795

796

797

stock.

Paid-in surplus.

Other capital surplus.

Retained income-Appropriated.

798 Retained income-Unappropriated. 799 Form of general balance sheet statement.

AUTHORITY: The provisions of this Part 1205 issued under sec. 12, 24 Stat. 383, as amended, sec. 20(6), 54 Stat. 517; 49 U.S.C. 12, 20(6).

SOURCE: The provisions of this Part 1205 appear at 32 F.R. 20254, Dec. 20, 1967, unless otherwise noted.

General Instructions

1 Persons or companies for whom this system of accounts is prescribed. This system of accounts is prescribed for refrigerator car lines which are railroad owned or controlled and are operated in interstate commerce subject to provisions of section 20(6) of the Interstate Commerce Act furnishing cars or protective services against heat or cold. This system of accounts is not designed to meet the requirements of persons or companies, except those "railroad owned or controlled", which furnish cars but not protective service, to or on behalf of any carrier by railroad or express company subject to Part I of the Act. 2 Definitions.

(a) "Accounts" means the accounts prescribed in this system of accounts.

(b) "Actually issued" as applied to securities issued or assumed, means those which have been sold to a bona fide purchaser for a valuable consideration and those issued as dividends on stock.

(c) "Actually outstanding" as applied to securities issued or assumed by the accounting company means those which

have been actually issued and are neither retired nor held by or for the accounting company.

(d) "Affiliated 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 company.

(e) "Amortization” means the gradual extinguishment of an amount in an account by distributing such amount over a fixed period, over 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.

(f) "Book cost" means the amount at which assets are recorded in the accounts of the company without deduction of any related reserves or other items. If the book cost of units and minor items of property retired cannot be determined definitely from the company's records, the book cost of such items shall be estimated.

(g) "Book liability” means the amount at which liabilities (including securities issued or assumed by the company) are recorded in the accounts of the company.

(h) "Cars or protective service" means the furnishing of cars or protective service against heat or cold to or on behalf of any carrier by railroad or express company and services incident thereto. "Cars or protective service property" means property devoted to such service. (i) "Company," when not otherwise indicated in the context, means the persons to which this system of accounts is applicable.

(j) "Commission" means the Interstate Commerce Commission.

(k) "Control" (including the terms "controlling," "controlled by," and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a company, whether such power is exercised through one or more intermediary companies, or alone, or in conjunction with, or pursuant to an agreement, and whether such established power is through a majority of minority ownership or voting of securities, common directors, officers or stockholders, voting trusts, holding trusts, associated companies, contract or any other direct or indirect means.

(1) "Cost of removal" means cost of demolishing, dismantling, tearing down or otherwise removing property.

(m) "Debt expense" means all expenses in connection with the issuance and initial sale of evidences of 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 and certificates of indebtedness; fees paid trustees; specific costs of obtaining governmental authority; fees for legal services; fees and commissions paid underwriters, brokers, and salesmen for marketing such evidences of debt; fees and expenses of listing on exchanges; and other like costs.

(n) "Discount" as applied to the securities issued or assumed by the accounting company means the excess of the par (stated value of no-par stocks) 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 their sale.

(o) "Ledger value of property" means the value at which the property is carried in the property investment account in the general ledger of the company. In case the value of any item of property is not shown separately in the ledger the ledger value of that item shall be its proportionate share of the value of the entire group in which the particular property is included.

(p) "Minor items of property" means the associated parts or items of which units of property are composed.

(q) "Nominally issued" as applied to securities issued or assumed by the company, 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 accounting company.

(r) "Nominally outstanding" as applied to securities issued or assumed by the accounting company, means those which, after being actually issued, have been reacquired by or for the accounting company under such circumstances which require them to be considered as held alive and not retired.

(s) "Persons" means those who furnish cars or protective service against heat or cold to or on behalf of any carrier by railroad or express company, and includes an individual, firm, copartnership, corporation, company, association or joint-stock association; also a trustee,

receiver, assignee, or personal representative thereof.

(t) "Premium" as applied to securities issued or assumed by the company, 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 and interest or dividends accrued at the date of sale.

(u) "Property retired" means property which has been removed, sold, abandoned, destroyed, or which for any cause has been withdrawn from service.

