**UNITED STATES DEPARTMENT OF AGRICULTURE**

**Rural Electrification Administration**

**Bulletin 1770 B-1**

**SUBJECT: [Part 32, Uniform System of Accounts, and
Supplementary]{.underline}**

**[Accounts Required of REA Telephone Borrowers.]{.underline}**

**TO:** All Telephone Borrowers

REA Telephone Staff

REA Economic Development and Technical Services Staff

**EFFECTIVE DATE:** Date of Approval.

**EXPIRATION DATE:** Date of change in 47 CFR part 32 or in 7 CFR
1770.15 by rulemaking.

**OFFICE OF PRIMARY INTEREST:** Technical Accounting and Auditing Staff,
Borrowers Accounting Division.

**PREVIOUS INSTRUCTIONS:** This is a new bulletin.

**FILING INSTRUCTIONS:** File with 7 CFR part 1770.

**PURPOSE:** This bulletin 1770 B-1 sets forth, in a more user-friendly
format, the FCC Uniform System of Accounts (USOA) for Telecommunication
Companies. This bulletin is a **reprint of already codified procedures
and policies** found in 47 CFR part 32, revised as of October 1, 1989,
and found in 7 CFR Part 1770, Accounting System Requirements for REA
Telephone Borrowers, revised as of February 1, 1990, as specified in 7
CFR 1770.15, Supplementary Accounts Required of REA Telephone Borrowers.
This bulletin is for use by borrowers, consultants, and other interested
parties.

Every effort has been made to ensure the accuracy of this document.
However, in case of discrepancies, the regulations at 7 CFR part 1770
and 47 CFR part 32 are the authorized sources.

George E. Pratt 11/12/92

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_
\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Administrator Date

**PART 32 - UNIFORM SYSTEM OF ACCOUNTS**

**FOR TELECOMMUNICATIONS COMPANIES**

TABLE OF CONTENTS

**SUBPART A - PREFACE**

ù32.1 Background

ù32.2 Basis of the accounts

ù32.3 Authority

ù32.4 Communications Act

**SUBPART B - GENERAL INSTRUCTIONS**

ù32.11 Classification of companies

ù32.12 Records

ù32.13 Accounts - general

ù32.14 Regulated accounts

ù32.15 \[Reserved\]

ù32.16 Changes in accounting standards

ù32.17 Interpretation of accounts

ù32.18 Waivers

ù32.19 Address for reports and correspondence

ù32.20 Numbering convention

ù32.21 Sequence of accounts

ù32.22 Comprehensive interperiod tax allocation

ù32.23 Nonregulated activities

ù32.24 Compensated absences

ù32.25 Unusual items and contingent liabilities

ù32.26 Materiality

ù32.27 Transaction with affiliates

**SUBPART C - INSTRUCTIONS FOR BALANCE SHEET ACCOUNTS**

ù32.101 Structure of the balance sheet accounts

ù32.102 Nonregulated investments

ù32.103 Balance sheet accounts for other than regulated-

fixed assets to be maintained

ù32.1120 Cash and equivalents

*REA* 1120.11 Cash - general fund

*REA* 1120.12 Cash - construction fund trustee

*REA* 1120.13 Cash - transfer of funds

*REA* 1120.21 Special cash deposits

*REA* 1120.31 Petty cash fund

*REA* 1120.32 Change fund

ù32.1130 Cash

*REA* 1130.1 Cash - general fund

*REA* 1130.2 Cash - construction fund trustee

*REA* 1130.3 Cash - transfer of funds

ù32.1140 Special cash deposits

ù32.1150 Working cash advances

*REA* 1150.1 Petty cash fund

*REA* 1150.2 Change fund

ù32.1160 Temporary investments

ù32.1180 Telecommunications accounts receivable

ù32.1181 Accounts receivable allowance - telecommunications

ù32.1190 Other accounts receivable

ù32.1191 Accounts receivable allowance - other

ù32.1200 Notes receivable

ù32.1201 Notes receivable allowance

ù32.1210 Interest and dividends receivable

ù32.1220 Inventories

*REA* 1220.1 Material and supplies

*REA* 1220.2 Property held for sale or lease

*REA* 1220.3 Exempt materials - clearing

ù32.1280 Prepayments

*REA* 1280.1 Prepaid rents

*REA* 1280.2 Prepaid taxes

*REA* 1280.3 Prepaid insurance

*REA* 1280.4 Prepaid directory expenses

*REA* 1280.5 Other prepayments

ù32.1290 Prepaid rents

ù32.1300 Prepaid taxes

ù32.1310 Prepaid insurance

ù32.1320 Prepaid directory expenses

ù32.1330 Other prepayments

ù32.1350 Other current assets

*REA* 1350.1 Subscriptions to capital stock

*REA* 1350.2 Subscriptions to memberships

*REA* 1350.3 Subscriptions to members\' equity certificates

*REA* 1350.4 Other current assets

ù32.1401 Investments in affiliated companies

ù32.1402 Investments in nonaffiliated companies

*REA* 1402.1 Investments in nonaffiliated companies - Class B RTB

stock

*REA* 1402.11 Investments in nonaffiliated companies - Class B RTB

stock - cr.

*REA* 1402.2 Investments in nonaffiliated companies - Class C RTB

stock

*REA* 1402.3 Other investments in nonaffiliated companies

ù32.1406 Nonregulated investments

ù32.1407 Unamortized debt issuance expense

ù32.1408 Sinking funds

ù32.1410 Other noncurrent assets

ù32.1438 Deferred maintenance and retirements

ù32.1439 Deferred charges

ù32.1500 Other jurisdictional assets - net

ù32.2000 Instructions for telecommunications plant accounts

ù32.2001 Telecommunications plant in service

*REA* 2001.1 Telecommunications plant in service - classified

*REA* 2001.2 Telecommunications plant in service - unclassified

ù32.2002 Property held for future telecommunication use

ù32.2003 Telecommunications plant under construction -

short-term

*REA* 2003.1 Telecommunications plant under construction -

short-term - contract

*REA* 2003.2 Telecommunications plant under construction -

short-term - force account

*REA* 2003.3 Telecommunications plant under construction -

short-term - work orders

ù32.2004 Telecommunications plant under construction -

long-term

*REA* 2004.1 Telecommunications plant under construction -

long-term - contract

*REA* 2004.2 Telecommunications plant under construction -

long-term - force account

*REA* 2004.3 Telecommunications plant under construction -

long-term - work orders

ù32.2005 Telecommunications plant adjustment

ù32.2006 Nonoperating plant

ù32.2007 Goodwill

ù32.2110 Land and support assets

ù32.2111 Land

ù32.2112 Motor vehicles

ù32.2113 Aircraft

ù32.2114 Special purpose vehicles

ù32.2115 Garage work equipment

ù32.2116 Other work equipment

ù32.2121 Buildings

ù32.2122 Furniture

ù32.2123 Office equipment

ù32.2124 General purpose computers

ù32.2210 Central office - switching

*REA* 2210.11 Central office switching - analog

*REA* 2210.21 Central office switching - digital

*REA* 2210.31 Central office switching - electro-mechanical -

step-by-step

*REA* 2210.32 Central office switching - electro-mechanical -

crossbar

*REA* 2210.33 Central office switching - electro-mechanical -

other

ù32.2211 Analog electronic switching

ù32.2212 Digital electronic switching

ù32.2215 Electro-mechanical switching

ù32.2220 Operator systems

ù32.2230 Central office - transmission

*REA* 2230.11 Central office transmission - radio systems -

satellite and earth station facilities

*REA* 2230.12 Central office transmission - radio systems - other

*REA* 2230.21 Central office transmission - circuit equipment

ù32.2231 Radio system

ù32.2232 Circuit equipment

ù32.2310 Information origination/termination

ù32.2311 Station apparatus

ù32.2321 Customer premises wiring

ù32.2341 Large private branch exchanges

ù32.2351 Public telephone terminal equipment

ù32.2362 Other terminal equipment

ù32.2410 Cable and wire facilities

ù32.2411 Poles

ù32.2421 Aerial cable

ù32.2422 Underground cable

ù32.2423 Buried cable

ù32.2424 Submarine cable

ù32.2425 Deep sea cable

ù32.2426 Intrabuilding network cable

ù32.2431 Aerial wire

ù32.2441 Conduit systems

ù32.2680 Amortizable tangible assets

ù32.2681 Capital leases

ù32.2682 Leasehold improvements

ù32.2690 Intangibles

ù32.3000 Instructions for balance sheet accounts -

depreciation and amortization

ù32.3100 Accumulated depreciation

*REA* 3100x Retirement work in progress

ù32.3200 Accumulated depreciation - held for future

telecommunications use

ù32.3300 Accumulated depreciation - nonoperating

ù32.3400 Accumulated amortization - tangible

ù32.3410 Accumulated amortization - capitalized leases

ù32.3420 Accumulated amortization - leasehold improvements

ù32.3500 Accumulated amortization - intangible

ù32.3600 Accumulated amortization - other

ù32.4000 Instructions for balance sheet accounts -

liabilities and stockholders\' equity

ù32.4010 Accounts payable

*REA* 4010.11 Accounts payable to affiliated companies

*REA* 4010.21 Accounts payable to nonaffiliated companies

*REA* 4010.22 Accounts payable - employees\' income tax withheld

*REA* 4010.23 Accounts payable - FICA taxes withheld

*REA* 4010.24 Accounts payable - federal excise taxes

*REA* 4010.25 Accounts payable - payroll

ù32.4020 Notes payable

ù32.4030 Advance billing and payments

ù32.4040 Customers\' deposits

ù32.4050 Current maturities - long-term debt

ù32.4060 Current maturities - capital leases

ù32.4070 Income taxes - accrued

*REA* 4070.1 Income taxes accrued - federal

*REA* 4070.2 Income taxes accrued - state and local

ù32.4080 Other taxes - accrued

*REA* 4080.1 Other taxes accrued - property

*REA* 4080.2 Other taxes accrued - employer\'s portion - FICA

*REA* 4080.3 Other taxes accrued - federal unemployment

*REA* 4080.4 Other taxes accrued - state unemployment

*REA* 4080.5 Other taxes accrued - miscellaneous

ù32.4100 Net current deferred operating income taxes

ù32.4110 Net current deferred nonoperating income taxes

ù32.4120 Other accrued liabilities

*REA* 4120.1 Unmatured interest accrued - REA notes

*REA* 4120.2 Unmatured interest accrued - Telephone Bank notes

*REA* 4120.3 Unmatured interest accrued - Federal Financing Bank

notes

*REA* 4120.4 Unmatured interest accrued - Bank for Cooperatives

notes

*REA* 4120.5 Unmatured interest accrued - Rural Telephone Finance

Cooperative notes

*REA* 4120.6 Other accrued liabilities

ù32.4130 Other current liabilities

*REA* 4130.1 Patronage capital payable

*REA* 4130.2 Other current liabilities - miscellaneous

ù32.4210 Funded debt

*REA* 4210.11 Funded debt - other

*REA* 4210.12 REA notes

*REA* 4210.13 Telephone Bank notes

*REA* 4210.14 Federal Financing Bank notes

*REA* 4210.15 Bank for Cooperatives notes

*REA* 4210.16 Rural Telephone Finance Cooperative notes

*REA* 4210.17 REA notes - deferred interest

*REA* 4210.18 REA notes - advance payments, dr.

*REA* 4210.19 Funded debt - other - unadvanced, dr.

*REA* 4210.20 REA notes - unadvanced, dr.

*REA* 4210.21 Telephone Bank notes - unadvanced, dr.

*REA* 4210.22 Federal Financing Bank notes - unadvanced, dr.

*REA* 4210.23 Bank for Cooperatives notes - unadvanced, dr.

*REA* 4210.24 Rural Telephone Finance Cooperative notes -

unadvanced, dr.

ù32.4220 Premium on long-term debt

ù32.4230 Discount on long-term debt

ù32.4240 Reacquired debt

ù32.4250 Obligations under capital leases

ù32.4260 Advances from affiliated companies

ù32.4270 Other long-term debt

*REA* 4270.1 Members\' redeemable equity certificates subscribed

but unissued

*REA* 4270.2 Members\' redeemable equity certificates issued

*REA* 4270.3 Other long-term debt

ù32.4310 Other long-term liabilities

ù32.4320 Unamortized operating investment tax credits - net

ù32.4330 Unamortized nonoperating investment tax credits -

net

ù32.4340 Net noncurrent deferred operating income taxes

ù32.4350 Net noncurrent deferred nonoperating income taxes

ù32.4360 Other deferred credits

ù32.4370 Other jurisdictional liabilities and deferred

credits - net

ù32.4510 Capital stock

ù32.4520 Additional paid-in capital

ù32.4530 Treasury stock

ù32.4540 Other capital

*REA* 4540.11 Capital stock subscribed

*REA* 4540.12 Memberships subscribed but unissued

*REA* 4540.13 Members\' equity certificates subscribed but unissued

*REA* 4540.21 Memberships issued

*REA* 4540.22 Members\' equity certificates issued

*REA* 4540.23 Members\' equity - other

*REA* 4540.31 Installments paid on capital stock

*REA* 4540.32 Installments paid on memberships subscribed

*REA* 4540.33 Installments paid on equity certificates subscribed

*REA* 4540.41 Other capital - miscellaneous

ù32.4550 Retained earnings

*REA* 4550.1 Operating margins

*REA* 4550.2 Nonoperating margins

*REA* 4550.3 Other margins

*REA* 4550.4 Patronage capital assignable

*REA* 4550.5 Patrons\' capital credits assigned

*REA* 4550.6 Gain on the retirement of capital credits

**SUBPART D - INSTRUCTIONS FOR REVENUE ACCOUNTS**

ù32.4999 General

ù32.5000 Basic local service revenue

ù32.5001 Basic area revenue

ù32.5002 Optional extended area revenue

ù32.5003 Cellular mobile revenue

ù32.5004 Other mobile services revenue

ù32.5010 Public telephone revenue

ù32.5040 Local private line revenue

ù32.5050 Customer premises revenue

ù32.5060 Other local exchange revenue

ù32.5069 Other local exchange revenue settlements

ù32.5080 Network access revenue

ù32.5081 End user revenue

ù32.5082 Switched access revenue

ù32.5083 Special access revenue

ù32.5084 State access revenue

ù32.5100 Long distance message revenue

ù32.5110 Unidirectional long distance revenue

ù32.5111 Long distance inward-only revenue

ù32.5112 Long distance outward-only revenue

ù32.5120 Long distance private network revenue

ù32.5121 Subvoice grade long distance private network revenue

ù32.5122 Voice grade long distance private network revenue

ù32.5123 Audio program grade long distance private network

revenue

ù32.5124 Video program grade long distance private network

revenue

ù32.5125 Digital transmission long distance private network

revenue

ù32.5126 Long distance private network switching revenue

ù32.5128 Other long distance private network revenue

ù32.5129 Other long distance private network revenue

settlements

ù32.5160 Other long distance revenue

ù32.5169 Other long distance revenue settlements

ù32.5200 Miscellaneous revenue

ù32.5230 Directory revenue

ù32.5240 Rent revenue

ù32.5250 Corporate operations revenue

ù32.5260 Miscellaneous revenue

ù32.5261 Special billing arrangements revenue

ù32.5262 Customer operations revenue

ù32.5263 Plant operations revenue

ù32.5264 Other incidental regulated revenue

ù32.5269 Other revenue settlements

ù32.5270 Carrier billing and collection revenue

ù32.5280 Nonregulated operating revenue

ù32.5300 Uncollectible revenue

ù32.5301 Uncollectible revenue - telecommunications

ù32.5302 Uncollectible revenue - other

**SUBPART E - INSTRUCTIONS FOR EXPENSE ACCOUNTS**

ù32.5999 General

ù32.6110 Network support expenses

ù32.6112 Motor vehicle expense

ù32.6113 Aircraft expense

ù32.6114 Special purpose vehicles expense

ù32.6115 Garage work equipment expense

ù32.6116 Other work equipment expense

ù32.6120 General support expenses

ù32.6121 Land and building expense

ù32.6122 Furniture and artworks expense

ù32.6123 Office equipment expense

ù32.6124 General purpose computers expense

ù32.6210 Central office switching expenses

*REA* 6210.11 Analog electronic expense

*REA* 6210.21 Digital electronic expense

*REA* 6210.31 Electro-mechanical expense

ù32.6211 Analog electronic expense

ù32.6212 Digital electronic expense

ù32.6215 Electro-mechanical expense

ù32.6220 Operator systems expense

ù32.6230 Central office transmission expense

*REA* 6230.11 Radio systems expense

*REA* 6230.21 Circuit equipment expense

ù32.6231 Radio systems expense

ù32.6232 Circuit equipment expense

ù32.6310 Information origination/termination expenses

ù32.6311 Station apparatus expense

ù32.6341 Large private branch exchange expense

ù32.6351 Public telephone terminal equipment expense

ù32.6362 Other terminal equipment expense

ù32.6410 Cable and wire facilities expenses

ù32.6411 Poles expense

ù32.6421 Aerial cable expense

ù32.6422 Underground cable expense

ù32.6423 Buried cable expense

ù32.6424 Submarine cable expense

ù32.6425 Deep sea cable expense

ù32.6426 Intrabuilding network cable expense

ù32.6431 Aerial wire expense

ù32.6441 Conduit systems expense

ù32.6510 Other property, plant and equipment expenses

ù32.6511 Property held for future telecommunications use

expense

ù32.6512 Provisioning expense

ù32.6530 Network operations expenses

ù32.6531 Power expense

ù32.6532 Network administration expense

ù32.6533 Testing expense

ù32.6534 Plant operations administration expense

ù32.6535 Engineering expense

ù32.6540 Access expense

ù32.6560 Depreciation and amortization expenses

*REA* 6560.1 Depreciation expense

*REA* 6560.2 Amortization expense

ù32.6561 Depreciation expense - telecommunications plant in

service

ù32.6562 Depreciation expense - property held for future

telecommunications use

ù32.6563 Amortization expense - tangible

ù32.6564 Amortization expense - intangible

ù32.6565 Amortization expense - other

ù32.6610 Marketing

ù32.6611 Product management

ù32.6612 Sales

ù32.6613 Product advertising

ù32.6620 Services

ù32.6621 Call completion services

ù32.6622 Number services

ù32.6623 Customer services

ù32.6710 Executive and planning

ù32.6711 Executive

ù32.6712 Planning

ù32.6720 General and administrative

ù32.6721 Accounting and finance

ù32.6722 External relations

ù32.6723 Human resources

ù32.6724 Information management

ù32.6725 Legal

ù32.6726 Procurement

ù32.6727 Research and development

ù32.6728 Other general and administrative

ù32.6790 Provision for uncollectible notes receivable

**SUBPART F - INSTRUCTIONS FOR OTHER INCOME ACCOUNTS**

ù32.6999 General

ù32.7099 Content of accounts

ù32.7100 Other operating income and expenses

ù32.7110 Income from custom work

ù32.7130 Return from nonregulated use of regulated facilities

ù32.7140 Gains and losses from foreign exchange

ù32.7150 Gains and losses from the disposition of land and

artworks

ù32.7160 Other operating gains and losses

ù32.7199 Content of accounts

ù32.7200 Operating taxes

*REA* 7200.1 Operating investment tax credits - net

*REA* 7200.2 Operating federal income taxes

*REA* 7200.3 Operating state and local income taxes

*REA* 7200.41 Operating taxes - property

*REA* 7200.42 Operating taxes - miscellaneous

*REA* 7200.5 Provision for deferred operating income taxes - net

ù32.7210 Operating investment tax credits - net

ù32.7220 Operating federal income taxes

ù32.7230 Operating state and local income taxes

ù32.7240 Operating other taxes

*REA* 7240.1 Operating taxes - property

*REA* 7240.2 Operating taxes - miscellaneous

ù32.7250 Provision for deferred operating income taxes - net

ù32.7299 Content of accounts

ù32.7300 Nonoperating income and expense

*REA* 7300.1 Dividend income

*REA* 7300.2 Interest income

*REA* 7300.3 Income from sinking and other funds

*REA* 7300.4 Allowance for funds used during construction

*REA* 7300.5 Gains or losses from the disposition of certain

property

*REA* 7300.6 Other nonoperating income and expense

ù32.7310 Dividend income

ù32.7320 Interest income

ù32.7330 Income from sinking and other funds

ù32.7340 Allowance for funds used during construction

ù32.7350 Gains or losses from the disposition of certain

property

ù32.7360 Other nonoperating income

ù32.7370 Special charges

ù32.7399 Content of accounts

ù32.7400 Nonoperating taxes

*REA* 7400.1 Nonoperating investment tax credits - net

*REA* 7400.2 Nonoperating federal income taxes

*REA* 7400.3 Nonoperating state and local income taxes

*REA* 7400.4 Nonoperating other taxes

*REA* 7400.5 Provision for deferred nonoperating income taxes -

net

ù32.7410 Nonoperating investment tax credits - net

ù32.7420 Nonoperating federal income taxes

ù32.7430 Nonoperating state and local income taxes

ù32.7440 Nonoperating other taxes

ù32.7450 Provision for deferred nonoperating income taxes -

net

ù32.7499 Content of accounts

ù32.7500 Interest and related items

ù32.7510 Interest on funded debt

ù32.7520 Interest expense - capital leases

ù32.7530 Amortization of debt issuance expense

ù32.7540 Other interest deductions

ù32.7599 Content of accounts

ù32.7600 Extraordinary items

*REA* 7600.1 Extraordinary income credits

*REA* 7600.2 Extraordinary income charges

*REA* 7600.3 Current income tax effect of extraordinary items -

net

*REA* 7600.4 Provision for deferred income tax effect of

extraordinary items - net

ù32.7610 Extraordinary income credits

ù32.7620 Extraordinary income charges

ù32.7630 Current income tax effect of extraordinary items -

net

ù32.7640 Provision for deferred income tax effect of

extraordinary items - net

ù32.7899 Content of accounts

ù32.7910 Income effect of jurisdictional ratemaking

differences - net

ù32.7990 Nonregulated net income

**SUBPART G - GLOSSARY**

ù32.9000 Glossary of terms

**SUBPART A - PREFACE**

**ù32.1 Background.**

The revised Uniform System of Accounts (USOA) is a historical financial
accounting system which reports the results of operational and financial
events in a manner which enables both management and regulators to
assess these results within a specified accounting period.

The USOA also provides the financial community and others with financial
performance results. In order for an accounting system to fulfill these
purposes, it must exhibit consistency and stability in financial
reporting (including the results published for regulatory purposes).

Accordingly, the USOA has been designed to reflect stable, recurring
financial data based to the extent regulatory considerations permit upon
the consistency of the well established body of accounting theories and
principles commonly referred to as generally accepted accounting
principles.

**ù32.2 Basis of the accounts.**

\(a\) The financial accounts of a company are not used to record, in
monetary terms, the basic transactions which occur. Certain natural
groupings of these transactions are called (in different contexts)
transaction cycles, business processes, functions or activities. The
concept, however, is the same in each case; i.e., the natural groupings
represented what happens within the company on a consistent and
continuing basis.

This repetitive nature of the natural groupings, over long periods of
time, lends an element of stability to the financial account structure.

\(b\) Within the telecommunications industry companies, certain
recurring functions (natural groupings) do take place in the course of
providing products and services to customers. These accounts reflect, to
the extent feasible, those functions. For example, the primary bases of
the accounts containing the investment in telecommunications plant are
the functions performed by the assets. In addition, because of the
anticipated effects of future innovations, the telecommunications plant
accounts are intended to permit technological distinctions. Similarly,
the primary bases of plant operations, customer operations and corporate
operations expense accounts are the functions performed by individuals.
The revenue accounts, on the other hand, reflect a market perspective of
natural groupings based primarily upon the products and services
purchased by customers.

\(c\) In the course of developing the bases for this account structure,
several other alternatives were explored. It was, for example,
determined that because of the variety and continual changing of various
costs allocation mechanisms, the financial accounts of a company should
not reflect an a priori allocation of revenues, investments or expenses
to products or services, jurisdictions or organizational structures.
(Note also ù32.14 (c) and (d) of Subpart B). It was also determined that
costs (in the case of assets) should not be recorded based solely upon
physical attributes such as location, description or size.

\(d\) Care has been taken in this account structure to avoid confusing a
function with an organizational responsibility, particularly as it
related to the expense accounts. Whereas in the past specific
organizations may have performed specific functions, the future
environment with its increasing mechanization and other changes will
result in entirely new or restructured organizations. Thus, any
relationships drawn between organizations and accounts would become
increasingly meaningless with the passage of time.

\(e\) These accounts, then, are intended to reflect a functional and
technological view of the telecommunications industry. This view will
provide a stable and consistent foundation for the recording of
financial data.

\(f\) The financial data contained in the accounts, together with the
detailed information contained in the underlying financial and other
subsidiary records required by this Commission, will provide the
information necessary to support separations, costs of service and
management reporting requirements. The basic account structure has been
designed to remain stable as reporting requirements change.

**ù32.3 Authority.**

This Uniform System of Accounts has been prepared under the following
authority: Section 4 of the Communications Act of 1934, as amended, 47
U.S.C. Section 154 (1984); Sections 219, 220 of the Communications Act
of 1934, as amended, 47 U.S.C.

Sections 219, 220 (1984).

**ù32.4 Communications Act.**

Attention is directed to the following extract from

Section 220 of the Communications Act of 1934, 47 U.S.C. 220 (1984):

\(e\) Any person who shall willfully make any false entry in the
accounts of any book of accounts or in any record or memoranda kept by
any such carrier, or who shall willfully destroy, mutilate, alter, or by
any other means or device falsify any such account, or memoranda, or who
shall willfully neglect or fail to make full, true, and correct entries
in such accounts, records, or memoranda of all facts and transactions
appertaining to the business of the carrier, shall be deemed guilty of a
misdemeanor, and shall be subject, upon conviction, to a fine of not
less the \$1,000 nor more than \$5,000 or imprisonment for a term of not
less than one year nor more than three years, or both such fine and
imprisonment: Provided, that the Commission may in its discretion issue
orders specifying such operating, accounting or financial papers,
records, books, blanks, or documents which may after a reasonable time,
be destroyed, and prescribing the length of time such books, papers, or
documents shall be preserved.

For regulations governing the periods for which records are to be
retained, see Part 42, Preservation of Records of Communications Common
Carriers, of this chapter which relates to preservation of records.

**SUBPART B - GENERAL INSTRUCTIONS**

**ù32.11 Classification of companies.**

\(a\) For accounting purposes, companies are divided into classes as
follows:

\(1\) Class A. Companies having annual revenues from regulated
telecommunications operations of \$100,000,000 or more.

\(2\) Class B. Companies having annual revenues from regulated
telecommunications operations of less than \$100,000,000.

\(b\) Class A companies shall keep all the accounts of this system of
accounts which are applicable to their affairs and are designated as
Class A accounts. These companies shall also keep Basic Property Records
in compliance with the requirements of ù32.2000(e) and (f).

\(c\) Class B companies shall keep all the accounts of this system of
accounts which are applicable to their affairs and are designated as
Class B accounts. These companies shall also keep Continuing Property
Records in compliance with the requirements of ù32.2000(e)(7)(A) and
ù32.2000 (f) of Subpart C.

\(d\) Class B companies that desire more detailed accounting may adopt
the accounts prescribed for Class A companies upon the submission of a
written notification to the Commission.

\(e\) The initial classification of a company shall be determined by its
lowest annual operating revenues for the five immediately preceding
years. Subsequent changes in classification shall be made when the
annual operating revenues show a greater or lesser classification for
five consecutive years. Companies becoming subject to the jurisdiction
of the Commission and not having revenue data for the five immediately
preceding years shall estimate the amount of their annual revenues and
adopt the scheme of accounts appropriate for the amount of such
estimated revenues.

**ù32.12 Records.**

\(a\) The company\'s financial records shall be kept in accordance with
generally accepted accounting principles to the extent permitted by this
system of accounts.

\(b\) The company\'s financial records shall be kept with sufficient
particularity to show fully the facts pertaining to all entries in these
accounts. The detail records shall be filed in such manner as to be
readily accessible for examination by representatives of this
Commission.

\(c\) The Commission shall require a company to maintain financial and
other subsidiary records in such manner that specific information, of a
type not warranting disclosure as an account or subaccount, will be
readily available. When this occurs, or where the full information is
not otherwise recorded in the general books, the subsidiary records
shall be maintained in sufficient detail to facilitate the reporting of
the required specific information. The subsidiary records, in which the
full details are shown, shall be sufficiently referenced to permit ready
identification and examination by representatives of this Commission.

**ù32.13 Accounts - general.**

\(a\) As a general rule, all accounts kept by reporting companies shall
conform in numbers and titles to those prescribed herein. However,
reporting companies may use different numbers for internal purposes when
separate accounts (or subaccounts) maintained are consistent with the
title and content of accounts and subaccounts prescribed in this system.

\(i\) For Class A reporting companies, accounts which are clearly
summaries of other accounts or subaccounts are to be used for reporting
purposes and are not otherwise required to be maintained.

\(ii\) A company may subdivide any of the accounts prescribed. The
titles of all such subaccounts shall refer by number or title to the
controlling account.

\(iii\) A company may establish temporary or experimental accounts
provided that within 30 days of the opening of such accounts the company
notifies the Commission of the nature and purpose thereof.

\(b\) Exercise of the preceding options shall be allowed only if the
integrity of the prescribed accounts is not impaired.

\(c\) As of the date a company becomes subject to this system of
accounts, the company is authorized to make any such subdivisions,
reclassifications or consolidations of existing balances as are
necessary to meet the requirements of this system of accounts.

\(d\) Nothing contained in this Part shall prohibit or excuse any
company, receiver, or operating trustee of any carrier from subdividing
the accounts hereby prescribed for the purpose of:

\(i\) Complying with the requirements of the state commission(s) having
jurisdiction; or

\(ii\) Securing the information required in the prescribed reports to
such commission(s).

\(e\) Where the use of subsidiary records is considered necessary in
order to secure the information required in reports to any state
commission, the company shall incorporate the following controls into
their accounting system with respect to such subsidiary records.

\(i\) Subsidiary records shall be reconciled to the company\'s general
ledger or books of original entry, as appropriate.

\(ii\) The company shall adequately document the accounting procedures
related to subsidiary records.

\(iii\) The subsidiary records shall be maintained at an adequate level
of detail to satisfy state regulators.

**ù32.14 Regulated accounts.**

\(a\) In the context of this Part, the regulated accounts shall

be interpreted to include the investments, revenues and expenses
associated with those telecommunications products and services to which
the tariff filing requirements contained in Title II of the
Communications Act of 1934, as amended, are applied, except as may be
otherwise provided by the Commission. Regulated telecommunications
products and services are thereby fully subject to the accounting
requirements as specified in Title II of the Communications Act of 1934,
as amended and as detailed in Sections 0 through 7 of this Part of the
Commission\'s Rules and Regulations.

\(b\) In addition to those amounts considered to be regulated by the
provisions of (a) above, those telecommunications products and services
to which the tariff filing requirements of the several state
jurisdictions are applied shall be accounted for as regulated, except
where such treatment is prescribed or otherwise excluded from the
requirements pertaining to regulated telecommunications products and
services by this Commission.

\(c\) In the application of the detailed accounting requirements
contained in this part, when a regulated activity involves the common or
joint use of assets and resources in the provision of regulated and
nonregulated products and services, companies shall account for these
activities within the accounts prescribed in this system for telephone
company operations. Assets and expenses shall be subdivided in
subsidiary records among amounts solely assignable to nonregulated
activities, amounts solely assignable to regulated activities, and
amounts related to assets used and expenses incurred jointly or in
common, which will be allocated between regulated and nonregulated
activities. Companies shall submit reports identifying regulated and
nonregulated amounts in the manner and at the times prescribed by this
Commission. Nonregulated revenue items not qualifying for incidental
treatment, as provided in ù32.4999(i) shall be recorded in Account 5280,
Nonregulated Operating Revenue.

\(d\) Other income items which are incidental to the provision of
regulated products and services shall be accounted for as regulated
activities.

\(e\) All costs and revenues related to the offering of regulated
products and services which result from arrangements for joint
participation or apportionment between two or more telephone companies
(e.g., joint operating agreements, settlement agreements, cost-pooling
agreements) shall be recorded within the detailed regulated accounts.
Under joint operating agreements, the creditor will initially charge the
entire expenses to the appropriate primary accounts. The proportion of
such expenses borne by the debtor shall be credited by the creditor and
charged by the debtor to the account initially charged. Any allowances
for return on property used will be accounted for as provided in Account
5240, Rent Revenue.

\(f\) All items of nonregulated revenue, investment and expense that are
not properly includible in the detailed, regulated accounts prescribed
in Subparts A through F of this Part, as determined by paragraphs (a)
through (e) of this section shall be accounted for and included in
reports to this Commission as specified in ù32.23 of this subpart.

**ù32.15 \[Reserved\]**

**ù32.16 Changes in accounting standards.**

\(a\) The company\'s records and accounts shall be adjusted to apply new
accounting standards prescribed by the Financial Accounting Standards
Board or successor authoritative accounting standard-setting groups, in
a manner consistent with generally accepted accounting principles. The
change in accounting standard will automatically take effect 90 days
after the company informs this Commission of its intention to follow the
new standard, unless the Commission notifies the company to the
contrary. Concurrent with informing this Commission of its intent to
adopt an accounting standards change, the company shall also file a
revenue requirement study for the current year and a projection for
three years into the future analyzing the effects of the accounting
standards change. Furthermore, any change subsequently adopted shall be
disclosed in annual reports to this Commission.

\(b\) The changes in accounting standards which this Commission approves
will not necessarily be binding on the ratemaking practices of the
various state commission.

**ù32.17 Interpretation of accounts.**

To the end that uniform accounting shall be maintained within the
prescribed system, questions involving matters of significance which are
not clearly provided for shall be submitted to the Chief, Common Carrier
Bureau, for explanation, interpretation, or resolution. Questions and
answers thereto with respect to this system of accounts will be
maintained by the Common Carrier Bureau.

**ù32.18 Waivers.**

A waiver from any provision of this system of accounts shall be made by
the Federal Communications Commission upon its own initiative or upon
the submission of written request therefor from any telecommunications
company, or group of telecommunications companies, provided that such a
waiver is in the public interest and each request for waiver expressly
demonstrates that: existing peculiarities or unusual circumstances
warrant a departure from a prescribed procedure or technique; a
specifically defined alternative procedure or technique will result in a
substantially equivalent or more accurate portrayal of operating results
or financial condition, consistent with the principles embodied in the
provisions of this system of accounts, and the application of such
alternative procedure will maintain or improve uniformity in substantive
results as among telecommunication companies.

**ù32.19 Address for reports and correspondence.**

Reports, statements, and correspondence submitted to the Federal
Communications Commission in accordance with or relating to instructions
and requirements contained herein shall be addressed to the Common
Carrier Bureau, Federal Communications Commission, Washington, D.C.,
20554.

**ù32.20 Numbering convention.**

\(a\) The number \"32\" (appearing to the left of the first decimal
point) indicated the part number.

\(b\) The numbers immediately following to the right of the decimal
point indicate, respectively, the Section or Account. All Part 32
account numbers contain 4 digits to the right of the decimal point.

\(c\) Cross references to accounts are made by citing the account
numbers to the right of the decimal point; e.g.,

Account 2232 rather than the corresponding complete Part 32 reference
number ù32.2232.

**ù32.21 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 this Commission.

**ù32.22 Comprehensive interperiod tax allocation.**

\(a\) Companies shall apply interperiod tax allocation (tax
normalization) to all book/tax timing differences which would be
considered material for published financial report purposes.
Furthermore, companies shall also apply intraperiod tax allocation if
any item or group of similar items when aggregated would yield debit or
credit entries which exceed or would exceed 5 percent of the gross
deferred income tax expense debits or credits during any calendar year
over the life of the timing difference.

Book/tax timing differences, other than those resulting from accelerated
depreciation or waiver, however, shall be phased-in over a period of
five years as directed by this Commission. The tax effects of book/tax
timing differences shall be normalized and the deferrals shall be
included in the following accounts:

4100 Net Current Deferred Operating Income Taxes

4110 Net Current Deferred Nonoperating Income Taxes

4340 Net Noncurrent Deferred Operating Income Taxes

4350 Net Noncurrent Deferred Nonoperating Income Taxes

In lieu of the accounting prescribed herein, any company shall treat the
increase/reduction in current income taxes payable resulting from the
use of flow through accounting in prior years and the phase-in years as
an increase/reduction in current income tax expense.

\(b\) Supporting documentation shall be maintained so as to separately
identify the amount of deferred taxes which arise from the use of an
accelerated method of depreciation.

\(c\) With respect to the tax differentials that are phased-in,
companies shall maintain underlying entries to and the balance in the
above accounts so as to show that the deferred tax amounts are not
greater than the phase-in percentage allowed by this Commission.

