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[Code of Federal Regulations]
[Title 7, Volume 11, Parts 1600 to 1899]
[Revised as of January 1, 2000]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1767]

[Page 688-879]
 
PART 1767--ACCOUNTING REQUIREMENTS FOR RUS ELECTRIC BORROWERS

                     Subpart A--General  [Reserved]

Sec.
1767.1--1767.9  [Reserved]

                  Subpart B--Uniform System of Accounts

1767.10  Definitions.
1767.11  Purpose.
1767.12  Accounting system requirements.
1767.13  Departures from the prescribed RUS Uniform System of Accounts.
1767.14  Interpretations of the RUS Uniform System of Accounts.
1767.15  General instructions.
1767.16  Electric plant instructions.
1767.17  Operating expense instructions.
1767.18  Assets and other debits.
1767.19  Liabilities and other credits.
1767.20  Plant accounts.
1767.21  Operating income.
1767.22  Other income and deductions.
1767.23  Interest charges.
1767.24  Extraordinary items.
1767.25  Retained earnings.
1767.26  Operating revenue.
1767.27  Operation and maintenance expenses.
1767.28  Customer accounts expenses.
1767.29  Customer service and informational expenses.
1767.30  Sales expenses.
1767.31  Administrative and general expenses.
1767.32--1767.40  [Reserved]
1767.41  Accounting methods and procedures required of all RUS 
          borrowers.
1767.42--1767.45  [Reserved]

        Subpart C--Depreciation Rates and Procedures  [Reserved]

1767.46--1767.65  [Reserved]

             Subpart D--Preservation of Records  [Reserved]

1767.66--1767.85  [Reserved]

    Authority: 7 U.S.C. 901 et seq., 1921 et seq., 6941 et seq.

    Source:  58 FR 59825, Nov. 10, 1993, unless otherwise noted.

                     Subpart A--General  [Reserved]

Secs. 1767.1--1767.9  [Reserved]

                  Subpart B--Uniform System of Accounts

Sec. 1767.10  Definitions.

    As used in this **part**:
    Accounting borrower is an RUS borrower.
    Accounts are the accounts prescribed in this system of accounts.
    Actually issued as applied to securities issued or assumed by the 
utility, are those which have been sold to bona fide purchasers for a 
valuable consideration, those issued as dividends on stock, and those 
which have been issued in accordance with contractual requirements 
direct to trustees of sinking funds.
    Actually outstanding as applied to securities issued or assumed by 
the utility, are those which have been actually issued and are neither 
retired nor held by or for the utility; provided, however, that 
securities held by trustees shall be considered as actually outstanding.
    Amortization is the gradual extinguishment of an amount in an 
account by distributing such amount over a fixed period, over the life 
of the asset or liability to which it applies, or over the period during 
which it is anticipated the benefit will be realized.
    Associated (affiliated) companies are companies or persons that 
directly, or indirectly through one or more intermediaries, control, or 
are controlled by, or under common control with, the accounting company.
    Book Cost means the amount at which property is recorded in these 
accounts without deduction of related provisions for accrued 
depreciation, amortization, or for other purposes.
    Capital lease is a lease of property used in utility or nonutility 
operations, which meets one or more of the criteria stated in 
Sec. 1767.15 (s).
    CFC is the National Rural Utilities Cooperative Finance Corporation.

[[Page 689]]

    Continuing Property Records are company plant records for retirement 
units and mass property that provide, as either a single record, or in 
separate records readily obtainable by references made in a single 
record, the following information:
    (1) For each retirement unit:
    (i) The name or description of the unit, or both;
    (ii) The location of the unit;
    (iii) The date the unit was placed in service;
    (iv) The cost of the unit as set forth in Sec. 1767.16 (b) and (c); 
and
    (v) The plant control account to which the cost of the unit is 
charged.
    (2) For each category of mass property:
    (i) A general description of the property and quantity;
    (ii) The quantity placed in service by vintage year;
    (iii) The average cost as set forth in Sec. 1767.16 (b) and (c); and
    (iv) The plant control account to which the costs are charged.
    Control (including the terms controlling, controlled by, and under 
common control with) is the possession, directly or indirectly, of the 
power to direct or cause the direction of the management and policies of 
a company, whether such power is exercised through one or more 
intermediary companies, or alone, or in conjunction with, or pursuant to 
an agreement, and whether such power is established through a majority 
or minority ownership or through voting of securities; common directors, 
officers, or stockholders; voting trusts; holding trusts; associated 
companies; contracts; or any other direct or indirect means.
    Cost is the amount of money actually paid for property or services. 
When the consideration given is other than cash in a purchase and sale 
transaction, as distinguished from a transaction involving the issuance 
of common stock in a merger or a pooling of interest, the value of such 
consideration shall be determined on a cash basis.
    Cost of removal is the cost of demolishing, dismantling, tearing 
down or otherwise removing electric plant, including the cost of 
transportation and handling incidental thereto.
    Customer is a consumer or patron.
    Debt expense includes all expenses incurred in connection with the 
issuance and initial 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 and 
certificates of indebtedness; fees paid to trustees; specific costs of 
obtaining governmental authority; fees for legal services; fees and 
commissions paid underwriters, brokers, and salesmen for marketing such 
evidences of debt; fees and expenses of listing on exchanges; and other 
like costs.
    Depreciation, as applied to depreciable electric plant, is the loss 
in service value, not restored by current maintenance, incurred in 
connection with the consumption or prospective retirement of electric 
plant in the course of service from causes which are known to be in 
current operation and against which the utility is not protected by 
insurance. Among the causes to be given consideration are wear and tear, 
decay, action of the elements, inadequacy, obsolescence, changes in the 
art, changes in demand and requirements of public authorities.
    Discount, as applied to the securities issued or assumed by the 
utility, is the excess of the par (stated value of no-par stocks) or 
face value of the securities plus interest or dividends accrued at the 
date of the sale over the cash value of the consideration received from 
their sale.
    FASB is the Financial Accounting Standards Board.
    G&T is a generation and transmission cooperative.
    Investment advances are advances, represented by notes or by book 
accounts only, with respect to which it is mutually agreed or intended 
between the creditor and debtor that they shall be settled by the 
issuance of securities or shall not be subject to current settlement.
    Minor items of property are the associated parts or items of which 
retirement units are composed.
    Net salvage value is the salvage value of property retired less the 
cost of removal.
    Nominally issued, as applied to securities issued or assumed by the 
utility,

[[Page 690]]

are those which have been signed, certified, or otherwise executed, and 
placed with the proper officer for sale and delivery, or pledged, or 
otherwise placed in some special funds of the utility, but which have 
not been sold, or issued direct to trustees of sinking funds in 
accordance with contractual requirements.
    Nominally outstanding, as applied to securities issued or assumed by 
the utility, are those which, after being actually issued, have been 
reacquired by or for the utility under circumstances which require them 
to be considered as held alive and not retired, provided, however, that 
securities held by trustees shall be considered as actually outstanding.
    NRECA is the National Rural Electric Cooperative Association.
    Operating lease is a lease of property used in utility or nonutility 
operations, which does not meet any of the criteria stated in 
Sec. 1767.15 (s).
    Original cost, as applied to electric plant, is the cost of such 
property to the person first devoting it to public service.
    Person is an individual, a corporation, a partnership, an 
association, a joint stock company, a business trust, or any organized 
group of persons, whether incorporated or not, or any receiver or 
trustee.
    Premium, as applied to securities issued or assumed by the utility, 
is the excess of the cash value of the consideration received from their 
sale over the sum of their par (stated value of no-par stocks) or face 
value and interest or dividends accrued at the date of sale.
    Project is a complete unit of improvement or development, consisting 
of a power house, all water conduits, all dams and appurtenant works and 
structures (including navigation structures) which are a **part** of said 
unit, and all storage, diverting, or forebay reservoirs directly 
connected therewith, the primary line or lines transmitting power 
therefrom to the point of junction with the distribution system or with 
the interconnected primary transmission system, all miscellaneous 
structures used and useful in connection with said unit or any **part** 
thereof, and all water rights, rights of way, ditches, dams, reservoirs, 
lands, or interest in lands the use and occupancy of which are necessary 
or appropriate in the maintenance and operation of such unit.
    Property retired, as applied to electric plant, is property which 
has been removed, sold, abandoned, destroyed, or which for any cause has 
been withdrawn from service.
    REA means the Rural Electrification Administration formerly an 
agency of the United States Department of Agriculture and predecessor 
agency to RUS with respect to administering certain electric and 
telephone loan programs.
    Regulatory Assets and Liabilities are assets and liabilities that 
result from rate actions of regulatory agencies. Regulatory assets and 
liabilities arise from specific revenues, expenses, gains, or losses 
that would have been included in net income determinations in one period 
under the general requirements of the Uniform System of Accounts but for 
it being probable:
    (1) That such items will be included in a different period(s) for 
purposes of developing the rates the utility is authorized to charge for 
its utility services; or
    (2) In the case of regulatory liabilities, that refunds to 
customers, not provided for in the other accounts, will be required.
    Replacing (including replacement) when not otherwise indicated in 
the context, is the construction or installation of electric plant in 
place of property retired, together with the removal of the property 
retired.
    Research, Development, and Demonstration (RD&D) includes all 
expenditures incurred by borrowers either directly or through another 
person or organization (such as a research institute, industry 
association, foundation, university, engineering company or similar 
contractor) in pursuing research, development, and demonstration 
activities including experiment, design, installation, construction, or 
operation. This definition includes expenditures for the implementation 
or development of new and/or existing concepts until technically 
feasible and commercially feasible operations are verified. Such 
research, development,

[[Page 691]]

and demonstration costs should be reasonably related to the existing or 
future utility business, broadly defined, of the borrower or in the 
environment in which it operates or expects to operate. The term 
includes, but is not limited to, all such costs incidental to the 
design, development or implementation of an experimental facility, a 
plant process, a product, a formula, an invention, a system or similar 
items, and the improvement of already existing items of a like nature; 
amounts expended in connection with the proposed development and/or 
proposed delivery of alternate sources of electricity; and the costs of 
obtaining its own patent, such as attorney's fees expended in making and 
perfecting a patent application. The term includes preliminary 
investigations and detailed planning of specific projects for securing 
for customers non-conventional electric power supplies that rely on 
technology that has not been verified previously to be feasible. The 
term does not include expenditures for efficiency surveys; studies of 
management, management techniques, and organization; or consumer 
surveys, advertising, promotions, or items of a like nature.
    Retirement units are those items of electric plant which, when 
retired with or without replacement, are accounted for by crediting the 
book cost thereof to the electric plant accounts in which included.
    RUS means the Rural Utilities Service, an agency of the United 
States Department of Agriculture established pursuant to Section 232 of 
the Federal Crop Insurance Reform and Department of Agriculture 
Reorganization Act of 1994 (Pub. L. 103-354, 108 Stat. 3178), successor 
to REA with respect to administering certain electric and telephone 
programs. See 7 CFR 1700.1.
    RUS Form 7 is the August 1988 revision (or the revision of any other 
date which may be specified) of such RUS Form 7, Financial and 
Statistical Report, or any later revision which shall have been at the 
time prescribed for use by RUS.
    RUS Form 12 is the November 1979 revision (or the revision of any 
other date which may be specified) of such RUS Form 12, Operating 
Report--Financial, or any later revision which shall have been at the 
time prescribed for use by RUS.
    RUS USoA is the USoA prescribed in this subpart.
    Salvage value is the amount received for property retired, less any 
expenses incurred in connection with the sale or in preparing the 
property for sale; or, if retained, the amount at which the material 
recovered is chargeable to materials and supplies, or other appropriate 
accounts.
    Service life is the time between the date electric plant is 
includible in electric plant in service, or electric plant leased to 
others, and the date of its retirement. If depreciation is accounted for 
on a production basis rather than on a time basis, service life should 
be measured in terms of the appropriate unit of production.
    Service value is the difference between original cost and net 
salvage value of electric plant.
    State is a State admitted to the Union, the District of Columbia, 
and any organized Territory of the United States.
    Subsidiary company is a company which is controlled by the utility 
through ownership of voting stock. (See the definition of control in 
Sec. 1767.10.) A corporate joint venture in which a corporation is owned 
by a small group of businesses as a separate and specific business or 
project for the mutual benefit of the members of the group is a 
subsidiary company for the purposes of this system of accounts.
    Utility is an RUS borrower.
    Work order is an order authorizing the construction of utility 
plant. It serves as the basis for the accounts or subaccounts in which 
costs are recorded.

[58 FR 59825, Nov. 10, 1993, as amended at 59 FR 66440, Dec. 27, 1994]

Sec. 1767.11  Purpose.

    (a) The standard form of RUS loan documents for electric borrowers 
requires that the borrower keep books, records, and accounts in which 
full and true entries will be made of all of the dealings, business and 
affairs of the borrower in accordance with the methods and principles of 
accounting of this **part**.

[[Page 692]]

    (b) This subpart implements these provisions of the RUS loan 
documents by prescribing the RUS USoA for electric borrowers and by 
providing accounting methodologies and procedures which are applicable 
to particular situations.

Sec. 1767.12  Accounting system requirements.

    (a) Each RUS electric borrower must maintain and keep its books of 
accounts and all other books and records that support the entries in 
such books of accounts in accordance with Secs. 1767.18-1767.31.
    (b) Each RUS electric borrower shall maintain and keep its books of 
accounts and all other books and records which support the entries in 
such books of accounts in accordance with Sec. 1767.41, Accounting 
Methods and Procedures Required of All RUS Borrowers, herein, which 
prescribes accounting principles to be applied to specific factual 
circumstances.

Sec. 1767.13  Departures from the prescribed RUS Uniform System of 
          Accounts.

    (a) No departures are to be made to the prescribed RUS USoA without 
the prior written approval of RUS. RUS grants a departure to any 
borrower electing to delay implementation of the functional (activity-
based) accounting requirements of this **part** through December 31, 1997. 
Requests for departures from the RUS USoA shall be addressed, in 
writing, to the Director, Program Accounting Services Division (PASD).
    (b) RUS borrowers subject to the jurisdiction of a state regulatory 
authority with jurisdiction over rates and/or accounting for electric 
utilities will not:
    (1) Request approval of such authority to use accounting 
methodologies and principles that depart from the provisions herein; or
    (2) File with such authority, any documents or information, 
including without limitation, any filings associated with the borrower's 
rates, based upon accounting methods and principles inconsistent with 
the provisions of this **part**.
    (c) If any state regulatory authority with jurisdiction over an RUS 
borrower prescribes accounting methods or principles for the borrower 
that are inconsistent with the provisions of this **part**, the borrower 
must immediately notify the Director, BAD, and provide such documents, 
information, and reports as RUS may request to evaluate the impact that 
such accounting methods or principles may have on the interests of RUS.
    (1) If RUS determines that the accounting methods and principles do 
not adversely impact RUS interests, RUS will permit the borrower to use 
the accounting methods and principles as prescribed by the state 
regulatory authority to comply with the provisions of the RUS loan 
documents.
    (2) If RUS determines that the accounting methods and principles may 
adversely impact RUS's interests, RUS may require that, for the purposes 
of complying with provisions of RUS loan documents, including, without 
limitation, those provisions relating to financial coverage standards 
(e.g. ``TIER''), the borrower continue to maintain books, records, and 
accounts in accordance with this subpart.
    (i) RUS may, however, approve requests by the borrower to maintain 
such additional books, records, and accounts as necessary to comply with 
the requirements of the state regulatory authority.
    (ii) Such approval will not waive, modify or amend the requirements 
of the RUS loan documents or of this subpart.
    (d) RUS borrowers will not implement the provisions of Statement of 
Financial Accounting Standards (SFAS) No. 71, Accounting for the Effects 
of Certain Types of Regulation, SFAS No. 90, Regulated Enterprises--
Accounting for Abandonments and Disallowances of Plant Costs, SFAS No. 
92, Regulated Enterprises--Accounting for Phase-in Plans, without the 
prior written approval of RUS except as provided for in paragraphs 
(d)(1) through (d)(5) of this section. Requests for approval shall be 
addressed, in writing, to the Director, PASD. The specific deferrals set 
forth in paragraphs (d)(1) through (d)(5) of this section may be 
implemented without the prior written

[[Page 693]]

approval of RUS provided that the deferrals comply with Statement No. 71 
and that the RUS borrowers implementing such deferrals continue to meet 
the requirements set forth in Statement No. 71 for doing so:
    (1) The deferral and amortization of prior service pension costs 
(See Sec. 1767.41, Interpretation No. 606, Pension Costs), remapping 
expenses (See Sec. 1767.41, Interpretation No. 613, Mapping Costs), and 
preliminary survey and investigation charges (See Sec. 1767.17, 
Interpretation No. 111, Engineering Contracts for System Planning);
    (2) The deferral of any current period expense or expenses, on a 
cumulative basis for the fiscal year, only if a borrower would have met 
each of its financial tests or coverage ratios that it has covenanted 
with RUS to meet for that fiscal year, had the deferral not been made;
    (3) The deferral of any cost that will be fully amortized within the 
next 12 succeeding months;
    (4) The accelerated amortization of any previously deferred expense; 
and
    (5) The deferral of revenues coincident with a moratorium imposed by 
the National Rural Electric Cooperative Association on its Retirement 
and Security Program, provided, however, that the deferral is for the 
sole purpose of offsetting future pension costs.
    (e) RUS will consider approval of specific departures from this **part** 
upon submission of:
    (1) A detailed description of the proposed departure;
    (2) The specific accounting journal entries that will be used 
including the account number and title, and the dollar amounts where 
appropriate;
    (3) The total dollar amount of the departure and the impact on 
margins during the time period of the departure; and
    (4) Any additional information RUS may deem necessary to adequately 
evaluate the borrower's request.
    (f) RUS will, within 90 days of final receipt of this information, 
render a decision on the borrower's request for a departure from the 
prescribed RUS USoA.
    (1) If, due to extenuating circumstances, RUS is unable to reach a 
decision within the required time period, RUS will notify the borrower 
of the delay within this same 90-day period, and provide a projected 
decision date.
    (2) The requested departure from the prescribed RUS USoA must not be 
implemented until final approval is granted by RUS.

[58 FR 59825, Nov. 10, 1993, as amended at 60 FR 55429, Nov. 1, 1995; 62 
FR 42289, Aug. 6, 1997]

Sec. 1767.14  Interpretations of the RUS Uniform System of Accounts.

    To maintain uniformity in accounting, borrowers must submit 
questions concerning interpretations of the RUS USoA, in writing, to the 
Director, BAD, for consideration and decision.

(Approved by the Office of Management and Budget under control number 
0572-0002)

[60 FR 55429, Nov. 1, 1995]

Sec. 1767.15  General instructions.

    (a) Records. (1) Each utility shall keep its books of account, and 
all other books, records, and memoranda which support the entries in 
such books of account so as to be able to furnish readily full 
information as to any item included in any account.
    (2) Each entry shall be supported by such detailed information as 
will permit ready identification, analysis, and verification of all 
facts relevant thereto.
    (3) The books and records referred to herein include not only 
accounting records in a limited technical sense, but all other records, 
such as minute books, stock books, reports, correspondence, memoranda, 
etc., which may be useful in developing the history of or facts 
regarding any transaction.
    (4) No utility shall destroy any such books or records unless the 
destruction thereof is permitted by the rules and regulations of RUS in 
7 CFR chapter XVII.
    (5) In addition to the prescribed accounts, clearing accounts, 
temporary or experimental accounts, and subdivisions of any accounts, 
may be kept, provided the integrity of the prescribed accounts is not 
impaired.
    (6) All amounts included in the accounts prescribed herein for 
electric plant and operating expenses shall be

[[Page 694]]

just and reasonable and any payments or accruals by the utility in 
excess of just and reasonable charges shall be included in Account 
426.5, Other Deductions.
    (7) The arrangement or sequence of the accounts prescribed herein 
shall not be controlling as to the arrangement or sequence in report 
forms which may be prescribed by RUS.
    (b) Numbering system. (1) The account numbering plan used herein 
consists of a system of three-digit whole numbers as follows:

100-199  Assets and other debits.
200-299  Liabilities and other credits.
300-399  Plant accounts.
400-432, 434-435  Income accounts.
433, 436-439  Retained earnings accounts.
440-459  Revenue accounts.
500-599  Production, transmission, and distribution expenses.
900-949  Customer accounts, customer service and informational, sales, 
          and general and administrative expenses.

    (2) In certain instances, numbers have been skipped in order to 
allow for possible later expansion or to permit better coordination with 
the numbering system for other utility departments.
    (3) The numbers prefixed to account titles are to be considered as 
parts of the titles.
    (i) Each utility, however, may adopt, for its own purposes, a 
different system of account numbers provided that the numbers herein 
prescribed shall appear in the descriptive headings of the ledger 
accounts and in the various sources of original entry.
    (ii) If a utility uses a different group of account numbers and it 
is not practicable to show the prescribed account numbers in the various 
sources of original entry, such reference to the prescribed account 
numbers may be omitted from the various sources of original entry.
    (iii) Each utility using different account numbers for its own 
purposes shall keep readily available, a list of such account numbers 
which it uses and a reconciliation of such account numbers with the 
account numbers provided herein.
    (iv) The utility's records shall be so kept as to permit ready 
analysis by prescribed accounts (by direct reference to sources of 
original entry to the extent practicable) and to permit preparation of 
financial and operating statements directly from such records at the end 
of each accounting period according to the prescribed accounts.
    (c) Accounting period. (1) Each utility shall keep its books on a 
monthly basis so that for each month, all transactions applicable 
thereto, as nearly as may be ascertained, shall be entered in the books 
of the utility.
    (2) Amounts applicable or assignable to specific utility departments 
shall be so segregated monthly.
    (3) Each utility shall close its books at the end of each fiscal 
year unless otherwise authorized by RUS.
    (d) Submission of questions. To maintain uniformity of accounting, 
utilities shall submit questions of doubtful interpretation to RUS for 
consideration and decision.
    (e) Item lists. (1) Lists of ``items'' appearing in the texts of the 
accounts or elsewhere herein are for the purpose of more clearly 
indicating the application of the prescribed accounting.
    (2) The lists are intended to be representative, but not exhaustive.
    (3) The appearance of an item in a list warrants the inclusion of 
the item in the account mentioned only when the text of the account also 
indicates inclusion inasmuch as the same item frequently appears in more 
than one list.
    (4) The proper entry in each instance must be determined by the 
texts of the accounts.
    (f) Extraordinary items. (1) Net income shall reflect all items of 
profit and loss during the period with the exception of prior period 
adjustments as described in Sec. 1767.15 (g) and long-term debt as 
described in Sec. 1767.15 (q).
    (2) Those items related to the effects of events and transactions 
which have occurred during the current period and which are not typical 
or customary business activities of the company shall be considered 
extraordinary items.
    (3) They will be events and transactions of significant effect which 
would not be expected to recur frequently and which would not be 
considered as recurring factors in any evaluation of the ordinary 
operating processes of business.

[[Page 695]]

    (i) In determining significance, items of a similar nature should be 
considered in the aggregate.
    (ii) Dissimilar items should be considered individually; however, if 
they are few in number, they may be considered in the aggregate.
    (iii) To be considered as extraordinary under the above guidelines, 
an item should be more than approximately 5 percent of income, computed 
before extraordinary items.
    (iv) RUS approval must be obtained to treat an item of less than 5 
percent, as extraordinary. (See Accounts 434 and 435.)
    (g) Prior period items. (1) Items of profit and loss related to the 
following shall be accounted for as prior period adjustments and 
excluded from the determination of net income for the current year:
    (i) