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Sec. 2-15 Contingent assets and con- (5) A description of the sampling tingent liabilities.
technique and conversion to totals, i Contingent assets and contingent lia
sampling was employed. bilities shall not be included in the body
(6) The amount and basis for all estiof the balance sheet but shall be ex
mates employed in the verification. plained in the footnotes to the financial
(7) The amount of resulting adjuststatements.
ments and the quarter in which such
adjustments were, or are to be, made in (ER-980, 42 FR 25, Jan. 3, 1977)
the accounts. Sec. 2-16 Notes to financial statements. (d) For those carriers who use the All matters which are not clearly iden
sales-lift match method to determine tified in the body of the financial state
earned revenue, the analysis supporting ments but which may influence mate
the physical inventory verification shall
include: rially interpretations or conclusions 'which may reasonably be drawn in re
(1) The cutoff date for the liability to gard to financial condition or earnings
be verified; such cutoff date shall be at
the end of a calendar month. position shall be clearly and completely
(2) A trial balance as of the cutor stated as footnotes to the financial
date of all subaccounts supporting the statements.
Air Traffic Liability control account; the Sec. 2-17 Revenue and accounting prac- subsidiary trial balance must agree with tices.
the Air Traffic Liability control account (a) Revenue accounting practices shall
or a reconciliation statement furnished. conform to the provisions of account
(3) A statement to the effect that & 2160, Air Traffic Liability.
sales listing of the value of all unmatched (b) Physical verification of the relia
auditor coupons has been compiled and bility of passenger revenue accounting
compared to the general ledger control practices shall be made at least once each
figure; the statement required by this accounting year by each route air carrier
subparagraph shall indicate whether or and an analysis showing the results of
not the value of the unmatched coupons such verification shall be submitted to
is in agreement with the general ledger. the Board within 30 days following its
If the sales listing is not in agreement completion.
with the Air Traffic Liability control ac(c) For those carriers who use the
count, the amount of such difference
shall be shown on such statement. yield or average-fare method to deter
(e) Those carriers who are on a salesmine earned revenue, the analysis sup
lift match method for determining porting the verification shall include:
earned revenue shall submit to the Board (1) The cutoff date for the liability to
an annual statement showing the value be verified; such cutoff date shall be at
of purged auditor coupons from the sales the end of a calendar month.
listing, during the calendar year, by (2) The number of months after the
quarters. This statement shall accom*cutoff date during which documents were
pany the analysis supporting the physical examined to verify the liability; the
verification, as described in paragraph number of months after the cutoff date
(b) above. during which documents are examined shall not exceed the maximums set forth
(f) An annual statement shall be filed below:
with the Board by those carriers who use
the sales-lift match method to determine
Maximum Class of carrier:
earned revenue, showing the value of
months a TWA and Pan American
revenue earned due to loss, destruction, 18
or mutilation of lifted coupons from pasTrunks (except TWA and Pan American)
12 sengers who have been furnished transAll other route air carriers.------ 6 portation. This statement shall show the • Applles only to carriers on a yield or basis used in computing the amount of average-fare basis.
revenue taken up as income. The amount (3) The nature of the documents
of revenue shall be shown by calendar which were examined for purposes of the
quarters. The statement shall accomverification.
pany the analysis supporting the physi(4) The totals for each of the various cal verification, as described in paratypes of documents examined, on actual graph (b) above. or sampling basis.
(ER-948, 41 FR 12290, Mar. 25, 1976)
Sec. 2-18 Transactions between mem- priate. Where such services and assets bers of an affiliated group.
are reflected in tariffs filed with the (a) Unless otherwise approved by the
Board or in price lists held out to the Board's Director, Bureau of Accounts and general public, the associated revenues Statistics, transactions between the regu
shall be recorded at the rates, fares or lated activity of an air carrier and ac
charges contained therein in the approtivities conducted by nontransport divi
priate incidental services, capital gains sions or other corporate members of an
or air transport income accounts. Where afiliated group shall be recorded by the
no tariff or prevailing price list is appliair carrier as provided in paragraphs (b)
cable, the associated revenue shall be rethrough (e) of this section 2–18.