\(d\) The records supporting the activity in the deferred income tax
accounts shall be maintained in sufficient detail to identify the nature
of the specific timing differences giving rise to both the debits and
credits to the individual accounts.

\(e\) Any company that uses accelerated depreciation (or recognizes
taxable income or losses upon the retirement of property) for income tax
purposes shall normalize the tax differentials occasioned thereby as
indicated in paragraphs (e)(1) and (e)(2) of this section.

\(1\) With respect to the retirement of property the book/tax difference
between:

\(i\) The recognition of proceeds as income and the accrual for salvage
value; and

\(ii\) The book and tax capital recovery, shall be normalized.

\(2\) Records shall be maintained so as to show the deferred tax amounts
by vintage year separately for each class or subclass of eligible
depreciable telephone plant for which an accelerated method of
depreciation has been used for income tax purposes. When property is
transferred to nonregulated activities, the associated deferred income
taxes and unamortized investment tax credits shall also be identified
and transferred to the appropriate nonregulated accounts.

\(f\) The tax differentials to be normalized as indicated herein shall
also encompass the additional effect of state and local income tax
changes on Federal income taxes produced by the provision for deferred
state and local income taxes for book/tax timing differences related to
such income taxes.

\(g\) Companies that receive the tax benefits from the filing of a
consolidated income tax return by the parent company, (pursuant to
closing agreements with the Internal Revenue Service, effective January
1, 1966) representing the deferred income taxes from the elimination of
intercompany profits for income tax purposes on sales of regulated
equipment, may credit such deferred taxes directly to the plant account
which contains such intercompany profit rather than crediting such
deferred taxes to the applicable accounts in paragraph (a) of this
section. If the deferred income taxes are recorded as a reduction of the
appropriate plant accounts, such reduction shall be treated as reducing
the original cost of the plant and accounted for as such.

**ù32.23 Nonregulated activities.**

\(a\) This section describes the accounting treatment of activities
classified for accounting purposes as \"nonregulated.\" Preemptively
deregulated activities and activities (other than incidental activities)
never subject to regulation will be classified for accounting purposes
as \"nonregulated.\" Activities that qualify for incidental treatment
under the policies of this Commission will be classified for accounting
purposes as regulated activities. Activities that have been deregulated
by a state will be classified for accounting purposes as regulated
activities. Activities that have been deregulated at the interstate
level, but not preemptively deregulated, will be classified for
accounting purpose as regulated activities until such time as this
Commission decides otherwise. The treatment of nonregulated activities
shall differ depending on the extent of the common or joint use of
assets and resources in the provision of both regulated and nonregulated
products and services.

\(b\) When a nonregulated activity does not involve the joint or common
use of assets and resources in the provision of both regulated and
nonregulated products and services, carriers shall account for these
activities on a separate set of books consistent with instructions set
forth in ù32.1406 and ù32.7990. Transfer of assets and sales of products
and services between the regulated activity and a nonregulated activity
for which a separate set of books is maintained, shall be accounted for
in accordance with the rules presented in ù32.27, Transactions with
Affiliates. In the separate set of books, carriers may establish
whatever detail they deem appropriate beyond what is necessary to
provide this Commission with the information required in ù32.1406 and
ù32.7990.

\(c\) When a nonregulated activity does involve the common or joint use
of assets and resources in the provision of regulated and nonregulated
products and services, carriers shall account for these activities
within accounts prescribed in this system for telephone company
operations. Assets and expenses shall be subdivided in subsidiary
records among amounts solely assignable to nonregulated activities,
amounts solely assignable to regulated activities, and amounts related
to assets and expenses incurred jointly or in common, which will be
allocated between regulated and nonregulated activities. Carriers shall
submit reports identifying regulated and nonregulated amounts in the
manner and at the times prescribed by this Commission. Nonregulated
revenue items not qualifying for incidental treatment, as provided in
ù32.4999(i) shall be recorded in separate subsidiary record categories
of Account 5280, Nonregulated Operating Revenue. Amounts assigned or
allocated to regulated products or services shall be subject to Part 36
of this chapter.

**ù32.24 Compensated absences.**

\(a\) Companies shall record a liability and charge the appropriate
expense accounts for compensated absences (vacations, sick leave, etc.)
in the year in which these benefits are earned by employees.

\(b\) With respect to the liability that exists for compensated absences
which is not yet recorded on the books as of the effective date of this
Part, the liability shall be recorded in Account 4120, Other Accrued
Liabilities, with a corresponding entry to Account 1439, Deferred
Charges. This deferred charge shall be amortized on a straight line
basis over a period of ten years.

\(c\) Records shall be maintained so as to show that no more than ten
percent of the deferred charge is being amortized each year.

**ù32.25 Unusual items and contingent liabilities.**

Extraordinary items, prior period adjustments and liabilities shall be
submitted to this Commission for review before being recorded in the
company\'s books of account. The materiality of corrections of errors in
prior periods shall be measured in relation to the summary account level
used for reporting purposes for Class A carriers, or in relation to
total operating revenues or total operating expenses for Class B
carriers. For Class A carriers, no correction in excess of one percent
of the aggregate summary account dollars or one million dollars,
whichever is higher, may be recorded in current operating accounts
without prior approval. For Class B carriers, no correction which
exceeds one percent of total operating revenues or one percent of total
operating expenses, depending on the nature of the item, may be recorded
in current operating accounts without prior approval.

**ù32.26 Materiality.**

Companies shall follow this system of accounts in recording all
financial and statistical data irrespective of an individual items
materiality under GAAP, unless a waiver has been granted under the
provisions of ù32.18 of this subpart to do otherwise.

**ù32.27 Transactions with affiliates.**

\(a\) Unless otherwise approved by the Chief, Common Carrier Bureau,
transactions with affiliates involving asset transfers into or out of
the regulated accounts shall be recorded by the carrier in its regulated
accounts as provided in paragraphs (b) through (f) of this section.

\(b\) Charges for assets purchased by or transferred to the regulated
telephone activity of a carrier from affiliates shall be recorded in the
operating accounts of the regulated activity at the invoice price if
that price is determined by a prevailing price held out to the general
public in the normal course of business. If a prevailing price for the
assets received by the regulated activity is not available, the charges
recorded by the regulated activity for such assets shall be the lower of
their cost to the originating activity and the affiliated group less all
applicable valuation reserves, or their fair market value.

\(c\) Assets sold or transferred from the regulated accounts to
affiliates shall be recorded as operating revenues, incidental revenues
on asset retirements according to the nature of the transaction
involved. If such sales are reflected in tariffs on file with a
regulatory commission or in a prevailing price held out to the general
public, the associated revenues shall be recorded at the prices
contained therein in the appropriate revenue accounts. If no tariff or
prevailing price is applicable, the proceeds from such sales shall be
determined at the higher of costs less all applicable evaluation
reserves, or estimated fair market value of the asset.

\(d\) Services provided to an affiliate pursuant to a tariff, including
a tariff filed with a state commission, shall be recorded in the
appropriate revenue accounts at the tariffed rate. Services provided by
an affiliate to the regulated activity when the same services are also
provided by the affiliate to unaffiliated persons or entities, shall be
recorded at the market rate. When a carrier provides substantially all
of a service to or receives substantially all of a service from an
affiliate which are not also provided to unaffiliated persons or
entities, the services shall be recorded at cost which shall be
determined in a manner that complies with the standards and procedures
of the apportionment of joint and common costs between the regulated and
nonregulated operations of the carrier entity.

\(e\) Income taxes shall be allocated among the regulated activities of
the carrier, its nonregulated divisions, and members of an affiliated
group. Under circumstances in which income taxes are determined on a
consolidated basis by the carrier and other members of the affiliated
group, the income tax expense to be recorded by the carrier shall be the
same as would result if determined for the carrier separately for all
time periods, except that the tax effect of carry-back and carry-forward
operating losses, investment tax credits, or other tax credits generated
by operations of the carrier shall be recorded by the carrier during the
period in which applied in settlement of the taxes otherwise
attributable to any member, or combination of member, of the affiliated
group.

\(f\) Companies that employ average schedules in lieu of actual costs
are exempt from the provisions of this section. For other organizations,
the principles set forth in this section shall apply equally to
corporations, proprietorships, partnerships and other forms of business
organizations.

**SUBPART C - INSTRUCTIONS FOR BALANCE SHEET ACCOUNTS**

**ù32.101 Structure of the balance sheet accounts.**

The Balance Sheet accounts shall be maintained as follows:

Account 1120, Cash and Equivalents, through Account 1500, Other
Jurisdictional Assets - Net, shall include assets other than
regulated-fixed assets.

Account 2001, Telecommunications Plant in Service, through Account 2007,
Goodwill, shall include the regulated-fixed assets.

Account 3100, Accumulated Depreciation, through Account 3600,
Accumulated Amortization - Other, shall include the asset and deferred
tax reserves.

Account 4010, Accounts Payable, through Account 4550, Retained Earnings,
shall include all liabilities and stockholders equity.

**ù32.102 Nonregulated investments.**

Nonregulated investments shall include the investment in nonregulated
activities that are conducted through the same legal entity as the
telephone company operations, but do not involve the joint or common use
of assets or resources in the provision of both regulated and
nonregulated products and services. See ù32.14 and ù32.23.

**ù32.103 Balance sheet accounts for other than regulated-fixed**

**assets to be maintained.**

BALANCE SHEET ACCOUNTS

Class A Class B

[Account Title]{.underline} [Account]{.underline} [Account]{.underline}

CURRENT ASSETS

Cash and Equivalents:

Cash and equivalents 1120

Cash 1130

Cash - general fund 1130.1 1120.11

Cash - construction fund trustee 1130.2 1120.12

Cash - transfer of funds 1130.3 1120.13

Special cash deposits 1140 1120.21

Working cash advances 1150

Petty cash fund 1150.1 1120.31

Change fund 1150.2 1120.32

Temporary investments 1160

Receivables and Allowances for Doubtful

Accounts:

Telecommunications accounts receivable 1180 1180

Accounts receivable allowance -

telecommunications 1181 1181

Other accounts receivable 1190 1190

Accounts receivable allowance - other 1191 1191

Notes receivable 1200 1200

Notes receivable allowance 1201 1201

Interest and dividends receivable 1210 1210

Supplies:

Inventories 1220 1220

Material and supplies 1220.1 1220.1

Property held for sale or lease 1220.2 1220.2

Exempt materials - clearing 1220.3 1220.3

Prepayments:

Prepayments 1280

Prepaid rents 1290 1280.1

Prepaid taxes 1300 1280.2

Prepaid insurance 1310 1280.3

Prepaid directory expenses 1320 1280.4

Other prepayments 1330 1280.5

Other Current Assets:

Other current assets 1350 1350

Subscriptions to capital stock 1350.1 1350.1

Subscriptions to memberships 1350.2 1350.2

Subscriptions to members\' equity

certificates 1350.3 1350.3

Other current assets 1350.4 1350.4

Class A Class B

[Account Title]{.underline} [Account]{.underline} [Account]{.underline}

NONCURRENT ASSETS

Investments:

Investments in affiliated companies 1401 1401

Investments in nonaffiliated companies 1402 1402

Investments in nonaffiliated companies -

Class B RTB stock 1402.1 1402.1

Investments in nonaffiliated companies -

Class B RTB stock - cr. 1402.11 1402.11

Investments in nonaffiliated companies -

Class C RTB stock 1402.2 1402.2

Other investments in nonaffiliated

companies 1402.3 1402.3

Nonregulated investments 1406 1406

Unamortized debt issuance expense 1407 1407

Sinking funds 1408 1408

Other noncurrent assets 1410 1410

Deferred Charges:

Deferred maintenance and retirements 1438 1438

Deferred charges 1439 1439

Other:

Other jurisdictional assets - net 1500 1500

**ù32.1120 Cash and equivalents.**

This account shall be used by Class B companies to record assets of the
type required of Class A companies in Accounts 1130 through 1160.

***REA 1120.11 Cash - general fund.***

This account shall used by Class B companies. This account shall include
all unrestricted funds derived from revenues and other sources which are
on deposit in banks or other financial institutions and available on
demand. It shall also include funds in transit to the depository for
which customers and agents have received credit on their accounts.
Separate subaccounts should be maintained for each bank account in which
general fund cash is deposited.

***REA 1120.12 Cash - construction fund trustee.***

This account shall used by Class B companies. This account shall include
all loan funds received from REA, the Rural Telephone Bank, the Federal
Financing Bank, the Bank for Cooperatives, the Rural Telephone Finance
Cooperative, and all non-loan funds supplied by the borrower under the
terms of the loan contract or otherwise required by REA. The offsetting
credit for funds received from REA shall be to Account 4210.20, REA
Notes - Unadvanced, Dr.; funds received from the Rural Telephone Bank,
to Account 4210.21, Telephone Bank Notes - Unadvanced, Dr.; funds
received from the Federal Financing Bank, to Account 4210.22, Federal
Financing Bank Notes - Unadvanced, Dr; funds received from the Bank for
Cooperatives, to

Account 4210.23, Bank for Cooperatives Notes - Unadvanced, Dr.; and
funds received from the Rural Telephone Finance Cooperative, to Account
4210.24, Rural Telephone Finance Cooperative Notes - Unadvanced, Dr.

***REA 1120.13 Cash - transfer of funds.***

This account shall used by Class B companies. This account shall include
all transfers of funds from one bank account to another. This account
shall be charged with the amount of a check drawn for the transfer, and
credited when the amount transferred is entered into the Cash Receipts
Book.

***REA 1120.21 Special cash deposits.***

This account shall used by Class B companies. This account shall include
all cash on special deposit, other than in sinking and other special
funds provided for elsewhere, to pay dividends, interest, and other
debts, when such payments are due one year or less from the date of
deposit; the amount of cash deposited to insure the performance of
contracts to be performed within one year from the date of the deposit;
and other cash deposits of a special nature not provided for elsewhere.
This account shall include the amount of cash deposited with trustees to
be held until mortgaged property sold, destroyed, or otherwise disposed
of is replaced, and also cash realized from the sale of the company\'s
securities and deposited with trustees to be held until invested in
physical property of the company or for disbursement when the purposes
for which the securities were sold are accomplished.

***REA 1120.31 Petty cash fund.***

This account shall used by Class B companies. This account shall include
funds in the custody of employees or agents for making minor
disbursements. The fund shall be operated on an inprest basis.
Expenditures shall be supported by receipts, and reimbursements to the
fund shall be for the exact amount of such expenditures and shall be
charged to the various accounts to which the expenditures are allocable.
At all times, the total of the cash on hand and the unreimbursed
expenditures shall equal the amount of the fund.

***REA 1120.32 Change fund.***

This account shall used by Class B companies. This account shall include
funds in the custody of employees or agents for making change. Records
shall be kept of the amount held by each person. Disbursements shall not
be made from the fund.

**ù32.1130 Cash.**

\(a\) This account shall include the amount of current funds available
for use on demand in the hands of financial officers

and agents, deposited in banks or other financial institutions and also
funds in transit for which agents have received credit.

\(b\) Working cash advances shall be included in Account 1150, Working
Cash Advances.

***REA 1130.1 Cash - general fund.***

This account shall include all unrestricted funds derived from revenues
and other sources which are on deposit in banks or other financial
institutions and available on demand. It shall also include funds in
transit to the depository for which customers and agents have received
credit on their accounts. Separate subaccounts should be maintained for
each bank account in which general fund cash is deposited.

***REA 1130.2 Cash - construction fund trustee.***

This account shall include all loan funds received from REA, the Rural
Telephone Bank, the Federal Financing Bank, the Bank for Cooperatives,
the Rural Telephone Finance Cooperative, and all non-loan funds supplied
by the borrower under the terms of the loan contract or otherwise
required by REA. The offsetting credit for funds received from REA shall
be to Account 4210.20, REA Notes - Unadvanced, Dr.; funds received from
the Rural Telephone Bank, to Account 4210.21, Telephone Bank Notes -
Unadvanced, Dr.; funds received from the Federal Financing Bank, to
Account 4210.22, Federal Financing Bank Notes - Unadvanced, Dr; funds
received from the Bank for Cooperatives, to

Account 4210.23, Bank for Cooperatives Notes - Unadvanced, Dr.; and
funds received from the Rural Telephone Finance Cooperative, to Account
4210.24, Rural Telephone Finance Cooperative Notes - Unadvanced, Dr.

***REA 1130.3 Cash - transfer of funds.***

This account shall include all transfers of funds from one bank account
to another. This account shall be charged with the amount of a check
drawn for the transfer, and credited when the amount transferred is
entered into the Cash Receipts Book.

**ù32.1140 Special cash deposits.**

\(a\) This account shall include the amount of cash on special deposit,
other than in sinking and other special funds provided for elsewhere, to
pay dividends, interest, and other debts, when such payments are due one
year or less from the date of deposit; the amount of cash deposited to
insure the performance of contracts to be performed within one year from
date of the

deposit; and other cash deposits of a special nature not provided for
elsewhere. This account shall include the amount of cash deposited with
trustees to be held until mortgaged property sold, destroyed, or
otherwise disposed of is replaced, and also cash realized from the sale
of the company\'s securities and deposited with trustees to be held
until invested in physical property of the company or for disbursement
when the purpose for which the securities were sold are accomplished.

\(b\) Cash on deposit in special accounts where the funds are available
for the current requirements of the company shall be included in Account
1130, Cash.

\(c\) Cash on special deposit to be held for more than one year from the
date of deposit shall be included in Account 1410, Other Noncurrent
Assets.

**ù32.1150 Working cash advances.**

This account shall include the amount of cash advances to officers,
agents, employees, and others as petty cash or working funds from which
expenditures are to be made and accounted for.

***REA 1150.1 Petty cash fund.***

This account shall include funds in the custody of employees or agents
for making minor disbursements. The fund shall be operated on an inprest
basis. Expenditures shall be supported by receipts, and reimbursements
to the fund shall be for the exact amount of such expenditures and shall
be charged to the various accounts to which the expenditures are
allocable. At all times, the total of the cash on hand and the
unreimbursed expenditures shall equal the amount of the fund.

***REA 1150.2 Change fund.***

This account shall include funds in the custody of employees or agents
for making change. Records shall be kept of the amount held by each
person. Disbursements shall not be made from the fund.

**ù32.1160 Temporary investments.**

\(a\) This account shall include the cost of current securities acquired
for the purpose of temporarily investing cash, such as time drafts
receivable and time loans, bankers\' acceptances, United States Treasury
certificates, marketable securities, and other similar investments of a
temporary character.

\(b\) Accumulated changes in the net unrealized losses of current
marketable equity securities shall be included in the determination of
net income in the period in which they occur in Account 7360, Other
Nonoperating Income.

\(c\) Subsidiary record categories shall be maintained in order that the
entity may separately report the amounts contained herein that relate to
affiliates and nonaffiliates. Such subsidiary record categories shall be
reported as required by Part 43 of this Commission\'s Rules and
Regulations.

**ù32.1180 Telecommunications accounts receivable.**

\(a\) This account shall include all amounts due from customers for
services rendered or billed and from agents and collectors authorized to
make collections from customers. This account shall also include all
amounts due from customers or agents for products sold. This account
shall be kept in such manner as will enable the company to make the
following analysis:

\(i\) Amounts due from customers who are receiving telecommuni-cations
service.

\(ii\) Amounts due from customers who are not receiving service and
whose accounts are in process of collection.

\(b\) Collections in excess of amounts charged to this account may be
credited to and carried in this account until applied against charges
for services rendered or until refunded.

\(c\) Subsidiary record categories shall be maintained in order that the
entity may separately report the amounts contained herein that relate to
affiliates and nonaffiliates. Such subsidiary record categories shall be
reported as required by Part 43 of this Commission\'s Rules and
Regulations.

**ù32.1181 Accounts receivable allowance - telecommunications.**

\(a\) This account shall be credited with amounts charged to Account
5301, Uncollectible Revenue - Telecommunications, to provide for
uncollectible amounts included in Account 1180, Telecommunications
Accounts Receivable. There shall also be credited to this account
amounts collected which previously had been written off through charges
to this account and credits to Account 1180. There shall be charged to
this account any amounts covered thereby which have been found to be
impracticable of collection.

\(b\) If no such allowance is maintained, uncollectible amounts shall be
charged directly to Account 5301, Uncollectible

Revenue - Telecommunications.

\(c\) Subsidiary records categories shall be maintained in order that
the entity may separately report the amounts contained herein that
relate to affiliates and nonaffiliates. Such subsidiary record
categories shall be reported as required by Part 43 of this
Commission\'s Rules and Regulations.

**ù32.1190 Other accounts receivable.**

\(a\) This account shall include all amounts currently due, and not
provided for in other accounts, such as those for traffic settlements,
divisions of revenue, material and supplies, matured rents, and interest
receivable under monthly settlements on short-term loans, advances, and
open accounts.

\(b\) Subsidiary record categories shall be maintained in order that the
entity may separately report the amounts contained herein, that relate
to affiliates and nonaffiliates. Such subsidiary record categories shall
be reported as required by

Part 43 of this Commission\'s Rules and Regulations.

\(c\) Amounts included in this account pertaining to affiliates shall
not include amounts receivable from sales of telecommunica-tions service
provided at tariffed rates. Such amounts shall be included in Account
1180, Telecommunications Accounts Receivable.

\(d\) If any items included in this account are not to be paid currently
they shall be transferred to Account 1410, Other Noncurrent Assets, or
1401, Investments in Affiliated Companies, as appropriate.

**ù32.1191 Accounts receivable allowance - other.**

\(a\) This account shall be credited with amounts charged to Account
5302, Uncollectible Revenue - Other, to provide for uncollectible
amounts included in Account 1190, Other Accounts Receivable. There shall
also be credited to this account amounts collected which previously had
been written off through charges to this account and credits to Account
1190. There shall be charged to this account any amounts covered thereby
which have been found to be impracticable of collection.

\(b\) If no such allowance is maintained uncollectible amounts shall be
charged directly to Account 5302, Uncollectible

Revenue - Other.

\(c\) Subsidiary record categories shall be maintained in order that the
entity may separately report the amounts contained herein that relate to
affiliates and nonaffiliates. Such subsidiary record categories shall be
reported as required by Part 43 of this Commission\'s Rules and
Regulations.

**ù32.1200 Notes receivable.**

\(a\) This account shall include the cost of demand or time notes, bills
and drafts receivable, or other similar evidences (except interest
coupons) of money receivable on demand or within a time not exceeding
one year from date of issue.

\(b\) Subsidiary record categories shall be maintained in order that the
entity may separately report the amounts contained herein that relate to
affiliates and nonaffiliates. Such subsidiary record categories shall be
reported as required by Part 43 of this Commission\'s Rules and
Regulations.

**ù32.1201 Notes receivable allowance.**

\(a\) This account shall be credited with amounts charged to Account
6790, Provision for Uncollectible Notes Receivable, to provide for
uncollectible amounts included in Account 1200, Notes Receivable. There
shall also be credited to this account amounts collected which
previously had been written off through charges to this account and
credit to Account 1200. There shall be charged to this account any
amounts covered thereby which have been found to be impracticable of
collection.

\(b\) If no such allowance is maintained, uncollectible amounts shall be
charged directly to Account 6790, Provision for Uncollectible Notes
Receivable.

\(c\) Subsidiary record categories shall be maintained in order that the
entity may separately report the amounts contained herein that relate to
affiliates and nonaffiliates. Such subsidiary record categories shall be
reported as required by Part 43 of this Commission\'s Rules and
Regulations.

**ù32.1210 Interest and dividends receivable.**

\(a\) This account shall include the amount of interest accrued to the
date of the balance sheet on bonds, notes, and other commercial paper
owned, on loans made, and the amount of dividends receivable on stocks
owned.

\(b\) This account shall not include dividends or other returns on
securities issued or assumed by the company and held by or for it,
whether pledged as collateral, or held in its treasury, in special
deposits, or in sinking and other funds.

\(c\) Interest receivable under monthly settlements on short-term loans,
advances, and open accounts, shall be included in Account 1180,
Telecommunications Accounts Receivable, or

Account 1190, Other Accounts Receivable, as appropriate

\(d\) Dividends received and receivable from affiliated companies
accounted for on the equity method shall be included in Account 1401,
Investments in Affiliated Companies, as a reduction of the carrying
value of the investment.

**ù32.1220 Inventories.**

\(a\) This account shall include the cost of materials and supplies held
in stock and inventories of goods held for resale or lease. The
investment in inventories shall be maintained in the following
subaccounts:

1220.1 Material and supplies

1220.2 Property held for sale or lease

\(b\) These subaccounts shall not include items which are related to a
nonregulated activity unless that activity involved joint or common use
of assets and resources in the provision of regulated and nonregulated
products and services.

\(c\) 1220.1, Material and Supplies. This subaccount shall include cost
of material and supplies held in stock including plant supplies, motor
vehicles supplies, tools, fuel, other supplies and material and articles
of the company in process of manufacture for supply stock. (Note also
ù32.2000(c)(2)(iii) of this subpart.)

\(d\) Transportation charges and sales and use taxes, so far as
practicable, shall be included as a part of the cost of the particular
material to which they relate. Transportation and sales and use taxes
which are not included as part of the cost of particular material shall
be equitably apportioned among the detail accounts to which material is
charged.

\(e\) So far as practicable, cash and other discount on material shall
be deducted in determining cost of the particular material to which they
relate or credited to the account to which the material is charged.

When such deduction is not practicable, discounts shall be equitably
apportioned among the detail accounts to which material is charged.

\(f\) Material recovered in connection with construction, maintenance or
retirement of property shall be charged to this account as follows:

\(1\) Reusable items that, when installed or in service, were retirement
units shall be included in this account at the original cost, estimated
if not known. (Note also ù32.2000(d)(3) of this subpart.)

\(2\) Reusable minor items that, when installed or in service, were not
retirements units shall be included in this account at current prices
new.

\(3\) The cost of repairing reusable material shall be charged to the
appropriate account in the Plant Specific Operations Expense account.

\(4\) Scrap and nonusable material included in this account shall be
carried at the estimated amount which will be received therefor. The
difference between the amounts realized for scrap and nonusable material
sold and the amounts at which it is carried in this account, so far as
practicable, shall be adjusted in the accounts credited when the
material was taken up in this account.

\(g\) Interest paid on material bills, the payments of which are
delayed, shall be charged to Account 7540, Other Interest Deductions.

\(h\) Inventories of material and supplies shall be taken during each
calendar year and the adjustments to this account shall be charged or
credited to Account 6512, Provisioning Expense.

\(i\) 1220.2, Property Held for Sale or Lease. This subaccount shall
include the cost of all items purchased for resale or lease. The cost
shall include applicable transportation charges, sales and use taxes,
and cash and other purchase discounts. Inventory shortage and overage
shall be charged and credited, respectively, to Account 5820,
Nonregulated Operating Revenue.

***REA 1220.3 Exempt materials - clearing.***

\(a\) This account shall include the cost of materials and supplies
designated as exempt material on the carrier\'s \"Exempt Material
List\". Charges to this account shall be cleared monthly to the primary
plant and maintenance accounts in accordance with percentages developed
by the individual carriers.

\(b\) When there is a substantial amount of exempt material on hand at
the end of the year, substantial enough to distort net income or
margins, a physical inventory may be taken. The cost of the inventory on
hand shall be debited to this account and credited to the appropriate
primary plant and maintenance accounts on a pro-rata basis related to
the original charges to these accounts. This entry shall be reversed at
the first of the year.

**ù32.1280 Prepayments.**

This account shall be used by Class B companies to record assets of the
type required of Class A Companies in Accounts 1290 through 1330.

***REA 1280.1 Prepaid rents.***

This account shall used by Class B companies. This account shall include
the amount of rents paid in advance of the period in which it is
chargeable to income, except amounts chargeable to telecommunications
plant under construction and minor amounts which may be charged directly
to the final accounts. As the term expires for which the rents are paid,
this account shall be credited monthly and the appropriate account
charged.

***REA 1280.2 Prepaid taxes.***

This account shall used by Class B companies. This account shall include
the balance of all taxes paid in advance of the period in which they are
chargeable to income, except amounts chargeable to telecommunications
plant under construction and minor amounts which may be charged directly
to the final accounts. As the term expires for which the taxes are paid,
this account shall be credited monthly and the appropriate account
charged.

***REA 1280.3 Prepaid insurance.***

This account shall used by Class B companies. This account shall include
the amount of insurance premiums paid in advance of the period in which
they are chargeable to income, except premiums chargeable to
telecommunications plant under construction and minor amounts which may
be charged directly to the final accounts. As the term expires for which
the premiums are paid, this account shall be credited monthly and the
appropriate account charged.

***REA 1280.4 Prepaid directory expenses.***

This account shall used by Class B companies. This account shall include
the cost of preparing, printing, binding, and delivering directories and
the cost of soliciting advertisements for directories, except minor
amounts which may be charged directly to Account 6620, Services. Amounts
in this account, shall be cleared to Account 6620 by monthly charges
representing that portion of the expenses applicable to each month.

***REA 1280.5 Other prepayments.***

This account shall used by Class B companies. This account shall include
prepayments, other than those includable in Accounts 1280.1 through
1280.4 except minor amounts which may be charged directly to the final
accounts. As the term expires for which the payments apply, this account
shall be credited monthly and the appropriate account charged.

**ù32.1290 Prepaid rents.**

This account shall include the amounts of rents paid in advance of the
period in which they are chargeable to income, except amounts chargeable
to telecommunications plants under construction and minor amounts which
may be charged directly to the final accounts. As the term expires for
which the rents are paid, this account shall be credited monthly and the
appropriate account charged.

**ù32.1300 Prepaid taxes.**

This account shall include the balance of all taxes, other than amounts
chargeable to telecommunication plant under construction and minor
amounts which may be charged to the final accounts, paid in advance and
which are chargeable to income within one year. As the term expires for
which the taxes are paid, this account shall be credited monthly and the
appropriate account charged.

**ù32.1310 Prepaid insurance.**

This account shall include the amount of insurance premiums paid in
advance of the period in which they are chargeable to income, except
premiums chargeable to telecommunications plant under construction and
minor amount which may be charged directly to the final accounts. As the
term expires for which the premiums are paid, this account shall be
credited monthly and the appropriate account charged.

**ù32.1320 Prepaid directory expenses.**

This account shall include the cost of preparing, printing, binding, and
delivering directories and the cost of soliciting advertisements for
directories, except minor amounts which may be charged directly to
Account 6622, Number Services. Amounts in this account shall be cleared
to Account 6622 by monthly charges representing that portion of the
expenses applicable to each month.

**ù32.1330 Other prepayments.**

This account shall include prepayments, other than those includable in
Accounts 1290 through 1320, except minor amounts which may be charged
directly to the final accounts. As the term expires for which the
payments apply, this account shall be credited monthly and the
appropriate account charged.

**ù32.1350 Other current assets.**

This account shall include the amount of all current assets which are
not includable in Accounts 1120 through 1330.

***REA 1350.1 Subscriptions to capital stock.***

\(a\) This account shall include the balance due from subscribers upon
legally enforceable subscriptions to capital stock.

\(b\) The purchase price of subscriptions shall be charged to this
account at the time the subscription is received. The par value of the
stock subscribed shall be credited to

Account 4540.11, Capital Stock Subscribed, and the difference between
the purchase price and the par value shall be credited to Account 4520,
Additional Paid-In Capital.

***REA 1350.2 Subscriptions to memberships.***

\(a\) This account shall include the balance due on memberships
subscribed. The face amount of memberships subscribed shall be charged
to this account at the time the subscription is received. The offsetting
credit shall be to Account 4540.12, Memberships Subscribed but Unissued.

\(b\) A subscription ledger shall be maintained to record for each
subscriber, the amount subscribed, payments made, and the balance due.
The balance in this account shall be reconciled monthly with the
subscription ledger.

***REA 1350.3 Subscriptions to members\' equity certificates.***

\(a\) This account shall include the balance due on member\'s equity
certificates subscribed. The face amount of certificates subscribed
shall be charged to this account at the time the subscription is
received. The offsetting credit shall be to Account 4540.13, Members\'
Equity Certificates Subscribed but Unissued, or to Account 4270.1,
Members\' Redeemable Equity Certificates Subscribed but Unissued.

\(b\) A subscription ledger shall be maintained to record for each
subscriber, the amount subscribed, payments made, and the balance due.
The balance in this account shall be reconciled monthly with the
subscription ledger. The subscription ledger shall be maintained in such
a manner as to separately identify redeemable and nonredeemable
certificates.

***REA 1350.4 Other current assets.***

This account shall include the amount of all current assets which are
not includable in Accounts 1120 through 1350.3.

**ù32.1401 Investments in affiliated companies.**

\(a\) This account shall include the acquisition cost of the company\'s
investment in equity or other securities issued or assumed by affiliated
companies, other than securities held in special funds which shall be
charged to Account 1408, Sinking Funds. The carrying value of the
investment (securities) accounted for on the equity method shall be
adjusted to recognize the company\'s share of the earnings or losses and
dividends received or receivable of the affiliated company from the date
of acquisition. (Note also Account 1210, Interest and Dividends
Receivable, and Account 7310, Dividend Income.)

\(b\) Declines in value of investments accounted for under the cost
method shall be charged to Account 4540, Other Capital, if temporary and
as a current period loss if permanent. Detail records shall be
maintained to reflect unrealized losses for each investment.

\(c\) A subsidiary record shall be kept identifying separately common
stocks, preferred stocks, advances to affiliates, and long-term debt.
Further, the company\'s records shall identify the securities pledged as
collateral for any of the company\'s long-term debt or short-term loans
or to secure performance of contracts.

\(d\) This account shall also include advances represented by book
accounts only with respect to which it is carried or intended that they
shall be either settled by issuance of capital stock or debt; or shall
not be subject to current cost settlement.

\(e\) Amounts due from affiliated companies which are subject to current
settlement shall be included in Account 1180, Telecommunications Account
Receivable; Account 1190, Other Accounts Receivable; or Account 1200,
Notes Receivable, as appropriate.

\(f\) Subsidiary record categories shall be maintained in order that the
entity may separately report the amounts contained herein that relate to
the equity method and the cost method. Such subsidiary record categories
shall be reported as required by Part 43 of this Commission\'s Rules and
Regulations.

**ù32.1402 Investments in nonaffiliated companies.**

\(a\) This account shall include the acquisition cost of the Company\'s
investment in securities issued or assumed by nonaffiliated companies
and individuals, other than securities held in special funds which shall
be charged to Account 1408, Sinking Funds, and also its investment
advances to such parties and special deposits of cash for more than one
year from date of deposit.

\(b\) Declines in value of investment shall be charged to Account 4540,
Other Capital, if temporary and as a current period loss if permanent.
Detail records shall be maintained to reflect unrealized losses for each
investment.

\(c\) This account shall also include advances represented by book
accounts only with respect to which it is agreed or intended that they
shall be either settled by issuance of capital stock or debt; or shall
not be subject to current cost settlement.

\(d\) A subsidiary record shall be kept identifying separately common
stocks, preferred stocks, long-term debt, investment advances and
special deposits of cash for more than one year from the date of
deposit. Further, the company\'s record shall identify the securities
pledged as collateral for any of the company\'s long-term debt or
short-term debt or short-term loans or to secure performance of
contracts.

\(e\) Amounts due from nonaffiliated companies which are subject to
current settlement shall be included in Account 1180, Telecommunications
Accounts Receivable; Account 1190, Other Accounts Receivable; or Account
1200, Notes Receivable, as appropriate.

***REA 1402.1 Investments in nonaffiliated companies - Class B RTB***

***stock.***

\(a\) This account shall include the par value of the required purchase
of Class B Rural Telephone Bank stock and the par value of the Class B
Rural Telephone Bank stock received as a patronage refund. This account
shall be debited at the time the refund is received and Account 1402.11,
Investments in Nonaffiliated Companies - Class B RTB Stock - Cr.,
credited.

\(b\) This account shall be credited and Account 1402.11 debited when
the patronage refund is redeemed.

***REA 1402.11 Investments in nonaffiliated companies - Class B***

***RTB stock - cr.***

\(a\) This account shall include the par value of Class B Rural
Telephone Bank stock received as a patronage refund. This account shall
be credited at the time the refund is received and Account 1402.1,
Investments in Nonaffiliated Companies - Class B RTB Stock, debited.

\(b\) This account shall be debited and Account 1402.1 credited when the
patronage refund is redeemed.

***REA 1402.2 Investments in nonaffiliated companies - Class C RTB***

***stock.***

This account shall include the par value of the company\'s investment in
Class C Rural Telephone Bank stock. Cash dividends on Class C stock
shall be recorded in

Account 7310/7300.1, Dividend Income, when declared.

