11.2255 Operating joint 412. Operating joint tracks and tracks and facilities-Dr. facilities-Dr.*† 11.2256 Operating joint 413. Operating joint tracks and tracks and facilities-Cr. facilitiesCr.*t VI. MISCELLANEOUS OPERATIONS V. TRANSPORTATION-WATER LINE [431. Operation of vessels. VI. MISCELLANEOUS OPERATIONS 441. Dining and buffet service. 442. Hotels and restaurants. 443. Grain elevators. 11.2258 Miscellaneous opera-444. Stockyards. tions. VII. GENERAL 11.2261 Administration. 11.2262 Insurance. 11.2263 Valuation expenses. 445. Producing power sold. 11.2264 Other general ex-457. Pensions. penses. 458. Stationery and printing. 11.2265 General joint facili- 461. General joint facilitiesties-Dr. Dr.*t 11.2266 General joint facili- 462. General joint facilitiesties-Cr. VIII. TRANSPORTATION FOR INVEST- Cr."t VIII. TRANSPORTATION FOR INVEST MENT-CR. PART 13-STEAM ROADS: DEPRECIATION CHARGES Section 13.0 Depreciation charges of steam railroad companies. It appearing, that on November 2, 1926 (118 I.C.C. 295), the Commission entered its report and order in the above-entitled proceeding; that on July 11, 1927, this proceeding was reopened for further hearing; and on August 1, 1928, the effective dates of the order were indefinitely postponed; and such further hearing has been held *For statutory citation, see note to § 11.00–1. Page 263 and the Commission on the date hereof has made and filed a report containing its further findings of fact and conclusions thereon, which said report and the report of November 2, 1926 (118 I.C.C. 295), are hereby referred to and made parts hereof: (a) It is ordered that, The order herein, entered November 2, 1926 (118 I.C.C. 295), is hereby vacated and set aside. (b) All steam-railroad companies subject to the Interstate Commerce Act shall, effective January 1, 1935, institute depreciation accounting, as hereinafter prescribed, with respect to the following classes of common-carrier property, found in the accompanying report to be classes of property for which depreciation charges may properly be included under operating expenses: Steam locomotives. Miscellaneous equipment. Provided, That in case a steam-railroad company can show that the service life of its property is dependent upon a particular source of traffic, upon exhaustion of which the operation of the property for common-carrier purposes must in all probability be abandoned, and that the time of such exhaustion can be predicted with a reasonable degree of accuracy, then the entire property of such railroad may be classed as depreciable, in which case, however, depreciation of this character shall be provided for through a special amortization account, instructions as to which will hereafter be given. (c) In the application of this order the terms "service life," "service value," "salvage value," "straight-line method," and "ledger value" shall be construed in accordance with the definitions and explanations given therefor in 177 I.C.C. 351, 409, 431, 454. (d) Depreciation accounting, as referred to in this order, shall mean (1) The charging to operating expenses and the crediting to a depreciation reserve during the service life of the property, as hereinafter provided, of amounts which will approximate the loss in service value not restored by current maintenance and incurred in connection with the consumption or prospective retirement of property in the course of service from causes against which the carrier is not protected by insurance, which are known to be in current operation, and whose effect can be forecast with a reasonable approach to accuracy; and (2) The crediting of the ledger value of property at time of retirement to the appropriate primary road and equipment accounts and the charging of the service value of such property when retired to the depreciation reserve. (e) The annual charges to operating expenses for currently accruing depreciation shall be computed, as hereinafter provided, at such percentage rate of the ledger value of the property in question that the service value may be distributed under the straight-line method in Page 264 equal annual charges to operating expenses during the estimated service life of the property. (f) All depreciation charges to operating expenses and concurrent credits to the depreciation reserve shall be made monthly in conformity with the group plan of accounting for depreciation, as explained in the accompanying report (177 I.C.C. 351) and as hereinafter provided, and in determining such monthly charges and credits the annual percentage rates shall be applied to the total ledger value (see paragraph (k)), as of the first of each month, of the respective primary accounts covering the classes of property hereinbefore specified and the result divided by 12; but that for corporate ledger and balancesheet purposes the depreciation reserve shall be regarded and treated as a single composite reserve. Provided, That for purposes of analysis each carrier shall maintain subsidiary records in which the reserve is broken down into component parts corresponding to such primary accounts as include property hereinbefore found to be depreciable, showing in these records also in complete detail by such primary accounts the current credits and debits to the reserve; and that such detailed information shall be reported annually to this commission and to the commissions of all States in which the carrier operates. (g) In determining the monthly depreciation charges to operating expenses and the corresponding credits to the depreciation reserve a composite annual percentage rate shall be used for each of the primary accounts in the classification of road and equipment covering the classes of property hereinbefore specified; and the composite rates so used shall be those which are from time to time prescribed by the Commission. (h) For the assistance of the Commission in prescribing the composite annual percentage rates to be effective beginning January 1, 1935, each operating steam railroad company subject to the act shall, not later than September 1, 1934, file with the commission estimates of said percentage rates applicable to ledger values of the respective primary accounts covering the classes of property hereinbefore specified, owned and/or used by such