corded at the higher of cost or estimated (b) Charges for services and assets
fair market value of the asset or service purchased by or transferred to a regu
involved. Any difference between the revlated activity of an air carrier from other enue so recorded and the agreed considactivities of an affiliated group shall be
eration to the air carrier shall be recordrecorded initially in the accounts of the
ed in subaccount 88.1 Intercompany regulated air carrier activity at their Transaction Adjustment Credit or subinvoice price, if determinative from a account 89.1 Intercompany Transaction prevailing price list held out to the gen
Adjustment-Debit. eral public in the normal course of
(d) Income taxes shall be allocated business. Where the services and assets among the transport entities of the air received by the regulated activity of carrier, its nontransport divisions, and the air carrier are not marketed by the members of an affiliated group. Under affiliated supplier to the general public
circumstances in which income taxes are under a prevailing price list, the charges
determined on a consolidated basis by recorded by the air carrier activity for
an air carrier and other members of an such services and assets shall be the affiliated group, the income tax expense lower of their cost to the originating ac
to be recorded by the air carrier shall tivity of the affiliated group, less all ap
be the same as would result if deterplicable valuation allowances, or their mined for the air carrier separately for estimated fair market value. In the case all time periods, except that the tax efof charges against income for services fect of carryback and carry-forward received, as distinguished from charges operating losses, investment tax credits, for property and equipment or other as- or other tax credits generated by operasets acquired, any difference in the tions of the air carrier shall be recorded amount recorded and the consideration by the air carrier during the period in given by the air carrier shall be entered which applied in settlement of the taxes in subaccount 88.1 Intercompany Trans- otherwise attributable to any member, or action Adjustment Credit or in subac- combination of members, of the affiliated count 89.1 Intercompany Transaction group. Any difference between the inAdjustment-Debit. In the case of prop- come tax so recorded and the amount erty and other assets acquired, any dif- at which settlement is to be made shall ference between the amount recorded be recorded in subaccount 88.1 Intercomand the consideration given by the air pany Transaction Adjustment-Credit or carrier shall be entered in appropriate in subaccount 89.1 Intercompany Transsubaccounts of account 1870 Property action Adjustment-Debit, as is approAcquisition Adjustment, paralleling sub- priate. account 88.1 Intercompany Transaction (e) The principles set forth in this Adjustment-Credit and subaccount 89.1 section 2–18 shall apply equally to corIntercompany Transaction Adjust
porations, proprietorships, partnerships, ment-Debit, and shall be cleared to or other forms of business organizations. such income accounts through periodic
[ER-755, 37 FR 19726, Sept. 21, 1972, as amortization at rates coinciding with amended by ER-980, 42 FR 25, Jan. 3, 1977) those applied to other associated assets. (c) The cost, less all associated valua
82-19 Accounting for pension plans. tion allowance accumulations, of serv- (a) In accordance with the provisions ices and assets sold by or transferred of section 22(d) or 32(d), as applicable, from the regulated activity of an air car- each air carrier which has an employee rier to other activities of an affiliated pension plan or plans shall file with the group shall be charged by the air carrier Director, Bureau of Accounts and Statisto either applicable incidental services or tics, a standard statement showing with capital gain income accounts, as appro- respect to each pension plan covered by
the statement, the following information: (1) A copy of the text, or if there is no text, a comprehensive outline of each pension plan covering pensions, other than those required by law, to active, retired, or former employees or their representative or beneficiaries, the cost of which is borne in whole or in part by the carrier, except that no filing will be required for a plan which does not currently apply to present employees and pursuant to which payment to less than 100 former employees and the beneficiaries or representatives of such former employees were made during the reported year; (2) the number (rounded to the nearest 50) and types of employees covered (i.e., pilots, stewardesses, mechanics, etc.); (3) for each fund which forms a part of said plan: A copy of the trust agreement, declaration of trust or other instrument pursuant to which said pension was established, or, if there is no such agreement, declaration of trust or other instrument, a description of the arrangement, if any, which requires the payment of any pensions or benefits under each plan; and (4) description of the accounting policies for each plan which,
in the case of any unfunded plans, or plans for which no Department of Labor Form D-2 is filed, shall include actuarial assumptions made.
(b) In the event of a change in any of the items covered in the statement fil pursuant to paragraph (a) of thi section, the carrier shall file with the Director, Bureau of Accounts and Statistics, prior to the date on which said change is Implemented, a supplemental statement showing: (1) The item affected and a detailed explanation of the change; and (2) the estimated effect of the change on the carrier's pension benefit accounts.
(c) Each air carrier which is required to file the statement prescribed by paragraph (a) of this section shall also file annually with the Director, Bureau of Accounts and Statistics, in duplicate 11 applicable, a copy of its Department of Labor Form D-2. Employee Welfare or Pension Benefit Plan Annual Report Form, concurrent with the filing due dates prescribed by the Department of Labor. (ER-797, 38 FR 10925, May 3, 1973]
BALANCE SHEET CLASSIFICATIONS—Continued
Maintenance buildings and improvements.