***REA 1402.3 Other investments in nonaffiliated companies.***

\(a\) This account shall include the acquisition cost of the company\'s
investment in securities issued by nonaffiliated companies, other than
securities held in special funds which shall be charged to Account 1408,
Sinking Funds, and also its investment advances to such parties and
special deposits of cash for more than one year from the date of
deposit.

\(b\) Declines in value of investments shall be charged to Account
4540.41, Other Capital, if temporary and as a current period loss if
permanent. Detailed records shall be maintained to reflect unrealized
losses for each investment.

**ù32.1406 Nonregulated investments.**

\(a\) This account shall include the carrier\'s investment in
nonregulated activities accounted for in a separate set of books as
provided in ù32.23(b).

\(b\) This account shall be subdivided as follows:

1406.1 Permanent investment

1406.2 Receivable/payable

1406.3 Current net income or loss

**ù32.1407 Unamortized debt issuance expense.**

\(a\) This account shall include the total unamortized balance of debt
issuance expense for all classes of outstanding long-term debt. Amounts
included in this account shall be amortized monthly and charged to
Account 7530, Amortization of Debt Issuance Expense.

\(b\) Debt Issuance expense includes all expenses in connection with the
issuance and sale of evidence of debt, such as fees for drafting
mortgages and trust deeds; fees and taxes for issuing or recording
evidences of debt; costs of engraving and printing bonds, certificates
of indebtedness, and other commercial paper; fees paid trustees;
specific costs of obtaining governmental authority; fees for legal
services; fees and commissions paid underwriters, brokers, and salesmen;
fees and expenses of listing on exchanges, and other like costs.

\(c\) A subsidiary record shall be kept of each issue outstanding.

**ù32.1408 Sinking funds.**

\(a\) This account shall include the amount of cash and other assets
which are held by trustees or by the company\'s treasurer in a distinct
fund, for the purpose of redeeming outstanding obligations.

\(b\) Interest or other income arising from funds carried in this
account shall generally be charged to this account.

\(c\) A subsidiary record shall be kept for each sinking fund which
shall designate the obligation in support of which the fund was created.

**ù32.1410 Other noncurrent assets.**

This account shall include the amount of all noncurrent assets which are
not includable in Accounts 1401 through 1408.

**ù32.1438 Deferred maintenance and retirements.**

\(a\) This account shall include such items as the unprovided-for loss
in service value of telecommunications plant for extraordinary
non-recurring retirement not considered in depreciation and the cost of
extensive replacements of plant normally chargeable to the current
period Plant Specific Operations Expense accounts.

\(b\) Charges provided for in paragraph (a) above shall be included in
this account only upon direction or approval from this Commission.
However, the company\'s application to this Commission for such approval
shall give full particulars concerning the property retired, the
extensive replacements, the amounts chargeable to operating expenses and
the period over which in its judgement the amount of such charges should
be distributed.

**ù32.1439 Deferred charges.**

\(a\) This account shall include all deferred charges not provided for
in Accounts 1438, Deferred Maintenance and Retirements, and 1500, Other
Jurisdictional Assets - Net. Such charges include unaudited amounts and
other debit balances in suspense that cannot be cleared and disposed of
until additional information is received; the amount, pending
determination of loss, of funds on deposit with banks which have failed;
revenue, expense, and income items held in suspense; amounts paid for
options pending final disposition.

\(b\) This account shall include the cost of preliminary surveys, plans,
investigation, etc., made for construction projects under contemplation.
If the projects are carried out, the preliminary costs shall be included
in the cost of the plant constructed. If the projects are abandoned, the
preliminary costs shall be charged to Account 7370, Special Charges.

\(c\) This account shall include also the cost of valuations,
inventories, and appraisals taken in connection with the acquisition or
sale of property. If the property is subsequently acquired, the
preliminary costs shall be accounted for as a part of the cost of
acquisition, or if it is sold, such costs shall be deducted from the
sale price in accounting for the property sold. If purchases or sales
are abandoned, the preliminary costs included herein (including options
paid, if any) shall be charged to Account 7370.

**ù32.1500 Other jurisdictional assets - net.**

This account shall include the cumulative impact on assets of
jurisdictional ratemaking practices which vary from those of this
Commission. All entries recorded in this account shall be recorded net
of any applicable income tax effects and shall be supported by
subsidiary records where necessary as provided for in ù32.13(e) of
Subpart B.

**ù32.2000 Instructions for telecommunications plant accounts.**

\(a\) Purpose of telecommunications plant accounts.

\(1\) The telecommunications plant accounts (2001 to 2007 inclusive) are
designed to show the investment in the company\'s tangible and
intangible telecommunications plant which ordinarily has a service life
of more than one year, including such plant whether used by the company
or others in providing telecommunications service.

\(2\) The telecommunications plant accounts shall not include the cost
or other value of telecommunications plant contributed to the company.
Contributions in the form of money or its equivalent toward the
construction of telecommunications plant shall be credited to the
accounts charged with the cost of such construction. Amounts of
non-recurring reimbursements based on the cost of plant or equipment
furnished in rendering service to a customer shall be credited to the
accounts charged with the cost of the plant or equipment. Amounts
received for construction which are ultimately to be repaid wholly or in
part, shall be credited to Account 4360, Other Deferred Credits; when
final determination has been made as to the amount to be returned any
unrefunded amounts shall be credited to the accounts charged with the
cost of such construction. Amounts received for the construction of
plant, the ownership of which rests with or will revert to others, shall
be credited to the accounts charged with the cost of such construction.
(Note also Account 7110, Income from Custom Work.)

\(3\) When telecommunications plant ordinarily having a service life of
more than one year is installed for temporary use in providing
telecommunications service, it shall be accounted for in the same manner
as plant having a service life of more than one year. This includes
temporary installations of plant (such as poles, wire and cable)
installed to maintain service during the progress of highway
reconstruction or during interruptions due to storms or other
casualties, equipment used for training of operators, equipment used to
provide intercepting positions in central offices to handle traffic for
a short period following extensive system changes and similar
installations of property used to provide telecommunications service.

\(4\) The cost of individual items of equipment, classifiable to
Accounts 2112, Motor Vehicles; 2113, Aircraft; 2114, Special Purpose
Vehicles; 2115, Garage Work Equipment; 2116, Other Work Equipment; 2122,
Furniture; 2123, Office Equipment; and 2124, General Purpose Computers,
costing \$500 or less or having a life less than one year shall be
charged to the applicable Plant Specific Operations Expense accounts. If
the aggregate investment in the items is relatively large at the time of
acquisition, such amounts shall be maintained in an applicable materials
and supplies account until the items are used.

Note: An 11/21/89 Order on Reconsideration (FCC 89-298) provided relief
from the requirement to keep Continuing Property Record requirements in
effect for items costing between \$200 and \$500 that had been
capitalized prior to the change in expense limit.

\(b\) Telecommunications plant acquired.

\(1\) Property, plant and equipment acquired from an entity, whether or
not affiliated with the accounting company, shall be accounted for at
original costs, except that property, plant and equipment acquired from
a nonaffiliated entity shall be accounted

for at acquisition cost if the purchase price is less than \$100,000 for
Class A companies or \$25,000 for Class B companies.

\(2\) The accounting property plant and equipment to be recorded at
original cost shall be as follows:

\(i\) The amount of money paid (or current money value of any
consideration other than money exchanged) for the property (together
with preliminary expenses incurred in connection with the acquisition)
shall be charged to Account 1439, Deferred Charges.

\(ii\) The original cost, estimated if not known, of telecommunications
plant, governmental franchises and other similar rights acquired shall
be charged to the applicable telecommunications plant accounts,
telecommunications plant under construction, and property held for
future telecommunications use, as appropriate, and credited to Account
1439. When the actual original cost cannot be determined and estimates
are used, the company shall be prepared to furnish the Commission with
the particulars of such estimates.

\(iii\) Depreciation and amortization of plant acquired shall be
credited to Account 3100, Accumulated Depreciation, or

Account 3200, Accumulated Depreciation - Held for Future
Telecommunications Use; 3400, Accumulated Amortization - Tangible; 3410,
Accumulated Amortization - Capitalized Leases; 3420, Accumulated
Amortization - Leasehold Improvements; 3500, Accumulated Amortization -
Intangibles; and 3600, Accumulated Amortization - Other, and debited to
Account 1439.

\(iv\) Any amount remaining in Account 1439, applicable to the plant
acquired, shall upon completion of the entries provided in paragraphs
(b)(2)(i), (ii) and (iii) above, be debited or credited, as applicable
to Account 2007, Goodwill, or to

Account 2005, Telecommunications Plant Adjustment, as appropriate.

\(3\) A memorandum record shall be kept showing the amount of
contributions in aid of construction applicable to the property acquired
as shown by the accounts of the previous owner.

\(4\) Companies shall submit to the Commission for consideration and
approval copies of journal entries recording acquisition of
telecommunications plant covered by this instruction when the
consideration paid is \$1,000,000 or greater (Class A companies) and
\$250,000 or greater (Class B companies). The text of such entries shall
give a complete description of the property acquired and the basis upon
which the amounts of the entries have been determined.

\(c\) Cost of construction.

\(1\) Telecommunications plant represents an economic resource which
will be used to provide future services, the cost of which will be
allocated in a rational and systematic manner to the future periods in
which it provides benefits. In accounting for construction costs, the
utility shall charge to the telecommuni-cations plant accounts, where
applicable, all direct and indirect costs.

\(2\) Direct and indirect costs shall include, but not be limited to:

\(i\) \"Labor\" includes the wages and expenses of employees directly
engaged in or in direct charge of construction work. It includes
expenses directly related to an employee\'s wages, such as worker\'s
compensation insurance, payroll taxes, benefits and other similar items
of expense.

\(ii\) \"Engineering\" includes the portion of the wages and expenses of
engineers, draftsmen, inspectors, and their direct supervision
applicable to construction work. In includes expenses directly related
to an employee\'s wages, such as worker\'s compensation insurance,
payroll taxes, benefits and other similar items of expense.

\(iii\) \"Material and supplies\" includes the purchase price of
material used at the point of free delivery plus the costs of
inspection, loading and transportation, and an equitable portion of
provisioning expense. In determining the cost of material used, proper
allowance shall be made for unused material, for material recovered from
temporary structures used in performing the work involved, and for
discounts allowed and realized in the purchase of material. This item
does not include construction material that is stolen or rendered
unusable due to vandalism. Such material should be charged to the
applicable plant specific operations expense accounts.

\(iv\) \"Transportation\" includes the cost of transporting employees,
material and supplies, tools and other work equipment to and from the
physical construction location. It includes amounts paid therefore to
other companies or individuals and the cost of using the company\'s own
motor vehicles or other transportation equipment.

\(v\) \"Contract work\" includes amounts paid for work performed under
contract or other agreement by other companies, firms or individuals;
engineering and supervision applicable to such work; cost incident to
the award of contracts; and the inspection of such work. The cost of
construction work performed by affiliated companies and other details
relating thereto shall be available from the work in progress and
supporting records.

\(vi\) \"Protection\" includes the cost of protecting the company\'s
property from fire or other casualties and the cost of preventing
damages to others or the property of others.

\(vii\) \"Privileges, Permits and Rights of way\" includes such costs
incurred in obtaining these privileges, permits, or rights of way in
connection with construction work, such as for use of private property,
streets or highways. The cost of such privileges and permits shall be
included in the cost of the work for which the privileges or permits are
obtained, except for costs includable in Account 2111, Land, and Account
2690, Intangibles.

\(viii\) \"Taxes\" includes taxes properly includable in construction
costs before the facilities are completed for service, which taxes are
assessed separately from taxes on operating property or under conditions
that permit separate identification of the amount chargeable to
construction.

\(ix\) \"Special machine service\" includes the cost of labor expended,
materials and supplies consumed and other expenses incurred in the
maintenance, operation and use of special and other labor saving
machines (other than transportation equipment) such as trenching
equipment, cable plows and pole setting trucks. Also included are
expenditures for rental, maintenance and operation of such machines
owned by others. When a construction job requires the purchase of
special machines, the cost thereof, less the appraised or salvage value
at the time of release from the job, shall be included in the cost of
construction.

\(x\) \"Allowance for funds used during construction\" includes the cost
of debt and equity funds used in the construction of telecommunications
property and shall be applied to telecommunications property designed to
be completed in over one year as described in ù32.2004 of this subpart.
Allowance for funds used during construction shall be charged to the
accounts appropriate for the cost of the property acquired or
constructed as follows:

\(A\) Reasonable amounts of interest during the construction period
(before the property is received or is completed ready for
telecommunications service) on general funds expended for any
acquisition or construction of telecommunications plant shall be
computed on amounts in Account 2004, Telecommunications Plant Under
Construction - Long-Term, and shall be charged thereto. Such amounts
shall be credited to Account 7340, Allowance For Funds Used During
Construction.

\(B\) When funds, derived from the sales of bonds, notes and other
interest bearing debt, are specifically acquired and separately held for
use in the construction of telecommunications plant, the total interest,
discount or premium shall in included in the cost of telecommunications
plant and credited to

Account 7340, Allowance for Funds Used During Construction; provided,
however, that no interest charge for a period longer than six months
prior to the commencement of construction work shall be made unless
specifically authorized by the Commission.

\(C\) During the period of suspension of a construction project, no
allowance for funds used during construction for a period longer than
six months from the date of its suspension shall be included in these
accounts unless specifically authorized by the Commission. No allowance
for funds used during construction shall be included in these accounts
on expenditures for construction projects which have been abandoned.

\(D\) No amount of allowance for funds used during construction shall be
accrued retroactively for any telecommunications plant which was once
included in Account 2003, Telecommunications Plant Under Construction -
Short-Term. No reversal of allowance for funds used during construction
is necessary for plant included in Account 2004, but completed in less
than one year.

\(xi\) \"Insurance\" includes premiums paid specifically for protection
against loss and damage in connection with the construction of
telecommunications plant due to fire or other casualty, injury to or
death of employees or others, damages to property of others,
defalcations of employees and agents, and the nonperformance of
contractual obligations of others.

\(xii\) \"Construction services\" include the cost of telephone,
electricity, power, construction quarters, office space and equipment
directly related to the construction project.

\(xiii\) \"Indirect construction costs\" shall include indirect costs
such as general engineering, supervision and support. Such costs, in
addition to direct supervision, shall include indirect plant operations
and engineering supervision up to, but not including, supervision by
executive officers whose pay and expenses are chargeable to Account
6711, Executive. The records supporting the entries for indirect
construction cost shall be kept so as to show the nature of the
expenditures, the individual jobs and accounts charged, and the bases of
the distribution. The amounts charged to each plant account for indirect
costs shall be readily determinable. The instructions contained herein
shall not be interpreted as permitting the addition to plant of amounts
to cover indirect costs based on arbitrary allocations.

\(xiv\) The cost of construction shall not include any amounts
classifiable as Corporate Operations Expense.

\(d\) Telecommunications plant retired.

\(1\) Telecommunications plant accounts shall at all times disclose the
original cost of all property in service. When any item of property
subject to plant retirement accounting is worn out, lost, sold,
destroyed, abandoned, surrendered upon lapse of title, becomes
permanently unserviceable, is withdrawn or for any other reason is
retired from service, the plant accounts applicable to that item shall
be credited with the original cost of the plant retired whether replaced
or not (except as provided for minor items in paragraph (d)(2)(ii) of
this section). Normally, these retirements credits with respect to such
plant as entire buildings, entire central offices, all plant abandoned
and any large sections of plant withdrawn from service, shall be entered
in the accounts for the month in which use of the property ceased. For
any other plant withdrawn from service, the retirement credits shall be
entered no later than the next succeeding month. Literal compliance with
the provision for timing of entries with respect to property amounting
to less than \$50,000 retired under any one project is not required if
an unreasonable amount of recordkeeping and estimating of quantities,
original costs and salvage is necessary. The retirement entry shall
refer to the continuing property record, or records supplemental
thereto, from which the cost was obtained (note also paragraph (d)(3) of
this section). Every company shall establish procedures which will
ensure compliance with these requirements.

\(2\) To avoid undue refinement, depreciable telecommunications plant
shall be accounted for as follows:

\(i\) Retirement units: This group includes major items of property, a
representative list of which shall be prescribed by this Commission. In
lieu of the retirement units prescribed with respect to a particular
account, a company may, after obtaining specific approval by this
Commission, establish and maintain its own list of retirement units for
a portion or all of the plant in any such account. For items included on
the retirement units list, the original cost of any such items retired
shall be credited to the plant account and charged to Account 3100,
Accumulated Depreciation, whether or not replaced. The original cost of
retirement units installed in place of property retired shall be charged
to the applicable telecommunications plant account.

\(ii\) Minor items: This group includes any part or element of plant
which is not designated as a retirement unit. The original cost of a
minor item of property when included in the specific or average cost for
a retirement unit or units requires no separate credit to the
telecommunications plant account when such a minor item is retired. The
cost of replacement shall be charged to the account applicable for the
cost of repairs of the property. However, if the replacement effects a
substantial betterment (the primary aim of which is to make the property
affected more useful, of greater durability, of greater capacity or more
economical in operation), the excess cost of such a replacement, over
the estimated cost at the then current prices of replacement without
betterment of the minor items being retired, shall be charged to the
applicable telecommunications plant account.

\(3\) The cost of property to be retired shall be the amount at which
property is included in the telecommunications plant accounts. However,
when it is impracticable to determine the cost of each item due to the
relatively large number or small cost of such items, the average cost of
all the items covered by an appropriate subdivision of the account shall
be used in determining the cost to be assigned to such items when
retired. The method used in determining average cost must give due
regard to the quantity, vintage, size and kind of items, the area in
which they were installed and their classification in other respects.
Average cost may be applied in retirement of such items as poles, wire,
cable, cable terminals, conduit and booths. Any company may use average
cost of property installed in a year or band of years as approved by the
Commission. It should be understood, however, that the use of average
costs shall not relieve the company of the requirement for maintaining
its continuing property records to show, where practicable, dates of
installation and removal for purposes of mortality studies. (See
ù32.2000(f) of this subpart, Standard Practices for Establishing and
Maintaining Continuing Property Records.)

\(4\) The accounting for the retirement of property, plant and equipment
shall be as provided above except:

\(i\) Amounts included in Account 2005, Telecommunications Plant
Adjustment; Account 2680, Amortizable Tangible Assets; Account 2681,
Capital Leases; Account 2682, Leasehold Improvements; Account 2690,
Intangibles; and any amounts associated with amortizable leaseholds,
easements, and similar rights in land included in Account 2111, Land,
shall be debited, as appropriate, to Accounts 3400, 3410, 3420, 3500, or
3600, and credited to the applicable accounts.

\(ii\) Amounts in Account 2111, Land, and amounts for works of art
recorded in Account 2122, Furniture, shall be treated at disposition as
a gain or loss and shall be credited or debited to Account 7150, Gains
and Losses from Disposition of Land and Artwork, as applicable. If land
or artwork is retained by the company and held for sale, the cost shall
be charged to

Account 2006, Nonoperating Plant.

\(5\) When the telecommunications plant is sold together with traffic
associated therewith, the original cost of the property shall be
credited to the applicable plant accounts and the estimated amounts
carried with respect thereto in the accumulated depreciation and
amortization accounts shall be charged to such accumulated accounts. The
difference, if any between the net amount of such debit and credit items
and the consideration received (less commissions and other expenses of
making the sale) for the property shall be included in Account 7350,
Gains and Losses from Disposition of Certain Property. The accounting
for depreciable telecommunications plant sold without the traffic
associated therewith shall be in accordance with the accounting provided
in ù32.3100(c) of this subpart.

\(e\) Basic property records.

\(1\) The basic property records are that portion of the local property
accounting system which preserves the following detailed information:

\(i\) The identity, vintage, location and original cost of units of
property;

\(ii\) Original and ongoing transactional data (plant account activity)
in terms of such units; and

\(iii\) Any other specific financial and cost accounting information not
properly warranting separate disclosure as an account or subaccount but
which is needed to support regulatory, cost, tax, management and other
specific accounting information needs and requirements.

\(2\) The basic property records must be (i) subject to internal
accounting controls, (ii) auditable, (iii) equal in the aggregate to the
total investment reflected in the financial property control accounts as
well as the total of the cost allocations supporting the determination
of cost-of-service at any particular point in time, and (iv) maintained
throughout the life of the property.

\(3\) The basic property records shall consist of (i) continuing
property records and (ii) records supplemental thereto which together
reveal clearly, by accounting area, the detailed and systematically
summarized information necessary to meet fully the requirements of
paragraphs (e)(1) and (e)(2) of this section.

\(4\) Companies shall establish and maintain basic property records for
each class of property recorded in the several plant accounts which
comprise the balance sheet Account 2001, Telecommunications Plant In
Service; Account 2002, Property Held for Future Telecommunications Use;
and Account 2006, Nonoperating Plant.

\(5\) The company shall notify the Commission of a plan for the basic
property record as follows:

\(i\) Not later than June 30 of the year following that in which it
becomes subject to this system of accounts, the company shall file with
the Commission two (2) copies of a complete plan of the method to be
used in the compilation of a basic property record with respect to each
class of property. The plan shall include a list of proposed accounting
areas accompanied by description of the boundaries of each area as
defined in accordance with the requirements of ù32.2000(f)(1)(i) and
(ii) of this subpart. The plan shall also include a list of property
record units proposed for use under each regulated plant account. These
property record units shall be selected such that the requirements of
ù32.2000(f)(2)(i), (ii) and (iii) of this subpart can be satisfied.

\(ii\) The company shall submit to the Commission one copy of any major
proposed changes in its basic property record plan at least 30 days
before the effective date of the proposed changes.

\(6\) The company shall prepare and maintain the basic property record
as follows:

\(i\) Not later than June 30 of the year following that in which the
company becomes subject to this system of accounts, begin the
preparation of a basic property record.

\(ii\) Compete within two years of the prescribed beginning date, basic
property records for all property as of the end of the preceding
calendar year.

\(iii\) Promptly process in the basic property records all property
changes affecting periods sub sequent to initial establishment of the
basic property record.

\(7\) The basic property record components (see paragraph (c) above)
shall be arranged in conformity with the regulated plant accounts
prescribed in this system of accounts as follows:

\(i\) The continuing property records shall be compiled on the basis of
original cost (or other book cost consistent with this system of
accounts). The continuing property records shall be maintained as
prescribed in ù32.2000(f)(2)(iii) of this subpart in such manner as will
meet the following basic objectives:

\(A\) Provide for the verification of property record units by physical
examination.

\(B\) Provide for accurate accounting for retirements.

\(C\) Provide data for use in connection with depreciation studies.

\(ii\) The records supplemental to the continuing property records shall
disclose such service designations, usage measurement criteria,
apportionment factors, or other data as may be prescribed by the
Commission in this Part or other Parts of its Rules and Regulations.
Such data are subject to the same general controls and standards for
auditability and support as are all other elements of the basic property
records.

\(f\) Standard practices for establishing and maintaining continuing
property records.

\(1\) Accounting area.

\(i\) The continuing property record, as related to each primary plant
account, shall be established and maintained by subaccounts for each
accounting area. An accounting area is the smallest territory of the
company for which accounting records of investment are maintained for
all plant accounts within the area. Areas already established for
administrative, accounting, valuation, or other purposes may be adopted
for this purpose when appropriate. In no case shall the boundaries of
accounting areas cross either State lines or boundaries prescribed by
the Commission.

\(ii\) In determining the limit of each area consideration shall be
given to the quantities of property, construction conditions, operating
districts, county and township lines, taxing district boundaries, city
limits, and other political or geographical limits, in order that the
area adopted may have maximum adaptability, within the confines of
practicability, for both the company\'s purpose and those of Federal,
State, and municipal authorities.

\(2\) Property record units.

\(i\) In each of the established accounting areas, the \"property record
units\" which are to be maintained in the continuing property record
shall be set forth separately, classified by size and type with the
amount of original cost (or other appropriate book cost) associated with
such units. When a list of property record units has been accepted by
the Commission, they shall become the units referred to in this
statement of standard practices. Such units shall apply to only the
regulated portion of this system of accounts.

\(ii\) When it is found necessary to revise this list because of the
addition of units used in providing new types of service, or new units
resulting from improvements in technology, or because of the grouping or
elimination of units which no longer merit separate recognition as
property record units, one copy of such changes shall be submitted to
the Commission. Upon appropriate showing by the company, the Commission
may specifically exempt the company from these filing requirements.

\(iii\) The continuing property record shall reveal the description,
location, date of placement, the essential details of construction, and
the original cost (note also ù32.2000(f)(3) of this subpart) of the
property record units. The continuing property record and other
underlying records of construction costs shall be so maintained that,
upon retirement of one or more retirement units or of minor items
without replacement when not included in the costs of retirement units,
the actual cost or a reasonably accurate estimate of the cost of the
plant retired can be determined.

\(3\) Methods of determining original cost of property record units. The
original cost of the property record units shall be determined by
analyses of the construction costs incurred as shown by completion
reports and other data, accumulated in the respective construction work
orders or authorization. Costs shall be allocated to and associated with
the property record units to facilitate accounting for retirements. The
original cost of property record units shall be determined by unit
identification or averaging as described in paragraphs (f)(3)(i) and
(ii) of this section.

\(i\) Unit identification. Cost shall be identified and maintained by
specific location for property record units contained within certain
regulated plant accounts or account groupings such as land, buildings,
central office switching, central office network management, motor
vehicles, garage work equipment, and furniture. In addition, units
involved in any unusual or special type of construction shall be
recorded by their specific location costs (note also paragraph
ù32.2000(f)(3)(ii)(B) of this subpart.

\(ii\) Averaging.

\(A\) Average costs may be developed for plant consisting of a large
number of similar units such as terminal equipment, poles, wire, cable,
cable terminals, conduit, furniture, and work equipment. Units of
similar size and type within each specified accounting area and
regulated plant account may be grouped. Each such average cost shall be
set forth in the continuing property record of the units with which it
is associated.

\(B\) The averaging of costs permitted under the provisions of the
foregoing paragraph is restricted to plant installed in a particular
vintage or band of years incurred within an accounting area. This
paragraph does not permit the inclusion of the cost of units involved in
any unusual or special type of construction. The units involved in such
unusual or special type of construction shall be recorded at cost by
location.

\(4\) Estimates. In cases where the actual original cost of property
cannot be ascertained, such as pricing an inventory for the initial
entry of a continuing property record or the pricing of an acquisition
for which the continuing property record has not been maintained, the
original cost may be estimated. Any estimated original cost shall be
consistent with the accounting practices in effect at the time the
property was constructed.

\(5\) Identification of property record units. There shall be shown in
the continuing property record or in record supplements thereof, a
complete description of the property records units in such detail as to
identify such units. The description shall include the identification of
the work order under which constructed, the year of installation (unless
not determinable per ù32.2000(f)(4) of this subpart, specific location
of the property within each accounting area in such manner that it can
be readily spot-checked for proof of physical existence, the accounting
company\'s number or designation, and any other description used in
connection with the determination of the original cost. Descriptions of
units of similar size and type shall follow prescribed groupings.

\(6\) Reinstalled units. When units to which average costs are not
applied, i.e., specific and fixed location units, are removed or retired
and subsequently reinstalled, the date when the unit was first charged
to the appropriate plant account shall, when required for adequate
service life studies and reasonably accurate retirement accounting, be
shown in addition to the date of reinstallation.

\(7\) Age and service life of property. The continuing property record
shall disclose the age of existing property and the supporting records
shall disclose the service life of property retired. Exceptions from
this requirement for any property record unit shall be submitted to the
Commission for approval.

\(8\) Reference to sources of information. There shall be shown by
appropriate reference the source of all entries. All drawings,
computations, and other detailed records which support quantities and
costs of estimated costs shall be retained as a part of on in support of
the continuing property record.

\(9\) Jointly owned property.

\(i\) With respect to jointly owned property, there shall be shown in
the continuing property record or records supplemental thereto:

\(A\) The identity of all joint owners.

\(B\) The percentage owned by the accounting company.

\(ii\) When regulated plant is constructed under arrangements for joint
ownership, the amount received by the construction company from the
other joint owner or owners shall be credited as a reduction of the
gross cost of the plant in place.

\(iii\) When a sale of a part interest in regulated plant is made, the
fractional interest sold shall be treated as a retirement and the amount
received shall be treated as salvage. The continuing property record or
records supplemental thereto shall be so maintained as to identify
separately retirements of this nature from physical retirements of
jointly owned plant.

\(iv\) If jointly owned regulated property is substantial in relation to
the total of the same kind of regulated property owned wholly by the
company, such jointly owned regulated property shall be appropriately
segregated in the continuing property record.

\(g\) Depreciation accounting.

\(1\) Computation of depreciation rates.

\(i\) Unless otherwise provided by the Commission, either through prior
approval or upon prescription by the Commission, depreciation percentage
rates shall be computed in conformity with a 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.

\(ii\) In the event any composite percentage rate becomes no longer
applicable, revised composite percentage rates shall be computed in
accordance with subparagraph (i) of this section.

\(iii\) The company shall keep such records of property and property
retirements as will allow the determination of the service life of
property which has been retired, or facilitate the determination of
service life indications by mortality, turnover, or other appropriate
methods. Such records will also allow the determination of the
percentage of salvage value and cost of removal for property retired
from each class of depreciable plant.

\(2\) Depreciation charges.

\(i\) A separate annual percentage rate for each depreciation category
of telecommunications plant shall be used in computing depreciation
charges.

\(ii\) Companies, upon receiving prior approval from this Commission, or
upon prescription by this Commission, shall apply such depreciation
rate, except where provisions of

paragraph (g)(2)(iv) of this paragraph apply, as will ratably distribute
on a straight line basis the difference between the net book cost of a
class or subclass of plant and its estimated net salvage during the
known or estimated remaining service life of the plant.

\(iii\) Charges for currently accruing depreciation shall be made
monthly to the appropriate depreciation accounts, and corresponding
credits shall be made to the appropriate depreciation reserve accounts.
Current monthly charges shall normally be computed by the application of
one-twelfth of the annual depreciation rate to the monthly average
balance of the associated category of plant. The average monthly balance
shall be computed using the balance as of the first and last days of the
current month.

\(iv\) In certain circumstances and upon prior approval of this
Commission, monthly charges may be determined in total or in part
through the use of other methods whereby selected plant balances

or portions thereof are ratably distributed over periods prescribed by
this Commission. Such circumstances could include but not be limited to
factors such as the existence of reserve deficiencies or surpluses,
types of plant that will be completely retired in the near future, and
changes in the accounting for plant. Where alternative methods have been
used in accordance with this subparagraph, such amounts shall be applied
separately or in combination with rates determined in accordance with
paragraph (g)(2)(ii) of this section.

\(3\) Acquired depreciable plant. When acquired depreciable plant
carried in Account 1439, Deferred Charges, 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 1439.

\(4\) Plant retired for nonrecurring factors not recognized in
depreciation rates.

\(i\) A retirement will be considered as nonrecurring (extraordinary)
only if the following criteria are met:

\(A\) The impending retirement was not adequately considered in setting
past depreciation rates.

\(B\) The charging of the retirement against the reserve will unduly
deplete that reserve.

\(C\) The retirement is unusual such that similar retirements are not
likely to recur in the future.

\(5\) Upon direction or approval from this Commission, the company shall
credit Account 3100, Accumulated Depreciation, and charge Account 1438,
Deferred Maintenance and Retirements, with the unprovided-for loss in
service value. Such amounts shall be distributed from Account 1438 to
Account 6561, Depreciation Expense - Telecommunications Plant in
Service, or Account 6562, Depreciation Expense - Property Held for
Future Telecommunications Use, over such period as this Commission may
direct or approve.

\(h\) Amortization accounting.

\(1\) Unless otherwise provided by this Commission, either through
approval, or upon prescription by this Commission, amortization shall be
computed on the straight-line method, i.e., equal annual amounts shall
be applied. The cost of each type of asset shall be amortized on the
basis of the estimated life of that asset and shall not be written off
in the accounting period in which the asset is acquired. A reasonable
estimate of the useful life may be based on the upper or lower limits
even though a fixed existence is not determinable. However, the period
of amortization shall not exceed forty years.

\(2\) In the event any estimated useful life becomes no longer
applicable, a revised estimated useful life shall be determined in
accordance with paragraph (h)(1) of this section.

\(3\) Amortization charges shall be made monthly to the appropriate
amortization expense accounts and corresponding credits shall be made to
the appropriate amortization reserve accounts. Monthly charges shall be
computed by the application of one-twelfth to the annual amortization
amount.

\(4\) The company shall keep such records as will allow the
determination of the useful life of the asset.

\(i\) Accounting for software. The original cost of initial operating
system software for computers shall be classified to the same account as
the associated hardware whether acquired separately or in conjunction
with the associated hardware.

\(j\) Plant accounts to be maintained by Class A and Class B telephone
companies as indicated:

Class A Class B

[Account Title]{.underline} [Account]{.underline} [Account]{.underline}

REGULATED PLANT

Property, Plant and Equipment:

Telecommunications plant in service 1 2001 1 2001

Telecommunications plant in service -

classified 2001.1 2001.1

Telecommunications plant in service -

unclassified 2001.2 2001.2

Property held for future telecommuni-

cations use 2002 2002

Telecommunications plant under

construction - short-term 2003 2003

Telecommunications plant under

construction - short-term -

contract 2003.1 2003.1

Class A Class B

[Account Title]{.underline} [Account]{.underline} [Account]{.underline}

Telecommunications plant under

construction - short-term -

force account 2003.2 2003.2

Telecommunications plant under

construction - short-term -

work orders 2003.3 2003.3

Telecommunications plant under

construction - long-term 2004 2004

Telecommunications plant under

construction - long-term -

contract 2004.1 2004.1

Telecommunications plant under

construction - long-term -

force account 2004.2 2004.2

Telecommunications plant under

construction - long-term -

work orders 2004.3 2004.3

Telecommunications plant adjustment 2005 2005

Nonoperating plant 2006 2006

Goodwill 2007 2007

TELECOMMUNICATIONS PLANT IN SERVICE (TPIS)

TPIS - General Support Assets:

Land and support assets 2110

Land 2111

Motor vehicles 2112

Aircraft 2113

Special purpose vehicles 2114

Garage work equipment 2115

Other work equipment 2116

Buildings 2121

Furniture 2122

Office equipment 2123

General purpose computers 2124

TPIS - Central Office Assets:

Central office - switching 2210

Central office switching - analog 2210.11

Central office switching - digital 2210.21

Central office switching - electro-

mechanical - step-by-step 2210.31

Central office switching - electro-

mechanical - crossbar 2210.32

Central office switching - electro-

mechanical - other 2210.33

Analog electronic switching 2211

Digital electronic switching 2212

Electro-mechanical switching 2215

Operator systems 2220 2220

Central office - transmission 2230

Class A Class B

[Account Title]{.underline} [Account]{.underline} [Account]{.underline}

Central office transmission - radio

systems - satellite and earth

station facilities 2230.11

Central office transmission - radio

systems - other 2230.12

Central office transmission - circuit

equipment 2230.21

Radio system 2231

Circuit equipment 2232

TPIS - Information Origination/Termination Assets:

Information origination/termination 2310

Station apparatus 2311

Customer premises wiring 2321

Large private branch exchanges 2341

Public telephone terminal equipment 2351

Other terminal equipment 2362

TPIS - Cable and Wire Facilities Assets:

Cable and wire facilities 2410

Poles 2411

Aerial cable 2421

Underground cable 2422

Buried cable 2423

Submarine cable 2424

Deep sea cable 2425

Intrabuilding network cable 2426

Aerial wire 2431

Conduit systems 2441

TPIS - Amortizable Assets:

Amortizable tangible assets 2680

Capital leases 2681

Leasehold improvements 2682

Intangibles 2690 2690

1 Balance sheet summary account only

**ù32.2001 Telecommunications plant in service.**

This account shall include the original cost of the investment included
in Accounts 2110 through 2690.

***REA 2001.1 Telecommunications plant in service - classified.***

This account shall include the original cost of the property capitalized
in Accounts 2110 through 2690.

***REA 2001.2 Telecommunications plant in service - unclassified.***

This account shall include the original cost of
***t***elecommuni***-***cations property which has been completed and
placed in service but which has not been classified pending completion
of final inventories of construction, final cost summaries, etc. The
balance in this account is subject to depreciation charges.

**ù32.2002 Property held for future telecommunications use.**

\(a\) This account shall include the original cost of property owned and
held for no longer than two years under a definite plan for use in
telecommunications service. If at the end of two years the property is
not in service, the original cost of the property shall be transferred
to Account 2006, Nonoperating Plant.

\(b\) Should a carrier desire to retain the property in this account for
a period longer than two years, it shall request approval of this
Commission. The request should include the property item in question,
demonstrate that the waiver is in the public interest, and indicate, as
precisely as possible, the additional time required for the property to
be held in this account.

\(c\) Subsidiary records shall be maintained to show the character of
the amounts carried in this account.

