equal annual charges as nearly as may be during its service life. (gg) "Telephone operations" and "telephone service" means the service by common carriers of transmitting intelligence by wire or wireless primarily through the use of telephones, and services incidental or auxiliary to such service, such as private line, teletypewriter, telegraph, and telephotograph services. (hh) "Telephone plant" means physical property used in telephone service. (ii) "Time of installation" means the date at which telephone plant is placed in telephone service. (jj) "Time of retirement" means the date at which telephone plant is retired from telephone service. [28 F.R. 13039, Dec. 5, 1963, as amended at 30 F.R. 13949, Nov. 4, 1965] § 31.01-4 Unaudited items. When the amount of any known item affecting these accounts cannot 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. If during the interval between the Idate 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 company is not required to anticipate minor items which would not appreciably affect these accounts. § 31.01-5 Delayed items. (a) The term "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. (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 company shall distribute to earned surplus so much of the amount as affects the operations of prior years. The company shall show in the appropriate schedule of its annual report to this Commission the full particulars concerning each such item in the manner prescribed therein. § 31.01-6 Spreading of 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 month is relatively so large that its inclusion in the accounts for that month would seriously distort those accounts, it may be included in account 139, "Other deferred charges," or account 174, "Other deferred credits," as appropriate, and distributed in equal amounts to the accounts for the current and remaining months of the calendar year. § 31.01-7 Profits and losses from foreign exchange. (a) Profits and losses from premiums and discounts on foreign exchange shall be included, so far as practicable, in the accounts appropriate for the transactions in connection with which such items arise. For example, profits realized and losses suffered due to the difference in rates of exchange between the date that money is borrowed or loaned and the date of payment or collection shall be included in account 402, "Miscellaneous credits to earned surplus," or account 413, "Miscellaneous debits to earned surplus," as may be appropriate. (b) Minor amounts of profits and losses on foreign exchange arising in the course of the company's telephone operations and impracticable of allocation to each specific transaction involved shall be included in account 526, "Other operating revenues," or account 675, "Other expenses," as may be appropriate. § 31.01-8 Item lists. On Lists of "items" appearing in the texts of the several accounts are given for the purpose of clearly indicating the application of the prescribed accounting in specific cases. The lists are not to be considered as comprising all the items includible in the several accounts but merely as representative of them. 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. § 31.01-9 Submission of questions. To the end that uniformity of accounting may be maintained, the company shall submit all questions of doubtful interpretation of the prescribed accounting to this Commission for consideration and decision. Questions and answers thereto with respect to this system of accounts are included in Appendix A. § 31.01-9A Sequence of accounts. The order in which the accounts are presented in this system of accounts is not to be considered as necessarily indicative of the order in which they will be scheduled at all times in reports to the Commission. INSTRUCTIONS FOR DEPRECIATION § 31.02-80 Computation of depreciation rates. (a) Depreciation charges shall be computed by applying the composite annual percentage rates considered applicable to the original cost of each class of depreciable telephone plant owned or used by the company. (Note also § 31.02-81 (b).) These percentage rates shall be based upon the 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 prospective future conditions. These percentage rates shall be computed in conformity with the group plan of accounting for depreciation and shall be such that the loss in service value of the property, except for losses excluded under the definition of depreciation, may be distributed under the straight-line method during the service life of the property. Such percentage rates shall not include any allowance for loss in service value of property expected to be installed in the future. The 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. (b) In the event any composite percentage rate becomes no longer applicable. revised composite percentage rates shall be computed in accordance with paragraph (a) of this section. e The company shall keep such records of property and property retire.ents 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, and also such records as will reflect the percentage of salvage value, or net salvage value, as appropriate, for property retired from each class of depreciable telephone plant. For purposes of the records required to be kept under this paragraph, that portion of the costs incurred in the removal (see § 31.01-3 (k)) of station apparatus from customers' premises, by reason of service discontinuance, from the inception of the removal through transportation of the removed apparatus to the company's premises shall be recorded as applicable to account 232, "Station connections," rather than being associated with account 231, "Station apparatus." (See also account 605.) [28 F.R. 13039, Dec. 5, 1963, as amended at 30 F.R. 13950, Nov. 4, 1965] § 31.02-81 Depreciation charges. (b) When the company is responsible under the terms of a lease for depreciation of property, used but not owned, for which the rent is chargeable to account 303, "Rent for lease of operating property," depreciation charges shall be made on the same basis as for owned depreciable property. (c) A separate composite annual percentage rate for each account covering