said Issue of 1914, or may make assignment of the amount charged to any such primary account to operating divisions, to its individual lines, or to States: Provided, however, That such subprimary accounts set up or such assignments made by any such carrier or by any receiver or operating trustee of any such carrier shall not impair the integrity of the accounts hereby prescribed.

(d) In order that the basis of comparison with previous years be not destroyed, any such carrier or any receiver or operating trustee of any such carrier may, during the 12 months from the time that the said Issue of 1914 becomes effective, keep and maintain, in addition to the accounts hereby prescribed, such portion or portions of its present accounts as may be deemed desirable by any such carrier, `or by any receiver or operating trustee thereof, for the purpose of such comparison; or, during the same period, may maintain such groupings of the primary accounts hereby prescribed as may be desired for that purpose.

(e) Any such carrier or any receiver or operating trustee of any such carrier, in addition to the accounts hereby prescribed, may, unless otherwise ordered, keep any temporary or experimental accounts the purpose of which is to develop the efficiency of operation: Provided, however, That such temporary or experimental accounts shall not impair the integrity of any primary account hereby prescribed.

(f) July 1, 1914 is hereby fixed as the date on which the said Issue of 1914 of the uniform system of accounts for express companies shall become effective.* [Order adopting Uniform system of accounts for express companies, ICC, May 28, 1914]

*88 18.00-1 to 18.554, inclusive, issued under the authority contained in sec. 20, 24 Stat. 386, sec. 7, 34 Stat. 593, sec. 435, 41 Stat. 493; 49 U.S.C. 20 (5).

18.00-2 Introductory letter to accounting officers of express companies. (a) This uniform system of accounts for express companies supersedes the Classification of Expenditures for Real Property and Equipment, First Issue, effective July 1, 1908, the Classification of Operating Expenses, First Issue, effective July 1, 1908, and the Classification of Operating Revenues, First Issue, effective July 1, 1908; also the Form of General Balance Sheet Statement, First Issue, effective July 1, 1911. It also supersedes all conflicting rules and instructions contained in Accounting Bulletin No. 6.19

(b) In the preparation of the revision of the accounting rules contained in this uniform system of accounts for express companies, the Commission has had the cooperation of the Committee on Corporate and Fiscal Accounts of the Association of Express Accountants.

(c) Accounting officers are invited to correspond with this office should questions arise with regard to the correct interpretation of any account or rule herein prescribed, in order that uniformity may be secured in the application of the provisions of the classifications.* [Introductory letter, Uniform system of accounts for express companies, ICC, May 28, 1914]

19 See Accounting Bulletin No. 13.

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GENERAL INSTRUCTIONS

18.01-0 Records. The carrier's records shall be kept with sufficient particularity to show fully the facts pertaining to all entries made in the accounts provided herein. Where the full information is not recorded in the general books, the entries therein shall be supported by other records in which the full details shall be shown. Such general book entries shall contain sufficient reference to the detail records to permit ready identification, and the detail records shall be filed in such manner as to be readily accessible for examination by representatives of the Interstate Commerce Commission.* [General note to Uniform system of accounts for express companies, ICC, May 28, 1914]

18.01-1 Definitions. When used in this system of accounts the term:

(a) "Cost of removal" means the cost of demolishing, tearing down, dismantling, removing or otherwise disposing of carrier property, recovering the salvage, and filling excavations of structures removed.

(b) "Component rates" as applied to depreciation accounting means the rates applied to the various subclasses of property within a primary account in arriving at the depreciation charge upon which the composite rate is based.

(c) "Composite rate" means the percentage rate applicable to the primary account as a whole.

(d) "Depreciable accounts" are those in which is recorded the cost of those classes of property for which depreciation accounting is required. (See § 18.01-2 (d).)

(e) "Depreciation" means the loss in service value (note definition (o)) not restored by current maintenance and incurred in connection with the consumption or prospective retirement of physical 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 the effect of which can be forecast with a reasonable approach to accuracy.

(f) "Group method" as applied to depreciation accounting means the method under which depreciation charges are accrued upon the basis of the ledger value of all property included in each depreciable account, using the average service life thereof properly weighted, and upon the retirement of any depreciable property its full service value is charged to the depreciation reserve regardless of the amount accrued with respect to the particular unit retired.

(g) "Ledger value" means the amount at which assets are properly recorded in the accounts of the carrier.

(h) "Minor item" as applied to carrier property means any part or element thereof which is not designated as a unit of property in note following § 18.218.

(i) "Nondepreciable accounts" are those real-property-and-equipment accounts in which are recorded the ledger values of those classes of carrier property for which no charges to operating expenses for depreciation are permitted.

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*For statutory citation, see note to § 18.00-1.

(j) "Property retired" as applied to carrier property means property which has been permanently withdrawn from transportation service.