**ù32.2003 Telecommunications plant under construction - short-**

**term.**

\(a\) This account shall include the original cost of construction
projects designed to be completed in one year or less. (Note also
ù32.2000(c) of this subpart.)

\(b\) There may be charged directly to the appropriate plant accounts
the cost of any construction project which is estimated to be completed
and ready for service within two months from the date on which the
project was begun. There may also be charged directly to the plant
accounts the cost of any construction project for which the gross
additions to plant are estimated to amount to less than \$100,000.

\(c\) When the plant includable in this account is not ready for service
at the end of one year, the cost of construction of the plant shall be
transferred to Account 2004, Telecommunications Plant Under
Construction - Long-Term, without further direction or approval of this
Commission. If a construction project has been suspended for six months
or more, the cost of the plant includable in this account shall be
transferred to Account 2004 without further direction or approval of
this Commission.

If a project is abandoned the cost included in this account shall be
charged to Account 7370, Special Charges.

\(d\) When any telecommunications plant, the cost of which has been
included in this account, is completed ready for service, the cost
thereto shall be credited to this account, and charged to the
appropriate telecommunications plant or other accounts.

***REA 2003.1 Telecommunications plant under construction - short-***

***term - contract.***

This account shall include all costs incurred in the construction of
telecommunications plant performed under contract and designed to be
completed in one year or less. Included among these costs are contractor
payments, and charges for engineering, supervision, taxes, insurance,
transportation, and other costs incurred in contract construction. This
account shall be maintained such that the various items of cost are
readily identifiable.

***REA 2003.2 Telecommunications plant under construction - short-***

***term - force account.***

This account shall include all costs incurred in ***t***he construction
of telecommunications plant performed by the borrowers\' own employees
and designed to be completed in one year or less. Included among these
costs are charges for material, labor, engineering, supervision, taxes,
insurance, transportation, supply expense, and other costs incurred in
the construction. This account shall be maintained so that the various
items of cost are readily identified. Specific subaccounts should be
maintained to distinguish individual projects.

***REA 2003.3 Telecommunications plant under construction - short-***

***term - work orders.***

This account shall include all costs incurred in the construction of
telecommunications plant performed under a work order system or a line
extension contract and designed to be completed in one year or less.
This type of construction generally includes service installations,
subscriber extensions, and minor plant improvements after the completion
of the initial system. Included among these costs are charges for labor,
materials and supplies, transportation, payroll taxes, insurance,
supervision and other costs incurred in the construction. Subsidiary
records shall be maintained to reflect the cost of individual jobs.
These records shall be reconciled periodically with the general ledger
control account. Specific subaccounts should be maintained to accumulate
costs incurred under line extension contracts.

**ù32.2004 Telecommunications plant under construction - long-**

**term.**

\(a\) This account shall include the original cost of construction
projects designed to be completed in more than one year. (Note also
ù32.2000 (c) of this subpart.)

\(b\) There may be charged directly to the plant accounts the cost of
any construction project for which the gross additions to plant are
estimated to the amount to less than \$100,000.

\(c\) If a project is abandoned, the cost included in this account shall
be charged to Account 7370, Special Charges.

\(d\) When any telecommunications plant, the cost of which has been
included in this account, is completed and ready for service, the cost
thereof shall be credited to this account and charged to the appropriate
telecommunications plant or other accounts.

***REA 2004.1 Telecommunications plant under construction - long-***

***term - contract.***

This account shall include all costs incurred in the construction of
telecommunications plant performed under contract and designed to be
completed in more than one year. Included among these costs are
contractor payments, and charges for engineering, supervision, taxes,
insurance, transportation, interest during construction, and other costs
incurred in contract construction. This account shall be maintained such
that the various items of cost are readily identified.

***REA 2004.2 Telecommunications plant under construction - long-***

***term - force account.***

This account shall include all costs incurred in the construction of
telecommunications plant performed by the borrowers\' own employees and
designed to be completed in more than one year. Included among these
costs are charges for material, labor, engineering, supervision, taxes,
insurance, transportation, supply expense, interest during construction,
and other costs incurred in the construction. This account shall be
maintained such that the various items of cost are readily identified.
Specific subaccounts should be maintained to distinguish individual
projects.

***REA 2004.3 Telecommunications plant under construction - long-***

***term - work orders.***

This account shall include all costs incurred in the construction of
telecommunications plant performed under a work order system or a line
extension contract and designed to be completed in more than one year.
Included among these costs are charges for labor, materials and
supplies, transportation, payroll taxes, insurance, supervision,
interest during construction, and other costs incurred in the
construction. Subsidiary records shall be maintained to reflect the cost
of individual jobs. These records shall be reconciled periodically with
the general ledger control account. Specific subaccounts should be
maintained to accumulate costs incurred under line extension contracts.

**ù32.2005 Telecommunications plant adjustment.**

\(a\) This account shall include amounts determined in accordance with
paragraph ù32.2000(b) of this subpart representing the difference
between:

\(1\) The fair market value of the telecommunications plant acquired,
plus preliminary expenses incurred in connection with the acquisition;
and

\(2\) The original cost of such plant, governmental franchises and
similar rights acquired, less the amounts of reserve requirements for
depreciation and amortization of the property acquired. If the actual
original cost is not known, the entries in this account shall be based
upon an estimate of such costs.

\(b\) The amounts recorded in this account with respect to each property
acquisition (except land and artworks) shall be disposed of, written
off, or provision shall be made for the amortization thereof, as
follows:

\(1\) Debit amounts may be charged to Account 7370, Special Charges, in
whole or in part, or amortized over a reasonable period through charges
to Account 7360, Other Nonoperating Income, without further direction or
approval by this Commission. When specifically approved by this
Commission, or when the provisions of paragraph (b)(3) of this section
apply, debit amounts shall be amortized to Account 6565, Amortization

Expense - Other.

\(2\) Credit amounts shall be disposed of in such manner as this
Commission may approve or direct, except for credit amounts referred to
in paragraph (b)(3) of this section.

\(3\) Within one year from the date of inclusion in this account of a
debit or credit amount with respect to a current acquisition, the
company may dispose of the total amount from an acquisition of telephone
plant by a lump-sum charge or credit, as appropriate, to Account 6565
without further approval of this Commission, provided that such amount
does not exceed \$100,000 and that the plant was not acquired from an
affiliated company.

**ù32.2006 Nonoperating plant.**

\(a\) This account shall include the company\'s investment in regulated
property which is not includable in the plant accounts as operating
telecommunications plant. It shall include the company\'s investment in
telecommunications property held for sale. (Note also Account 1406,
Nonregulated Investments.)

\(b\) Subsidiary records shall be maintained to show the character of
the amounts carried in this account.

**ù32.2007 Goodwill.**

\(a\) This account shall include any portion of the plant purchase price
that cannot be assigned to specifically identifiable property acquired
and such amount should be identified as \"goodwill\". Such amounts
included in this account shall be amortized to Account 7360, Other
Nonoperating Income, on a straight line basis over the remaining life of
the acquired plant, not to exceed 40 years.

\(b\) the amounts included in this account shall be maintained to show
the nature of each amount.

**ù32.2110 Land and support assets.**

This account shall be used by Class B companies to record the original
cost of land and support assets of the type and character required of
Class A companies in Accounts 2111 through 2124.

**ù32.2111 Land.**

\(a\) This account shall include the original cost of all land held in
fee and of easements, and similar rights in land having a term of more
than one year used for purposes other than the location of outside plant
(See Accounts 2411 through 2441) or externally mounted central office
equipment (see Accounts 2211 and 2212). It shall also include special
assessments upon land for the construction of public improvements.

\(b\) When land, together with buildings thereon, is acquired, the
original cost shall be fairly apportioned between the land and the
buildings and accounted for accordingly. If the plan of acquisition
contemplates the removal of buildings, the total cost of the land and
buildings shall be accounted for as the cost of the land, and the
salvage value of the buildings when disposed of shall be deducted from
the cost of the land so determined.

\(c\) Annual or more frequent payments for use of land shall be recorded
in the rent subsidiary record category for Account 6121, Land and
Building Expense.

\(d\) When land is acquired for which there is not a definite plan for
its use in telecommunications service, its costs shall be included in
Account 2006, Nonoperating Plant.

\(e\) When land is acquired in excess of that required for
telecommunications purposes, the cost of such excess land shall in
included in Account 2006.

\(f\) Installments of assessments for public improvement, including
interest, if any, which are deferred without option to the company shall
be included in this account only as they become due and payable.
Interest on assessments which are not paid when due shall be included in
Account 7540, Other Interest Deductions.

\(g\) When land is purchased for immediate use in a construction
project, its cost shall be included in Account 2003, Telecommunications
Plant Under Construction - Short-Term, or Account 2004,
Telecommunications Plant Under Construction - Long- Term, as
appropriate, until such time as the project involved is completed and
ready for service.

\(h\) The original cost of leaseholds, easements, rights of way, and
similar rights in land having a term of more than one year and not
includable in Account 2111 shall be included in the accounts for outside
plant or externally mounted central office equipment in connection with
which the rights were acquired.

**ù32.2112 Motor vehicles.**

This account shall include the original cost of motor vehicles of the
type which are designed and routinely licensed to operate on public
streets and highways.

**ù32.2113 Aircraft.**

This account shall include the original cost of aircraft and any
associated equipment and furnishings installed as an integral part of
the aircraft.

**ù32.2114 Special purpose vehicles.**

This account shall include the original cost of special purpose
vehicles.

**ù32.2115 Garage work equipment.**

This account shall include the original cost of tools and equipment used
to maintain items included in Accounts 2112 through 2116.

**ù32.2116 Other work equipment.**

This account shall include the original cost of power operated
equipment, general purpose tools and other items of work equipment.

**ù32.2121 Buildings.**

\(a\) This account shall include the original cost of buildings, and the
cost of all permanent fixtures, machinery, appurtenances and appliances
installed as a part thereof. It shall include costs incident to the
construction or purchase of a building and to securing possession and
title.

\(b\) When land, together with the buildings thereon, is acquired, the
original cost shall be fairly apportioned between the land and
buildings, and the amount applicable to the buildings shall be included
in this account. The amount applicable to the land shall be included in
Account 2111, Land.

\(c\) This account shall not include the cost of any telephone equipment
or wiring apparatus for generating or controlling electricity for
operating the telephone system.

**ù32.2122 Furniture.**

This account shall include the original cost of furniture in offices,
storerooms, shops, and all other quarters. This account shall also
include the cost of objects which possess aesthetic value, are of
original or limited edition, and do not have a determinable useful life.
The cost of any furniture attached to and constituting a part of a
building shall be charged to

Account 2121, Buildings.

**ù32.2123 Office equipment.**

\(a\) This account shall include the original cost of office equipment
in offices, shops and all other quarters. The cost of any equipment
attached to and constituting a part of a building shall be charged to
Account 2121, Buildings.

\(b\) Office Equipment shall be maintained by the following subaccounts:

2123.1 Office Support Equipment

2123.2 Company Communications Equipment

**ù32.2124 General purpose computers.**

\(a\) This account shall include the original cost of computers and
peripheral devices which are designed to perform general administrative
information processing activities.

\(b\) Administrative information processing includes but is not limited
to activities such as the preparation of financial, statistical, or
other business analytical reports; preparation or payroll customer
bills, and cash management reports, and other records and reports not
specifically designed for testing, diagnosis, maintenance or control of
the telecommunications network facilities.

\(c\) This account shall include the original cost of initial operating
system software for computers classifiable to this account whether
acquired separately or in conjunction with associated hardware.

\(d\) This account does not include the cost of computers, their
associated peripheral devices, and their operating system software
associated with switching, network signaling, network operations or
other specific telecommunications plant. Such computers, peripherals,
and software shall be classified to the appropriate switching, network
signaling, network expense, or other plant account.

**ù32.2210 Central office - switching.**

This account shall be used by Class B companies to record the original
cost of switching assets of the type and character required of Class A
companies in Accounts 2211 through 2215.

***REA 2210.11 Central office switching - analog\*.***

This account shall used by Class B companies. This account shall include
the original cost of stored program control analog circuit-switching and
associated equipment. This account shall also include the original cost
of remote analog electronic circuit switches.

***REA 2210.21 Central office switching - digital\*.***

This account shall used by Class B companies. This account shall include
the original cost of stored program control digital switches and their
associated equipment. Included in this account is the original cost of
digital switches which utilize either dedicated or non-dedicated
circuits. This account shall also include the original cost of remote
digital electronic switches.

***REA 2210.31 Central office switching - electro-mechanical -***

***step-by-step\*.***

This account shall used by Class B companies. This account shall include
the original cost of step-by-step and associated circuit-switching
equipment.

***REA 2210.32 Central office switching - electro-mechanical -***

***crossbar\*.***

This account shall used by Class B companies. This account shall include
the original cost of crossbar and associated circuit switching
equipment. Also included in this account is the original cost of
electronic translator system equipment used in switching.

***REA 2210.33 Central office switching - electro-mechanical -***

***other\*.***

This account shall used by Class B companies. This account shall include
the original cost of all other types of non-electronic circuit-switching
equipment such as panel systems and their associated circuit-switching
equipment.

\* Switching plant excludes switchboards which perform operator
assistance functions and equipment which is an integral part thereof. It
does not exclude equipment used solely for the recording of calling
telephone numbers in connection with customer dialed charged traffic,
dial tandem switchboards, and special service switchboards used in
conjunction with private line service; such equipment shall be
classified to the particular switch that it serves.

**ù32.2211 Analog electronic switching.**

\(a\) This account shall include the original cost of stored program
control analog circuit switching and associated equipment. This account
shall also include the cost of remote analog electronic circuit
switches.

\(b\) Switching plant excludes switchboards which perform an operator
assistance function and equipment which is an integral part thereof. It
does not exclude equipment used solely for the recording of calling
telephone numbers in connection with customer dialed charged traffic,
dial tandem switchboards and special service switchboards used in
conjunction with private line service; such equipment shall be
classified to the particular switch that it serves.

**ù32.2212 Digital electronic switching.**

\(a\) This account shall include the original cost of stored program
control digital switches and their associated equipment. Included in
this account are digital switches which utilize either dedicated or
non-dedicated circuits. This account shall also include the cost of
remote digital electronic switches.

\(b\) Switching plant excludes switchboards which perform an operator
assistance function and equipment which is an integral part thereof. It
does not exclude equipment used solely for the recording of calling
telephone numbers in connection with customer dialed charged traffic,
dialed tandem switchboards and special service switchboards used in
conjunction with private line service; such equipment shall be
classified to the particular switch that it serves.

**ù32.2215 Electro-mechanical switching.**

\(a\) This account shall include the original cost of non-electronic
circuit switching equipment. The investment in electro-mechanical
switching equipment shall be maintained in the following subaccounts:

2215.1 Step-by-Step Switching

2215.2 Crossbar Switching

2215.3 Other Electro-Mechanical Switching

\(b\) 2215.1, Step-by-step Switching. This subaccount shall include the
original cost of step-by-step and associated circuit switching
equipment.

\(c\) 2215.2, Crossbar Switching. This subaccount shall include the
original cost of crossbar and associated circuit switching equipment.
Also included in this account is the cost of electronic translator
system equipment used in switching.

\(d\) 2215.3, Other Electro-Mechanical Switching. This subaccount shall
include the original cost of all other types of non-electronic circuit
switching equipment such as panel systems and their associated circuit
switching equipment.

\(e\) Switching plant excludes switchboards which perform an operator
assistance function and equipment which is an integral part thereof. It
does not exclude equipment used solely for the recording of calling
telephone numbers in connection with customer dialed charged traffic,
dial tandem switchboards and special service switchboards used in
conjunction with private line service; such equipment shall be
classified to the particular switch that it serves.

**ù32.2220 Operator systems.**

\(a\) This account shall include the original cost of those items of
equipment used to assist subscribers in utilizing the network and
equipment used in the provision of directory assistance, call intercept,
and other operator assisted call completion activities.

\(b\) This account does not include equipment used solely for the
recording of calling telephone numbers in connection with customer
dialed charged traffic, dial tandem switchboards and special service
switchboards used in conjunction with private line service; such
equipment shall be classified to the particular switch that it serves.

**ù32.2230 Central office - transmission.**

This account shall be used by Class B companies to record the original
cost of radio systems and circuit equipment of the type and character
required of Class A companies in Accounts 2231 and 2232.

***REA 2230.11 Central office transmission - radio systems -***

***satellite and earth station facilities.***

This account shall used by Class B companies. This account shall include
the original cost of an ownership interest in satellites (including
land-side spares), other spare parts, materials, and supplies. It shall
include launch insurance and other satellite launch costs. This account
shall also include the original cost of earth stations and spare parts,
materials, and supplies therefor.

***REA 2230.12 Central office transmission - radio systems -***

***other.***

This account shall used by Class B companies. This account shall include
the original cost of radio equipment used to provide radio communication
channels. Radio equipment is that equipment which is used for the
generation, amplification, propagation, reception, modulation, and
demodulation of radio waves in free space over which communications
channels can be provided. This account shall also include the associated
carrier and auxiliary equipment and patch bay equipment which is an
integral part of the radio equipment. Such equipment may be located in
central office buildings, terminal rooms, or repeater stations or may be
mounted on towers, masts, or other supports.

***REA 2230.21 Central office transmission - circuit equipment.***

\(a\) This account shall used by Class B companies. This account shall
include the original cost of equipment which is used to reduce the
number of physical pairs otherwise required to serve a given number of
subscribers by utilizing carrier systems, concentration stages or
combinations of both. It shall include equipment that provides for
simultaneous use of a number of interoffice channels on a single
transmission path. This account shall also include the original cost of
equipment which is used for the amplification, modulation, regeneration,
circuit patching, balancing or control of signals transmitted over
interoffice communications transmission channels. This account shall
include the original cost of equipment which utilizes the message path
to carry signaling information or which utilizes separate channels
between switching offices to transmit signaling information independent
of the subscribers\' communication paths or transmission channels. This
account shall also include the original cost of associated material used
in the construction of such plant. Circuit equipment may be located in
central offices, in manholes, on poles, in cabinets or huts or at other
locations.

\(b\) This account excludes carrier and auxiliary equipment and patch
bay which are recorded in Account 2230.12, Central Office Transmission -
Radio Systems - Other.

**ù32.2231 Radio system.**

\(a\) This account shall include the original cost of ownership of radio
transmitters and receivers. The investment in radio systems shall be
maintained in the following subaccounts:

2231.1 Satellite and Earth Station Facilities

2231.2 Other Radio Facilities

\(b\) 2231.1, Satellite and Earth Station Facilities. This subaccount
shall include the original cost of ownership interest in satellites
(including landside spares), other spare parts, material and supplies.
It shall include launch insurance and other satellite launch costs. This
subaccount shall also include the original cost of earth stations and
spare parts, material or supplies therefor.

\(c\) 2231.2, Other Radio Facilities.

\(1\) This subaccount shall include the original cost of radio equipment
used to provide radio communication channels. Radio equipment is that
equipment which is used for the generation, amplification, propagation,
reception, modulation, and demodulation of radio waves in free space
over which communication channels can be provided. This subaccount shall
also include the associated carrier and auxiliary equipment and patch
bay equipment which in an integral part of the radio equipment. Such
equipment may be located in central office buildings, terminal rooms, or
repeater stations or may be mounted on towers, masts or other supports.

\(2\) This subaccount shall be maintained in order that the company may
separately report the amounts contained herein that relate to cellular
radio facilities, non-cellular radio facilities, and terrestrial
microwave radio facilities. Such subsidiary record categories shall be
reported as required by Part 43 of this Commission\'s Rules and
Regulations.

**ù32.2232 Circuit equipment.**

\(a\) This account shall include the original cost of equipment which is
used to reduce the number of physical pairs otherwise required to serve
a given number of subscribers by utilizing carrier systems,
concentration stages or combinations of both. It shall include equipment
that provides for simultaneous use of a number of interoffice channels
on a single transmission path. This account shall also include equipment
which is used for the amplification, modulation, regeneration, circuit
patching, balancing or control of signals transmitted over interoffice
communications transmission channels. This account shall include
equipment which utilizes the message path to carry signaling information
or which utilizes separate channels between switching offices to
transmit signaling information independent of the subscribers\'
communication paths or transmission channels. This account shall also
include the original cost of associated material used in the
construction of such plant. Circuit equipment may be located in central
offices, in manholes, on poles, in cabinets or huts or at other company
locations.

\(b\) This account excludes carrier and auxiliary equipment and patch
bays which are includable in Account 2231.2, Other Radio Facilities.
This account also excludes such equipment which is an integral component
of a major unit which is classifiable to other accounts.

\(c\) Subsidiary record categories shall be maintained in order that the
company may separately report the amounts contained herein that relate
to digital and analog. Such subsidiary record categories shall be
reported as required by Part 43 of this Commission\'s Rules and
Regulations.

**ù32.2310 Information origination/termination.**

This account shall be used by Class B companies to record the original
cost of information origination/termination equipment of the type and
character required of Class A companies in

Accounts 2311 through 2362.

**ù32.2311 Station apparatus.**

\(a\) This account shall include the original cost of station apparatus,
including teletypewriter equipment, telephone and miscellaneous
equipment, small private branch exchanges and radio equipment (excluding
mobile), installed for customers\' use. Items included in this account
shall remain herein until finally disposed of or until used in such
manner as to warrant inclusion in other accounts.

\(b\) Each company shall prepare a list of station apparatus which shall
be used as its list of disposition units for this account, the cost of
which when finally disposed of shall be credited to this account and
charged to Account 3100, Accumulated Depreciation.

\(c\) The cost of cross-connection boxes, distributing frames or other
distribution points which are installed to terminate intrabuilding
network cable shall be charged to Account 2426, Intrabuilding Network
Cable.

\(d\) Operator head sets and transmitter in central offices and at
private branch exchanges, and test sets such as those used by wire
chiefs, outside plant technicians, and others shall be included in
Account 2116, Other Work Equipment; Account 2221, Operator Systems; or
Account 2341, Large Private Branch Exchanges, as appropriate.

\(e\) Station apparatus for company official use shall be included in
Account 2123, Office Equipment.

\(f\) An annual inventory shall be taken of all station apparatus in
stock that are included in this account. The number of such station
apparatus items as determined by this inventory, together with number of
all other station apparatus items included in this account, shall be
compared with the corresponding number of station apparatus items as
shown by the respective control records. The original cost of any
unreconciled differences thereby disclosed shall be adjusted through
Account 3100, Accumulated Depreciation. Appropriate verifications shall
also be made at suitable intervals and necessary adjustments between
this account and Account 3100 shall be made for all station apparatus
included in this account.

\(g\) Items of station apparatus in stock for which no further use in
the ordinary conduct of the business is contemplated, but which as a
precautionary measure, are held for possible future contingencies
instead of being discarded shall be excluded from this account and
included in Account 1220, Inventories.

\(h\) Embedded CPE is that equipment or inventory which was tariffed or
otherwise subject to the jurisdictional separations process as of
January 1, 1983.

**ù32.2321 Customer premises wiring.**

\(a\) This account shall include all amounts transferred from the former
Account 232, Station Connections, inside wiring subclass.

\(b\) Embedded customer premises wiring is that investment in customer
premises wiring equipment or inventory which was capitalized prior to
October 1, 1984.

**ù32.2341 Large private branch exchanges.**

\(a\) This account shall include the original cost, including the cost
of installation, of multiple manual private branch exchanges and of dial
system private branch exchanges of types designed to accommodate 100 or
more lines or which can normally be expanded to 100 or more lines,
installed for customers\' use. This account shall also include the
original cost of other large installations of station equipment (1)
which do not constitute stations, (2) which require special or
individual treatment because of their complexity, special design, or
other distinctive characteristics, and (3) for which individual or other
specialized cost records are appropriate. (Note also

Account 2311, Station Apparatus.)

\(b\) The cost of intrabuilding network cables including their
associated cross-connection boxes, terminals, distributing frames, etc.,
is chargeable to Account 2426, Intrabuilding Network Cable.

\(c\) The cost of outside plant, whether or not on private property,
used with intrabuilding network cable shall be charged to the
appropriate outside plant accounts.

\(d\) \[Reserved\]

\(e\) \[Reserved\]

\(f\) Private branch exchanges for company official use shall be
included in Account 2123, Office Equipment.

\(g\) Embedded CPE is that equipment or inventory which is tariffed or
otherwise subject to the jurisdictional separations process as of
January 1, 1983.

\(h\) Inventories of large private branch exchanges equipment are
included in Account 1220, Inventories.

**ù32.2351 Public telephone terminal equipment.**

\(a\) This account shall include the original cost of coinless,
coin-operated (including public and semi-public), credit card and pay
telephones installed for use by the public.

\(b\) This account shall also include the original cost of operating
spares that are required to provide a continuity of service for public
telephones. The operating spares shall not exceed six months\' supply in
terms of turnover and be available to installers from locations in
reasonable proximity to the location of the installed equipment.

\(c\) The original cost of installing public telephone equipment shall
not include the labor and minor materials costs of installing the public
telephone equipment or premises wiring. These costs as well as the cost
of replacing a public telephone shall be charged to Account 6351, Public
Telephone Terminal Equipment Expense. The labor and minor materials
costs of removal of public telephones will also be charged to

Account 6351.

**ù32.2362 Other terminal equipment.**

\(a\) This account shall include the original cost of other non-CPE
terminal equipment not specifically provided for elsewhere and items
such as specialized communications equipment provided to meet the needs
of the disabled, over-voltage protection equipment, multiplexing
equipment to deliver multiple channels to customers, etc.

\(b\) Each company shall prepare a list of other terminal equipment
which shall be used as its list of retirement units for this account,
the cost of which when finally disposed of shall be credited to this
account and charged to Account 3100, Accumulated Depreciation.

**ù32.2410 Cable and wire facilities.**

This account shall be used by Class B companies to record the original
cost of cable and wire facilities of the type and character required of
Class A companies in Accounts 2411 through 2441.

**ù32.2411 Poles.**

This account shall include the original cost of poles, crossarms, guys
and other material used in the construction of pole lines and shall
include the cost of towers when not associated with buildings. This
account shall also include the cost of clearing pole line routes and of
tree trimming but shall exclude the cost of maintaining previously
cleared routes.

**ù32.2421 Aerial cable.**

\(a\) This account shall include the original cost of aerial cable and
of drop and block wires served by such cable or aerial wire as well as
the cost of other material used in construction of such plant.
Subsidiary record categories, as defined below, are to be maintained for
nonmetallic aerial cable and metallic aerial cable.

\(1\) Nonmetallic cable. This subsidiary record category shall include
the original cost of optical fiber cable and other associated material
used in constructing a physical path for the transmission of
telecommunications signals.

\(2\) Metallic cable. This subsidiary record category shall include the
original cost of single or paired conductor cable, wire and other
associated material used in constructing a physical path for the
transmission of telecommunications signals.

\(b\) The cost of permits and privileges for the construction of cable
and wire facilities shall be chargeable with such construction.

**ù32.2422 Underground cable.**

\(a\) This account shall include the original cost of underground cable
installed in conduit and of other material used in the construction of
such plant. Subsidiary record categories, as defined below, are to be
maintained for nonmetallic underground cable and metallic underground
cable.

\(1\) Nonmetallic cable. This subsidiary record category shall include
the original cost of optical fiber cable and other associated material
used in constructing a physical path for the transmission of
telecommunications signals.

\(2\) Metallic cable. This subsidiary record category shall include the
original cost of single or paired conductor cable, wire and other
associated material used in constructing a physical path for the
transmission of telecommunications signals.

\(b\) The cost of pumping water out of manholes and of cleaning manholes
and ducts in connection with construction work and the cost of permits
and privileges for the construction of cable and wire facilities shall
be included in the account chargeable with such construction.

\(c\) The cost of drop and block wires served by underground cable shall
be included in Account 2423, Buried Cable.

\(d\) The cost of cables leading from the main distributing frame or
equivalent to central office equipment shall be included in the
appropriate switching, transmission or other operations asset account.

**ù32.2423 Buried Cable.**

\(a\) This account shall include the original cost of buried cable as
well as the cost of other material used in the construction of such
plant. This account shall also include the cost of trenching for and
burying cable run in conduit not classifiable to Account 2441, Conduit
Systems. Subsidiary record categories, as defined below, are to be
maintained for nonmetallic buried cable and metallic buried cable.

\(1\) Nonmetallic cable. This subsidiary record category shall include
the original cost of optical fiber cable and other associated material
used in constructing a physical path for the transmission of
telecommunications signals.

\(2\) Metallic cable. This subsidiary record category shall include the
original cost of single or paired conductor cable, wire and other
associated material used in constructing a physical path for the
transmission of telecommunications signals.

\(b\) The cost of pumping water out of manholes and of cleaning manholes
and ducts in connection with construction work and the cost of permits
and privileges for the construction of cable and wire facilities shall
be included in the account chargeable with such construction.

**ù32.2424 Submarine cable.**

\(a\) This account shall include the original cost of submarine cable
and other material used in the construction of such plant. Subsidiary
record categories, as defined below, are to be maintained for
nonmetallic submarine cable and metallic submarine cable.

\(1\) Nonmetallic cable. This subsidiary record category shall include
the original cost of optical fiber cable and other associated material
used in constructing a physical path for the transmission of
telecommunications signals.

\(2\) Metallic cable. This subsidiary record category shall include the
original cost of single or paired conductor cable, wire and other
associated material used in constructing a physical path for the
transmission of telecommunications signals.

\(b\) The cost of permits and privileges for the construction of cable
and wire facilities shall be included in the account chargeable with
such construction.

**ù32.2425 Deep sea cable.**

\(a\) This account includes the original cost of deep sea cable and
other material used in the construction of such plant. Subsidiary record
categories, as defined below, are to be maintained for nonmetallic deep
sea cable and metallic deep sea cable.

\(1\) Nonmetallic cable. This subsidiary record category shall include
the original cost of optical fiber cable and other associated material
used in constructing a physical path for the transmission of
telecommunications signals.

\(2\) Metallic cable. This subsidiary record category shall include the
original cost of single or paired conductor cable, wire and other
associated material used in constructing a physical path for the
transmission of telecommunications signals.

\(b\) The cost of permits and privileges for the construction of cable
and wire facilities shall be included in the account chargeable with
such construction.

**ù32.2426 Intrabuilding network cable.**

\(a\) This account shall include the original cost of cables and wires
located on the company\'s side of the demarcation point or standard
network interface inside subscribers\' buildings or between buildings on
one customer\'s same premises. Intrabuilding network cables are used to
distribute network access facilities to equipment rooms,
cross-connection or other distribution points at which connection is
made with customer premises wiring. Subsidiary record categories, as
defined below, are to be maintained for nonmetallic intrabuilding
network cable and metallic intrabuilding.

\(1\) Nonmetallic cable. This subsidiary record category shall include
the original cost of optical fiber cable and other associated material
used in constructing a physical path for the transmission of
telecommunications signals.

\(2\) Metallic cable. This subsidiary record category shall include the
original cost of single or paired conductor cable, wire and other
associated material used in constructing a physical path for the
transmission of telecommunications signals.

\(b\) The cost of pumping water out of manholes and of cleaning manholes
and ducts in connection with construction work and the cost of permits
and privileges for the construction of cable and wire facilities shall
be included in the account chargeable with such construction.

\(c\) Intrabuilding network cable does not include the cost of cables or
wires which are classifiable as network terminating wire, nor the cables
or wires from the demarcation point or standard network interface to
subscribers\' stations.

**ù32.2431 Aerial wire.**

\(a\) This account shall include the original cost of bare line wire and
other material used in the construction of such plant.

\(b\) The cost of permits and privileges for the construction of cable
and wire facilities shall be chargeable with such construction.

\(c\) The cost of drop and block wires served by aerial wire shall be
included in Account 2421, Aerial Cable.

**ù32.2441 Conduit systems.**

\(a\) This account shall include the original cost of conduit, whether
underground, in tunnels or on bridges, which is reusable in place. It
shall also include the cost of opening trenches and of any repaving
necessary in the construction of conduit plant.

\(b\) The cost of pumping water out of manholes and of cleaning manholes
and ducts in connection with construction work and the cost of permits
and privileges for the construction of cable and wire facilities shall
be chargeable with such construction.

\(c\) The cost of protective covering for buried cable shall be charged
to Account 2423, Buried Cable, as appropriate, unless such protective
covering is reusable in place. The amounts thus charged shall be
included in the nonmetallic buried cable or metallic buried cable
subsidiary record category, as appropriate.

\(d\) The cost of pipes or other protective covering for underground
drop and block wires shall in included in

Account 2421, Aerial Cable, or Account 2423, Buried Cable, as
appropriate. The amounts thus charged shall be included in the
nonmetallic or metallic subsidiary record category, as appropriate. The
cost of pipes or other protective covering for inside wires shall be
included in Account 6321, Customer Premises Wiring Expense.

**ù32.2680 Amortizable tangible assets.**

This account shall be used by Class B carriers to record amounts for
property acquired under capital leases and the original cost of
leasehold improvements of the type of character required of Class A
companies in Accounts 2681 and 2682.

**ù32.2681 Capital leases.**

\(a\) This account shall include all property acquired under a capital
lease. A lease qualifies as a capital lease when one or more of the
following criteria is met:

\(1\) By the end of the lease term, ownership of the leased property is
transferred to the lessee.

\(2\) The lease contains a bargain purchase option.

\(3\) The lease term is substantially (75% or more) equal to the
estimated useful life of the leased property. However, if the beginning
of the lease term falls within the last 25% of the total estimated
economic life of the leased property, including earlier years of use,
this criterion shall not be used for purposes of classifying the lease.

\(4\) At the inception of the lease, the present value of the minimum
lease payments, excluding that portion of the payments representing
executory costs to be paid by the lessor, including any profit thereon,
equals or exceeds 90% or more of the fair value of the leased property.
However, if the beginning of the lease term falls within the last 25% of
the total estimated economic life of the leased property, including
earlier years of use, this criterion shall not be used for purposes of
classifying the lease.

\(b\) All other leases are operating leases.

\(c\) The amounts recorded in this account at the inception of a capital
lease shall be equal to the original cost, if known, or to the present
value not to exceed fair value, at the beginning of the lease term, of
minimum lease payments during the lease term, excluding that portion of
the payments representing executory costs to be paid by the lessor,
together with any profit thereon.

**ù32.2682 Leasehold improvements.**

\(a\) This account shall include the original cost of leasehold
improvements made to telecommunications plant held under a capital or
operating lease, which are subject to amortization treatment. This
account shall also include those improvements which will revert to the
lessor.

\(b\) Improvements to leased telecommunications plant which are of a
relatively minor cost or short life or for which the period of the lease
is one year or less shall be charged to the account chargeable with the
cost of repairs to such plant.

\(c\) Amounts contained in this account shall be amortized over the term
of the related lease.

**ù32.2690 Intangibles.**

\(a\) This account shall include the cost of organizing and
incorporating the company, the original cost of government franchises,
the original cost of patent rights, and other intangible property having
a life of more than one year and used in connection with the company\'s
telecommunications operations.

\(b\) Subsidiary records for this account shall include a description of
each class of intangible property.

\(c\) The cost of other intangible assets having a life of one year or
less shall be charged directly to Account 6564, Amortization Expense -
Intangible. Such intangibles acquired at small cost may also be charged
to Account 6564, irrespective of their term of life.

\(d\) This account shall not include any discounts on securities issued,
nor shall it include costs incident to negotiating loans, selling bonds
or other evidences of debt, or expenses in connection with the issuance,
sale or resale of capital stock.

\(e\) When charges are made to this account for expenses incurred in
mergers, consolidations, or reorganizations, amounts previously included
in this account on the books of the various companies concerned shall
not be carried over.

\(f\) Franchise taxes payable annually or more frequently shall be
charged to Account 7240, Operating Other Taxes.

\(g\) This account shall not include the cost of plant, material and
supplies, or equipment furnished to municipalities or other governmental
authorities when given other than as initial consideration for
franchises or similar rights. (Note also Account 6728, Other General and
Administrative.)

\(h\) This account shall not include the original cost of easements,
rights of way, and similar rights in land having a term of more than one
year. Such amounts shall be recorded in Account 2111, Land, or in the
appropriate outside plant account (see Accounts 2411 through 2441), or
in the appropriate central office account (see Accounts 2211 through
2232).

**ù32.3000 Instructions for balance sheet accounts - depreciation**

**and amortization.**

\(a\) Depreciation and Amortization Subsidiary Records:

\(1\) Subsidiary record categories shall be maintained for each class of
depreciable telecommunications plant in Account 3100 for which there is
a prescribed depreciation rate. (See also ù32.2000(g)(1)(iii) of this
subpart.)

\(2\) Subsidiary records shall be maintained for Accounts 3400, 3410,
3420, 3500, and 3600 in accordance with ù32.2000(h)(4) of this subpart.

