cordance with contractual requirements direct to trustees of sinking and other funds.

§ 181.01-3 Actually outstanding. Actually outstanding, as applied to securities issued or assumed by the carrier, means those which have been actually issued and are neither retired nor held by or for the carrier; Provided, however. That securities held by trustees shall be considered as actually outstanding.

§ 181.01-4 Addition. Addition means structures, facilities, or equipment added to those in service and not taking the place of anything previously existing.

§ 181.01-5 Amortization. Amortization means the gradual extinguishment of an amount in an account by prorating such amount over either a fixed period dependent on the life of the asset or liability to which it applies, or over the period during which it is anticipated the benefit will be realized.

§ 181.01-6 Associated companies and control. (a) Associated companies means companies or persons that directly or indirectly, through one or more intermediaries, control or are controlled by, or are under common control with the accounting carrier.

(b) Control (including the terms "controlling," "controlled by," and "under common control") as used in this part, means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a person, firm or corporation, whether through the ownership of voting securities, by contract or otherwise. If in any instance the existence of control is or may be open to reasonable doubt, the carrier shall report to the Commission all of the material facts pertinent to the possible existence of control.

§ 181.01-7 Betterment. Betterment means the enlargement or improvement of existing structures, facilities, and equipment.

§ 181.01-8 Book cost. Book cost means the amount at which property is recorded on the books of the carrier without deduction of related reserves.

§ 181.01-9 Carrier or motor carrier. Carrier or motor carrier includes both a common carrier by motor vehicle and a contract carrier by motor vehicle, subject to Part II of the Interstate Commerce Act.

§ 181.01-10 Carrier operating property. Carrier operating property means the property which is used (see § 181.0140) by the carrier in the conduct of its motor carrier operations or leased to others for such operations, and which has an expectation of life in service of more than 1 year from date of installation. This includes land, structures, equipment, and facilities necessary for such operations and services incidental thereto.

§ 181.01-11

Company. Company means any individual, firm, copartnership, corporation, association, or jointstock association; and includes any trustee, receiver, assignee, or personal representative thereof.

§ 181.01-12 Commission or the Commission. Commission or the Commission means the Interstate Commerce Commission.

§ 181.01-13 Contingent assets. Contingent assets means a possible source of value to the carrier dependent upon the fulfillment of conditions regarded as uncertain.

§ 181.01-14 Contingent liabilities. Contingent liabilities means items which may under certain conditions become obligations of the carrier but which are neither direct nor assumed liabilities at the date of the balance sheet.

§ 181.01-15 Cost. Cost means the amount of money actually paid for property or services, or the cash value at the time of the transaction of any consideration other than money.

§ 181.01-16 Cost of removal. Cost of removal means the cost of demolishing, dismantling, tearing down, or otherwise removing operating property, including the cost of transportation and handling incident thereto.

either matured at the date of the balance sheet or become due within 1 year from date of issuance or assumption or upon demand, except bonds, equipment and other long-term obligations, receivers' or trustees' certificates, which shall be classed as long-term obligations (see § 181.01-26) regardless of the period for which they are to run.

§ 181.01-19 Date of retirement. Date of retirement, as applied to operating property, means the date at which such property is permanently withdrawn from service.

Debt ex§ 181.01-20 Debt expense. pense means all expense in connection with the issuance and sale of evidences of long-term debt, such as fees for drafting mortgages and trust deeds; fees and taxes for issuing or recording evidences of debt; cost of engraving and printing bonds, certificates of indebtedness, and other evidences of debt; fees paid trustees; specific costs of obtaining governmental authority; fees for legal services; fees and commissions paid underwriters, brokers, and salesmen for marketing evidences of debt; fees and expenses of listing on exchanges; and other like costs.

§ 181.01-21 Delayed items. Delayed items means items relating to transactions which occurred before the current calendar year. It includes adjustments of errors in the income, operating revenue, and operating expense accounts of prior years.

Deprecia

§ 181.01-22 Depreciation. tion, as applied to depreciable operating property, means the loss in service value (see § 181.01-37) not restored by current maintenance, 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. Among the causes to be given consideration are wear and tear, decay, action of the elements, obsolescence, changes in the art, inadequacy, changes in demand, and requirements of public authority.