Other buildings and improvements.
Maintenance buildings and improvements.
Other buildings and improvements..
and amortization of overhaul and airworthiness costs.
Current maturities of long-term debt..
Other current liabilities.
Other noncurrent liabilities
Deferred income taxes..
Other deferred credits...
Other capital stock transactions..
1 Prescribed for group II and group III air carriers only.
: At the option of the air carrier, these accounts may be assigned Nos. 2629 and 2729, respectively, for accounting purposes.
NOTE.-Digits to right of decimals and italicized codes established for CAB control purposes only. (ER-980, 42 FR 26, Jan. 3, 1977)
tion 03 as investor controlled companies,
and investments in other than associated (a) The balance sheet accounts aro
companies shall be recorded at cost, exdesigned to show the financial condition of the air carrier as at a given date,
cept as provided in paragraph (f) of this reflecting the asset and liability balances
section. Investments in investor con
trolled companies shall be recorded at carried forward subsequent to the closing or constructive closing of the air
cost, except as provided in paragraph carrier's books of account.
(c), plus the equity in undistributed (b) The balance sheet accounts pre
earnings or losses since acquisition.
(c) Permanent impairment in the scribed in this system of accounts for
value of securities may be reflected each air carrier group are set forth in
through charges to profit and loss clasSection 3, Chart of Balance Sheet Accounts. The balance sheet elements to
sification 8100 Nonoperating Income and
ExpenseNet. be included in each account are presented in section 6 and the balance sheet
(ER-755, 37 FR 19726, Sept. 21, 1972, as
amended by ER-948, 41 FR 12292, Mar. 25, groupings to be accorded each account
1976; ER-980, 42 FR 27, Jan. 3, 1977) are set forth in section 5.
Sec. 5–3 Property and equipment. Section 5–Balance Sheet Account
(a) All investments of the air carrier Groupings
in land and units of tangible property Sec. 5-1 Current assets.
and equipment shall be included within (a) Include in this classification all
this general classification.
(b) The cost of properties covered by resources which may reasonably be ex
conditional sales contracts shall be repected to be realized in cash or sold or
corded in the appropriate property and consumed within one year, such as un
equipment accounts of the buyer, and restricted cash, those assets that are
removed from the property and equipreadily convertible into cash or are held
ment accounts of the seller, as at the for current use in operations, and cur
date on which possession is delivered to rent claims against others to the extent
the buyer unless there is material uncersettlement is reasonably assured, except
tainty as to the complete consummation that securities of others classified in in
of the transaction. vestment and special fund accounts at date of acquisition need not be reclassi
(c) Property obtained under an agree
ment for lease or lease with option to fied until disposition thereof. (b) Perpetual inventories of all ma.
purchase, not constituting a conditional
sale, shall not be recorded on the books terials, supplies, lubricating oils, motor
of the lessee until actual purchase, at fuels and flight equipment expendable
which time the price at actual date of parts shall be maintained and shall be
purchase plus leasehold improvements physically verified at least annually. Any
shall be recorded in the appropriate shortage, overage, shrinkage, etc., shall
property and equipment accounts. be adjusted by charges or credits to the appropriate expense account.
(d) The general classification "Prop
erty and Equipment" shall be subclassi(c) Items of general current asset characteristics which are not expected to
fied as between "Operating Property and be realized or consumed within one year
Equipment" and "Nonoperating Propmay be included in this classification
erty and Equipment." "Operating Prop
erty and Equipment” shall encompass provided the noncurrent portion is not
items used in air transportation services substantial in amount and classification
and services incidental thereto. "Nonas a current item will not impair the significance of working capital.
operating Property and Equipment"
shall encompass investments in property Sec. 5-2 Investments and special funds. and equipment not separately accounted
(a) Include in this classification long- for within a nontransport division but term investments in securities, securities assigned to other than air transportation which are not readily marketable, funds and its incidental services, and property set aside for specific purposes or involv- and equipment held for future use. ing restrictions preventing current use, (e) Operating and nonoperating propcontract performance deposits and other erty and equipment shall be accounted securities, receivables, or funds not avail- for separately in accordance with the able for current operations.
following instructions: (b) Investments in associated com- (1) Investment in property and equippanies, other than those defined in sec- ment shall be recorded at total cost iD