\(b\) Depreciation and amortization accounts to be maintained by Class A
and Class B telephone companies as indicated:

Class A Class B

[Account Title]{.underline} [Account]{.underline} [Account]{.underline}

Depreciation and Amortization:

Accumulated depreciation 3100 3100

Retirement work in progress 3100x 3100x

Accumulated depreciation - held for

future telecommunications use 3200 3200

Accumulated depreciation - nonoperating 3300 3300

Accumulated amortization - tangible 3400

Accumulated amortization - capitalized

leases 3410

Accumulated amortization - leasehold

improvements 3420

Accumulated amortization - intangible 3500 3500

Accumulated amortization - other 3600 3600

**ù32.3100 Accumulated depreciation.**

\(a\) This account shall include the accumulated depreciation associated
with the investment contained in Account 2001, Telecommunications Plant
in Service.

\(b\) This account shall be credited with depreciation amounts
concurrently charged to Account 6561, Depreciation Expense -
Telecommunications Plant in Service. (Note also Account 3300,
Accumulated Depreciation - Nonoperating.)

\(c\) At the time of retirement of depreciable operating
telecommunications plant, this account shall be charged with the
original cost of the property retired plus the cost of removal and
credited with the salvage value and any insurance proceeds recovered.

\(d\) This account shall be credited with amounts charged to Account
1438, Deferred Maintenance and Retirements, as provided in
ù32.2000(g)(4) of this subpart. This account shall be credited with
amounts charged to Account 6561 with respect to other than relatively
minor losses in service values suffered through terminations of service
when charges for such terminations are made to recover the losses.

Note: A 1/21/88 FCC Order in CC Docket No. 87-447 (FCC 88-6) adopted
policy changes to permit a one-time five-year amortization period
commencing 1/01/87 of LECs\' reserve imbalances. Action was taken to
eliminate the large industry-wide reserve deficiency faster than
previous procedures allowed.

***REA 3100x Retirement work in progress.***

This account shall be charged with the original cost of property retired
from the telecommunications plant accounts. It shall also be charged
with all of the costs incurred in removing the retired plant from
service. This account shall be credited with the salvage value of
materials recovered in the retirement of the telecommunications plant.
At such time as the retirement work order is complete, the net
income/loss resulting therefrom shall be transferred from this account
to the appropriate primary plant depreciation reserve account.

**ù32.3200 Accumulated depreciation - held for future telecommuni-**

**cations use.**

\(a\) This account shall include the accumulated depreciation associated
with the investment contained in Account 2002, Property Held for Future
Telecommunications Use.

\(b\) This account shall be credited with amounts concurrently charged
to Account 6562, Depreciation Expense - Property Held for Future
Telecommunications Use.

**ù32.3300 Accumulated depreciation - nonoperating.**

\(a\) This account shall include the accumulated amortization and
depreciation associated with the investment contained in Account 2006,
Nonoperating Plant.

\(b\) This account shall be credited with amortization and depreciation
amounts concurrently charged to Account 7360, Other Nonoperating Income.

\(c\) When nonoperating plant not previously used in telecom-munications
service is disposed of, this account shall be charged with the amount
previously credited hereto with respect to such property and the book
cost of the property so retired less the amount chargeable to this
account and less the value of the salvage recovered or the proceeds from
the sale of the property shall be included in Account 7350, Gains or
Losses on Disposition of Certain Property. In case the property had been
used in telecommunications service previous to its inclusion in

Account 2006, Nonoperating Plant, the amount accrued for depreciation
thereon after its retirement from telecommunications service shall be
charged to this account and credited to

Account 3100, Accumulated Depreciation, and the accounting for its
retirement from Account 2006 shall be in accordance with that applicable
to telecommunications plant retired.

**ù32.3400 Accumulated amortization - tangible.**

This account shall be used by Class B companies to record accumulated
amortization of the type and character required of Class A companies in
Accounts 3410 and 3420.

**ù32.3410 Accumulated amortization - capitalized leases.**

\(a\) This account shall include the accumulated amortization associated
with the investment contained in Account 2681, Capital Leases.

\(b\) This account shall be credited with amounts for the amortization
of capital leases concurrently charged to

Account 6563, Amortization Expense - Tangible. (Note also

Account 3300, Accumulated Depreciation - Nonoperating.)

\(c\) When any item carried in Account 2681 is sold, is relinquished, or
is otherwise retired from service, this account shall be charged with
the cost of the retired item. Remaining amounts associated with the item
shall be debited to

Account 7160, Other Operating Gains and Losses, or Account 7360, Other
Nonoperating Income, as appropriate.

**ù32.3420 Accumulated amortization - leasehold improvements.**

\(a\) This account shall include the accumulated amortization associated
with the investment contained in Account 2682, Leasehold Improvements.

\(b\) This account shall be credited with amounts for the amortization
of leasehold improvements concurrently charged to Account 6563,
Amortization Expense - Tangible. (Note also

Account 3300, Accumulated Depreciation - Nonoperating.)

\(c\) When any item carried in Account 2682 is sold, is relinquished, or
is otherwise retired from service, this account shall be charged with
the cost of the retired item. Remaining amounts associated with the item
shall be debited to

Account 7360, Other Nonoperating Income.

**ù32.3500 Accumulated amortization - intangible.**

\(a\) This account shall include the accumulated amortization associated
with the investment contained in Account 2690, Intangibles.

\(b\) This account shall be credited with amortization amounts
concurrently charged to Account 6564, Amortization - Intangible. (Note
also Account 3300, Accumulated Depreciation - Nonoperating.)

\(c\) When any item carried in Account 2690 is sold, relinquished, or
otherwise retired from service, this account shall be charged with the
cost of the retired item. Remaining amounts associated with the item
shall be debited to

Account 7360, Other Nonoperating Income.

**ù32.3600 Accumulated amortization - other.**

\(a\) This account shall include the accumulated amortization associated
with the investment contained in Account 2005, Telecommunications Plant
Adjustment.

\(b\) This account shall be credited with amortization amounts
concurrently charged to Account 6565, Amortization Expense - Other.
(Note also Account 3300, Accumulated Depreciation -Nonoperating.)

\(c\) When any item carried in Account 2005 is sold, relinquished, or
otherwise retired from service, this account shall be charged with the
cost of the retired item. Remaining amounts associated with the item
shall be debited Account 7360, Other Nonoperating Income.

**ù32.4000 Instructions for balance sheet accounts - liabilities**

**and stockholders\' equity.**

Liabilities and stockholders\' equity accounts to be maintained by Class
A and Class B telephone companies:

Class A Class B

[Account Title]{.underline} [Account]{.underline} [Account]{.underline}

Current Liabilities:

Accounts payable 4010 4010

Accounts payable to affiliated

companies 4010.11 4010.11

Accounts payable to nonaffiliated

companies 4010.21 4010.21

Accounts payable - employees\' income

tax withheld 4010.22 4010.22

Accounts payable - FICA taxes withheld 4010.23 4010.23

Accounts payable - federal excise taxes 4010.24 4010.24

Accounts payable - payroll 4010.25 4010.25

Notes payable 4020 4020

Advance billing and payments 4030 4030

Customers\' deposits 4040 4040

Current maturities - long-term debt 4050 4050

Current maturities - capital leases 4060 4060

Income taxes - accrued 4070 4070

Class A Class B

[Account Title]{.underline} [Account]{.underline} [Account]{.underline}

Income taxes accrued - federal 4070.1 4070.1

Income taxes accrued - state and local 4070.2 4070.2

Other taxes - accrued 4080 4080

Other taxes accrued - property 4080.1 4080.1

Other taxes accrued - employer\'s

portion - FICA 4080.2 4080.2

Other taxes accrued - federal

unemployment 4080.3 4080.3

Other taxes accrued - state

unemployment 4080.4 4080.4

Other taxes accrued - miscellaneous 4080.5 4080.5

Net current deferred operating income

taxes 4100 4100

Net current deferred nonoperating income

taxes 4110 4110

Other accrued liabilities 4120 4120

Unmatured interest accrued - REA notes 4120.1 4120.1

Unmatured interest accrued - Telephone

Bank notes 4120.2 4120.2

Unmatured interest accrued - Federal

Financing Bank notes 4120.3 4120.3

Unmatured interest accrued - Bank for

Cooperatives notes 4120.4 4120.4

Unmatured interest accrued - Rural

Telephone Finance Cooperative notes 4120.5 4120.5

Other accrued liabilities 4120.6 4120.6

Other current liabilities 4130 4130

Patronage capital payable 4130.1 4130.1

Other current liabilities - miscellaneous 4130.2 4130.2

Long-Term Debt:

Funded debt 4210 4210

Funded debt - other 4210.11 4210.11

REA notes 4210.12 4210.12

Telephone Bank notes 4210.13 4210.13

Federal Financing Bank notes 4210.14 4210.14

Bank for Cooperatives notes 4210.15 4210.15

Rural Telephone Finance Cooperative

notes 4210.16 4210.16

REA notes - deferred interest 4210.17 4210.17

REA notes - advance payments, dr. 4210.18 4210.18

Funded debt - other - unadvanced, dr. 4210.19 4210.19

REA notes - unadvanced, dr. 4210.20 4210.20

Telephone Bank notes - unadvanced, dr. 4210.21 4210.21

Federal Financing Bank notes -

unadvanced, dr. 4210.22 4210.22

Bank for Cooperatives notes -

unadvanced, dr. 4210.23 4210.23

Rural Telephone Finance Cooperative

notes - unadvanced, dr. 4210.24 4210.24

Premium on long-term debt 4220 4220

Class A Class B

[Account Title]{.underline} [Account]{.underline} [Account]{.underline}

Discount on long-term debt 4230 4230

Reacquired debt 4240 4240

Obligations under capital leases 4250 4250

Advances from affiliated companies 4260 4260

Other long-term debt 4270 4270

Members\' redeemable equity certificates

subscribed but unissued 4270.1 4270.1

Members\' redeemable equity certificates

issued 4270.2 4270.2

Other long-term debt 4270.3 4270.3

Other Liabilities and Deferred Credits:

Other long-term liabilities 4310 4310

Unamortized operating investment tax

credits - net 4320 4320

Unamortized nonoperating investment tax

credits - net 4330 4330

Net noncurrent deferred operating

income taxes 4340 4340

Net noncurrent deferred nonoperating

income taxes 4350 4350

Other deferred credits 4360 4360

Other jurisdictional liabilities and

deferred credits - net 4370 4370

Stockholders\' Equity:

Capital stock 4510 4510

Additional paid-in capital 4520 4520

Treasury stock 4530 4530

Other capital 4540 4540

Capital stock subscribed 4540.11 4540.11

Memberships subscribed but unissued 4540.12 4540.12

Members\' equity certificates subscribed

but unissued 4540.13 4540.13

Memberships issued 4540.21 4540.21

Members\' equity certificates issued 4540.22 4540.22

Members\' equity - other 4540.23 4540.23

Installments paid on capital stock 4540.31 4540.31

Installments paid on memberships

subscribed 4540.32 4540.32

Installments paid on equity certificates

subscribed 4540.33 4540.33

Other capital - miscellaneous 4540.41 4540.41

Retained earnings 4550 4550

Operating margins 4550.1 4550.1

Nonoperating margins 4550.2 4550.2

Other margins 4550.3 4550.3

Patronage capital assignable 4550.4 4550.4

Patrons\' capital credits assigned 4550.5 4550.5

Gain on the retirement of capital credits 4550.6 4550.6

**ù32.4010 Accounts payable.**

\(a\) This account shall include all amounts currently due to others for
recurring trade obligations, and not provided for in other accounts,
such as those for traffic settlements, material and supplies, repairs to
telecommunications plant, matured rents, and interest payable under
monthly settlements on short-term loans, advances, and open accounts. It
shall also include amounts of taxes payable that have been withheld from
employees\' salaries.

\(b\) Subsidiary record categories shall be maintained for this account
in order that the company may separately report the amounts contained
herein that relate to nonaffiliates and affiliates. Such subsidiary
record categories shall be reported as required by Part 43 of this
Commission\'s Rules and Regulations.

\(c\) There shall be included herein accounts payable arising from
sharing of revenues.

***REA 4010.11 Accounts payable to affiliated companies.***

This account shall include all amounts currently due to affiliated
companies for recurring trade obligations, and not provided for in other
accounts, such as those for traffic settlements, material and supplies,
repairs to telecommunications plant, matured rents, and interest payable
under monthly settlements on short-term loans, advances, and open
accounts.

***REA 4010.21 Accounts payable to nonaffiliated companies.***

This account shall include all amounts currently due to nonaffiliated
companies for recurring trade obligations, and not provided for in other
accounts, such as those for traffic settlements, materials and supplies,
repairs to telecommunications plant, m***a***tured rents, and interest
payable under monthly settlements on short-term loans, advances, and
open accounts.

***REA 4010.22 Accounts payable - employees\' income tax withheld.***

This account shall include income taxes payable that have been withheld
from employees\' salaries.

***REA 4010.23 Accounts payable - FICA taxes withheld.***

This account shall include FICA taxes payable that have been withheld
from employees\' salaries.

***REA 4010.24 Accounts payable - federal excise taxes.***

This account shall include Federal excise taxes payable.

***REA 4010.25 Accounts payable - payroll.***

This account shall include amounts payable to the company\'s employees
in the form of salaries or wages.

**ù32.4020 Notes payable.**

\(a\) This account shall include the face amount of notes, drafts, and
other evidences of indebtedness issued or assumed by the company (except
interest coupons) which are payable on demand or not more than one year
or less from date of issue.

\(b\) Subsidiary record categories shall be maintained for this account
in order that the company may separately report the amounts contained
herein that relate to nonaffiliates and affiliates. Such subsidiary
record categories shall be reported as required by Part 43 of this
Commission\'s Rules and Regulations.

\(c\) If any part of an obligation, otherwise includable in this account
matures more than one year from date of issue, it shall be included in
Account 4210, Funded Debt; 4260, Advances from Affiliated Companies, or
other appropriate account.

\(d\) The records supporting the entries to this account shall be kept
so that the company can furnish complete details as to each note, when
it is issued, the consideration received, and when it is payable.

**ù32.4030 Advance billing and payments.**

This account shall include the amount of advance billing creditable to
revenue accounts in future months; also advance payments made by
prospective customers prior to the establishment of service. Amounts
included in this account shall be credited to the appropriate revenue
accounts in the months in which the service is rendered or cleared from
this account as refunds are made.

**ù32.4040 Customers\' deposits.**

\(a\) This account shall include the amount of cash deposited with the
company by customers as security for the payment for telecommunications
service.

\(b\) Advance payments made by prospective customers prior to the
establishment of service shall be credited to Account 4030, Advance
Billing and Payments.

**ù32.4050 Current maturities - long-term debt.**

This account shall include the amount (including any obligations for
premiums) of long-term debt matured and unpaid without any specific
agreement for extension of maturity, including unpresented bonds drawn
for redemption through the operation of sinking and redemption fund
agreements.

**ù32.4060 Current maturities - capital leases.**

This account shall include the current portion of obligations applicable
to property obtained under capital leases.

**ù32.4070 Income taxes - accrued.**

\(a\) This account shall be credited or charged and the following
accounts shall be charged or credited with the offsetting amount of
current year income taxes (Federal, state and local) accrued during the
period or adjustments to prior accruals:

7220 Operating Federal Income Taxes

7230 Operating State and Local Income Taxes

7420 Nonoperating Federal Income Taxes

7430 Nonoperating State and Local Income Taxes

7630 Current Income Tax Effect of Extraordinary Items - Net

\(b\) If significant, current year income taxes paid in advance shall be
reclassified to Account 1300, Prepaid Taxes.

***REA 4070.1 Income taxes accrued - federal.***

For Class A companies, this account shall be credited and Accounts 7220,
7420, and 7630, as appropriate, shall be debited for the amount of
Federal income taxes accrued during the current operating period. For
Class B companies, this account shall be credited and Accounts 7200.2,
7400.2, and 7600.3, as appropriate, shall be debited for the amount of
federal income taxes accrued during the current operating period.

***REA 4070.2 Income taxes accrued - state and local.***

For Class A companies, this account shall be credited and Accounts 7230,
7430, and 7630, as appropriate, shall be debited for the amount of state
and local income taxes accrued during the current operating period. For
Class B companies, this account shall be credited and Accounts 7200.3,
7400.3, and 7600.3, as appropriate, shall be debited for the amount of
state and local income taxes accrued during the current operating
period.

**ù32.4080 Other taxes - accrued.**

\(a\) This account shall be credited or charged and

Account 7240, Operating Other Taxes, or 7440, Nonoperating Other Taxes,
or for payroll related costs, the appropriate expense accounts shall be
charged or credited for all taxes, other than Federal, State and local
income taxes, accrued or adjusted for previous accruals during the
period. Among the taxes includable in this account are property, gross
receipts, franchise, capital stock, social security and unemployment
taxes.

\(b\) Taxes paid in advance of the period in which they are chargeable
to income shall be included in the prepaid taxes Account 1300, Prepaid
Taxes, or 1410, Other Noncurrent Assets, as appropriate.

***REA 4080.1 Other taxes accrued - property.***

This account shall be credited and Account 7240.1/7200.41, Operating
Taxes - Property, shall be debited for the amount of property taxes
accrued during the current operating period.

***REA 4080.2 Other taxes accrued - employer\'s portion - FICA.***

This account shall be credited and the appropriate construction,
depreciation, or expense account shall be debited for the employer\'s
portion of FICA taxes accrued during the current operating period.

***REA 4080.3 Other taxes accrued - federal unemployment.***

This account shall be credited and the appropriate construction,
removal, or expense account shall be debited for the amount of Federal
unemployment taxes accrued during the current operating period.

***REA 4080.4 Other taxes accrued - state unemployment.***

This account shall be credited and the appropriate construction,
removal, or expense account shall be debited for the amount of state
unemployment taxes accrued during the current operating period.

***REA 4080.5 Other taxes accrued - miscellaneous.***

This account shall be credited and Account 7240.2/7200.42, Operating
Taxes - Miscellaneous, shall be debited for the amount of all other
taxes accrued during the current operating period and not provided for
elsewhere such as a gross receipts tax, franchise taxes, and capital
stock taxes.

**ù32.4100 Net current deferred operating income taxes.**

\(a\) This account shall include the balance of income tax expense
related to current items from regulated operations which have been
deferred to later periods as a result of the normalized method of
accounting for tax differentials authorized by this Commission and not
provided for elsewhere.

\(b\) As regulated assets or liabilities which generated the deferred
income tax are reclassified from long-term or noncurrent status to
current, the appropriate deferred income tax shall be reclassified from
Account 4340, Net Noncurrent Deferred Operating Income Taxes, to this
account.

\(c\) This account shall be debited or credited with the amount being
debited or credited to Account 7250, Provision for Deferred Operating
Income Taxes - Net, in accordance with that account\'s description and
ù32.22 of Subpart B.

\(d\) The classification of deferred income taxes as current or
noncurrent shall follow the classification of the asset or liability
that gave rise to the deferred income tax. If there is no related asset
or liability, classification shall be based on the expected turnaround
of the tax timing difference.

\(e\) Subsidiary record categories shall be maintained in order that the
company may separately report the amounts contained herein that are
property related and those that are nonproperty related. Such subsidiary
record categories shall be reported as required by Part 43 of this
Commission\'s Rules and Regulations.

**ù32.4110 Net current deferred nonoperating income taxes.**

\(a\) This account shall include the balance of income tax expense
resulting from comprehensive interperiod tax allocation which has been
deferred to later periods.

\(b\) As other assets or liabilities which generated the deferred income
tax are reclassified from long-term or noncurrent status to current, the
appropriate deferred income tax shall be reclassified from Account 4350,
Net Noncurrent Deferred Nonoperating Income Taxes, to this account.

\(c\) This account shall be debited or credited with the amount being
credited or debited to Account 7450, Provision for Deferred Nonoperating
Income Taxes - Net, in accordance with that account\'s description and
ù32.22 of Subpart B.

\(d\) This account shall also include the balance of the income taxes
(Federal, state and local) related to current extraordinary items which
have been deferred to later periods resulting from comprehensive
interperiod tax allocation.

\(e\) As the extraordinary item which generated the deferred income tax
becomes current, the appropriate deferred income tax shall be
reclassified from Account 4350, Net Noncurrent Deferred Nonoperating
Income Taxes, to this account.

\(f\) This account shall be debited or credited with the amount being
credited and debited to Account 7640, Provision for Deferred Income Tax
Effect of Extraordinary Items - Net.

\(g\) The classification of deferred income taxes as current or
noncurrent shall follow the classification of the asset or liability
that gave rise to the deferred income tax. If there is no related asset
or liability, classification shall be based on the expected turnaround.

\(h\) Subsidiary record categories shall be maintained in order that the
company may separately report the amounts contained herein that are
property related and those that are nonproperty related. Such subsidiary
record categories shall be reported as required by Part 43 of this
Commission\'s Rules and Regulations.

**ù32.4120 Other accrued liabilities.**

\(a\) This account shall include the amount of wages, compensated
absences, interest on indebtedness of the company, dividends on capital
stock and rents accrued to the date for which the balance sheet is made,
but not payable until after that date.

\(b\) This account shall be maintained so as to show separately the
amount and nature of the items accrued to the date of the balance sheet.

\(c\) Matured rents, dividends and interest shall be included in Account
4010, Accounts Payable.

\(d\) Interest payable under monthly settlements on short-term loans,
advances, and open accounts shall be included in

Account 4010.

***REA 4120.1 Unmatured interest accrued - REA notes.***

\(a\) This account shall include the interest accrued as of the balance
sheet date but not payable until after that date on REA mortgage notes.

\(b\) Interest expense incurred during the period of construction of
telecommunications plant shall be charged to Account 2004,
Telecommunications Plant Under Construction - Long Term, and credited to
Account 7340/7300.4, Allowance for Funds Used During Construction.

***REA 4120.2 Unmatured interest accrued - Telephone Bank notes.***

\(a\) This account shall include the interest accrued as of the balance
sheet date but not payable until after that date on Rural Telephone Bank
mortgage notes.

\(b\) Interest expense incurred during the period of construction of
telecommunications plant shall be charged to Account 2004,
Telecommunications Plant Under Construction - Long Term, and credited to
Account 7340/7300.4, Allowance for Funds Used During Construction.

***REA 4120.3 Unmatured interest accrued - Federal Financing Bank***

***notes.***

\(a\) This account shall include the interest accrued as of the balance
sheet date but not payable until after that date on Federal Financing
Bank mortgage notes.

\(b\) Interest expense incurred during the period of construction of
telecommunications plant shall be charged to Account 2004,
Telecommunications Plant Under Construction - Long Term, and credited to
Account 7340/7300.4, Allowance for Funds Used During Construction.

***REA 4120.4 Unmatured interest accrued - Bank for Cooperatives***

***notes.***

\(a\) This account shall include the interest accrued as of the balance
sheet date but not payable until after that date on Bank for
Cooperatives mortgage notes.

\(b\) Interest expense incurred during the period of construction of
telecommunications plant shall be charged to Account 2004,
Telecommunications Plant Under Construction - Long Term, and credited to
Account 7340/7300.4, Allowance for Funds Used During Construction.

***REA 4120.5 Unmatured interest accrued - Rural Telephone Finance***

***Cooperative notes.***

\(a\) This account shall include the interest accrued as of the balance
sheet date but not payable until after that date on Rural Telephone
Finance Cooperative mortgage notes.

\(b\) Interest expense incurred during the period of construction of
telecommunications plant shall be charged to Account 2004,
Telecommunications Plant Under Construction - Long Term, and credited to
Account 7340/7300.4, Allowance for Funds Used During Construction.

***REA 4120.6 Other accrued liabilities.***

\(a\) This account shall include the amount of wages, compensated
absences, interest on indebtedness of the company, dividends on capital
stock, and rents accrued as of the balance sheet date but not payable
until after that date.

\(b\) This account shall not include interest accrued on REA, Rural
Telephone Bank, Bank for Cooperatives, Federal Financing Bank, or Rural
Telephone Finance Cooperative debt.

**ù32.4130 Other current liabilities.**

This account shall include liabilities of current character which are
not includable in Accounts 4010 through 4120.

***REA 4130.1 Patronage capital payable.***

This account shall include the amount of patronage capital which has
been authorized to be returned to patrons.

***REA 4130.2 Other current liabilities - miscellaneous.***

This account shall include liabilities of current character which are
not includable in Accounts 4010 through 4130.1.

**ù32.4210 Funded debt.**

\(a\) This account shall include the total face amount of unmatured
debt, maturing more than one year from date of issue, issued by the
company and not retired, and the total face amount of similar unmatured
debt of other companies, the payment of which has been assumed by the
company, including funded debt the maturity of which has been extended
by specific agreement.

\(b\) This account shall include such items as mortgage bonds,
collateral trust bonds, income bonds, convertible debt, debt securities
with detachable warrants and other similar obligations maturing more
than one year from date of issue.

\(c\) In the case of debt securities with detachable warrants this
account shall include only the face amount of the security at the time
of issuance. The value of detachable warrants shall be charged to either
Account 4220, Premium on Long-Term Debt, or Account 4230, Discount on
Long-Term Debt, as appropriate, and credited to Account 4520, Additional
Paid-in Capital, in the case of capital stock warrants or retained in
this account as a separately identifiable amount in the case of
detachable long-term debt warrants. No similar allocation shall be made
for the issuance of either convertible debt or debt securities with
non-detachable warrants.

\(d\) Subsidiary records shall be maintained for each issue.

\(e\) Securities maturing in one year or less, including securities
maturing serially, shall be included in Account 4050, Current
Maturities - Long-Term Debt.

\(f\) Investment advances, including those represented by notes, shall
be included in Account 4270, Other Long-Term Debt.

***REA 4210.11 Funded debt - other.***

\(a\) This account shall include the total face amount of unmatured
debt, maturing more than one year from the date of issue, issued by the
company and not retired, and the total face amount of similar unmatured
debt of other companies, the payment of which has been assumed by the
company, including funded debt the maturity of which has been extended
by specific agreement.

\(b\) This account shall not include unmatured REA, Rural Telephone
Bank, Federal Financing Bank, Bank for Cooperatives, or Rural Telephone
Finance Cooperative debt.

***REA 4210.12 REA notes.***

\(a\) This account shall include the total face amount of unmatured REA
mortgage notes. Account 4210.20, REA Notes - Unadvanced, Dr., shall be
charged and this account credited upon execution of the notes.

\(b\) If principal installments are not paid at the maturity date, the
amount due shall be transferred to Account 4050, Current Maturities -
Long-Term Debt.

***REA 4210.13 Telephone Bank notes.***

\(a\) This account shall include the total face amount of unmatured
Rural Telephone Bank mortgage notes. Account 4210.21, Telephone Bank
Notes - Unadvanced, Dr., shall be charged and this account credited upon
execution of the notes.

\(b\) If principal installments are not paid at the maturity date, the
amount due shall be transferred to Account 4050, Current Maturities -
Long-Term Debt.

***REA 4210.14 Federal Financing Bank notes.***

\(a\) This account shall include the total face amount of unmatured
Federal Financing Bank mortgage notes.

Account 4210.22, Federal Financing Bank Notes - Unadvanced, Dr., shall
be charged and this account credited upon execution of the notes.

\(b\) If principal installments are not paid at the maturity date, the
amount due shall be transferred to Account 4050, Current Maturities -
Long-Term Debt.

***REA 4210.15 Bank for Cooperatives notes.***

\(a\) This account shall include the total face amount of unmatured Bank
for Cooperatives mortgage notes.

Account 4210.23, Bank for Cooperatives Notes - Unadvanced, Dr., shall be
charged and this account credited upon execution of the notes.

\(b\) If principal installments are not paid at the maturity date, the
amount due shall be transferred to Account 4050, Current Maturities -
Long-Term Debt.

***REA 4210.16 Rural Telephone Finance Cooperative notes.***

\(a\) This account shall include the total face amount of unmatured
Rural Telephone Finance Cooperative mortgage notes.

Account 4210.24, Rural Telephone Finance Cooperative Notes - Unadvanced,
Dr. shall be charged and this account credited upon execution of the
notes.

\(b\) If principal installments are not paid at the maturity date, the
amount due shall be transferred to Account 4050, Current Maturities -
Long-Term Debt.

***REA 4210.17 REA notes - deferred interest.***

\(a\) This account shall include interest accrued on REA mortgage notes,
the payment of which has been deferred in accordance with the terms of
the notes or extension agreements. The offsetting charge shall be to
Account 7510, Interest on Funded Debt, for Class A companies and Account
7500, Interest and Related Items, for Class B companies.

\(b\) If interest payments are not made at the due date, this account
shall be debited and Account 4010.21, Accounts Payable to Nonaffiliated
Companies, credited with the amount of the matured interest.

***REA 4210.18 REA notes - advance payments, dr.***

This account shall include all payments on REA mortgage notes made in
advance of the due date and not applied to a specific quarterly payment.
As these payments are applied to specific notes, this account shall be
credited and the long-term debt and interest liability accounts debited.

***REA 4210.19 Funded debt - other - unadvanced, dr.***

\(a\) This account shall include the total face amount of notes executed
to others, for which funds have not been received.

\(b\) This account shall be credited and Account 1130.1/

1120.11, Cash - General Funds, debited when funds are received from the
lender.

***REA 4210.20 REA notes - unadvanced, dr.***

\(a\) This account shall include the total face amount of REA mortgage
notes for which funds have not been received.

\(b\) This account shall be credited and Account 1130.2/

1120.12, Cash - Construction Fund Trustee, debited when funds are
received from REA.

***REA 4210.21 Telephone Bank notes - unadvanced, dr.***

\(a\) This account shall include the total face amount of Rural
Telephone Bank mortgage notes for which funds have not been received.

\(b\) This account shall be credited and Account 1130.2/

1120.12, Cash - Construction Fund Trustee, debited when funds are
received from the Rural Telephone Bank.

***REA 4210.22 Federal Financing Bank notes - unadvanced, dr.***

\(a\) This account shall include the total face amount of Federal
Financing Bank mortgage notes for which funds have not been received.

\(b\) This account shall be credited and Account 1130.2/

1120.12, Cash - Construction Fund Trustee, debited when funds are
received from the Federal Financing Bank.

***REA 4210.23 Bank for Cooperatives notes - unadvanced, dr.***

\(a\) This account shall include the total face amount of Bank for
Cooperatives mortgage notes for which funds have not been received.

\(b\) This account shall be credited and Account 1130.2/

1120.12, Cash - Construction Fund Trustee, debited when funds are
received from the Bank for Cooperatives.

***REA 4210.24 Rural Telephone Finance Cooperative notes -***

***unadvanced, dr.***

\(a\) This account shall include the total face amount of Rural
Telephone Finance Cooperative mortgage notes for which funds have not
been received.

\(b\) This account shall be credited and Account 1130.2/

1120.12, Cash - Construction Fund Trustee, debited when funds are
received from the Rural Telephone Finance Cooperative.

**ù32.4220 Premium on long-term debt.**

\(a\) This account shall include the premium associated with all classes
of long-term debt. Premium, as applied to securities issued or assumed
by the company, means the excess of the current money value received at
their sale over the sum of their book or face amount and interest or
dividends accrued at the date of the sale.

\(b\) Amounts included in this account shall be amortized monthly by the
interest method and credited to Account 7510, Interest on Funded Debt.
(Note also ù32.4210(c) of this subpart.)

\(c\) Subsidiary records shall be maintained to identify the premium
attributable to each issue.

**ù32.4230 Discount on long-term debt.**

\(a\) This account shall include the discount associated with all
classes of long-term debt. Discount, as applied to securities issued or
assumed by the company, means the excess of the book or face amount of
the securities plus interest or dividends accrued at the date of the
sale over the current money value of the consideration received at their
sale.

\(b\) Amounts included in this account shall be amortized monthly by the
interest method and charged to Account 7510, Interest On Funded Debt.
(Note also ù32.4210(c) of this subpart.)

\(c\) Subsidiary records shall be maintained to identify the discount
attributable to each issue.

**ù32.4240 Reacquired debt.**

This account shall include the face amount of debt reacquired prior to
maturity that has not been retired. Gain or loss shall be recognized at
the time of reacquisition by credits or charges

to Account 7360, Other Nonoperating Income, except that material gains
or losses shall be treated as extraordinary. (See

Accounts 7610, Extraordinary Income Credits, and 7620, Extraordinary
Income Charges.)

**ù32.4250 Obligations under capital leases.**

\(a\) This account shall include the noncurrent portion of obligations
applicable to property obtained under capital leases.

\(b\) Amounts subject to current settlement shall be included in Account
4060, Current Maturities - Capital Leases.

**ù32.4260 Advances from affiliated companies.**

\(a\) This account shall include the amount of advances from affiliated
companies.

\(b\) Amounts due affiliated companies which are subject to current
settlement shall be included in Account 4010 or 4020, as appropriate.

**ù32.4270 Other long-term debt.**

This account shall include long-term debt not provided for elsewhere.

***REA 4270.1 Members\' redeemable equity certificates subscribed***

***but unissued.***

\(a\) This account shall include the face amount of members\' equity
certificates which are redeemable at some specified

future date for which subscriptions have been received but for which
certificates have not been issued. This account shall be credited at the
time the subscription is received and

Account 1350.3, Subscriptions to Members\' Equity Certificates, debited.

\(b\) This account shall be debited and Account 4270.2, Members\'
Redeemable Equity Certificates Issued, credited when a subscriber has
paid the subscription in full and the equity certificates are issued.

***REA 4270.2 Members\' redeemable equity certificates issued.***

This account shall include the face amount of outstanding members\'
equity certificates which are redeemable at some specified future date.
A subsidiary members\' redeemable equity certificate record shall be
maintained to reflect the detail of the balance in this account.

***REA 4270.3 Other long-term debt.***

This account shall include long-term debt not provided for elsewhere.

**ù32.4310 Other long-term liabilities.**

\(a\) This account shall include amounts accrued to provide for such
items as unfunded pensions (if actuarially determined), death benefits,
deferred compensation costs and other long-term liabilities not provided
for elsewhere.

\(b\) Subsidiary records shall be maintained to identify the nature of
the items included herein.

**ù32.4320 Unamortized operating investment tax credits - net.**

\(a\) This account shall be credited and Account 7210, Operating
Investment Tax Credits - Net, should be debited with investment tax
credits generated from qualified expenditures related to regulated
operations which the company defers rather than recognizes currently in
income.

\(b\) This account shall be debited and Account 7210 credited with a
proportionate amount determined in relation to the period of time used
for computing book depreciation on the property to which the tax credit
relates.

**ù32.4330 Unamortized nonoperating investment tax credits - net.**

\(a\) This account shall be credited and Account 7410, Nonoperating
Investment Tax Credits - Net, shall be debited with investment tax
credits generated from qualified expenditures related to other
operations which the company has elected to defer rather than recognize
currently in income.

\(b\) This account shall be debited and Account 7410 credited with a
proportionate amount determined in relation to the useful book life of
the property to which the tax credit relates.

**ù32.4340 Net noncurrent deferred operating income taxes.**

\(a\) This account shall include the balance of income tax expense
related to noncurrent items from regulated operations which have been
deferred to later periods as a result of comprehensive interperiod tax
allocation related to timing differences that arise from regulated
operations.

\(b\) This account shall be credited or debited as appropriate, and
Account 7250, Provision for Deferred Operating Income Taxes -Net, shall
reflect the offset for the tax effect of revenues and expenses from
regulated operations which have been included in the determination of
taxable income, but which will not be included in the determination of
book income or for the tax effect of revenues and expenses from
regulated operations which have been included in the determination of
book income prior to the inclusion in the determination of taxable
income.

\(c\) As regulated assets or liabilities which generated the prepaid
income tax or deferred income tax are reclassified from long-term or
noncurrent status to current status, the appropriate deferred income tax
shall be reclassified from this account to Account 4100, Net Current
Deferred Operating Income Taxes.

\(d\) The classification of deferred income taxes as current or
noncurrent shall follow the classification of the asset or liability
that gave rise to the deferred income tax. If there is no related asset
or liability, classification shall be based on the expected turnaround
of the tax timing difference.

\(e\) Subsidiary record categories shall be maintained in order that the
company may separately report the amounts contained herein that are
property related and those that are nonproperty related. Such subsidiary
record categories shall be reported as required by Part 43 of this
Commission\'s Rules and Regulations.

**ù32.4350 Net noncurrent deferred nonoperating income taxes.**

\(a\) This account shall include the balance of income tax expense
(Federal, state and local) that has been deferred to later periods as a
result of comprehensive interperiod tax allocation related to
nonoperating timing differences.