NOTE A: Unit plan means the plan under which depreciation charges are computed and the records maintained so that the total amount of depreciation accrued applicable to each unit can be determined.

NOTE B: Group plan means the plan under which depreciation charges are accrued upon the basis of the sum total of the book cost balances at the close of each month (or

4-week period) of all property included in each account or subdivision thereof, at rates determined from the average service life of the property included therein, and upon the retirement of any such property its full service value is charged to the depreciation reserve whether or not the particular item has attained the average service life.

as

§ 181.01-23 Discount. Discount, applied to securities issued or assumed by the carrier, means the excess of the par or face value of the securities, plus interest or dividends accrued at the date of the sale over the cash value of the consideration received from the sale.

§ 181.01-24 Distinct operating unit. Distinct operating unit means all or any portion of a route or routes covered by a certificate of convenience and necessity or a permit and operated as a separate entity, including the physical property used in the operation thereof.

§ 181.01-25 Joint facility. Joint facility means any property occupied or used jointly by the carrier and one or more other carriers under a definite arrangement whereby the costs are shared between the parties to the joint agreement. Portions of a structure or other property used exclusively by each of two or more carriers are not joint facilities.

§ 181.01-26 Long-term obligations. Long-term obligations means obligations having a life of more than 1 year from date of creation or assumption, and all unmatured bonds and receivers' or trustees' certificates.

Mile

§ 181.01-27 Mileage method. age method, as applied to depreciation of vehicles, means the plan under which the service value is charged to depreciation expenses and credited to depreciation reserves at a fixed rate per mile run. § 181.01-28 Minor items. Minor items, as applied to carrier operating property (see § 181.01-10), means the associated parts or elements of which units of property (see § 181.01-39) are composed. (See § 181.02-21 (c).)

§ 181.01-29 Net book cost. Net book cost, when applied to property, means the book cost (see § 181.01-8) less related depreciation and amortization reserves.

§ 181.01-30 Net salvage value. Net salvage value means the salvage value (see § 181.01-35) of property retired after deducting the cost of removal.

§ 181.01-31 Nominally issued. Nominally issued, as applied to securities is

sued or assumed by the carrier, means those which have been signed, certified, or otherwise executed and placed with the proper officer for sale and delivery, or pledged, or otherwise placed in some special fund of the carrier, but which have not been sold or issued direct to trustees of sinking funds in accordance with contractual requirements.

§ 181.01-32 Premium. Premium, as applied to securities issued or assumed by the carrier, means the excess of the cash value of the consideration received from their sale over the sum of their par (stated value of no-par stocks) or face value of the securities plus interest or dividends accrued at the date of sale.

§ 181.01-33 Property retired. Property retired, as applied to operating property, means property which has been removed, sold, abandoned, destroyed, or which for any cause has been permanently withdrawn from service.

§ 181.01-34 Replacing or replacement. Replacing or replacement, when not otherwise indicated in the context, means the acquisition, construction, or installation of property in place of property of like purpose retired, together with the removal of the property retired.

§ 181.01-35 Salvage value. Salvage value means the amount received for property retired, less any expenses incurred in connection with the sale or in preparing the property for sale; or, if retained, the amount at which the material recovered is chargeable to account 1180, Material and Supplies, or other appropriate account.

§ 181.01-36 Service life. Service life means the period between the date when carrier operating property (see § 181.0110) is placed in service and the date of its retirement. (See § 181.01-33.)

§ 181.01-37 Service value. Service value means the difference between the book cost (see § 181.01-8) and the net salvage value (see § 181.01-30) of carrier operating property.

§ 181.01-38 Straight-line method. Straight-line method, as applied to depreciation accounting, means the plan under which the service value (see $181.01-37) of property is charged to depreciation expenses or other appropriate accounts and credited to the depreciation reserves through equal periodic charges as nearly as may be during its service life.

§ 181.01-39 Unit of property. Unit of property, for the purpose of this system of accounts, means any item of property which on sale, abandonment, disposal or replacement is written out of the property accounts as provided for in § 181.0221.