depreciable telephone plant shall be used in computing depreciation charges. Such composite rates shall be computed in accordance with § 31.02-80. § 31.02-82 Classes of depreciable telephone plant. The classes of depreciable telephone plant and the accounts covering such plant are as follows: Buildings (account 212). Central office equipment (account 221). #ik Tee (*ccount 241). ****) **** (count 242:1), Budd cable (account 242:2), $ (ccount 242:8). Summarine cxine (account 242:4). Underground conduit (secount 244). Furniture and office equipment (account 261). Vehicles and other work equipment (account 264), Note: When depreciable plant carried in account 276, "Telephone plant acquired," is distributed to the appropriate plant acCounts, adjusting entries shall be made covering the depreciation charges applicable to such plant for the period during which it was carried in account 276. § 31.02-83 Plant retired for causes not factors in depreciation. The service value of depreciable telephone plant retired (note also § 31.2-25) shall be charged in its entirety to account 171, "Depreciation reserve." If the cause of retirement is not a recognized factor in depreciation and the loss is not covered by insurance, the company may upon proof that the charge to the depreciation reserve will result in undue depletion thereof, and with the approval of this Commission, credit account 171, "Depreciation reserve," and charge account 138, "Extraordinary maintenance and retirements," with the unprovidedfor loss in service value and distribute it from that account to account 609, "Extraordinary retirements," over such period as this Commission may approve. $31.02-84 Plant retired compensated for by termination charges." When charges for terminations of service are made which are designed to revover a loss in service value resulting therefrom a charge to account 609. "Extraordinary retirements," shall be made #s provided for in paragraph (b) of that assets, liabilities, capital stock, and sixplus or deficit of the compay. 311-11 Current assets. (a) In the group of accounts designated as current assets (accounts 113123, inclusive) there shall not be included any item the book cost of which is not reasonably assured, except that items of current character but of doubtful value may be written down and for record purposes carried in these accounts at a nominal amount. If not thus written down, they shall be included in account 139, "Other deferred charges," at book cost or nominal amount, or written off, as may be appropriate, but they shall not be so included at book cost unless there is a reasonable prospect of future substantial value. (b) The amount of any item written off shall be included in account 530, "Uncollectible operating revenues-Dr.," account 323, "Miscellaneous income charges," account 413, "Miscellaneous debits to earned surplus," or other appropriate account. § 31.1-12 Book cost of securities owned. (a) Securities issued by others shall be recorded in these accounts at the time of purchase at the current money value of the consideration given therefor by the company. (Note also paragraph (d) of account 313 and paragraph (b) of account 314.) (b) The company is allowed the option of writing down such book cost in recognition of decline in the value of the securities. It shall write down to a nominal amount or write off the book cost if there is no reasonable prospect of future substantial value. The amount of such adjustment shall be debited to account 413. "Miscellaneous debits to earned surplus" The company shall maintain a complete record of the facts on which it bases such adjustment $ 31.1-13 Company securities owned. (s) The book or face amount of nominally issued and nominaly outstanding stocks and other serie wed or sssumed by the company shall be excided them the a :& focuses thereto. sheet and shown Note also in (b) The necessary adjustments for the difference between (1) the face amount of bonds and other evidences of debt that have been reacquired and (2) the amounts actually paid for them plus the amounts of expenses incurred in connection with their reacquisition shall be included, when a debit, in account 413, "Miscellaneous debits to earned surplus," and when a credit, in account 402, "Miscellaneous credits to earned surplus." In the case of refinancing, amounts that ordinarily would thus be charged or credited to earned surplus may be made subject to amortization upon approval by the Commission in the specific instance. (c) The necessary adjustments for the difference between (1) the face amount of bonds and other evidences of debt that previously have been reacquired and are resold and (2) the amounts actually received for them less the amounts of expense incurred in connection with their resale shall be included when a debit in account 413, "Miscellaneous debits to earned surplus," and, when a credit, in account 402, "Miscellaneous credits to earned surplus." (d) The necessary adjustments for the difference between (1) the book amount of capital stock that has been reacquired and (2) the amount actually paid for it plus the amounts of expense incurred in connection with its reacquisition shall be included in account 179, "Other capital surplus," except that the excess of a debit adjustment over the balance in account 179, applicable to capital stock of the same class, shall be charged to earned surplus: And, provided further, That a credit adjustment shall be included in earned surplus to the extent that any previous charges to earned surplus on account of transactions in the same class of stock have not been offset by previous credits to earned surplus on account of such transactions. (e) The necessary adjustments for the difference between (1) the book amount of capital stock that previously has been reacquired and is resold, and (2) the amount actually received for it less the amounts of expense incurred in connection with its resale shall be included in account 179, "Other capital surplus," ex cept that the excess of a debit adjustment over the balance in account 179, applicable to capital stock of the same class, shall be charged to earned surplus: And provided further, That a credit