\(b\) This account shall be credited or debited, as appropriate, and
Account 7450, Provision for Deferred Nonoperating Income Taxes - Net,
shall reflect the offset for the tax effect of revenues from other
operations and extraordinary items and nonoperating expense which have
been included in the determination of taxable income, but which will not
be included in the determination of book income or for the tax effect of
nonoperating expenses and extraordinary items and nonoperating income
which have been included in the determination of book income prior to
the inclusion in the determination of taxable income.

\(c\) As other assets or liabilities which generated the prepaid income
tax or deferred income tax are reclassified from long-term or
non-current status to current status, the appropriate deferred income
tax shall be reclassified from this account to Account 4110, Net Current
Deferred Nonoperating Income Taxes.

\(d\) This account shall also include the balance of the income tax
effect (Federal, State and local) related to noncurrent extraordinary
items which have been included in the determination of taxable income in
a period different from when it is included in the determination of book
income, that is, more than one year.

\(e\) This account shall be charged or credited with the contra amount
recorded to Account 7640, Provision for Deferred Income Tax Effect of
Extraordinary Items - Net, in accordance with paragraph ù32.22 of
Subpart B.

\(f\) As the extraordinary item which generated the deferred income tax
becomes current, the appropriate deferred income tax shall be
reclassified from this account to Account 4110, Net Current Deferred
Nonoperating Income Taxes.

\(g\) The classification of deferred income taxes as current or
noncurrent shall follow the classification of the asset or liability
that gave rise to the deferred income tax. If there is no related asset
or liability, classification shall be based on the expected turnaround
of the tax timing difference.

\(h\) Subsidiary record categories shall be maintained in order that the
company may separately report the amounts contained herein that are
property related and those that are nonproperty related. Such subsidiary
record categories shall be reported as required by Part 43 of this
Commission\'s Rules and Regulations.

**ù32.4360 Other deferred credits.**

This account shall include the amount of all deferred credits not
provided for elsewhere, such as amounts awaiting adjustment between
accounts; and revenue, expense, and income items in suspense.

**ù32.4370 Other jurisdictional liabilities and deferred**

**credits - net.**

This account shall include the cumulative impact on liabilities and
deferred credits of the jurisdictional ratemaking practices which vary
from those of this Commission. All entries recorded in this account
shall be recorded net of any applicable income tax effects and shall be
supported by appropriate subsidiary records where necessary as provided
for in ù32.13 of Subpart B.

**ù32.4510 Capital stock.**

\(a\) This account shall include the par value, stated amount, or in the
case of no-par stock, the amount received for capital stock issued and
outstanding.

\(b\) Subsidiary records shall be maintained so as to show separately
each class of stock.

\(c\) This account shall be charged with the book amount of any stock
retired.

**ù32.4520 Additional paid-in capital.**

\(a\) This account shall include the difference between the net proceeds
(including discount, premium and stock issuance expense) received from
the issuance of capital stock and the amount includable in Account 4510,
Capital Stock, unless such difference results in a debit balance for
that class of stock, in which case the amount shall be charged to
Account 4550, Retained Earnings.

\(b\) This account shall also include gains arising from the retirement
and cancellation of capital stock. Losses from retirement and
cancellation of capital stock shall be charged to this account to the
extent that there exist credits in this account for the same class of
stock; otherwise to Account 4550.

**ù32.4530 Treasury stock.**

This account shall include the cost of the company\'s own capital stock
which has been issued and subsequently reacquired but not retired or
resold.

**ù32.4540 Other capital.**

This account shall include amounts which are credits arising from the
donation by stockholders of the company\'s capital stock, capital
recorded upon the reorganization or recapitalization of the company and
temporary declines in the value of marketable securities held for
investment purposes. (See also Account 1401, Investment in Affiliated
Companies.)

***REA 4540.11 Capital stock subscribed.***

\(a\) This account shall include the par value of capital stock for
which legally enforceable subscriptions have been received but for
which, at the date of the balance sheet, stock certificates have not
been issued.

\(b\) This account shall be debited and Account 4510, Capital Stock,
credited when a subscriber has paid the subscription in full and stock
certificates are issued.

***REA 4540.12 Memberships subscribed but unissued.***

\(a\) This account shall include the face amount of memberships
subscribed but not issued. This account shall be credited at the time
the subscription is received and

Account 1350.2, Subscriptions to Memberships, debited.

\(b\) This account shall be debited and Account 4540.21, Memberships
Issued, credited when a subscriber has paid the subscription in full and
the membership certificates are issued.

***REA 4540.13 Members\' equity certificates subscribed but***

***unissued.***

\(a\) This account shall include the face amount of members\' equity
certificates subscribed but not issued. This account shall be credited
at the time the subscription is received and Account 1350.3,
Subscriptions to Members\' Equity Certificates, debited.

\(b\) This account shall be debited and Account 4540.22, Members\'
Equity Certificates Issued, credited when a subscriber has paid the
subscription in full and the members\' equity certificates are issued.

***REA 4540.21 Memberships issued.***

This account shall include the face amount of membership certificates
outstanding. A subsidiary membership certificate record shall be
maintained to reflect the detail of the balance in this account.

***REA 4540.22 Members\' equity certificates issued.***

This account shall include the face amount of members\' equity
certificates outstanding. A subsidiary members\' equity certificate
record shall be maintained to reflect the detail of the balance in this
account.

***REA 4540.23 Members\' equity - other.***

This account shall include credit amounts arising from donations,
forfeitures of membership fees, forgiveness of debts of the cooperative,
and member\'s equities not otherwise provided for.

***REA 4540.31 Installments paid on capital stock.***

\(a\) This account shall include the amount of installments paid on
capital stock on a partial or installment payment plan by subscribers
against whom there is no legally enforceable subscription contract, and
who are entitled to be reimbursed the principal amount of their
payments, with or without interest, in the event they fail to complete
payment for the stock and receive certificates therefore.

\(b\) This account shall be debited and Account 4510, Capital Stock,
credited with the par value of capital stock when the total subscription
is received and the stock certificates are issued. Any difference
between the purchase price of the subscription and the par value of the
stock shall be credited to

Account 4520, Additional Paid-In Capital.

\(c\) A subsidiary ledger shall be maintained to record for each
subscriber, the amount subscribed, payments made, and the balance due.
The balance in this account shall be reconciled monthly with the
subscription ledger.

***REA 4540.32 Installments paid on memberships subscribed.***

\(a\) This account shall include the amount of installments paid by
prospective members on membership subscriptions against whom there is no
legally enforceable subscription contract, and who are entitled to be
reimbursed for the principal amount of their payments, with or without
interest, in the event they fail to complete payment for the membership
and receive certificates therefor.

\(b\) This account shall be debited and Account 4540.21, Memberships
Issued, credited with the face amount of the membership when the total
subscription is received and the membership certificates are issued.

\(c\) A subsidiary ledger shall be maintained to record for each
subscriber, the amount subscribed, payments made, and the balance due.
The balance in this account shall be reconciled monthly with the
subscription ledger.

***REA 4540.33 Installments paid on equity certificates***

***subscribed.***

\(a\) This account shall include the amount of installments paid by
prospective members on equity certificate subscriptions against whom
there is no legally enforceable subscription contract, and who are
entitled to be reimbursed for the principal amount of their payments,
with or without interest, in the event they fail to complete payment for
the membership and receive equity certificates therefor.

\(b\) This account shall be debited and Account 4540.22, Members\'
Equity Certificates Issued, credited with the face amount of the
memberships when the total subscription is received and the equity
certificates are issued.

\(c\) A subsidiary ledger shall be maintained to record for each
subscriber, the amount subscribed, payments made, and the balance due.
The balance in this account shall be reconciled monthly with the
subscription ledger.

***REA 4540.41 Other capital - miscellaneous.***

This account shall include amounts which are credits arising from
capital recorded upon the reorganization or recapitali-zation of the
company and temporary declines in the value of marketable securities
held for investment purposes.

**ù32.4550 Retained earnings.**

\(a\) This account shall include the undistributed balance of retained
earnings derived from the operations of the company and from all other
transactions not includable in the other accounts appropriate for
inclusion of stockholders\' equity.

\(b\) Subsidiary records shall be maintained wherein are recorded all
entries to retained earnings during the year such that the detail of the
entries may be disclosed to this Commission.

***REA 4550.1 Operating margins.***

This account shall include amounts received or receivable from the
furnishing of telecommunications service in excess of costs incurred in
the furnishing of such service. If costs exceed revenues, the excess
cost of furnishing telecommunications service shall be recorded as a
debit to this account.

***REA 4550.2 Nonoperating margins.***

This account shall include margins arising from transactions or
activities not related to the furnishing of telecommunications service.
Included in this account are receipts from investments, income from
investments, income from nonoperating plant, and revenues derived from
services performed for others incident to the company\'s regulated
telecommunications operations.

***REA 4550.3 Other margins.***

\(a\) This account shall include patronage capital credits assigned to
the cooperative by other nonprofit organizations prior to January 1,
1970, which were not credited directly to an operating expense account
as a reduction in the cost of furnishing telecommunications service.

\(b\) No entries shall be made to this account unless it is to
distribute or eliminate prior balances in conformance with the bylaws of
the cooperative.

***REA 4550.4 Patronage capital assignable.***

This account shall include all amounts transferred from operating
margins, nonoperating margins, and other margin accounts which are
assignable to individual patrons.

***REA 4550.5 Patrons\' capital credits assigned.***

This account shall include the amounts of patronage capital which have
been credited to individual patrons. A subsidiary patronage capital
ledger shall be maintained so as to reflect the amount of capital
furnished by each patron and the amount of such capital returned to the
patron.

***REA 4550.6 Gain on the retirement of capital credits.***

\(a\) This account shall include credits resulting from the retirement
of patronage capital through settlement of individual patrons\' accounts
at less than 100 percent of the capital assigned to the patron. The
portion of patronage capital not returned to patrons under such
settlements shall be debited to Account 4550.5, Patrons\' Capital
Credits Assigned, and credited to this account.

\(b\) This account shall also include amounts representing patronage
capital authorized to be retired to patrons who cannot be located.
Returned checks issued for retirements of patronage capital, after an
appropriate waiting period, shall be credited to this account and a
record shall be maintained adequate to enable the cooperative to make
payment to the patron if and when a claim has been established by the
patron.

**SUBPART D - INSTRUCTIONS FOR REVENUE ACCOUNTS**

**ù32.4999 General.**

\(a\) Purpose of revenue accounts. The revenue accounts are intended to
include the actual cash inflows (or equivalents) that have or will occur
as a result of the company\'s ongoing major or central operations during
the period. They will include the revenues which arise from furnishing
regulated telecommunications services to others, from directory
advertising, rentals of telecommunications assets and from providing
other services which are directly associated with the provision of
regulated telecommunications services.

\(b\) Deductions from revenue. Corrections of overcharges, authorized
refunds of over collections previously credited to revenue, authorized
refunds and adjustments on account of failure in service, and other
corrections shall be charged to the revenue account previously credited
with the amounts involved.

\(c\) Commissions. Commissions paid to others or employees in place of
compensation or salaries for services rendered, such as public telephone
commissions, shall be charged to Account 6623, Customer Services, and
not to the revenue accounts.

\(d\) Revenue recognition. Credits shall be made to the appropriate
revenue accounts when such revenue is actually earned. When the billing
cycle encompasses more than on accounting period, adjustments are
necessary to properly recognize the revenue applicable to the current
accounting period under report. Revenues recorded under the terms of
two-tier contracts or other variable payment plans should be deferred,
if necessary, and recognized ratably with expenses over the term of
related contract. Any amounts deferred shall be credited to Account
4360, Other Deferred Credits.

\(e\) Contractual arrangements. Charges and credits resulting from
activities associated with the provision of regulated telecommunications
services shall be recorded in a manner consistent with the nature of the
underlying contractual arrangements. The charges and credits resulting
from expense sharing or apportionment arrangements associated with the
provision of regulated telecommunications services shall be recorded in
the detailed regulated accounts. Charges and credits resulting from
revenue settlement agreements or other revenue pooling arrangements
associated with the provision of regulated telecommunications services
shall be included in the appropriate revenue accounts. Those charges and
credits resulting from contractual revenue pooling and/or sharing
agreement shall be recorded in each prescribed revenue account and
prescribed subsidiary record categories thereof to the extent that each
is separately identifiable in the settlement process. It is not intended
that settlement amounts be allocated or generally spread to the
individual revenue accounts where they are not separately identifiable
in the settlement process. When settlement amounts are not identifiable
by a revenue account they shall be recorded in Account 5069, Other Local
Exchange Revenue Settlements; 5129, Other Long Distance Private Network
Revenue Settlements; 5169, Other Long Distance Revenue Settlements; or
5269, Other Revenue Settlements, as appropriate.

\(f\) Subsidiary records - jurisdictional subdivisions.

\(1\) Subsidiary record categories shall be maintained in order that the
company may separately report revenues derived from charges imposed
under intrastate, interstate and international tariff fillings. Such
subsidiary record categories shall be reported as required by Part 43 of
this Commission\'s Rules and Regulations.

\(2\) This jurisdictional subsidiary record requirement applies to all
accounts except the Network Access Services Group where separate
accounts have been established for Federal and state access revenues.

\(g\) Structure of revenue accounts.

\(1\) The revenue section of the system of accounts shall be organized
by revenue group summary account, account and subsidiary record category
(if required).

\(2\) The revenue section of this system of accounts shall be comprised
of five major groups - Local Network Services Revenues, Network Access
Services Revenues, Long Distance Network Services Revenues,
Miscellaneous Revenues, and Uncollectible Revenues, which shall be
considered as a revenue group for the purposes of the construction of
the system.

\(3\) Summary accounts within revenue groups shall be used to describe
aggregations of two or more accounts having a certain commonality.
Summary accounts are assigned numbers so that they may be used by Class
A telephone companies to aggregate accounts for reporting purposes; and,
as specifically directed, so that they may be used as accounts by Class
B telephone companies.

\(4\) Accounts shall be maintained as prescribed in this Section subject
to the conditions described in ù32.13 of

Subpart B. In certain instances, subsidiary record categories may be
required below the account level by this system of accounts or by
Commission order.

\(h\) Local Network Services revenues. Local Network Services revenues
(Accounts 5000-5069) shall include revenues derived from the provision
of service and equipment entirely within the basic service area. That
area is defined as the normal boundaries for local calling plus Extended
Area Service (EAS) boundaries as they apply to that service. It includes
revenues derived from both local private network service and local
public network services as well from customer premises facilities
services. Local revenues include associated charges such as one-time
service connection or termination charges and secondary features such as
call waiting.

\(i\) Network Access revenues.

\(1\) Network Access revenues (Accounts 5080-5084) shall include
revenues derived from the provision of exchange access services to an
interexchange carrier or to an end user of telecommunications services
beyond the exchange carrier\'s network.

\(2\) Billing and collections service provided under exchange access
tariffs shall be included in the Miscellaneous Revenue Group.

\(j\) Long Distance Network Service revenues. Long Distance Network
Service revenues shall include revenues derived from the provision of
services beyond the basic service area whether message or flat-rate and
including public network switching as well as private.

\(k\) Miscellaneous revenues. Miscellaneous revenues are those revenues
derived from the provision of regulated products and services provided
under tariff or contract but not contained elsewhere. They shall also
include operating revenue derived from activities performed incident to
the company\'s tariffed telecommunications operations which, though
non-tariffed, are included in the regulatory process.

\(l\) Nonregulated revenues. The nonregulated revenue account shall be
used for nonregulated operating revenues when a nonregulated activity
involves the common or joint use of assets or resources in the provision
of regulated and nonregulated products or services and when such
activity is accounted for, as required in ù32.23(c) of this subpart,
within the accounts prescribed in this system for telephone company
operations. Revenues from nontariffed activities offered incidental to
tariffed services may be accounted for as regulated revenues, provided
the activities are outgrowths of regulated operations and the revenues
do not exceed, in the aggregate, one percent of total revenues for three
consecutive years. Such activities must be listed in the
Commission-approved Cost Allocation Manual for any company required to
file a Cost Allocation Manual.

\(m\) Uncollectible revenues. Uncollectible revenues shall include
amounts originally credited to the revenue accounts which have proved
impracticable of collection.

\(n\) Revenue accounts to be maintained.

INCOME STATEMENT ACCOUNTS

Class A Class B

[Account Title]{.underline} [Account]{.underline} [Account]{.underline}

Local Network Services Revenues:

Basic local service revenue 1 5000 5000

Basic area revenue 5001

Optional extended area revenue 5002

Cellular mobile revenue 5003

Other mobile services revenue 5004

Public telephone revenue 5010

Local private line revenue 5040

Customer premises revenue 5050

Other local exchange revenue 5060

Other local exchange revenue settlements 5069

Network Access Services Revenues:

Network access revenue 1 5080 5080

End user revenue 5081 5081

Switched access revenue 5082 5082

Special access revenue 5083 5083

State access revenue 5084 5084

Class A Class B

[Account Title]{.underline} [Account]{.underline} [Account]{.underline}

Long Distance Network Services Revenues:

Long distance message revenue 5100 5100

Unidirectional long distance revenue 1 5110

Long distance inward-only revenue 5111

Long distance outward-only revenue 5112

Long distance private network revenue 1 5120

Subvoice grade long distance private

network revenue 5121

Voice grade long distance private

network revenue 5122

Audio program grade long distance

private network revenue 5123

Video program grade long distance

private network revenue 5124

Digital transmission long distance

private network revenue 5125

Long distance private network

switching revenue 5126

Other long distance private network

revenue 5128

Other long distance private network

revenue settlements 5129

Other long distance revenue 5160

Other long distance revenue settlements 5169

Miscellaneous Revenues:

Miscellaneous revenue 5200

Directory revenue 5230

Rent revenue 5240

Corporate operations revenue 5250

Miscellaneous revenue 1 5260

Special billing arrangements revenue 5261

Customer operations revenue 5262

Plant operations revenue 5263

Other incidental regulated revenue 5264

Other revenue settlements 5269

Carrier billing and collection revenue 5270

Nonregulated Revenues:

Nonregulated operating revenue 5280 5280

Uncollectible Revenues:

Uncollectible revenue 1 5300 5300

Uncollectible revenue - telecommuni-

cations 5301

Uncollectible revenue - other 5302

1 To be used by Class A telephone companies to summarize accounts for
reporting purposes.

**ù32.5000 Basic local service revenue.**

This account number shall be used by Class A telephone companies to
summarize for reporting purposes the contents of Accounts 5001 through
5004. Class B telephone companies shall use this account for revenues of
the type and character required of Class A companies in Accounts 5001
through 5069.

**ù32.5001 Basic area revenue.**

\(a\) This account shall include revenue derived from the provision of
basic area message services such as flat rate services and measured
services. Included is revenue derived from non-optional extended area
services. Also included in revenue derived from the billed or guaranteed
portion of semi-public services.

\(b\) Revenue derived from charges for nonpublished numbers or
additional and boldfaced listings in the alphabetical section of the
company\'s telephone directories shall be included in

Account 5230, Directory Revenue.

**ù32.5002 Optional extended area revenue.**

This account shall include total revenue derived from the provision of
optional extended area service.

**ù32.5003 Cellular mobile revenue.**

This account shall include message revenue derived from cellular mobile
telecommunications systems connected to the public switched network
placed between mobile units and other stations within the mobile service
area.

**ù32.5004 Other mobile services revenues.**

\(a\) This account shall include message revenue derived from general
radio telecommunications systems connected to the public switched
network placed between mobile units and other stations within the mobile
service area, as well as revenue from mobile radio paging, mobile
dispatching, and signaling services.

\(b\) Revenue from private mobile telephone services which do not have
access to the public switched network shall be included in Account 5264,
Other Incidental Regulated Revenue.

**ù32.5010 Public telephone revenue.**

This account shall include message revenue (e.g., coin paid) derived
from public and semi-public telephone services provided within the basic
service area.

**ù32.5040 Local private line revenue.**

This account shall include revenue derived from local services that
involve dedicated circuits, private switching arrangements, and/or
predefined transmission paths, whether virtual or physical, which
provide communications between specific locations (e.g., point-to-point
communications). It includes revenue from subvoice grade, voice grade,
audio and video program grade, digital transmission and local private
network switching as well as the revenue from administrative and
operational support services associated with private network services
and facilities, e.g., charges for company-directed testing, expedited
installation, and service restoration priority.

**ù32.5050 Customer premises revenue.**

This account shall include revenue derived from tariffed information
origination/termination plant. Included is revenue derived from the
provision under leasing arrangements of tariffed customer premises
equipment (CPE), terminal equipment, station apparatus and large private
branch exchanges as well as tariffed nonrecurring charges related solely
to station apparatus. Also included are all tariffed charges for
customer premises activities and facilities not related solely to
station apparatus.

**ù32.5060 Other local exchange revenue.**

This account shall also include revenue from the provision of secondary
features which are integrated with the telecommunica-tions network such
as call forwarding, call waiting and touch-tone line service. Also
included is revenue derived from the provision of public announcement
and other record message services, directory assistance and other call
completion services (excluding operator assisted basic long distance
calls), as well as revenue derived from central office related service
connection and termination charges, and other non-premise customer
specific charges associated with public network services. This account
shall also include local revenue not provided for in other accounts.

**ù32.5069 Other local exchange revenue settlements.**

This account shall include the charges and credits resulting from
contractual revenue pooling and/or sharing agreement for tariffed local
network services only when they are not separately identifiable by local
network services revenue accounts in the settlement process. (See also
ù32.4999(e) of this subpart.) To the extent that the charges and credits
resulting from a settlement process can be identified by Local Network
Services Revenue account they shall be recorded in the applicable
account.

**ù32.5080 Network access revenue.**

\(a\) This account number shall be used by Class A and Class B telephone
companies to summarize for reporting purposes the contents of Accounts
5081 through 5084. It shall include revenue derived from the provision
of exchange access services to an interexchange carrier or to an end
user of telecommunications service beyond the exchange carrier\'s
network.

\(b\) Accounts 5081 through 5083 are for federally tariffed access
charges while Account 5084 is to be used for state tariffed access
charges.

**ù32.5081 End user revenue.**

This account shall contain the federally tariffed monthly flat rate
charge assessed upon end users.

**ù32.5082 Switched access revenue.**

\(a\) This account shall consist of federally tariffed charges assessed
to interexchange carriers for access to local exchange facilities.

\(b\) Subsidiary record categories shall be maintained in order that the
company may separately report the amounts contained herein that relate
to limited pay telephone, carrier common line, line termination, local
switching, interception, information, common transport and dedicated
transport. Such subsidiary record categories shall be reported as
required by Part 43 of this Commission\'s Rules and Regulations.

**ù32.5083 Special access revenue.**

\(a\) This account shall include all federally tariffed charges assessed
for other than end user or switched access charges referred to in
Account 5081, End User Revenue, and Account 5082, Switched Access
Revenue.

\(b\) Subsidiary record categories shall be maintained in order that the
company may separately report the amounts contained herein that relate
to recurring charges, nonrecurring charges and surcharges. Such
subsidiary record categories shall be reported as required by Part 43 of
this Commission\'s Rules and Regulations.

**ù32.5084 State access revenue.**

\(a\) This account shall include all state tariffed charges assessed by
local exchange carriers upon interexchange carriers and end users access
for access to local exchange network for intrastate telecommunications.

\(b\) Billing and collections services provided under exchange access
tariffs shall be included in Account 5270, Carrier Billing and
Collection Revenue.

**ù32.5100 Long distance message revenue.**

\(a\) This account shall be used by Class A telephone companies for
revenues derived from message services that terminate beyond the basic
service area of the originating wire center and are individually priced.
This includes those message services which utilize the public long
distance switching network and the basic subscriber access subscriber
access line. (See also

Account 5111, Long Distance Inward-Only Revenue, and

Account 5112, Long Distance Outward-Only Revenue.) It also includes
those long distance calls placed from mobile and public telephones, as
well as any charges for operator assistance or special billing directly
related to the completion of a specific call. This account shall also
include revenue derived from individually priced message services
offered under calling plans (discounted long distance) which do not
utilize dedicated access lines, as well as those priced at the basic
long distance rated where a discounted toll charge is on a per message
basis. Any revenue derived from monthly or ones-time charges for
obtaining calling plan services shall be included in this account.

\(b\) Class B telephone companies shall use this account for revenues of
the type and character required of Class A companies in Accounts 5100
through 5169.

**ù32.5110 Unidirectional long distance revenue.**

This account number shall be used by Class A telephone companies to
summarize for reporting purposes the contents of Accounts 5111 and 5112.
It shall include revenue derived from long distance services which
permit unidirectional calls to a subscriber from specified service areas
or which permit the subscriber to place telephone calls from one
location to other specified services areas. It shall also include
revenue derived from toll calling plans which embody flat-rate or
measured time toll service. (See also Account 5100, Long Distance
Message Revenue.)

**ù32.5111 Long distance inward-only revenue.**

This account shall include the revenue derived from long distance
services which permit unidirectional calls to a subscriber from
specified services areas (multipoint-to-point service). These calls
require the use of dedicated access lines connecting a subscriber\'s
premises and a designated central office. These dedicated access lines
are generally separate from those required for the subscriber to place
outward calls. The call is billed to the subscriber even though it is
generally initiated by the subscriber\'s customer or correspondent.

**ù32.5112 Long distance outward-only revenue.**

This account shall include revenue derived from long distance services
which permit the subscriber to place telephone calls from one location
to other specified service areas (point-to-multipoint service). These
calls are completed without operator assistance and require the use of a
dedicated access line. The dedicated access line is generally separate
from those required for inward message services and cannot be used to
place calls within the basic service area or calls outside the selected
service areas. Outward calls are screened and blocked to determine
whether the calls are within an authorized service area.

**ù32.5120 Long distance private network revenue.**

\(a\) This account number shall be used by Class A telephone companies
to summarize for reporting purposes the contents of Accounts 5121
through 5129. It shall include revenue derived from services extending
beyond the basic service area that involve dedicated circuits, private
switching arrangements, and/or predefined transmission paths, whether
virtual or physical, which provide communications between specific
locations (e.g., point-to-point communications).

\(b\) Service connection charges, termination charges, rearrangements
and changes, etc., shall be included in each account to which they
apply. Revenue derived from associated administrative and operational
support services shall be included in Account 5128, Other Long Distance
Private Network Revenue.

**ù32.5121 Subvoice grade long distance private network revenue.**

This account which consists of revenue from narrow-band analog private
network circuits and facilities furnished exclusively from record forms
of communications, such as teletypewriter, teletypesetter, telewriter,
ticker, Morse, signaling, remote metering, and supervisory services.

**ù32.5122 Voice grade long distance private network revenue.**

This account consists of revenue from private network circuits and
facilities (including multipurpose wide-band) which provide voice grade
services for the transmission of analog signals. It includes revenue
from services such as voice, data and telephoto communication, as well
as remote metering, supervisory control, miscellaneous signaling and
channels furnished for the purpose of extending customer provided
communications systems. It includes revenue from the provision of
facilities between customer premises and (a) a serving office, (b) a
carrier distribution point or (c) an extension distribution channel,
except when furnished as a subscriber access line under an
unidirectional long distance service (in which case the revenue should
be included in Account 5111, Long Distance Inward-Only Revenue, or
Account 5112, Long Distance Outward-Only Revenue.

**ù32.5123 Audio program grade long distance private network**

**revenue.**

\(a\) This account consists of revenue from private network circuits and
facilities furnished for audio program transmission purposes, such as
radio broadcasting, sound recording (wired music) and loud speaker
services. It includes revenue from the provision of facilities for the
transmission of analog signals between customer premises and (1) a
serving office, (2) a carrier distribution point or (3) an extension
distribution channel furnished in connection with such services. It also
includes revenue from facilities furnished to carry the audio portion of
a television program if furnished under separate audio rates.

\(b\) If the rate for television program services includes both the
picture and sound portion of the transmission, the revenue shall be
included in Account 5124, Video Program Grade Long Distance Private
Network Revenue.

**ù32.5124 Video program grade long distance private network**

**revenue.**

This account consists of revenue from private network circuits and
facilities furnished for television program transmission purposes, such
as commercial broadcast an educational or private television services.
It includes revenue from the provision of facilities for the
transmission of analog signals between customer premises and (a) a
serving office, (b) a carrier distribution point or (c) an extension
distribution channel furnished in connection with such services. It also
includes revenue from both the picture and sound portions of
transmission for television program service when provided under a
combined rate schedule.

**ù32.5125 Digital transmission long distance private network**

**revenue.**

This account consists of revenue from the provision of circuits and
facilities for the transmission of digital signals only.

**ù32.5126 Long distance private network switching revenue.**

This account consists of revenue derived from the provision of common
user channels and switching capabilities used for the transmission of
telecommunication signals between three (3) or more points in the
network. Also included is revenue derived from the provision of basic
switching and transfer arrangements used to connect private line
channels.

**ù32.5128 Other long distance private network revenue.**

This account consists of revenue from administrative and operation
support services associated with private network services and
facilities, e.g., charges for company-directed testing, expedited
installation, and service restoration priority. Also included is other
private network services revenue not provided for in other accounts.

**ù32.5129 Other long distance private network revenue**

**settlements.**

This account shall include the charges and credits resulting from
contractual revenue pooling and/or sharing agreement for tariffed long
distance private network services only when they are not identifiable by
private network services revenue account in the settlement process. (See
also ù32.4999(e) of this subpart.) To the extent that the charges and
credits resulting from a settlement process can be identified by private
network services revenue account, that shall be recorded in the
applicable account.

**ù32.5160 Other long distance revenue.**

This account shall include long distance revenues not provided for
elsewhere.

**ù32.5169 Other long distance revenue settlements.**

This account shall include the charges and credits resulting from
contractual revenue pooling and/or sharing agreements for tariffed long
distances public network services only when they are not identifiable by
long distance public network services revenue accounts in the settlement
process. (See also ù32.4999(e) of this subpart.) To the extent that the
charges and credits resulting from a settlement process can be
identified by long distance public network services revenue account they
shall be recorded in the applicable account.

**ù32.5200 Miscellaneous revenue.**

Class B telephone companies shall use this account for revenues of the
type and character required of Class A companies in Accounts 5230
through 5270.

**ù32.5230 Directory revenue.**

This account shall include revenue derived from alphabetical and
classified sections of directories and shall also include fees paid by
other entities for the right to publish the company\'s directories.
Items to be included are:

\(a\) All revenue derived from the classified section of the
directories;

\(b\) Revenue from the sale of new telephone directories whether they
are the company\'s own directories or directories purchased from others.
This shall also include revenue from the sale of specially bound
telephone directories and special telephone directory covers;

\(c\) Amounts charged for additional and bold face listings, marginal
displays, inserts, and other advertisements in the alphabetical section
of the company\'s telephone directories; and

\(d\) Charges for unlisted and non-published telephone numbers.

**ù32.5240 Rent revenue.**

\(a\) This account shall include revenues (including taxes when borne by
the lessee) derived from the rental or subrental to others of
telecommunications services rendered by the company. It includes revenue
from the rent of such items as space in conduit, pole line space for
attachments, and any allowance for return on property used in joint
operations and shared facilities agreements.

\(b\) The expense of maintaining and operating the rented property,
including depreciation and insurance, shall be included in the
appropriate operating expense accounts. Taxes applicable to the rented
property shall be included by the owner of the rented property in
appropriate tax accounts.

\(c\) When land or buildings are rented on an incidental basis for
non-telecommunications use the rental and expenses are included in
Account 7360, Other Nonoperating Income.

**ù32.5250 Corporate operations revenue.**

This account shall include revenue derived from services rendered to
other companies under a license agreement, general service contracts, or
other arrangement provided for the furnishing of general accounting,
financial, legal, patent, and other general services associated with the
provision of regulated telecommunications services. (See also Accounts
5230 and 5270.)

**ù32.5260 Miscellaneous revenue.**

This account number shall be used by Class A telephone companies to
summarize for reporting purposes the contents of Accounts 5261 through
5269.

**ù32.5261 Special billing arrangements revenue.**

This account shall include revenue derived from the provision, either
under tariff or through contractual arrangements, of special billing
information to customers in the form of magnetic tapes, cards or
statements. Special billing information provides detail in a format
and/or at a level of detail not normally provided in the standard
billing rendered for the regulated telephone services utilized by the
customer.

**ù32.5262 Customer operations revenue.**

This account shall include revenue derived from the performance of
customer operations services for others incident to the company\'s
regulated telecommunications operations which are not provided for
elsewhere. (See also ù32.14(e) and ù32.4999(e) of this part.)

**ù32.5263 Plant operations revenue.**

\(a\) This account shall include revenue derived from contract services
(plant maintenance) performed for others incident to the company\'s
regulated telecommunications operations. This includes revenue from the
incidental performance of nontariffed operating and maintenance
activities for others which are similar in nature to those activities
which are performed by the company in operating and maintaining its own
telecommunications plant facilities.

\(b\) The records supporting the entries in this account shall be
maintained with sufficient particularity to identify the revenue and
associated Plant Specific Operations Expenses related to each
undertaking.

\(c\) This account does not include revenue related to the performance
of operation or maintenance activities under a joint operating
agreement. (See also Account 5240.)

**ù32.5264 Other incidental regulated revenue.**

\(a\) This account shall include the other incidental regulated revenue
not provided for in other revenues accounts. Such revenues to be
included are:

\(1\) Collection overages (collection shall be charged to Account 6623,
Customer Services.)

\(2\) Unclaimed refunds for telecommunications services when not subject
to escheats;

\(3\) Charges (penalties) imposed by the company for customer checks
returned for nonpayment;

\(4\) Discounts allowed customers for prompt payment;

\(5\) Late payments charges;

\(6\) Revenue from private mobile telephone services which do not have
access to the public switched network; and

\(7\) Other incidental revenue not provided for elsewhere in other
revenue accounts.

\(b\) Any definitely known amounts of losses of revenue collections due
to fire or theft, (1) at customers\' coin-box stations, (2) at public or
semipublic telephone stations, (3) in the possession of collectors en
route to collection offices, (4) on hand at collection offices, and (5)
between collection offices and banks shall be charged to Account 6728,
Other General and Administrative.

**ù32.5269 Other revenue settlements.**

This account shall include the charges and credits resulting from
contractual revenue pooling and/or sharing agreements for activities
included in the miscellaneous revenue accounts only when they are not
identifiable by miscellaneous revenue account in the settlement process.
(See also ù32.4999(e) of this subpart.) To the extent that the charges
and credits resulting from a settlement process can be identified by
miscellaneous revenue accounts they shall be recorded in the applicable
account.

**ù32.5270 Carrier billing and collection revenue.**

This account shall include revenue derived from the provision of billing
and collection services to other telecommunications companies. This
includes amounts charged for services such as message recording,
billing, collection, billing analysis, and billing information services,
whether rendered under tariff or contractual arrangements.

**ù32.5280 Nonregulated operating revenue.**

\(a\) This account shall include revenues derived from a nonregulated
activity involving the common or joint use of assets or resources in the
provision of regulated and nonregulated products or services, which are
not provided for elsewhere in this system of accounts.

\(b\) This account shall be debited and regulated revenue accounts shall
be credited at tariffed rates when tariffed services are provided to
nonregulated activities that are accounted for as prescribed in
ù32.23(c) of this subpart.

\(c\) Separate subsidiary record categories shall be maintained for each
nonregulated revenue item recorded in this account.

**ù32.5300 Uncollectible revenue.**

This account number shall be used by Class A telephone companies to
summarize for reporting purposes the contents of Accounts 5301 and 5302.
Class B telephone companies shall use this account for revenues of the
type and character required of Class A companies in Accounts 5301 and
5302.

**ù32.5301 Uncollectible revenue - telecommunications.**

This account shall be charged with amounts concurrently credited to
Account 1181, Accounts Receivable Allowances - Telecommunications.

**ù32.5302 Uncollectible revenue - other.**

This account shall be charged with amounts concurrently credited to
Account 1190, Other Accounts Receivable, or to Account 1191, Accounts
Receivable Allowance - Other, when such allowance is maintained.

**SUBPART E - INSTRUCTIONS FOR EXPENSE ACCOUNTS.**

**ù32.5999 General.**

\(a\) Structure of the expense accounts.

\(1\) The expense section of the system of accounts shall be organized
by expense group summary account, account, and subsidiary record
category (if required).

\(2\) The expense section of this system of accounts shall be comprised
of four major expense groups - Plant Specific Operations, Plant
Nonspecific Operations, Customer Operations, and Corporate Operations.
Expenses to be recorded in Plant Specific and Plant Nonspecific
Operations Expense groups generally reflect cost associated with the
various kinds of equipment identified in the plant asset accounts.
Expenses to be recorded in the Customer Operations and Corporate
Operations accounts reflect the costs of, or as associated with,
functions performed by people, irrespective of the organization in which
any particular function is performed.

