**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the matter of                 | *  | WCB/Pricing 03-19            |
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| Financial Accounting Standards   | ** |                              |
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| Accounting Standards No. 144,    | ** |                              |
| Accounting for the Impairment or |    |                              |
| Disposal of Long-Lived Assets    | *  |                              |
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**ORDER**

Adopted: May 14, 2003 Released: May 14, 2003

By the Chief, Wireline Competition Bureau:

1.  In October 2001, the Financial Accounting Standards Board (FASB)[^1]
    adopted Statement of Financial Accounting Standards No. 144,
    Accounting for the Impairment or Disposal of Long-Lived Assets (SFAS
    144). SFAS 144 requires companies to recognize an impairment loss
    when the carrying value of an asset is not recoverable from its
    undiscounted cash flows. The impairment loss is measured as the
    difference between the carrying amount and the fair value of an
    asset. SFAS 144 also requires companies to review their depreciation
    methodology with respect to assets that become impaired.

2.  In a letter dated February 14, 2003, BellSouth Corporation notified
    the Commission that it would adopt SFAS 144 for financial reporting
    purposes beginning January 1, 2003.[^2] BellSouth states that it
    does not plan to adopt the new standard for the Commission\'s
    regulatory accounting purposes, however, because it believes the new
    accounting required in SFAS 144 conflicts with the Commission\'s
    accounting rules prescribed in Part 32.[^3]

3.  It is the Commission\'s policy to incorporate changes in generally
    accepted accounting principles into its regulatory accounting,
    unless the changes conflict with its regulatory objectives.[^4]
    Section 32.16 of the Commission\'s rules, Changes in Accounting
    Standards, provides for automatic adoption of new FASB standards
    unless the Commission notifies carriers that a new standard should
    not be adopted within 90 days after receiving notification.[^5]

4.  The Commission\'s rules do not provide a method to write down the
    cost of an asset or group of assets that will continue in use as
    required by SFAS 144. Instead, the Commission\'s rules in section
    32.2000(d)(1) require carriers to account for and keep their
    telecommunications plant accounts at original cost.[^6] We conclude,
    therefore, that SFAS 144 should not be implemented for federal
    accounting purposes unless a rulemaking is completed to modify our
    current rules to accommodate the new accounting. Accordingly, we are
    notifying carriers that they shall not adopt SFAS 144 for Part 32
    federal accounting purposes unless the Commission specifically
    requires the adoption of SFAS 144 accounting in the future.

5.  ACCORDINGLY, IT IS ORDERED, pursuant to section 4(i), 4(j), and 220
    of the Communications Act of 1934, as amended, 47 U.S.C. § § 154
    (i), 154 (j), and 220, section 32.16 of the Commission\'s rules, 47
    C.F.R. § 32.16, and the authority delegated pursuant to sections
    0.91 and 0.291 of the Commission\'s rules, 47 C.F.R. §§ 0.91, 0.291,
    that all subject carriers are notified that they shall not adopt
    SFAS 144 for federal accounting purposes.

FEDERAL COMMUNICATIONS COMMISSION

> William F. Maher, Jr.
>
> Chief, Wireline Competition Bureau

[^1]: The Financial Accounting Standards Board is the authoritative
    standard setting body responsible for accounting and disclosure
    practices to be used for published financial statements in the
    American business community.

[^2]: Letter from Mary L. Henze, Executive Director, Federal Regulatory
    Affairs, BellSouth, to William Maher, Chief, Wireline Competition
    Bureau, FCC (February 14, 2003).

[^3]: 47 C.F.R. Part 32.

[^4]: *Revision of the Uniform System of Accounts for Telephone
    Companies to Accommodate Generally Accepted Accounting Principles*,
    CC Docket No. 84-469, Report and Order, 50 Fed. Reg. 48408 (Nov. 25,
    1985).

[^5]: 47 C.F.R. § 32.16.

[^6]: 47 C.F.R. 2000(d)(1).