**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the matter of                 | *  | WCB/Pricing 02-35            |
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| Financial Accounting Standards   | ** |                              |
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| Standards No. 143, Accounting    | *  |                              |
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**ORDER**

Adopted: December 20, 2002 Released: December 20, 2002

By the Chief, Wireline Competition Bureau:

1.  In June 2001, the Financial Accounting Standards Board (FASB)[^1]
    adopted Statement of Financial Accounting Standards No. 143,
    Accounting for Asset Retirement Obligations (SFAS 143). SFAS 143
    requires companies to record liabilities for asset retirement
    obligations at fair value in the period that the obligation is
    incurred and to increase the liability over the life of the related
    asset through periodic charges to expense. The fair value of the
    retirement obligation is also capitalized as part of the carrying
    value of the asset and is depreciated over the remaining life of the
    asset. This accounting is followed only when the company determines
    that it has an actual legal obligation associated with an asset
    retirement.

2.  In a letter dated December 4, 2002, BellSouth Corporation notified
    the Commission that it would adopt SFAS 143 for financial reporting
    purposes beginning January 1, 2003, as required by SFAS 143.[^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 143 conflicts with the
    Commission's accounting rules prescribed in Part 32. [^3]

3.  The Commission's rules do not provide for capitalization of an asset
    and recognition of a liability for asset retirement obligations.
    Instead, the Commission's rules account for the cost of asset
    retirements as part of the net salvage estimates included in the
    calculation of depreciation rates, and under §32.3100(c)[^4] costs
    associated with plant removal are charged to Account 3100,
    Accumulated depreciation, rather than charging them to a liability
    account. Moreover, the Commission's accounting rules and prescribed
    depreciation rates include the cost of plant removal in depreciation
    whether or not an actual legal obligation exists. The accounting
    required by SFAS 143, therefore, is not only inconsistent with the
    Commission's accounting rules, but its implementation also could
    require revision of prescribed depreciation rates.

4.  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.[^5]
    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.[^6]
    After reviewing SFAS 143, we conclude that its adoption for federal
    accounting purposes would conflict with the Commission's current
    accounting rules. Accordingly, we are notifying carriers that they
    shall not adopt SFAS 143 for Part 32 federal accounting purposes
    unless the Commission specifically requires the adoption of SFAS 143
    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, section32.16 of the Commission's rules, 47 C.F.R.
    §32.16, and the authority delegated pursuant to 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 143 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 (December 3, 2002).

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

[^4]: ^?^ 47 C.F.R. § 32.3100(c).

[^5]: ^?^ *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 F.R. 48408 (November 25,
    1985).

[^6]: ^?^ 47 CFR § 32.16.