\(3\) Summary accounts within expense groups shall be used to describe
aggregations of two or more accounts having a certain commonality.
Summary accounts are assigned numbers so that they may be used by Class
A telephone companies to aggregate accounts for reporting purposes; and
as specifically directed, so that they may be used as accounts by Class
B telephone companies.

\(4\) Accounts shall be maintained as prescribed in this section subject
to the conditions described in ù32.13 in

Subpart B. Subsidiary record categories may be required below the
account level by this system of accounts or by Commission order.

\(b\) Plant Specific Operations Expense.

\(1\) The Plant Specific Operations Expense accounts, 6110 through 6441,
are used to record costs related to specific kinds of telecommunications
plant.

\(2\) The Plant Specific Operations Expense accounts predominantly
mirror the telecommunications plant in service detail accounts and are
numbered consistently with them; the first digit of the expense account
being six (6) and the remaining digits being the same as the last three
numbers of the related plant account. In classifying Plant Specific
Operations expenses, the text of the corresponding plant account should
be consulted to ensure appropriateness.

\(3\) The Plant Specific Operations Expense accounts shall include the
costs of inspecting, testing (except as specified in Account 6533,
Testing Expense) and reporting on the condition of telecommunications
plant to determine the need for repairs, replacements, rearranges and
changes; performing routine work to

prevent trouble except as specified in Account 6533), replacing items of
plant other than retirement units; rearranging and changing the location
of plant not retired; repairing material for reuse; restoring the
condition of plant damaged by storms, floods, fire, or other casualties
(other than the cost of replacing retirement units); inspecting after
repairs have been made; and receiving training to perform these kinds of
work. Also included are the costs of direct supervision (immediate or
first-level) and office support of this work.

\(4\) In addition to the activities specified in

paragraph (b)(3) of this section, the appropriate Plant Specific
Operations Expense accounts shall include the cost of personnel whose
principal job is the operation of plant equipment, such as general
purpose computer operators, aircraft pilots, chauffeurs and shuttle bus
drivers. However, when the operation of equipment is performed as part
of other identifiable functions (such as the use of office equipment,
capital tools or motor vehicles) the operators\' cost shall be charged
to accounts appropriate for those functions. (For costs of operator
services personnel, see Accounts 6621, Call Completion Services, and
6622, Number Services, and for costs of test board personnel see Account
6533.)

\(c\) Plant Nonspecific Operations Expense. The Plant Nonspecific
Operations Expense accounts shall include expenses related to property
held for future telecommunications use, provisioning expenses, network
operations expenses, and depreciation and amortization expenses.
Accounts in this group (except for Accounts 6540, Access Expense, and
Accounts 6560 through 6565) shall include the costs of performing
activities described in narratives for individual accounts. These costs
shall also include the costs of supervision and office support of these
activities.

\(d\) Customer Operations Expense. The Customer Operations Expense
accounts shall include the cost of performing customer related marketing
and services activities described in narratives for individual accounts.
These costs shall also include the costs of supervision, office support
and training for these activities.

\(e\) Corporate Operations Expense. The Corporate Operations Expense
accounts shall include the costs of performing executive and planning
activities and general and administrative activities described in
narratives for individual accounts. These costs shall also include the
costs of supervision, office support and training for these activities.

\(f\) Expense Matrix. The expense accounts shall be maintained by the
following subsidiary record categories, as appropriate to each account.
Such subsidiary record categories shall be reported as required by Part
43 of this Commission\'s Rules and Regulations.

\(1\) Salaries and wages. This subsidiary record category shall include
compensation to employees, such as; wages, salaries, commissions,
bonuses, incentive awards and termination payments.

\(2\) Benefits. This subsidiary record category shall include payroll
related benefits on behalf of employees such as the following:

Pensions

Savings plan contributions (company portion) Workers compensation
required by law

Life, hospital, medical, dental, and vision plan insurance

Social Security and other payroll taxes

\(3\) Rents.

\(i\) This subsidiary record category shall include amounts paid for the
use of personal operating property. Amounts paid for real property shall
be included in Account 6121, Land and Buildings Expense. This category
includes payments for operating leases but does not include payments for
capital leases.

\(ii\) This subsidiary record category is applicable only to the Plant
Specific Operations Expense accounts. Incidental rents, e.g., short-term
rental car expense, shall be categorized as Other Expenses (see
paragraph (f)(4) of this section) under the account which reflects the
function for which the incidental rent was incurred.

\(4\) Other expenses. This subsidiary record category shall include
costs which cannot be classified to the other subsidiary record
categories. Included are material and supplies, including provisioning
(note also Account 6512, Provisioning Expense); contracted services;
accident and damage payments, insurance premiums; traveling expenses and
other miscellaneous costs.

\(5\) Clearances. This subsidiary record category shall include amounts
transferred to Construction accounts (see ù32.2000(c)(2)(iii)), or other
Plant Specific Operations Expense accounts, and/or Account 3100,
Accumulated Depreciation (cost of removal; see ù32.2000(g)(1)(iii)), as
appropriate, from

Accounts 6112, Motor Vehicle Expense; 6113, Aircraft Expense; 6114,
Special Purpose Vehicles Expense; 6116, Other Work Equipment Expense;
6534, Plant Operations Administration Expense; and 6535, Engineering
Expense. There shall also be transfers to Construction or other Plant
Specific Operations Expense accounts, as appropriate, from Account 6512,
Provisioning Expense. With respect to these expenses, companies may
establish such clearing accounts as they deem necessary to accomplish
substantially the same results, provided that within 30 days of the
opening of such accounts, companies shall notify the Commission of the
nature and purpose thereof. Additional clearing accounts affecting other
expense areas may be established with prior approval of the

Commission. Should companies elect, the initial incurred subsidiary
record category identification may be carried through to the final
accounts without this Commission\'s approval.

\(g\) Reimbursements. Reimbursements of actual costs incurred in
connection with joint operations or projects, repairing plant due to
damages by others, and obligations to make changes in telecommunications
plant (such as highway relocations), shall be credited to the accounts
originally charged.

\(h\) Expense accounts to be maintained.

INCOME STATEMENT ACCOUNTS

Class A Class B

[Account Title]{.underline} [Account]{.underline} [Account]{.underline}

Plant Specific Operations Expense:

Network support expenses 1 2 6110 6110

Motor vehicle expense 1 6112

Aircraft expense 1 6113

Special purpose vehicles expense 1 6114

Garage work equipment expense 1 6115

Other work equipment expense 1 6116

General support expenses 1 2 6120 6120

Land and building expense 1 6121

Furniture and artworks expense 1 6122

Office equipment expense 1 6123

General purpose computers expense 1 6124

Central office switching expenses 1 2 6210 6210

Analog electronic expense 1 6211 6210.11

Digital electronic expense 1 6212 6210.21

Electro-mechanical expense 1 6215 6210.31

Operator systems expense 1 6220 6220

Class A Class B

[Account Title]{.underline} [Account]{.underline} [Account]{.underline}

Central office transmission expense 1 2 6230 6230

Radio systems expense 1 6231 6230.11

Circuit equipment expense 1 6232 6230.21

Information origination/termination

expenses 1 2 6310 6310

Station apparatus expense 1 6311

Large private branch exchange expense 1 6341

Public telephone terminal equipment

expense 1 6351

Other terminal equipment expense 1 6362

Cable and wire facilities expenses 1 2 6410 6410

Poles expense 1 6411

Aerial cable expense 1 6421

Underground cable expense 1 6422

Buried cable expense 1 6423

Submarine cable expense 1 6424

Deep sea cable expense 1 6425

Intrabuilding network cable expense 1 6426

Aerial wire expense 1 6431

Conduit systems expense 1 6441

Plant Nonspecific Operations Expense:

Other property, plant and equipment

expenses 1 2 6510 6510

Property held for future telecommuni-

cations use expense 1 6511

Provisioning expense 1 6512

Network operations expenses 1 2 6530 6530

Power expense 1 6531

Network administration expense 1 6532

Testing expense 1 6533

Plant operations administration expense 1 6534

Engineering expense 1 6535

Access expense 1 6540 6540

Depreciation and amortization expenses 2 6560 6560

Depreciation expense 6560.1

Amortization expense 6560.2

Depreciation expense - telecommuni-

cations plant in service 6561

Depreciation expense - property held for

future telecommunications use 6562

Amortization expense - tangible 6563

Amortization expense - intangible 6564

Amortization expense - other 6565

Customer Operations Expense:

Marketing 1 2 6610 6610

Product management 1 6611

Sales 1 6612

Product advertising 1 6613

Services 1 2 6620 6620

Class A Class B

[Account Title]{.underline} [Account]{.underline} [Account]{.underline}

Call completion services 1 6621

Number services 1 6622

Customer services 1 6623

Corporate Operations Expense:

Executive and planning 1 2 6710 6710

Executive 1 6711

Planning 1 6712

General and administrative 1 2 6720 6720

Accounting and finance 1 6721

External relations 1 6722

Human resources 1 6723

Information management 1 6724

Legal 1 6725

Procurement 1 6726

Research and development 1 6727

Other general and administrative 1 6728

Provision for uncollectible notes

receivable 6790 6790

1 Subsidiary record categories required in accordance with ù32.5999(f)
of this subpart.

2 To be used by Class A telephone companies to summarize accounts for
reporting purposes.

**ù32.6110 Network support expenses.**

\(a\) This account number shall be used by Class A telephone companies
to summarize for reporting purposes the contents of Accounts 6112
through 6116. Class B telephone companies shall use this account for
expenses of the type and character required of Class A companies in
Accounts 6112 through 6116.

\(b\) Credits shall be made to this account by Class B companies for
amounts transferred to Construction and/or other Plant Specific
Operations Expense accounts. These amounts shall be computed on the
basis of direct labor hours. (See also ù32.5999(f)(5) of this subpart.)

**ù32.6112 Motor vehicle expense.**

\(a\) This account shall include costs of fuel, lubrications, license
and inspection fees, washing, repainting, and minor accessories. Also
included are the costs of personnel whose principal job is operating
motor vehicles, such as chauffeurs and shuttle bus drivers. The costs of
users of motor vehicles whose principal job is not the operation of
motor vehicles shall be charged to accounts appropriate for the
activities performed.

\(b\) Credits shall be made to this account for amounts transferred to
Construction and/or to other Plant Specific Operations Expense accounts.
These amounts shall be computed on the basis of direct labor hours. (See
also ù32.5999(f)(5) of this subpart.)

**ù32.6113 Aircraft expense.**

\(a\) This account shall include such costs as aircraft fuel, flight
crews, mechanics and ground crews, licenses and inspection fees,
washing, repainting, and minor accessories.

\(b\) Credits shall be made to this account for amounts transferred to
Construction and/or to other Plant Specific Operations Expense accounts.
These amounts shall be computed on the basis of direct labor hours. (See
also ù32.5999(f)(5) of this subpart.)

**ù32.6114 Special purpose vehicles expense.**

\(a\) This account shall include such costs as fuel, licenses and
inspection fees, washing repainting, and minor accessories. The costs of
operators of this equipment shall be charged to accounts appropriate for
the activities performed.

\(b\) Credits shall be made to this account for amounts transferred to
Construction and/or to other Plant Specific Operations Expense accounts.
These amounts shall be computed on the basis of direct labor hours. (See
also ù32.5999(f)(5) of this subpart.)

**ù32.6115 Garage work equipment expense.**

This account shall be charged only with costs incurred in connection
with the garage work equipment itself. The costs of using this equipment
to maintain motor vehicles, special purpose vehicles, or other work
equipment shall be charged to

Accounts 6112, Motor Vehicles; 6114 Special Purpose Vehicles; or 6116,
Other Work Equipment, as appropriate.

**ù32.6116 Other work equipment expense.**

\(a\) This account shall be charged only with costs incurred in
connection with this work equipment itself. The costs of operators of
this equipment shall be charged to accounts appropriate for the
activities performed.

\(b\) Credits shall be made to this account for amounts transferred to
Construction and/or to other Plant specific Operations Expense accounts.
These amounts shall be computed on the basis of direct labor hours. (See
also ù32.5999(f)(5) of this subpart.)

**ù32.6120 General support expenses.**

This account number shall be used by Class A telephone companies to
summarize for reporting purposes the contents of Accounts 6121 through
6124. Class B telephone companies shall use this account for expenses of
the type and character required of Class A companies in Accounts 6121
through 6124.

**ù32.6121 Land and building expense.**

\(a\) This account shall include expenses associated with land and
buildings (excluding amortization of leasehold improvements). This
account shall also include janitorial service, cleaning supplies, water,
sewage, fuel and guard service, and electrical power.

\(b\) The cost of electrical power used to operate the
telecommunications network shall be charged to Account 6531, Power
Expense, and the cost of separately metered electricity used for
operating specific types of equipment, such as computers, shall be
charged to the expense account appropriate for such use.

**ù32.6122 Furniture and artworks expense.**

This account shall include expenses associated with furniture and
artworks.

**ù32.6123 Office equipment expense.**

This account shall be charged only with costs incurred in connection
with the office equipment itself. The costs of operators of this
equipment shall be charged to accounts appropriate for the activities
performed.

**ù32.6124 General purpose computers expense.**

This account shall include costs of personnel whose principal job is the
physical operation of general purpose computers and the maintenance of
operating systems. This excludes the cost of preparation of input data
or the use of outputs which are chargeable to the accounts appropriate
for the activities being performed. Also excluded are costs incurred in
planning, developing, testing, implementing, and maintaining data bases
and application systems for general purpose computers. (See also Account
6724, Information Management.) Separately metered electricity for
general purpose computers shall also be included in this account.

Note: A 4/10/90 Notice of Proposed Rulemaking (NPRM) (FCC 90-132) in CC
Docket 90-215 is pending before the FCC. It proposes eliminating Part 32
Accounts 6124, General Purpose Computers Expense, and 6724, Information
Management. Comments and Replies were filed. Awaiting FCC Action.

**ù32.6210 Central office switching expenses.**

This account number shall be used by Class A telephone companies to
summarize for reporting purposes the contents of Accounts 6211 through
6215. Class B telephone companies shall use this account for expenses of
the type and character required of Class A companies in Accounts 6211
through 6215.

***REA 6210.11 Analog electronic expense.***

This account shall used by Class B companies. This account shall include
expenses associated with analog electronic switching.

***REA 6210.21 Digital electronic expense.***

This account shall used by Class B companies. This account shall include
expenses associated with digital electronic switching.

***REA 6210.31 Electro-mechanical expense.***

This account shall used by Class B companies. This account shall include
expenses associated with electro-mechanical switching.

**ù32.6211 Analog electronic expense.**

This account shall include expenses associated with analog electronic
switching.

**ù32.6212 Digital electronic expense.**

This account shall include expenses associated with digital electronic
switching.

**ù32.6215 Electro-mechanical expense.**

\(a\) This account shall include expenses associated with
electro-mechanical switching.

\(b\) Subsidiary record categories shall be maintained as provided in
ù32.2215(a) of Subpart C.

**ù32.6220 Operator systems expense.**

This account shall include expenses associated with operator systems
equipment.

**ù32.6230 Central office transmission expense.**

This account number shall be used by Class A telephone companies to
summarize for reporting purposes the contents of Accounts 6231 and 6232.
Class B telephone companies shall use this account for expenses of the
type and character required of Class A companies in Accounts 6231 and
6232.

***REA 6230.11 Radio systems expense.***

This account shall used by Class B companies. This account shall include
expenses associated with radio systems.

***REA 6230.21 Circuit equipment expense.***

This account shall used by Class B companies. This account shall include
expenses associated with circuit equipment.

**ù32.6231 Radio systems expense.**

\(a\) This account shall include expenses associated with radio systems.

\(b\) Subsidiary record categories shall be maintained as provided in
ù32.2231(a) of Subpart C.

**ù32.6232 Circuit equipment expense.**

This account shall include expenses associated with circuit equipment.

**ù32.6310 Information origination/termination expenses.**

This account number shall be used by Class A telephone companies to
summarize for reporting purposes the contents of Accounts 6311 through
6362. Class B telephone companies shall use this account for expenses of
the type and character required of Class A telephone companies in
Accounts 6311 through 6362.

**ù32.6311 Station apparatus expense.**

This account shall include expenses associated with station apparatus.
Expenses associated with company internal use communication equipment
shall be recorded in Account 6123, Office Equipment Expense.

**ù32.6341 Large private branch exchange expense.**

This account shall include expenses associated with large private branch
exchanges. Expenses associated with company internal use communication
equipment shall be recorded in

Account 6123, Office Equipment Expense.

**ù32.6351 Public telephone terminal equipment expense.**

This account shall include expenses associated with public telephone
terminal equipment.

**ù32.6362 Other terminal equipment expense.**

This account shall include expenses associated with other terminal
equipment.

**ù32.6410 Cable and wire facilities expenses.**

This account number shall be used by Class A telephone companies to
summarize for reporting purposes the contents of Accounts 6411 through
6426. Class B telephone companies shall use this account for expenses of
the type and character required of Class A companies in Accounts 6411
through 6426.

**ù32.6411 Poles expense.**

This account shall include expenses associated with poles.

**ù32.6421 Aerial cable expense.**

\(a\) This account shall include expenses associated with aerial cable.

\(b\) Subsidiary record categories shall be maintained as provided in
ù32.2421(a) of Subpart C.

**ù32.6422 Underground cable expense.**

\(a\) This account shall include expenses associated with underground
cable.

\(b\) Subsidiary record categories shall be maintained as provided in
ù32.24.22(a) of Subpart C.

**ù32.6423 Buried cable expense.**

\(a\) This account shall include expenses associated with buried cable.

\(b\) Subsidiary record categories shall be maintained as provided in
ù32.2423(a) of Subpart C.

**ù32.6424 Submarine cable expense.**

\(a\) This account shall include expenses associated with submarine
cable.

\(b\) Subsidiary record categories shall be maintained as provided in
ù32.2424(a) of Subpart C.

**ù32.6425 Deep sea cable expense.**

\(a\) This account shall include expenses associated with deep sea
cable.

\(b\) Subsidiary record categories shall be maintained as provided in
ù32.2425(a) of Subpart C.

**ù32.6426 Intrabuilding network cable expense.**

\(a\) This account shall include expenses associated with intrabuilding
network cable.

\(b\) Subsidiary record categories shall be maintained as provided in
ù32.2426(a) of Subpart C.

**ù32.6431 Aerial wire expense.**

This account shall include expenses associated with aerial wire.

**ù32.6441 Conduit systems expense.**

This account shall include expenses associated with conduit systems.

**ù32.6510 Other property, plant and equipment expenses.**

This account number shall be used by Class A telephone companies to
summarize for reporting purposes the contents of Accounts 6511 and 6512.
Class B telephone companies shall use this account for expenses of the
type and character required of Class A companies in Accounts 6511 and
6512.

**ù32.6511 Property held for future telecommunications use**

**expense.**

This account shall include expenses associated with property held for
future telecommunications use.

**ù32.6512 Provisioning expense.**

\(a\) This account shall include costs incurred in provisioning material
and supplies, including office supplies. This includes receiving and
stocking, filling requisitions from stock, monitoring and replenishing
stock levels, delivery of material, storage, loading or unloading and
administering the reuse or refurbishment of material. Also included are
adjustments resulting from the annual or more frequent inventory of
material and supplies.

\(b\) Credits shall be made to this account for amounts transferred to
construction and/or to plant specific operations expense. These costs
are to be cleared by adding to the cost of material and supplies a
suitable loading charge. (See also ù32.5999(f)(5) of this subpart.)

**ù32.6530 Network operations expenses.**

This account number shall be used by Class A telephone companies to
summarize for reporting purposes the contents of Accounts 6531 through
6535. Class B telephone companies shall use this account for expenses of
the type and character required of Class A companies in Accounts 6531
through 6535.

**ù32.6531 Power expense.**

This account shall include the cost of electrical power used to operate
the telecommunications network.

**ù32.6532 Network administration expense.**

This account shall include costs incurred in network administration.
This includes such activities as controlling traffic flow, administering
traffic measuring and monitoring devices, assigning equipment and load
balancing, collecting and summarizing traffic data, administering
trunking, and assigning interoffice facilities and circuit layout work.

**ù32.6533 Testing expense.**

This account shall include costs incurred in testing telecommunications
facilities from a testing facility (test desk or other testing system)
to determine the condition of plant on either a routine basis or prior
to assignment of the facilities; receiving, recording and analyzing
trouble reports; testing to determine the nature and location of
reported trouble condition; and dispatching repair persons or otherwise
initiating corrective action. (Note also ù32.5999(b)(3) of this
subpart.)

**ù32.6534 Plant operations administration expense.**

\(a\) This account shall include costs incurred in the general
administration of plant operations. This includes supervising plant
operations (except as specified in ù32.5999(a)(3) of this subpart);
planning, coordinating and monitoring plant operations; and performing
staff work such as developing methods and procedures, preparing and
conducting training (except on-the-job training) and coordinating safety
programs.

\(b\) Credits shall be made to this account for amounts transferred to
Construction accounts. These amounts shall be computed on the basis of
direct labor hours. (See ù32.2000(c)(2)(ii) of Subpart C.)

**ù32.6535 Engineering expense.**

\(a\) This account shall include costs incurred in the general
engineering of the telecommunications plant which are not directly
chargeable to an undertaking or project. This includes developing input
to the fundamental planning process, performing preliminary work or
advance planning in connection with potential undertakings, and
performing special studies of an engineering nature.

\(b\) Credits shall be made to this account for amounts transferred to
Construction accounts. These amounts shall be computed on the basis of
direct labor hours. (See ù32.2000(c)(2)(ii) of Subpart C.)

**ù32.6540 Access expense.**

\(a\) This account shall include amounts paid by interexchange carriers
or other exchange carriers to another exchange carrier for the provision
of carrier\'s carrier access.

\(b\) Subsidiary record categories shall be maintained in order that the
entity may separately report interstate and intrastate carrier\'s
carrier expense. Such subsidiary record categories shall be reported as
required by Part 43 of this Commission\'s Rules and Regulations.

**ù32.6560 Depreciation and amortization expenses.**

This account shall be used by Class A telephone companies to summarize
for reporting purposes the contents of Accounts 6561 through 6565. Class
B telephone companies shall use this account for expenses of the type
and character required of Class A companies in Accounts 6561 through
6565.

***REA 6560.1 Depreciation expense.***

This account shall include the depreciation expense associated with
telecommunicatons plant in service (Accounts 2112 through 2441) and
property held for future telecommunications use (Account 2002).

***REA 6560.2 Amortization expense.***

This account shall include the amortization expense associated with
capital leases and leasehold improvements (Accounts 2681 and 2682),
intangibles (Account 2690), and telecommunications plant adjustments
(Account 2005).

**ù32.6561 Depreciation expense - telecommunications plant in**

**service.**

This account shall include the depreciation expense of capitalized costs
in Accounts 2112 through 2441, inclusive.

**ù32.6562 Depreciation expense - property held for future**

**telecommunications.**

This account shall include the depreciation expense of capitalized costs
included in Account 2002, Property Held for Future Telecommunications
Use.

**ù32.6563 Amortization expense - tangible.**

This account shall include only the amortization of costs included in
Accounts 2681, Capital Leases, and 2682, Leasehold Improvements.

**ù32.6564 Amortization expense - intangible.**

This account shall include the amortization of costs included in Account
2690, Intangibles.

**ù32.6565 Amortization expense - other.**

\(a\) This account shall include only the amortization of costs included
in Account 2005, Telecommunications Plant Adjustment.

\(b\) This account shall also include lump-sum write offs of amounts of
plant acquisition adjustment as provided for in ù32.2005(b)(3) of
Subpart C.

\(c\) Subsidiary records shall be maintained so as to show that
character of the amounts contained in this account.

**ù32.6610 Marketing.**

This account number shall be used by Class A telephone companies to
summarize for reporting purposes the contents of Accounts 6611 through
6613. Class B telephone companies shall use this account for expenses of
the type and character required of Class A companies in Accounts 6611
through 6613.

**ù32.6611 Product management.**

This account shall include costs incurred in performing administrative
activities related to marketing products and services. This includes
competitive analysis, product and service identification and
specification, test market planning, demand forecasting, product life
cycle analysis, pricing analysis, and identification and establishment
of distribution channels.

**ù32.6612 Sales.**

This account shall include costs incurred in selling products and
services. This includes determination of individual customer needs,
development and presentation of customer proposals, sales order
preparation and handling, and preparation of sales records.

**ù32.6613 Product advertising.**

This account shall include costs incurred in developing and implementing
promotional strategies to stimulate the purchase of products and
services. This excludes nonproduct-related advertising, such as
corporate image, stock and bond issue and employment advertisements,
which shall be included in the appropriate functional accounts.

**ù32.6620 Services.**

This account shall be used by Class A telephone companies to summarize
for reporting purposes the contents of Accounts 6621 through 6623. Class
B telephone companies shall use this account for expenses of the type
and character required of Class A companies in Accounts 6621 through
6623.

**ù32.6621 Call completion services.**

This account shall include costs incurred in helping customers place and
complete calls, except directory assistance. This includes handling and
recording; intercept; quoting rates, time and charges; and all other
activities involved in the manual handling of calls.

**ù32.6622 Number services.**

This account shall include costs incurred in providing customer number
and classified listings. This includes preparing or purchasing,
compiling, and disseminating those listings through directory assistance
or other means.

**ù32.6623 Customer services.**

\(a\) This account shall include costs incurred in establishing and
servicing customer accounts. This includes:

\(1\) Initiating customer service orders and records;

\(2\) Maintaining and billing customer accounts;

\(3\) Collecting and investigating customer accounts, including
collecting revenues, reporting receipts, administering collection
treatment, and handling contacts with customers regarding adjustments of
bills;

\(4\) Collecting and reporting pay station receipts; and

\(5\) Instructing customers in the use of products and services.

\(b\) This account shall also include amounts paid by interexchange
carriers or other exchange carriers to another exchange carrier for
billing and collection services. Subsidiary record categories shall be
maintained in order that the entity may separately report interstate and
intrastate amounts. Such subsidiary record categories shall be reported
as required by

Part 43 of this Commission\'s Rules and Regulations.

**ù32.6710 Executive and planning.**

This account shall be used by Class A telephone companies to summarize
for reporting purposes the contents of Accounts 6711 and 6712. Class B
telephone companies shall use this account for expenses of the type and
character required of Class A companies in Accounts 6711 and 6712.

**ù32.6711 Executive.**

This account shall include costs incurred in formulating corporate
policy and in providing overall administration and management. Included
are the pay, fees and expenses of boards of directors or similar policy
boards and all board-designated officers of the company and their office
staffs, e.g., secretaries and staff assistants.

**ù32.6712 Planning.**

This account shall include costs incurred in developing and evaluating
long-term courses of action for the future operations of the company.
This includes performing corporate organization and integrated
long-range planning, including management studies, options and
contingency plans, and economic strategic analysis.

**ù32.6720 General and administrative.**

This account shall be used by Class A telephone companies to summarize
for reporting purposes the contents of Accounts 6721 through 6728. Class
B telephone companies shall use this account for expenses of the type
and character required of Class A companies in Accounts 6721 through
6728.

**ù32.6721 Accounting and finance.**

This account shall include costs incurred in providing accounting and
financial services. Accounting services include payroll and
disbursements, property accounting, capital recovery, regulatory
accounting (revenue requirements, separations, settlements and corollary
cost accounting), non-customer billing, tax accounting, internal and
external auditing, capital and operating budget analysis and control,
and general accounting (accounting principles and procedures and
journals, ledgers, and financial reports). Financial services include
banking operations, cash management, benefit investment fund management
(including actuarial services), securities management, debt trust
administration, corporate financial planning and analysis, and internal
cashier services.

**ù32.6722 External relations.**

This account shall include costs incurred in maintaining relations with
government, regulators, other companies and the general public. This
includes:

\(a\) Reviewing existing or pending legislation (See also Account 7370,
Special Charges, for lobbying expenses.):

\(b\) Preparing and presenting information for regulatory purposes,
including tariff and service cost filings, and obtaining radio licenses
and construction permits;

\(c\) Performing public relations and non-product related corporate
image advertising activities;

\(d\) Administering relations, including negotiating contracts (See also
Account 6725, Legal.), with telecommunications companies and other
utilities, businesses, and industries. This excludes sales contracts
(See also Account 6612, Sales); and

\(e\) Administering investor relations.

**ù32.6723 Human resources.**

This account shall include costs incurred in performing personnel
administration activities. This includes:

\(a\) Equal Employment Opportunity and Affirmative Action Programs;

\(b\) Employee data for forecasting, planning and reporting;

\(c\) General employment services;

\(d\) Occupational medical services;

\(e\) Job analysis and salary programs;

\(f\) Labor relations activities;

\(g\) Personnel development and staffing services, including counseling,
career planning, promotion and transfer programs;

\(h\) Personnel policy development;

\(i\) Employee communications;

\(j\) Benefit administration;

\(k\) Employee activity programs;

\(l\) Employee safety programs; and

\(m\) Nontechnical training course development and presentation.

**ù32.6724 Information management.**

This account shall include costs incurred in planning, developing,
testing, implementing and maintaining data bases and application systems
for general purpose computers.

Note: A 4/10/90 Notice of Proposed Rulemaking (NPRM) (FCC

90-132) in CC Docket 90-215 is pending before the FCC. It proposes
eliminating Part 32 Accounts 6124, General Purpose Computers Expense,
and 6724, Information Management. Comments and Replies were filed.
Awaiting FCC Action.

**ù32.6725 Legal.**

This account shall include costs incurred in providing legal services.
This includes conducting and coordinating litigation, providing guidance
on regulatory and labor matters, preparing, reviewing and filing patents
and contracts and interpreting legislation. Also included are court
costs, filing fees, and the costs of outside counsel, depositions,
transcripts and witnesses.

**ù32.6726 Procurement.**

This account shall include costs incurred in procuring material and
supplies, including office supplies. This includes analyzing and
evaluating suppliers\' products, selecting appropriate suppliers,
negotiating supply contracts, placing purchase orders, expediting and
controlling orders placed for material, developing standards for
material purchased and administering vendor or user claims.

**ù32.6727 Research and development.**

\(a\) This account shall include costs incurred in making planned search
or critical investigation aimed at discovery of new knowledge. It also
includes translating research findings into a plan or design for a new
product or process or for a significant improvement to an existing
product or process, whether intended for sale or use.

\(b\) This excludes making routine alterations to existing products,
processes, and other ongoing operations even though those alterations
may represent improvements.

**ù32.6728 Other general and administrative.**

This account shall include costs incurred in performing general
administrative activities not directly charged to the user, and not
provided for in other accounts. This includes providing general
reference libraries, food services (e.g., cafeterias, lunch rooms and
vending facilities), archives, general security investigation services,
operating official private branch exchanges in the conduct of the
business, and telecommunications and mail services. Also included are
payments in settlement of accident and damage claims, insurance premiums
for protection against losses and damages, direct benefit payments to or
on behalf of retired and separated employees, accident and sickness
disability payments, supplemental payments to employees while in
governmental service, death payments, and other miscellaneous costs of a
corporate nature. This account excludes the cost of office services,
which are to be included in the accounts appropriate for the activities
supported.

**ù32.6790 Provision for uncollectible notes receivable.**

This account shall be charged with amounts concurrently credited to
Account 1200, Notes Receivable, or to Account 1201, Notes Receivable
Allowance, when such allowance is maintained.

**SUBPART F - INSTRUCTIONS FOR OTHER INCOME ACCOUNTS**

**ù32.6999 General.**

\(a\) Structure of Other Income Accounts. The Other Income Accounts are
designed to reflect both operating and nonoperating income items
including taxes, extraordinary items and other income and expense items
not properly included elsewhere.

\(b\) Other income accounts listing.

Class A Class B

[Account Title]{.underline} [Account]{.underline} [Account]{.underline}

Other Operating Income and Expense:

Other operating income and expenses 1 7100 7100

Income from custom work 7110

Return from nonregulated use of

regulated facilities 7130

Gains and losses from foreign exchange 7140

Gains and losses from the disposition of

land and artworks 7150

Other operating gains and losses 7160

Operating Taxes:

Operating taxes 1 7200 7200

Operating investment tax credits - net 7210 7200.1

Operating federal income taxes 7220 7200.2

Operating state and local income taxes 7230 7200.3

Operating other taxes 7240

Operating taxes - property 7240.1 7200.41

Operating taxes - miscellaneous 7240.2 7200.42

Provision for deferred operating income

taxes - net 7250 7200.5

Class A Class B

[Account Title]{.underline} [Account]{.underline} [Account]{.underline}

Nonoperating Income and Expense:

Nonoperating income and expense 1 7300 7300

Dividend income 7310 7300.1

Interest income 7320 7300.2

Income from sinking and other funds 7330 7300.3

Allowance for funds used during

construction 7340 7300.4

Gains or losses from the disposition of

certain property 7350 7300.5

Other nonoperating income 7360 7300.6

Special charges 7370

Nonoperating Taxes:

Nonoperating taxes 1 7400 7400

Nonoperating investment tax credits -

net 7410 7400.1

Nonoperating federal income taxes 7420 7400.2

Nonoperating state and local income taxes 7430 7400.3

Nonoperating other taxes 7440 7400.4

Provision for deferred nonoperating

income taxes - net 7450 7400.5

Interest and Related Items:

Interest and related items 1 7500 7500

Interest on funded debt 7510

Interest expense - capital leases 7520

Amortization of debt issuance expense 7530

Other interest deductions 7540

Extraordinary Items:

Extraordinary items 1 7600 7600

Extraordinary income credits 7610 7600.1

Extraordinary income charges 7620 7600.2

Current income tax effect of

extraordinary items - net 7630 7600.3

Provision for deferred income tax effect

of extraordinary items - net 7640 7600.4

Jurisdictional Differences and Nonregulated Income Items:

Income effect of jurisdictional

ratemaking differences - net 7910 7910

Nonregulated net income 7990 7990

1 To be used by Class A telephone companies to summarize accounts for
reporting purposes.

**ù32.7099 Content of accounts.**

Other Operating Income and Expense accounts are intended to record the
results of transactions, events or circumstances during the periods
which are incidental or peripheral to the major or central operations of
the company. They shall include all items of an operating nature as
incidental work performed for others not provided for elsewhere.
Whenever practicable the inflows and outflows associated with a
transaction, event or circumstance shall be matched and the results
shown as a net gain or loss.

**ù32.7100 Other operating income and expenses.**

This account number shall be used by Class A telephone companies to
summarize for reporting purposes the contents of Accounts 7110 through
7160. Class B companies shall use this account for other operating
income an expense items of the type and character required of Class A
companies in Accounts 7110 through 7160.

**ù32.7110 Income from custom work.**

\(a\) This account shall include profits realized from custom work
(plant construction) performed for others incident to the company\'s
regulated telecommunications operations. This includes profits from the
incidental performance of nontariffed construction activities (including
associated engineering and design) for others which are similar in
nature to those activities which are performed by the company in
constructing its own telecommunications plant facilities.

\(b\) The records supporting the entries in this account shall be
maintained with sufficient particularity to identify separately the
revenue and costs associated with each undertaking.

**ù32.7130 Return from nonregulated use of regulated facilities.**

This account shall include a return on investment for the use of
regulated property plant and equipment to provide nonregulated products
and services.

**ù32.7140 Gains and losses from foreign exchange.**

This account shall include all gains and losses resulting from the
exchange of foreign currency. Transactions (realized) gains or losses
shall be measured based on the exchange rate in effect on the
transaction date. Unrealized gains or losses shall be measured bases on
the exchange rate in effect at the balance sheet date.

**ù32.7150 Gains and losses from the disposition of land and**

**artworks.**

This account shall include gains or losses resulting from the
disposition of land or artworks.

**ù32.7160 Other operating gains and losses.**

This account shall be charged or credited, as appropriate, to record the
results of transactions, events or circumstances which are of an
operational nature, but occur irregularly or are peripheral to the major
or central operations of the company and not provided for elsewhere.

**ù32.7199 Content of accounts.**

The Operating Tax accounts shall include the taxes arising from the
central operations of the company.

**ù32.7200 Operating taxes.**

This account number shall be used by Class A telephone companies to
summarize for reporting purposes the contents of Accounts 7210 through
7250. Class B telephone companies shall use this account for operating
taxes of the type and character required of Class A companies in
Accounts 7210 through 7250.

***REA 7200.1 Operating investment tax credits - net.***

\(a\) This account shall used by Class B companies. This account shall
be charged and Account 4320, Unamortized Operating Investment Tax
Credits - Net, shall be credited with investment tax credits generated
from qualified expenditures related to regulated operations which the
company defers rather than recognizes currently in income.

\(b\) This account shall be credited and Account 4320 shall be charged
ratably with the amortization of each year\'s investment tax credits
included in Account 4320 for investment services for ratemaking
purposes. Such amortization shall be determined in relation to the
period of time used for computing book depreciation on the property with
respect to which the tax credits relate.