company; such composite percentage rates shall be based upon estimated service values and service lives developed by a study of the company's history and experience and such engineering and other information as may be available with respect to future prospects, and shall produce a charge to operating expenses for the primary account, where more than one class of property is covered by the account, equal to the sum of the amounts that would otherwise be chargeable for each of the various classes; and such estimates shall be accompanied by a sworn statement showing the bases therefor and the methods employed in their computation.15 (i) Upon the retirement of a unit of depreciable property, whether or not the cause of the retirement is a recognized factor in depreciation, as explained in 177 I.C.C. 351, the service value shall be charged in its 15 Upon the submission by the companies of the data specified above temporary orders will be issued, specifying the composite annual percentage rates to be used, such orders to be subject to modification from time to time thereafter in accordance with the procedure indicated in finding 7 of 177 I.C.C. 351, 445, 446, or as may otherwise be deemed necessary or desirable by the commission. Page 265 entirety to the depreciation reserve. Provided, That if the cause of retirement is not a recognized factor in depreciation, but is a cause against which the carrier is insured, the depreciation reserve shall be credited with the full amount of insurance recovered; and provided further, that if the cause of the retirement is not a recognized factor in depreciation and the loss is not covered by insurance, the carrier may, upon proof that the charge to the depreciation reserve will result in undue depletion thereof, and with the approval of the commission, charge the service value to an appropriate suspense account and distribute it from that account over such period of years and to such accounts as the commission may approve. (j) In determining the amounts to be respectfully credited to the primary road and equipment accounts and charged to the material and supplies account and to the depreciation reserve in the case of the retirement of property, amounts for specific units shall be used so far as practicable; but where this is impracticable because of the relatively large number and small size of the units, average amounts shall be used. (k) As of January 1, 1935, each operating steam railroad company shall establish and thereafter shall maintain subsidiary records covering the cost of all carrier property owned and/or used for which depreciation accounting is herein prescribed; the manner in which such subsidiary records shall be kept and the method of determining the amounts to be included therein as of January 1, 1935, and for subsequent property changes, shall be in accordance with finding 8 of 177 I.C.C. 351, 454; and the ledger value of carrier property used for depreciation purposes thereafter shall be the costs entering into the subsidiary records so provided subject to the provisions of finding 9 (177 I.C.C. 455). (1) With respect to common-carrier property used but not owned operating steam-railroad companies shall include in operating expenses charges for depreciation upon the same basis as for owned property and shall maintain the same records of service lives, salvage values, etc., as are required for owned property. Provided, That this shall not apply to units of property the rent of which is included in net railway operating income, or units accounted for by the user as a joint facility under the joint-facility rules of the Commission's classifications nor, with the approval of the Commission, to other units of property with respect to which it is shown that there are special circumstances and conditions justifying such exception. (m) Prior to the effective date of the order each operating steamrailroad company shall make an estimate, in accordance with the principles set forth for the determination of currently accruing depreciation, of the amount of accrued depreciation in the depreciable property as of January 1, 1935, such estimate to be broken down into component parts corresponding to the primary investment accounts for which depreciation accounting is herein prescribed, and shall enter the same in a record to be kept for future reference. Provided, That the amount so ascertained shall be subject to check and revision by the Commission and shall be treated as a tentative estimate until such time as it has been approved by the Commission. Page 266 (n) Each operating steam-railroad company shall keep a record of property retirements which shall reflect the service life and percentage of salvage value of each important class of property hereinbefore specified; shall maintain in convenient and accessible form engineering and other data bearing on prospective service lives; and shall be prepared at any time upon direction by the Commission to compute and submit, for the Commission's approval, new percentage rates to take the place of those based upon service lives or percentages of salvage value found to be inaccurate. (o) All accounting procedure specifically provided in this order shall be subject to such modification as may be necessary to bring it into harmony with such accounting classifications as may be prescribed by the Commission for concurrent or subsequent application. (Sec. 20, 24 Stat. 386, sec. 7, 34 Stat. 593, sec. 435, 41 Stat. 493; 49 U.S.C. 20 (5)) [Depreciation charges of steam-railroad companies, Docket No. 15100, 177 I.C.C. 351, July 28, 1931, as amended by ICC orders of Feb. 13, 1933, Mar. 19, 1935] NOTE: By order of March 19, 1935, the requirements for depreciation charges on property, other than equipment, were postponed until further order. NOTE: Date of filing estimates of composite percentage rates for equipment as provided in paragraph 8, changed to September 1, 1934. [Order, Feb. 13, 1933] All other effective dates applicable to equipment depreciation changed to January 1, 1935. [Order, Feb. 13, 1933] All effective dates applicable to depreciation of property other than equipment postponed until further order of the Commission. [Order, Mar. 19, 1935] PART 14-ELECTRIC RAILWAYS: UNIFORM SYSTEM OF ACCOUNTS |