NOTE: The dismantling or tearing down of a structure or a unit of equipment in order to replace parts thereof with improved parts the purpose of which is to modernize the unit and to create an expectation of life fairly comparable with a new and modern unit shall be accounted a retirement but the dismantling or stripping of such property only to the extent necessary to recondition or to replace in kind defective parts shall be accounted as repairs.

(k) "Retirement" as applied to physical property means the permanent withdrawal of the property from the service in which it has been used.

(1) "Replacement" means the installation of physical property in substitution for other property which has been retired.

(m) "Salvage from retired property" means the amount received for property retired and disposed of, or the amount at which the material recovered should be charged if re-used.

(n) "Service life" means the period of time between the installation or placing in service of a unit of property and its retirement for accounting purposes. In case buildings or other improvements on land not owned pass to lessor at the expiration of the lease, the service life of such improvements shall be computed as not extending beyond the term of the lease.

(o) "Service value" as applied to carrier property is the ledger value thereof less the value of the salvage therefrom.

(p) "Straight-line method" as applied to depreciation accounting means the method under which the service value of all depreciable property is charged to operating expenses or other appropriate accounts and concurrently credited to the depreciation reserve through equal annual charges as nearly as may be during its service life.

(q) "Time of installation" means the date at which carrier property is placed in transportation service.

(r) "Time of retirement" as applied to carrier property means the date at which the property is permanently withdrawn from transportation service.*t

In §§ 18.01-1 to 18.01-3, inclusive, the numbers to the right of the dash correspond with the respective general instruction numbers in Uniform system of accounts for express companies, Interstate Commerce Commission, as modified and prescribed Mar. 5, 1938, 3 F.R. 660. Cross references to accounts are made by citing the account number, e. g., account No. 512, instead of the corresponding section number (§ 18.512).

18.01-2 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 ledger value of each class of depreciable carrier property owned and used by it. These percentage rates shall be based on the estimated service values and service lives 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. They shall be computed in conformity with the group method of accounting for depreciation and shall be such that the loss in service value of the property may be distributed under the straight-line

*For statutory citation, see note to § 18.00-1.

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[385]

method during its service life. 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 which becomes subject to the provisions of this system of accounts after January 1, 1938, shall file such percentage rates within 6 months after the provisions of this system of accounts become applicable to it.

(2) In the event any annual 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. Where property is acquired for which no rates have been prescribed the carrier shall immediately compile and submit to this Commission appropriate estimates developed in accordance with the provisions of this

section.

(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, turnover, or other appropriate methods; also such records as will reflect the percentage of value of the salvage for property retired from each class of depreciable carrier property. 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. (b) Depreciation charges. All depreciation charges to operating expenses, or other appropriate accounts, and concurrent credits to the accrued depreciation account shall be made monthly. In computing such monthly charges and credits the annual percentage rates shall be applied to the ledger value of depreciable property in the respective primary accounts as of the first of each month and the result divided by 12.

(c) Depreciation rates. A separate composite annual percentage rate (see note) 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 for any class of property 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 date rates prescribed by this Commission become effective.

NOTE: Where the composite rate as prescribed by this Commission has been developed by the application of 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, when specifically authorized, may be used in computing the current depreciation charges as long as the property to which they apply is in service and the

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estimated service lives, etc., upon which they are based remain the same, without a supplemental order.

(d) Classes of depreciable carrier property. The classes of depreciable carrier property and the accounts covering such property are as follows:

(e) Service value charge. Upon the retirement of a unit of depreciable property the service value shall be charged in its entirety to account No. 548, "Accrued depreciation-Buildings and equipment."

(f) Special accounting. If as a result of unforeseen retirements or of insufficient credits to the depreciation reserve in the past it develops that the balance in it has become inadequate, a carrier may, upon application to this Commission and with its approval, credit the reserve and charge account No. 417, "Miscellaneous profit and loss debits," with an appropriate amount. The application to this Commission for such special accounting shall give full particulars concerning the situation.

(g) Insurance recovered. If insured structures or units of equipment which are damaged are repaired, the insurance recovered shall be credited to the account in which the cost of the repairs is included; if they are destroyed, the insurance recovered shall be credited to the accrued depreciation account.**

18.01-3 Retirements and replacements. (a) To accounts 201 to 217, inclusive, shall be credited at the time of retirement the ledger value of carrier property retired as follows:

(1) Land retired including the proportional cost of public improvements pertaining to the land. (See § 18.2-4.)

(2) Units of depreciable carrier property retired. (See note following § 18.218.)

(3) Minor items of depreciable carrier property retired and not replaced.

NOTE: If the ledger value of the minor item retired is small, is not under a general plan and in the judgment of the carrier does not affect the condition

*For statutory citation, see note to § 18.00-1.

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