***REA 7200.2 Operating federal income taxes.***

\(a\) This account shall used by Class B companies. This account shall
be charged and Account 4070.1, Income Taxes Accrued - Federal, shall be
credited for the amount of Federal income tax expense incurred in the
current operating period.. This account shall also reflect subsequent
adjustments to amounts previously charged.

\(b\) Taxes should be accrued each month on an estimated basis and
adjustments made as later data becomes available.

***REA 7200.3 Operating state and local income taxes.***

\(a\) This account shall used by Class B companies. This account shall
be charged and Account 4070.2, Income Taxes Accrued - State and Local,
shall be credited for the amount of state and local income tax expense
incurred in the current operating period. This account shall also
reflect subsequent adjustments to amounts previously charged.

\(b\) Taxes should be accrued each month on an estimated basis and
adjustments made as later data becomes available.

***REA 7200.41 Operating taxes - property.***

\(a\) This account shall used by Class B companies. This account shall
be charged and Account 4080.1, Other Taxes

Accrued - Property, shall be credited for the amount of property tax
expense incurred in the current operating period. This account shall
also reflect subsequent adjustments to amounts previously charged.

\(b\) Taxes should be accrued each month on an estimated basis and
adjustments made as later data becomes available.

***REA 7200.42 Operating taxes - miscellaneous.***

\(a\) This account shall used by Class B companies. This account shall
be charged and Account 4080.5, Other Taxes

Accrued - Miscellaneous, shall be credited for the amount of all other
taxes accrued during the current operating period and not provided for
elsewhere such as gross receipts, franchise, and capital stock tax
expense incurred in the current operating period. This account shall
also reflect subsequent adjustments to amounts previously charged.

\(b\) Taxes should be accrued each month on an estimated basis and
adjustments made as later data becomes available.

***REA 7200.5 Provision for deferred operating income taxes - net.***

\(a\) This account shall used by Class B companies. This account shall
be charged or credited, as appropriate, with contra entries recorded in
either Account 4100, Net Current Deferred Operating Income Taxes, or
Account 4340, Net Noncurrent Deferred Operating Income Taxes, as
appropriate, for income tax expense that has been deferred.

\(b\) Subsidiary record categories shall be maintained to distinguish
between property and nonproperty related deferrals and so that the
company may separately report the amounts contained herein that relate
to Federal, state, and local income taxes.

**ù32.7210 Operating investment tax credits - net.**

\(a\) This account shall be charges and Accounts 4320, Unamortized
Operating Investment Tax Credits - Net, shall be credited with
investment tax credits generated from qualified expenditures related to
regulated operations which the company defers rather than recognizes
currently in income.

\(b\) This account shall be credited and Account 4320 shall be charged
ratably with the amortization of each year\'s investment tax credits
included in Account 4320 for investment services for ratemaking
purposes. (See also Account 7410, Nonoperating Investment Tax Credits -
Net.) Such amortization shall be determined in relation to the period of
time used for computing book depreciation on the property with respect
to which the tax credits relate.

**ù32.7220 Operating federal income taxes.**

\(a\) This account shall be charged and Account 4070, Income Taxes -
Accrued, shall be credited for the amount of Federal Income Taxes for
the current period. This account shall also reflect subsequent
adjustments to amounts previously charged.

\(b\) Taxes should be accrued each month on an estimated basis and
adjustments made as later data becomes available.

\(c\) Tax credits, other than investment tax credits, if normalized,
shall be recorded consistent with the accounting for investment tax
credits and shall be amortized to in income as directed by this
Commission.

\(d\) No entries shall be made to this account to reflect interperiod
tax allocations.

**ù32.7230 Operating state and local income taxes.**

\(a\) This account shall be charged and Account 4070, Income Taxes -
Accrued, shall be credited for the amount of state and local income
taxes for the current period. This account shall also reflect subsequent
adjustments to amounts previously charged.

\(b\) Taxes should be accrued each month on an estimated basis and
adjustments made as later data becomes available.

\(c\) No entries shall be made to this account to reflect interperiod
tax allocations.

**ù32.7240 Operating other taxes.**

\(a\) This account shall be charged and Account 4080, Other Taxes -
Accrued, shall be credited for all taxes, other than Federal, state, and
local income taxes and payroll related taxes, related to regulated
operations applicable to current periods. Among the items includable in
this account are property, gross receipts, franchise and capital stock
taxes; this account shall also reflect subsequent adjustments to amounts
previously charged.

\(b\) Special assessments for street and other improvements and special
benefit taxes, such as water taxes and the like, shall be included in
the operating expense accounts or investment accounts, as may be
appropriate.

\(c\) Discounts allowed for prompt payment of taxes shall be credited to
the account to which the taxes are chargeable.

\(d\) Interest on tax assessments which are not paid when due shall be
included in Account 7540, Other Interest Deductions.

\(e\) Taxes paid by the company under tax-free covenants on indebtedness
shall be charged to Account 7360, Other Nonoperating Income.

\(f\) Sales and use taxes shall be accounted for, so far as practicable,
as part of the cost of the items to which the taxes relate.

\(g\) Taxes on rented telecommunications plant which are borne by the
lessee shall be credited by the owners to Account 5240, Rent Revenue,
and shall be charged by the lessee to the appropriate Plant Specific
Operations Expense account.

***REA 7240.1 Operating taxes - property.***

\(a\) This account shall be charged and Account 4080.1, Other Taxes
Accrued - Property, shall be credited for the amount of property tax
expense incurred in the current operating period. This account shall
also reflect subsequent adjustments to amounts previously charged.

\(b\) Taxes should be accrued each month on an estimated basis and
adjustments made as later data becomes available.

***REA 7240.2 Operating taxes - miscellaneous.***

\(a\) This account shall be charged and Account 4080.5, Other Taxes
Accrued - Miscellaneous, shall be credited for the amount of all other
taxes accrued during the current operating period and not provided for
elsewhere such as gross receipts, franchise, and capital stock tax
expense incurred in the current operating period. This account shall
also reflect subsequent adjustments to amounts previously charged.

\(b\) Taxes should be accrued each month on an estimated basis and
adjustments made as later data becomes available.

**ù32.7250 Provision for deferred operating income taxes - net.**

\(a\) This account shall be charged or credited, as appropriate, with
contra entries recorded to the following accounts for income tax expense
that has been deferred in accordance with ù32.22 of Subpart B:

4100 Net Current Deferred Operating Income Taxes

4340 Net Noncurrent Deferred Operating Income Taxes

\(b\) Subsidiary record categories shall be maintained to distinguish
between property and nonproperty related deferrals and so that the
company may separately report the amounts contained herein that relate
to Federal, state and local income taxes. Such subsidiary record
categories shall be reported as required by Part 43 of the Commission\'s
Rules and Regulations.

**ù32.7299 Content of accounts.**

The nonoperating income and expense accounts are intended to record the
results of transactions, events and circumstances affecting the company
during a period and which are not operational in nature. They shall
include such items as nonoperating taxes, dividend income and interest
income. Whenever practicable the inflows and outflows associated with a
transaction or event shall be matched and the result shown as a net gain
or loss.

**ù32.7300 Nonoperating income and expense.**

This account number shall be used by Class A telephone companies to
summarize for reporting purposes the contents of Accounts 7310 through
7370. Class B telephone companies shall use this account for
nonoperating income and expense items of the type and character required
Class A companies in Account 7310 through 7370.

***REA 7300.1 Dividend income.***

\(a\) This account shall used by Class B companies. This account shall
include dividends on investments in common and preferred stock, which is
the property of the company, whether such stock is owned by the company
and held in its treasury, or deposited in trust, or otherwise
controlled.

\(b\) This account shall not include dividends or other returns on
securities issued or assumed by the company and held by or for it,
whether pledged as collateral, or held in its treasury, in special
deposits, or in sinking or other funds.

\(c\) Dividends on stocks of other companies held in sinking or other
funds shall be credited to Account 7300.3, Income from Sinking and Other
Funds.

\(d\) Dividends received and receivable from affiliated companies
accounted for on the equity method shall be included in Account 1401,
Investments in Affiliated Companies, as a reduction of the carrying
value of the investments.

***REA 7300.2 Interest income.***

This account shall used by Class B companies. This account shall include
interest on securities, including notes and other evidences of
indebtedness, which are the property of the company, whether such
securities are owned by the company and held in its treasury, or
deposited in trust (except in sinking or other funds) or otherwise
controlled. It shall also include interest on bank balances,
certificates of deposits, open accounts, and other analogous items.
There shall be included in this account for each month, the applicable
amount requisite to extinguish, during the interval between the date of
acquisition and the date of maturity, the difference between the
purchase price and the par value of securities owned, the income from
which is includable in this account. Amounts thus credited or charged
shall be concurrently included in the accounts in which the securities
are carried. Any such difference remaining unextinguished at the sale or
upon the maturity and satisfaction of such securities shall be cleared
to Account 7300.6, Other Nonoperating Income and Expense.

***REA 7300.3 Income from sinking and other funds.***

\(a\) This account shall used by Class B companies. This account shall
include the income accrued on cash, securities issued by other
companies, and other assets (not including securities issued or assumed
by the company) held in sinking and other funds.

\(b\) There shall be included in this account for each month the
applicable amount requisite to extinguish, during the interval between
the date of acquisition and the date of maturity, the difference between
the purchase price and the par value of securities held in sinking or
other funds. Amounts thus credited or charged shall be concurrently
included in the accounts in which the securities are carried. Any such
differences remaining unextinguished upon the maturity and satisfaction
of such securities shall be cleared to

Account 7300.6, Other Nonoperating Income and Expense.

***REA 7300.4 Allowance for funds used during construction.***

This account shall used by Class B companies. This account shall be
credited with such amounts as are charged to the telecommunications
plant accounts for the purpose or recording an allowance for funds used
for construction purposes.

***REA 7300.5 Gains or losses from the disposition of certain***

***property.***

This account shall used by Class B companies. This account shall include
gains or losses resulting from the disposition of land or artworks;
plant with traffic, and nonoperating telecommunications plant not
previously used in the provision of telecommunication services.

***REA 7300.6 Other nonoperating income and expense.***

This account shall used by Class B companies. This account shall include
all other items of income and gains or losses from activities not
specifically provided for elsewhere such as gains or losses realized on
the sale of temporary cash investments or marketable equity securities;
fees collected in connection with the exchange of coupon bonds for
registered bonds; uncollectible amounts previously credited to Accounts
7300.1, 7300.2, 7300.3, 7300.4, 7300.5, and 7300.6; gains or losses from
the extinguish-ment of debt made to satisfy sinking fund requirements;
gains or losses of a nonoperating nature arising from the exchange or
translation of foreign currency; net unrealized losses on investments in
current marketable equity securities; write-downs or write-offs of the
book costs of investments in equity securities due to permanent
impairment; amortization of goodwill; the company\'s share of earnings
or losses of affiliated companies accounted for on the equity method;
and the net balance of the revenue from and the expenses of property,
plant, and equipment, the cost of which is includable in

Account 2006, Nonoperating Plant.

**ù32.7310 Dividend income.**

\(a\) This account shall include dividends on investments in common and
preferred stock, which is the property of the company, whether such
stock is owned by the company and held in its treasury, or deposited in
trust (except in sinking or other funds, see paragraph (c) of this
section), or otherwise controlled.

\(b\) These accounts shall not include dividends or other returns on
securities issued or assumed by the company and held by or for it,
whether pledged as collateral, or held in its treasury, in special
deposits, or in sinking or other funds.

\(c\) Dividends on stocks of other companies held in sinking or other
funds shall be credited to Account 7330, Income from Sinking and Other
Funds.

\(d\) Dividends received and receivable from affiliated companies
accounted for on the equity method shall be included in Account 1401,
Investments in Affiliated Companies, as a reduction of the carrying
value of the investments.

**ù32.7320 Interest income.**

\(a\) This account shall include interest on securities, including notes
and other evidences of indebtedness, which are the property of the
company, whether such securities are owned by the company and held in
its treasury, or deposited in trust (except in sinking or other funds,
see paragraph (d) of this section) or otherwise controlled. It shall
also include interest on bank balances, certificates of deposits, open
accounts, and other analogous items.

\(b\) There shall be included in this account for each month the
applicable amount requisite to extinguish, during the interval between
the date of acquisition and date of maturity, the difference between the
purchase price and the par value of securities owned, the income from
which is includable in this account. Amounts thus credited or charged
shall be concurrently included in the accounts in which the securities
are carried. Any such difference remaining unextinguished at the sale or
upon the maturity and satisfaction of such securities shall be cleared
to Account 7360, Other Nonoperating Income.

\(c\) These accounts shall not include interest or other returns on
securities issues or assumed by the company and held by or for it,
whether pledged as collateral, or held in its treasury, in special
deposits, or in sinking or other funds.

\(d\) Interest on cash and on securities issued by others shall be
included in Account 7330, Income from Sinking and Other Funds, when such
assets are held in sinking or other funds.

\(e\) Cash discounts on bills for material purchased shall not be
included in this account.

**ù32.7330 Income from sinking and other funds.**

\(a\) This account shall include the income accrued on cash, securities
issued by other companies, and other assets (not including securities or
assumed by the company) held in sinking and other funds.

\(b\) There shall be included in this account for each month the
applicable amount requisite to extinguish, during the interval between
the date of acquisition and the date of maturity, the difference between
the purchase price, and the par value of securities held in sinking or
other funds. Amounts thus credited or charged shall be concurrently
included in the accounts in which the securities are carried. Any such
differences remaining unextinguished upon the maturity and satisfaction
of such securities shall be cleared to Account 7360, Other Nonoperating
Income.

**ù32.7340 Allowance for funds used during construction.**

This account shall be credited with such amounts as are charged to the
telecommunications plant accounts for the purpose of recording an
allowance for funds used for construction purposes.

**ù32.7350 Gains or losses from the disposition of certain**

**property.**

This account shall include gains or losses resulting from the
disposition of the following:

\(a\) Gains or losses from the disposition of land or artworks;

\(b\) Gains or losses from the disposition of plant with traffic; and

\(c\) Gains or losses from the disposition of nonoperating
telecommunications plant not previously used in the provision of
telecommunications services.

**ù32.7360 Other nonoperating income.**

\(a\) This account shall include all other items of income and gains or
losses from activities not specifically provided for elsewhere.

\(b\) This account shall include representative items as follows:

\(1\) Fees collected in connection with the exchange of coupon bonds for
registered bonds;

\(2\) Gains or losses realized on the sale of temporary cash investments
or marketable equity securities;

\(3\) Uncollectible amounts previously credited to

Accounts 7310 through 7350, inclusive;

\(4\) Net unrealized losses on investments in current marketable equity
securities;

\(5\) Write-downs or write-offs of the book costs of investment in
equity securities due to permanent impairment;

\(6\) Gains or losses of nonoperating nature arising from foreign
currency exchange or translation;

\(7\) Gains or losses from the extinguishment of debt made to satisfy
sinking fund requirements;

\(8\) Amortization of goodwill;

\(9\) Company\'s share of the earnings or loses of affiliated companies
accounted for on the equity method; and

\(10\) The net balance of the revenue from and the expenses (including
depreciation; amortization and insurance) or property, plant, and
equipment, the cost of which is includable in

Account 2006, Nonoperating Plant.

**ù32.7370 Special charges.**

This account shall include the following costs that are typically given
special regulatory scrutiny for ratemaking purposes. Unless specific
justification to the contrary is given, such costs are presumed to be
excluded from the cost of service in setting rates.

\(a\) Lobbying includes expenditures for the purpose of influencing
public opinion with respect to the election or appointment of public
officials, referenda, legislation, or ordinances (either with respect to
the possible adoption of new referenda, legislation or ordinances) or
approval, modification, or revocation of franchises, or for the purpose
of influencing the decisions of public officials. This also includes
advertising, gifts, honoraria, and political contributions. This does
not include such expenditures which are directly related to
communications with and appearances before regulatory or other
governmental bodies in connection with the reporting utility\'s existing
or proposes operations;

\(b\) Contributions for charitable, social or community welfare
purposes;

\(c\) Membership fees and dues in social, service and recreational or
athletic clubs and organizations;

\(d\) Penalties and fines paid on account of violations of statutes.
This account shall also include penalties and fines paid on account of
violations of U.S. statutes including judgments arising from a violation
of antitrust laws, and payments in settlement of civil and criminal
suits alleging such violations; and

\(e\) Abandoned construction projects.

**ù32.7399 Content of accounts.**

The Nonoperating Tax accounts shall include taxes arising from
activities which are not a part of the central operations of the entity.

**ù32.7400 Nonoperating taxes.**

This account number shall be used by Class A telephone companies to
summarize for reporting purposes the contents of Accounts 7410 through
7450. Class B telephone companies shall use this account for
nonoperating taxes of the type and character required of Class A
companies in Accounts 7410 through 7450.

***REA 7400.1 Nonoperating investment tax credits - net.***

\(a\) This account shall used by Class B companies. This account shall
be charged and Account 4330, Unamortized Nonoperating Investment Tax
Credits - Net, shall be credited with nonoperating investment tax
credits generated from qualified expenditures related to other
operations which the company has elected to defer rather than recognize
currently in income.

\(b\) This account shall be credited and Account 4330, Unamortized
Nonoperating Investment Tax Credits - Net, shall be charged with the
amortization of each year\'s investment tax credits included in such
accounts relating to amortization of previously deferred investment tax
credits of other property or regulated property, the amortization of
which does not serve to reduce costs of service (but the unamortized
balance does reduce rate base) for ratemaking purposes. Such
amortization shall be determined with reference to the period of time
used for computing book depreciation on the property with respect to
which the tax credits relate.

***REA 7400.2 Nonoperating federal income taxes.***

\(a\) This account shall used by Class B companies. This account shall
be charged and Account 4070.1, Income Taxes Accrued - Federal, shall be
credited for the amount of nonoperating Federal income taxes for the
current period. This account shall also reflect subsequent adjustments
to amounts previously charged.

\(b\) Taxes shall be accrued each month on an estimated basis and
adjustments made as later data becomes available. Companies that adopt
the flowthrough method of accounting for investment tax credits shall
reduce the calculated provision in this account by the entire amount of
the credit realized during the year. Tax credits, if normalized, shall
be recorded consistent with the accounting for investment tax credits.

\(c\) No entries shall be made to this account to reflect interperiod
tax allocation.

***REA 7400.3 Nonoperating state and local income taxes.***

\(a\) This account shall used by Class B companies. This account shall
be charged and Account 4070.2, Income Taxes Accrued - State and Local,
shall be credited for the amount of nonoperating state and local income
taxes for the current period. This account shall also reflect subsequent
adjustments to amounts previously charged.

\(b\) Taxes shall be accrued each month on an estimated basis and
adjustments made as later data becomes available.

\(c\) No entries shall be made to this account to reflect interperiod
tax allocation.

***REA 7400.4 Nonoperating other taxes.***

This account shall used by Class B companies. This account shall be
charged and Account 4080.5, Other Taxes Accrued - Miscellaneous, shall
be credited for all nonoperating taxes, other than Federal, state, and
local income taxes, and payroll related taxes for the current period.
Among the items includable in this account are property, gross receipts,
franchise and capital stock taxes. This account shall also reflect
subsequent adjustments to amounts previously charged.

***REA 7400.5 Provision for deferred nonoperating income taxes -***

***net.***

\(a\) This account shall used by Class B companies. This account shall
be charged or credited, as appropriate, with contra entries recorded in
either Account 4110, Net Current Deferred Nonoperating Income Taxes, or
Account 4350, Net Noncurrent Deferred Nonoperating Income Taxes, as
appropriate, for nonoperating tax expenses that have been deferred.

\(b\) Subsidiary record categories shall be maintained to distinguish
between property and nonproperty related deferrals and so that the
company may separately report the amounts contained herein that relate
to Federal, state, and local income taxes.

**ù32.7410 Nonoperating investment tax credits - net.**

\(a\) This account shall be charged and Account 4330, Unamortized
Nonoperating Investment Tax Credits - Net, shall be credited with
investment tax credits generated from qualified expenditures related to
other operations which the company has elected to defer rather than
recognize currently in income.

\(b\) This account shall be credited and Account 4330 shall be charged
with the amortization of each year\'s investment tax credits included in
such accounts relating to amortization of previously deferred investment
tax credits of other property or regulated property, the amortization of
which does not serve to reduce costs of service (but the unamortized
balance does reduce rate base) for ratemaking purposes. Such
amortization shall be determined with reference to the period of time
used for computing book depreciation on the property with respect to
which the tax credits relate.

**ù32.7420 Nonoperating federal income taxes.**

\(a\) This account shall be charged and Account 4070, Income Taxes -
Accrued, shall be credited for the amount of nonoperating Federal income
taxes for the current period. This account shall also reflect subsequent
adjustments to amounts previously charged.

\(b\) Taxes shall be accrued each month on an estimated basis and
adjustments made as later data becomes available.

\(c\) Companies that adopt the flow-through method of accounting for
investment tax credits shall reduce the calculated provision in this
account by the entire amount of the credit realized during the year. Tax
credits, other than investment tax credits, if normalized, shall be
recorded consistent with the accounting for investment tax credits.

\(d\) No entries shall be made to this account to reflect interperiod
tax allocation.

**ù32.7430 Nonoperating state and local income taxes.**

\(a\) This account shall be charged and Account 4070, Income Taxes -
Accrued, should be credited for the amount of state and local income
taxes for the current period. This account shall also reflect subsequent
adjustments to amounts previously charged.

\(b\) Taxes shall be accrued each month on an estimated basis and
adjustments made as later data becomes available.

\(c\) No entries shall be made to this account to reflect interperiod
tax allocation.

**ù32.7440 Nonoperating other taxes.**

This account shall be charged and Account 4080, Other Taxes -Accrued,
shall be credited for all nonoperating taxes, other than Federal, state
and local income taxes, and payroll related taxes for the current
period. Among the items includable in this account are property, gross
receipts, franchise and capital stock taxes. This account shall also
reflect subsequent adjustments to amounts previously charged.

**ù32.7450 Provision for deferred nonoperating income taxes - net.**

\(a\) This account shall be charged or credited, as appropriate, with
contra entries recorded to the following accounts for nonoperating tax
expense that has been deferred in accordance with ù32.22 of Subpart B:

4110 Net Current Deferred Nonoperating Income Taxes

4350 Net Noncurrent Deferred Nonoperating Income Taxes

\(b\) Subsidiary record categories shall be maintained to distinguish
between property and nonproperty related deferrals and so that the
company may separately report the amounts contained herein that relate
to Federal, state and local income taxes. Such subsidiary record
categories shall be reported as required by Part 43 of this
Commission\'s Rules and Regulations.

**ù32.7499 Content of accounts.**

Interest and related amounts shall be included in

Accounts 7510 through 7540.

**ù32.7500 Interest and related items.**

This account number shall be used by Class A telephone companies to
summarize for reporting purposes the contents of Accounts 7510 through
7540. Class B telephone companies shall use this account for interest
and related items of the type and character required of Class A
companies in Accounts 7510 through 7540.

**ù32.7510 Interest on funded debt.**

\(a\) This account shall include the current accruals of interest on all
classes of debt the principal of which is includable in Account 4210,
Funded Debt. It shall also include the interest on funded debt the
maturity of which has extended by specific agreement.

\(b\) This account shall be kept so that the interest on each class of
funded debt may be shown separately in the annual reports to this
Commission.

\(c\) These accounts shall not include charges for interest on funded
debt issued or assumed by the company and held by or for it, whether
pledged as collateral or held in its treasury, in special deposits or in
sinking or other funds.

\(d\) Interest expressly provided for and included in the face amount of
securities issued shall be charged at the time of issuance to Account
1330, Other Prepayments, and cleared to this account as the term expires
to which the interest applies.

\(e\) This account shall also include monthly amortization of balances
in Accounts 4220, Premium on Long-Term Debt, and 4230, Discount on
Long-Term Debt.

**ù32.7520 Interest expense - capital leases.**

This account shall include the interest portion of each capital lease
payment.

**ù32.7530 Amortization of debt issuance expense.**

This account shall include the monthly amortization of the balances in
Account 1407, Unamortized Debt Issuance Expense.

**ù32.7540 Other interest deductions.**

\(a\) This account shall include all interest deductions not provided
for elsewhere, e.g., discount, premium, and expense on notes maturing
one year or less from date of issue.

\(b\) A list of representative items of indebtedness, the interest on
which is chargeable to this account, follows

\(1\) Advances from affiliated companies;

\(2\) Advances from nonaffiliated companies and other liabilities;

\(3\) Assessments for public improvements past due;

\(4\) Bond coupons, matured and unpaid;

\(5\) Claims and judgments;

\(6\) Customers\' deposits;

\(7\) Funded debt mature, with respect to which a definite agreement as
to extension has not been made;

\(8\) Notes payable on demand or maturing one year or less from date of
issue;

\(9\) Open accounts;

\(10\) Tax assessments, past due; and

\(11\) Discount, premium, and issuance expense of notes maturing one
year or less from date of issue.

\(c\) Interest payable on notes or other evidences of indebtedness
maturing serially shall be charged to Account 7510, Interest of Funded
Debt, if any portion of the obligation matures more than one year from
date of issue.

**ù32.7599 Content of accounts.**

These accounts are intended to segregate the effects of events or
transactions that are extraordinary. Extraordinary events and
transactions are distinguished by both their unusual nature and by the
infrequency of their occurrence, taking into account the environment in
which the company operates. These accounts shall also include the
related income tax effect of the extraordinary items.

**ù32.7600 Extraordinary items.**

This account shall be used by Class A telephone companies to summarize
for reporting purposes the contents of Accounts 7610 through 7640. Class
B telephone companies shall use this account for expenses of the type
and character required of Class A companies in Accounts 7610 through
7640.

***REA 7600.1 Extraordinary income credits.***

This account shall used by Class B companies. This account shall be
credited with nontypical, noncustomary, and infrequently recurring gains
which would significantly distort the current year\'s income computed
before such extraordinary items, if reported other than as extraordinary
items. Income tax relating to the amounts recorded in this account shall
be recorded in Account 7600.3, Current Income Tax Effect for
Extraordinary Items - Net, and Account 7600.4, Provision for Deferred
Income Tax Effect of Extraordinary Items - Net.

***REA 7600.2 Extraordinary income charges.***

This account shall used by Class B companies. This account shall be
debited with nontypical, noncustomary, and infrequently recurring losses
which would significantly distort the current year\'s income computed
before such extraordinary items, if reported other than as extraordinary
items. Income tax relating to the amounts recorded in this account shall
be recorded in Account 7600.3, Current Income Tax Effect for
Extraordinary Items - Net, and Account 7600.4, Provision for Deferred
Income Tax Effect of Extraordinary Items - Net.

***REA 7600.3 Current income tax effect of extraordinary items -***

***net.***

This account shall used by Class B companies. This account shall be
charged or credited and Account 4070.1, Income Taxes Accrued - Federal,
or Account 4070.2, Income Taxes Accrued - State and Local, shall be
credited or charged, as appropriate, for all current income tax effects
(Federal, state, and local) of items included in Account 7600.1,
Extraordinary Income Credits, and Account 7600.2, Extraordinary Income
Charges.

***REA 7600.4 Provision for deferred income tax effect of***

***extraordinary items - net.***

This account shall used by Class B companies. This account shall be
charged or credited, as appropriate, with a contra amount recorded in
Account 4350, Net Noncurrent Deferred Nonoperating Income Taxes, or
Account 4110, Net Current Deferred Nonoperating Income Taxes, for the
income tax effects (Federal, state, and local) of items included in
Account 7600.1, Extraordinary Income Credits, and Account 7600.2,
Extraordinary Income Charges, that have been deferred.

**ù32.7610 Extraordinary income credits.**

This account shall be credited with nontypical, noncustomary and
infrequently recurring gains which would significantly distort the
current year\'s income computed before such extraordinary items, if
reported other than as extraordinary items. Income tax relating to the
amounts recorded in this account shall be recorded in Account 7630,
Current Income Tax Effect for Extraordinary Items - Net, and Account
7640, Provision for Deferred Income Tax Effect of Extraordinary Items -
Net.

**ù32.7620 Extraordinary income charges.**

This account shall be debited with nontypical, noncustomary and
infrequently recurring losses which would significantly distort the
current year\'s income computed before such extraordinary items, if
reported other than as extraordinary items. Income tax relating to the
amounts recorded in this account shall be recorded in Account 7630,
Current Income Tax Effect for Extraordinary Items - Net, and Account
7640, Provision for Deferred Income Tax Effect of Extraordinary Items -
Net.

**ù32.7630 Current income tax effect of extraordinary**

**items - net.**

This account shall be charged or credited and Account 4070, Income
Taxes - Accrued, shall be credited or charged for all current income tax
effects (Federal, state and local) of items included in Accounts 7610,
Extraordinary Income Credits, and 7620, Extraordinary Income Charges.

**ù32.7640 Provision for deferred income tax effect of**

**extraordinary items - net.**

This account shall be charged or credited, as appropriate, with a contra
amount recorded to Account 4350, Net Noncurrent Deferred Nonoperating
Income Taxes, or Account 4110, Net Current Deferred Nonoperating Income
Taxes, for the income tax effects (Federal, state and local) of items
included in Accounts 7610, Extraordinary Income Credits, and 7620,
Extraordinary Income Charges, that have been deferred in accordance with
ù32.22 of Subpart B.

**ù32.7899 Content of accounts.**

Jurisdictional differences and nonregulated income amounts shall be
included in Accounts 7910 and 7990.

**ù32.7910 Income effect of jurisdictional ratemaking**

**differences - net.**

This account shall include the impact on revenues and expenses of the
jurisdictional ratemaking practices which vary from those of this
Commission. All entries recorded in this account shall be recorded net
of the applicable income tax effects and shall be supported by
appropriate subsidiary records, where necessary, as provided for in
ù32.13(e) of Subpart B.

**ù32.7990 Nonregulated net income.**

\(a\) This account shall be used by those companies who offer
nonregulated activities that do not involve the joint or common use of
assets or resources used in the provision of both regulated and
nonregulated products and services, and which have not established a
separate subsidiary for that purpose.

\(b\) All revenue and expenses (including taxes) incurred in these
nonregulated activities shall be recorded on separate books of account
for such operations. Only the net of the total revenues and total
expenses shall be recorded in this account, with a contra debit or
credit to Account 1406.3.

**SUBPART G - GLOSSARY**

**ù32.9000 Glossary of terms.**

When used in this system of accounts:

\"**Accelerated depreciation**\" means a depreciation method or period
of time, including the treatment given cost of removal and gross
salvage, used in calculating depreciation deductions on income tax
returns which is different from the depreciation method or period of
time prescribed by this Commission for use in calculating depreciation
expense recorded in a company\'s books of account.

\"**Account**\" means a specific element of a chart of accounts used to
record, classify and accumulate similar financial transactions resulting
from the operations of the entity. \"**Accounts**\" or \"**these
accounts**\" refer to the accounts of this system of accounts.

\"**Accounting System**\" means the total set of interrelated
principles, rules, requirements, definitions, accounts, records,
procedures and mechanisms necessary to operate and evaluate the

entity from a financial perspective. An accounting system generally
consists of a chart of accounts, various parallel subsystems and
subsidiary records. An accounting system is utilized to provide the
necessary financial information to users to meet judiciary and other
responsibilities.

\"**Affiliated companies**\" means companies that directly or indirectly
through one or more intermediaries, control or are controlled by, or are
under common control with, the accounting company. See also Control.

\"**Amortization equipment**\" means that equipment which functions with
a specific type of plant or with two (2) or more types of plant, e.g.,
switching equipment, network power equipment, circuit equipment, common
channel network signaling equipment or network operations equipment.
Associated equipment shall be classified to the account appropriate for
the type of equipment with which it is predominantly used rather than on
its own characteristics. Illustrative examples of associated equipment
are:

Alarm and signal apparatus

Auxiliary framing

Cable and cable racks

Distributing frames and equipment thereon

Frame and aisle lighting equipment (not permanently attached to the
building)

Relay racks and panels

\"**Basic service area**\" means the minimum specified calling area for
which a tariff is prescribed.

\"**Book cost**\" means the amount at which property is recorded in
these accounts, without deduction of related allowances.

\"**Common carrier**\" or \"**carrier**\" means any person engaged as a
common carrier for hire, in interstate or foreign communication by wire
or radio or in interstate or foreign radio transmission of energy,
except where reference is made to common carriers not subject to this
Act; but a person engaged in radio broadcasting shall not, insofar as
such person is so engaged, be deemed a common carrier.

\"**Company**\" or \"**the company**\" when not otherwise indicated in
the context, means the accounting entity. It includes such
unincorporated entities which may be subject to the Communications Act
of 1934, as amended.

\"**Control**\" (including the terms \"**controlling**,\" 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 with, one or more
other companies, and whether such power is established through a
majority or minority ownership voting of securities, common directors,
officers, or stockholders, voting trusts, holding trusts (other than
money exchanged) for property or services. See also Original Cost.

\"**Cost of removal**\" means the cost of demolishing, dismantling,
removing, tearing down, of otherwise disposing of telecommunications
plant and recovering the salvage, including the cost of transportation
and handling incident thereto.

\"**Depreciation**\" means the loss not restored by current maintenance,
incurred in connection with the consumption or prospective retirement of
telecommunications plant in the course of service from causes which are
known to be in current operation, against which the company is not
protected by insurance, and the effect of which can be forecast with a
reasonable approach to accuracy. Among the causes to be given
consideration are wear and tear, decay, action of the elements,
inadequacy, obsolescence, changes in technology, changes in demand and
requirements of public authorities.

\"**Entity**\" means a legal enterprise (common carrier) engaged in
interstate communications within the meaning of the Communications Act
of 1934, as amended.

\"**Group plan**,\" as applied to depreciation accounting, means the
plan under which depreciation charges are accrued upon the basis of the
original cost of all property included in each depreciable plant
account, using the average service life thereof properly weighted, and
upon the retirement of any depreciable property its cost is charged to
the depreciation reserve whether or not the particular item has attained
the average service life.

\"**Intangible property**\" means assets that have no physical existence
but instead have value because of the rights which ownership confers.

\"**Intrasystems**\" means assets consisting of: (1) PBX and Key System
Common Equipment (a switchboard or switching equipment shared by all
stations), (2) Associated CPE station equipment (usually telephone or
Key Telephone Systems), and (3) Intrasystem wiring (all cable or wiring
and associated components which connect the common equipment and the
station equipment, located on the customer\'s side of the demarcation
point).

An intrasystem does not include property, plant or equipment which are
not solely dedicated to its operation.

\"**Minor items**,\" as applied to depreciable telecommunications plant,
means any part or element of such plant, which when removed, (with or
without replacement) does not initiate retirement accounting.

\"**Original cost**\" or \"**cost**,\" as applied to telecommunications
plant, rights of way and other intangible property, means the actual
money cost of (or the current money value of any consideration or other
than money exchanged for) property at the time when it was first
dedicated to use by a regulated telecommunications entity, whether the
accounting company or by predecessors.

For the application of this definition to property acquired from
predecessors see ù32.2000(b)(1) of Subpart C. Note also the definition
of Cost in this section.

\"**Plant retired**\" means plant which has been removed, sold,
abandoned, destroyed, or otherwise withdrawn from service.

\"**Retirement units**,\" as applied to depreciable telecommunications
plant, means those items of plant which when removed (with or without
replacement) cause the initiation of retirement accounting entries.

\"**Salvage value**\" means the amount received for property retired, if
sold, or if retained for reuse, the amount at which the material
recovered is chargeable to Account 1220, Material and Supplies, or other
appropriate account.

\"**Straight-line method**,\" as applied to depreciation accounting,
means the plan under which the cost of property is charged to operating
expenses and credited to accumulated depreciation through equal annual
charges as nearly as may be during its service life.

\"**Subsidiary record categories**\" means those segregations of certain
regulated costs, expenses and revenues which must be maintained and are
subject to specific reporting requirements of this Commission.

\"**Subsystems, parallel mechanisms**\" means processes or procedures
which augment the use of a chart of accounts in the financial operation
of the entity. These subsystems operate on and/or process account and
subsidiary record information for specific purposes.

\"**Telecommunications**\" means any transmission, emission, or
reception or signs, signals, writing, images or sounds or intelligence
of any nature by wire, radio, visual or other electromagnetic systems.
This encompasses the aggregate of several modes of conveying
information, signals or messages over a distance. Included in the
telecommunications industry is the transmitting, receiving, or
exchanging of information among multiple locations. The minimum elements
required for the telecommunications process to occur are a message
source, a transmission medium and a receiver.

\"**Time of installation**\" means the date at which telecommunications
plant is placed in service.

\"**Time of retirement**\" means the date at which telecommunications
plant is retired from service.

\"**Tangible property**\" means assets characterized by physical
existence, such as land, buildings, equipment, furniture, fixtures and
tools.