§ 181.01-40 Used. Used, as applied to operating property, means actually and necessarily in current service or ready for and reasonably required to be currently held for future service. INSTRUCTIONS

§ 181.02-1

Classification of carriers. (a) For the purpose of prescribing uniform systems of accounts for common or contract motor carriers subject to Part II of the Interstate Commerce Act, carriers are grouped into the following three classes:

Class I. Carriers having average gross operating revenues (including interstate and intrastate) of $100,000 or over annually, from motor carrier operations.

Class II. Carriers having average gross operating revenues (including interstate and intrastate) of $25,000 or over, but under $100,000 annually, from motor carrier operations.

Class II. Carriers having average gross operating revenues (including interstate and intrastate) of less than $25,000 annually, from motor carrier operations.

(b) Class I carriers shall keep all the accounts prescribed in this part, where applicable. Separate systems of accounts will be prescribed for Class II and Class III carriers.

(c) The class to which any carrier belongs shall be determined by the average of its annual gross operating revenues derived from motor carrier operations for the 3 calendar years immediately preceding the effective date of this system of accounts. If, at the end of any calendar year following the effective date of this system of accounts, the average of its annual gross operating revenues from motor carrier operations for the 3 preceding years is greater than the maximum or less than the minimum for the class in which the carrier has been grouped, it shall automatically be grouped in the higher or lower class in which it falls because of such increased or decreased average annual gross operating revenues. Any carrier which begins new operations or extends its existing operations subsequent to the effective date of this system of accounts

may be classified in accordance with a reasonable estimate of its prospective annual gross operating revenues.

(d) Any carrier may, at its option, place itself in any group higher than the one in which it falls on the basis of its average annual gross operating revenues. Notice of such action shall be promptly filed with the Commission.

[Ex Parte No. MC-16, I. C. C., 2 F. R. 3120, as amended at 11 F. R. 14109]

§ 181.02-2 Records. (a) All the accounts defined in this system of accounts must be kept by the double entry method. Each carrier shall keep its general accounting books and all other books, reccords and memoranda which support in any way the entries to such accounting books and analyses of general ledger account balances so that it can furnish at any time full information as to any account. Moreover, it shall support each entry to each account with such detailed information as will provide a ready analysis and verification of the facts recorded therein. All expenditures must be definitely supported by vouchers, pay rolls, receipted bills, canceled checks, receipts for petty cash payments, or other evidences of the expenditures incurred.

(b) The books referred to in this part include not only books of account in a limited technical sense but all other records such as minute books, stock books, reports, correspondence, memoranda, etc., which will be useful in developing the history of or facts regarding any transaction.

(c) Carriers shall not destroy any books, records, memoranda, etc., which support entries to its accounts unless the destruction thereof is specifically provided for in Part 203 of this chapter.

(d) Subdivisions of any account in this system of accounts may be kept, provided that such subdivisions do not impair the integrity of the accounts prescribed. The Commission reserves the right to order any carrier to subdivide any account in this system of accounts. The title of each such subdivision shall clearly indicate the account of which it is a part. When an account is subdivided in the general ledger, an account need not be maintained for the total of the subdivisions. When such subdivisions are carried in subsidiary ledgers, however, the general ledger shall contain the control

ling accounts therefor so that a complete general ledger trial balance may be obtained.

§ 181.02-3 Accounting period. Each carrier shall keep its books on a calendar year basis and for each month (or 4-week period) all transactions applicable thereto, as nearly as can be ascertained (see § 181.02-8) shall be written up, posted to the general ledger and balanced. The final entries for any month (or 4-week period) shall be made in the general ledger not later than 60 days after the last day of the accounting period for which the accounts are stated, unless otherwise authorized by the Commission, except that the period within which the final entries for the last period in the calendar year shall be made may be extended to such date in the following March as shall not interfere with the preparation and filing of annual reports as required by paragraph (a) of section 220 of Part II of the Interstate Commerce Act.

§ 181.02-4 Submission of questions. To maintain uniformity of accounting, carriers shall submit all questions of doubtful interpretation to the Commission for consideration and decision.

§ 181.02-5 Item lists; interpretation. Lists of items appearing in the texts of the several accounts are given for the purpose of indicating the application of the prescribed accounting in specific cases. The lists are not to be considered as comprising all items includible in the several accounts, but merely as representative of them. On the other hand, the appearance of an item in a list warrants the inclusion of such item in the account concerned only 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.

§ 181.02-6 Opening entries. As of the effective date of this system of accounts the accounts prescribed herein shall be opened by appropriately transferring thereto the balances carried in the accounts previously maintained by the carrier. The carrier is authorized to make such subdivisions, reclassifications, consolidations of or additions to such balances as are necessary to meet the requirements of this system of accounts.

§ 181.02-7 Delayed items. (a) Delayed items (see § 181.01-21) shall be

charged or credited to the same accounts which should have been charged or credited if the items had been taken up or adjusted in the period to which they pertain. When the amount of a delayed item is relatively so large that its inclusion in the accounts for a single period would seriously distort those accounts, it may be distributed in equal amounts to the accounts for the current and remaining periods of the calendar year.

(b) If the amount of any delayed item is relatively so large that its inclusion in the accounts for a single year would seriously distort those accounts, the amount shall be distributed to the appropriate surplus account.

If,

§ 181.02-8 Unaudited items. (a) When the amount of any item affecting these accounts can not be accurately determined in time for inclusion in the accounts of the calendar year in which the transaction occurs, the amount of the item shall be estimated and included in the proper accounts. When the item is audited the necessary adjustments shall be made through the accounts in which the estimate was recorded. during the interval between the date of inclusion of the item in the accounts and the date on which it is audited, a substantial difference from the initial estimate is determined, appropriate adjustments shall be made in the current accounts to cover such difference. The carrier is not required to anticipate small items which would not appreciably affect these accounts.

(b) If, owing to exceptional conditions, a carrier finds a modification of the instructions in paragraph (a) of this section necessary, it shall furnish a statement of its proposed plans to the Commission for approval before adoption.

§ 181.02-9 Spreading of unusual income; revenue and expense items. When the amount of any unusual item includible in an income, operating revenue, or operating expense account for a single period is relatively so large that its inclusion in the accounts for that period would seriously distort those accounts it may be included in account 1890, Other Deferred Debits, or account 2450, Other Deferred Credits, as appropriate, and distributed in equal amounts to the accounts for the current and remaining periods of the year. No such item shall be spread beyond the accounts of the current year without authority of the Commission.

§ 181.02-10 Current assets. (a) In the group of accounts designated as Current Assets (accounts 1000 to 1190, inclusive) there shall not be included any item the amount or collectibility of which is not reasonably assured or for which provision has not been made in a reserve. Items of current character but of doubtful value may be carried in these accounts at a nominal value or included in account 1890, Other Deferred Debits, at book cost or nominal value, or written off, as may be appropriate.

(b) Adjustments to accomplish the writing down of items of doubtful value not covered by reserves shall be made through account 4680, Uncollectible Revenues, account 7500, Other Deductions, account 2946, Other Debits to Surplus, or other appropriate income or surplus account.

§ 181.02-11 Discount or premium on securities of other companies. (See § 181.02-15.)

§ 181.02-12 Discount; expense and premium on capital stock. (a) This system of accounts provides accounts for discounts, commissions and expenses on capital stock and another account for premium on capital stock. These accounts shall be subdivided for each class and series of capital stock issued by the carrier. Commission and expenses applicable to capital stock issues shall be included in the commission and expense account and shall not be deducted from premium on capital stock.

(b) In stating the balance sheet, discount on capital stock shall not be netted against premiums.

(c) General levies or assessments against stockholders of par or stated `value shares shall be credited to the premium account for the particular class and series of capital stock so assessed.

(d) Discounts and expenses on capital stock may be amortized by charges to account 2900, Unearned Surplus. However, in no event shall net debits exceed the accumulated net credits in unearned surplus. Any excess of debits may be retained in account 1900, Discount on Capital Stock, or account 1910, Commission and Expense on Capital Stock, as appropriate, until the stock is reacquired or retired, or the excess debits may be charged to account 2946, Other Debits to Surplus.