adjustment shall be credited to earned surplus to the extent that any previous charges to earned surplus on account of transactions in capital stock of the same class have not been offset by previous credits to earned surplus on account of such transactions. (f) The company's records shall be so maintained that in reports to the Commission there may be shown the extent to which the surplus accounts have been charged and credited in connection with transactions in each class of capital stock. (g) The book amount for nonpar stock reacquired shall be obtained by first ascertaining the amount in account 150, "Capital stock," for the particular class of stock before the reacquirement. In this amount shall be included the proceeds realized at the sale, the amount of any assessments against stockholders, the amounts transferred to account 150 from surplus, less any amount which has been distributed from account 150 to the stockholders in liquidation. The amount thus ascertained shall be prorated to the shares reacquired on the basis of the proportion that the reacquired shares bear to the total number of shares actually outstanding immediately prior to their reacquirement. (Note also accounts 104, 105, 136, and 137.) § 31.1-14 Discount and premium on capital stock. (a) A separate discount and premium account shall be maintained to include both discounts suffered and premiums realized at the time of sale of each class and series of capital stock having a par value. (b) In stating the balance sheet, the total of debit balances in these accounts having debit balances shall be reported under account 134:1, "Discount on capital stock," and the total of credit balances in these accounts having credit balances shall be reported under account 152, "Premium on capital stock." Ac counts with debit balances shall not be offset by accounts with credit balances. (c) General levies or assessments against stockholders shall be credited to the discount and premium account for the particular class and series of capital stock so assessed. (d) Discounts, premiums, and assessments on capital stock shall be retained in the discount and premium account until the reacquirement of the securities to which they relate, or until otherwise disposed of lawfully. (e) When capital stock which has been actually issued or assumed by the company is reacquired the proportion (based upon the relation of the amount of stock reacquired to the total amount of that particular class or series of stock outstanding before its reacquirement) of the balance in the discount and premium account with respect to the stock reacquired shall be cleared to account 179, "Other capital surplus," except that any excess of a debit amount over the balance in account 179, applicable to capital stock of the same class, shall be charged to earned surplus: And, provided further, That a credit amount shall be credited to earned surplus to the extent that any previous charges to earned surplus on account of transactions in capital stock of the same class have not been offset by previous credits to earned surplus on account of such transactions. (f) No discount or premiums on capital stock shall be included in any account as a part of the cost of acquiring any property or as a part of the cost of operation. § 31.1-15 Discount, premium, and expense on long-term debt. (a) A separate discount, premium, and debt expense account shall be maintained to include both discounts suffered and premiums realized together with expenses incurred, in connection with the sale of each class and series of long-term debt (including receivers' certificates) issued or assumed by the company. (Note also § 31.1-13(b).) (b) In stating the balance sheet, the total of the debit balances remaining in these accounts having debit balances shall be reported under account 135, "Discount on long-term debt," and the total of credit balances remaining in these accounts having credit balances shall be reported under account 168, "Premium on long-term debt." Accounts with debit balances shall not be offset by accounts with credit balances. (c) The company may extinguish at any time through charges to account 413, "Miscellaneous debits to earned surplus," all or any part of the debit balance remaining in any particular discount, premium, and debt expense account. (d) Each month there shall be credited to each particular discount, premium and debt expense account in which there is a debit balance the proportion (based upon the ratio of the month to the life of the security remaining at the beginning of the month) of such debit balance as is applicable to the month. The amounts thus credited shall be concurrently charged to account 338, "Amortization of discount on long-term debt." (Note also § 31.2-22 (b) (10) (ii).) (e) Correspondingly each month there shall be charged to each particular discount, premium and debt expense account in which there is a credit balance the proportion of such credit balance as is applicable to the month. The amounts thus charged shall be concurrently credited to account 339, "Release of premium on long-term debt.-Cr." (Note also § 31.2-22 (b) (10) (ii).) (f) Except as provided in paragraphs (c), (d) and (e) of this section, the balance in each of these accounts shall be carried until the reacquirement of the securities to which it relates at which time the proportion (based upon the relation of the amount of long-term debt reacquired to the total amount of that particular class or series of long-term debt outstanding before its reacquirement) of the balance in the discount, premium and debt expense account with respect to the long-term debt reacquired shall be cleared to account 402, "Miscellaneous credits to earned surplus," or account 413, "Miscellaneous debits to earned surplus," as may be appropriate. In the case of refinancing, amounts that ordinarily would thus be charged or credited to earned surplus may be made subject to amortization upon approval of the Commission in the specific instance. (Note also § 31.1-13 (b).) (g) No discount, premium, or expense on long-term debt shall be included in any account as a part of the cost of acquiring any property or as a part of the |