are obtained and reasons for differences, if any.

3. Other values and elements of value of the carriers and the methods of determination of such values and reasons for differences, if any, between original cost to date, cost of reproduction new, and cost of reproduction less depreciation.

4. Original cost of lands, right-of-way, and terminals owned and used for purposes of the common carrier, both as of time of dedication to public use and as of present time.

5. Original and present cost of condemnation and damages or of purchase in excess of original cost or present value.

6. Original cost and present cost of property held for purposes other than those of a common carrier, and method of valuation. 7. History and organization of present and previous corporations operating such property.

8. Financial history.

9. Amount and value of any aid, gift, grant, or donation from public or private sources, including grants of right-of-way.

10. Amount of proceeds derived from sale of grants and value of unsold portion, if any, and value of any concession or allowance made to national, state, or local governments by carriers in consideration of aids, gifts, grants, or donations.

II. Valuation of all of the above by states and territories and the District of Columbia.

Following the ascertainment of the tentative valuation, the commission is authorized, after due notice and hearing of protests, to issue an order making the tentative valuation (corrected, if deemed necessary by the commission, in accordance with the findings at the hearings) the final valuation. All such final valuations are to be published and to be deemed prima facie evidence of the value of the property in all proceedings under the Interstate Commerce Act and in all judicial proceedings to enforce the terms of the act.

On October 31, 1921, the status of the valuation work was as follows: 151 tentative valuation reports upon the properties of 193 carriers had been completed and served on the parties interested; fifty-five supplemental tentative valuations had been issued and served showing the excess cost of acquisition of the lands and final value in figures, in accordance with a decision of the Supreme Court requiring the commission to investigate and report "the present cost of condemnation and damages, or of purchase, in excess of present value." All the engineering field work had been completed. In both the accounting and land sections, 98 per cent of the field work was completed. There remained to be completed, the analytical work of assembling the data accumulated, the preparation therefrom of the underlying reports which form the basis for the tentative valuations, the hearing of the carriers on their protests against the tentative valuations, the modifications thereof in accordance with such hearings, and the publication in final form of the reports on the individual carriers.'

After completion of these valuations, the commission must keep itself informed of all extensions, improvements, etc., and revise and correct them currently.

Authorization of Issuance of Securities. The Transportation Act added Section 20a to the Interstate Commerce Act which prohibits the issue of securities or the assumption of any obligation or liabilities in respect of the securities of others unless authorized by the commission, which may grant or deny applications made in whole or in part, with or without such modifications or terms as it may deem appropriate. The commission is directed to give its approval under the following conditions:

If the issue or obligation is for some lawful object within its corporate purposes, and compatible with the public interest, which is necessary or appropriate for or consistent with the proper performance by the carrier of service to the public as a common carrier, and which will not impair its ability to perform that service, and

252 U. S. 178.

'A full account of the methods employed in the valuation work is given by the Commission on page 108 et seq. in Valuation Docket No. 2, Valuation Reports of the I. C. C.

If the issue or obligation is reasonably necessary and appropriate for such purpose.

The provisions of the act do not apply to the issue of shortterm notes maturing not more than two years after date and aggregating (together with all other then outstanding notes of a maturity of two years or less) not more than five per centum of the par value of the securities of the carrier then outstanding." A certificate of notification is, required in such cases.

In the year ending October 31, 1921, 283 applications under Section 20a had been received and the issuance of securities authorized, principally for refunding purposes, to the following

Under Paragraph (9) of this section, certificates of notification of the issuance of notes maturing within two years or less in the aggregate sum of over $137,000,000 were filed.

Accounting. The statutory basis for the accounting and statistical work of the commission is in the Hepburn Act of June 29, 1906, which not only authorized the commission to prescribe a system of uniform accounts for carriers subject to the Interstate Commerce Act, as in the act of 1887, but also granted adequate powers for enforcement.

Section 20 now authorizes the commission to require annual reports from all the common carriers subject to the law and the owners of all railroads engaged in interstate commerce as defined in the act, to prescribe the manner in which such reports are to be made, and to require "specific answers to all questions upon which the commission may need information." Authority is granted also to require, by general or special orders, the filing of periodical, monthly, or special reports.

Not only is the commission authorized to require such reports but it is also authorized at its discretion to prescribe the forms, records, and memoranda to be kept by the carriers, including those relating to the movement of traffic as well as the receipt and

expenditure of funds. It is directed to prescribe the classes of property for which depreciation charges may properly be included under operating expenses and the percentages of depreciation to be charged with respect to each class. The carriers are prohibited from charging to operating expenses any depreciation charges on classes of property or any percentage of depreciation other than those prescribed by the commission. Proper classification of the carriers may be made for this purpose and modifications of the classes and percentages may be made whenever deemed necessary.

The reports of the carriers must be made under oath. Penalties are provided for failure to make and file such reports within the time fixed by the commission; for failure or refusal to keep the prescribed accounts, records, and memoranda or to submit to inspection of them; and for false entry, mutilation of accounts or records, or keeping unauthorized accounts or records. The commission may, in its discretion, issue orders, permitting destruction of specified records and prescribing the length of time such records are to be preserved.

The primary purpose of the accounting work is administrative, since it is aimed to create a condition whereby any improper practices of the carriers will be reflected in their accounts, but the value of such work in providing the foundation for reliable and accurate statistics on the financial and other operations of the carriers is patent. Incidentally, it may be noted that accurate information such as was required by the contracts under which the government assumed war-time operation of the railroads :-the average annual railroad operating income for the test period, for instance, would have been obtainable, if at all, only with the greatest difficulty and delay without the uniform accounting systems which had been established by the commission under the

act.

Much of the accounting work of the commission in recent years has related to matters growing out of federal control of the carriers. In the year ending October 31, 1921, accounting examinations conducted for the purpose of establishing the correctness of claims filed by carriers under Sections 204 and 209 of the Transportation Act, as the basis of the certifications of amounts payable to such carriers, practically absorbed the entire

attention of the Bureau of Accounts' force of field accountants. It was necessary to examine the accounts of 160 carriers claiming benefits under Sections 204 and 138 in connection with Section 209. Under these conditions little attention could be given to the general examinations which are required for effective inspection of carriers' accounts and for insuring the uniformity of accounting prescribed by the law and the commission's regulations. Such general examinations are now being resumed, and work is proceeding also on the general revision of the commission's regulations (last revised as of July 1, 1914), in accordance with the requirements of the legislation enacted since that date and in view of experience gained in the seven years' practical application. Studies and analyses are also being made as the basis for the determination of depreciable classes of railroad property and the percentages to be applied in accordance with the provisions of the law described above.

A comprehension of the extent of the normal activity of the commission in its accounting work may be obtained from mere enumeration of the "classifications" which, as revised from time to time, have been made effective. These have been made for steam railroads, in regard to operating revenues; operating expenses; expenditures for road and equipment; expenditures for additions and betterments; revenues and expenses for outside operations; locomotive miles, car miles, and train miles; general balance sheet statement; and income and profit and loss statement. Similar classifications are in effect for the accounts of electric railways, express companies, pipe line companies, sleeping car companies, carriers by water, telephone companies, and telegraph and cable companies. All such classifications, as they become effective, impose upon the carriers concerned a uniform system of accounting, adapted to the nature of the carriers' operations and adapted to statistical use.

Statistics. The present statistical service of the commission represents the outcome of a development of more than a quarter of a century under the original stimulus of the act of 1887, which contemplated and granted authority for a complete system of national statistics of railroads. Subsequent legislation gave authority to the commission to obtain statistics from interstate carriers other than the railroads, while coöperation with state