(v) "Protective service contracts" means those entered into with any common carrier by railroad or express company under the provisions of paragraph 14(b) of section 1 of the Interstate Commerce Act for furnishing protective services against heat or cold to property transported in interstate or foreign

commerce.

(w) "Service life" means the period between the date when property is placed in service and the date of its retirement.

(x) "Service value" means the ledger value less the value of the salvage, including insurance, recovered therefrom.

(y) "Value of salvage" means the amount received for property retired and disposed of, or the amount at which material recovered will be charged if reused.

3 Classification of accounts.

Accounts are prescribed to cover cost of property used in furnishing cars or protective service and for revenues, expenses, taxes and income from such service. Separate accounts are prescribed for investment in property not used in such services and for other investments and income therefrom; for extraordinary and prior period items, including applicable income taxes; and for assets, liabilities and capital includible in the balance sheet statement. Retained income accounts form the connecting link between the income account and the equity section of the balance sheet. They are provided to record the transfer of net income or loss for the year; certain capital transactions; and, when authorized by the Commission, other items.

All items of profit and loss recognized during the year are includible in ordinary income except nonrecurring items which in the aggregate for the same class are both material in relation to operating revenues and ordinary income for the

year and are clearly not identified with or do not result from usual business operations of the year. Important items of the kind which occur from time to time and which, when material in amount, are to be excluded from ordinary income are those resulting from unusual sales of property and investment securities other than temporary cash investments, from company bonds reacquired, from change in application of accounting principles, and from prior period items (other than ordinary adjustments of a recurring nature). Material items are those which, unless excluded from ordinary income, would distort the accounts and impair the significance of ordinary income for the year. Items so excludible from ordinary income are to be entered directly in the income accounts provided for extraordinary and prior period items upon approval of the Commission.

Adjustments constituting items of a character typical of customary business activities or representing corrections or refinements resulting from the natural use of estimates inherent in the accounting process, shall not be considered extraordinary or prior period items regardless of size.

In determining materiality, items of a similar nature should be considered in the aggregate; dissimilar items should be considered individually. As a general standard, an item to qualify for inclusion as an extraordinary or prior period item shall exceed 1 percent of total operating revenues and ten percent of ordinary income for the year.

All charges to the accounts prescribed for operating revenues, operating expenses and other accounts for furnishing cars or protective service shall be just, reasonable and necessary to the honest and efficient operation and management of the company's business. Payments or allowances in excess of such just and reasonable charges shall be included in account 551, "Miscellaneous income charges."

4 Records.

(a) Each company shall keep its books of account, and all other books, records, and memoranda which support the entries in such books of account so as to be able to furnish readily full information as to any item included in any account. Each entry shall be supported by such detailed information as will permit ready identification, analysis, and verification of all facts relevant thereto.

The books and records referred to herein include not only accounting records in a limited technical sense, but all other records, such as minute books, stock books, reports, correspondence, memoranda, etc., which may be useful in developing the history of or facts regarding any transaction.

(b) In addition to prescribed accounts, clearing accounts, temporary or experimental accounts, and subdivisions of any accounts, may be kept, provided the integrity of the prescribed accounts is not impaired. The titles of all subdivisions or subaccounts shall refer by number or title to the accounts prescribed herein of which they are subdivisions.

(c) The "Regulations to Govern the Destruction of Records of Railroad Companies" prescribed by this Commission, part 1220 of this chapter, are applicable to persons and companies subject to this system of accounts.

5 Accounting period.

Each company shall keep its books on a monthly basis so that for each month all transactions applicable thereto, or nearly as may be ascertained, shall be entered in the books of the company. The final entries for any month shall be made not later than 60 days after the last day of the month for which the accounts are stated, except that the period within which the final entries for the month of December shall be made may be extended to such date in the following March as shall not interfere with the preparation and filing of annual report.

6 Accrual method of accounting.

The accounting for operating revenues, operating expenses and income each month and year shall be, as nearly as practicable, upon the basis of accruals in conformity with generally accepted accounting principles consistently applied. Any change in practice of accounting for accruals or any unusual accruals involving material amounts shall be reported promptly to the Commission. 7 Unaudited items.

When it is known that a transaction has occurred which affects operating revenues, operating expenses or other income account but the amount involved and its effect upon the accounts cannot be determined with absolute accuracy, the amount thereof shall be estimated and included in the appropriate income and balance sheet accounts. Such esti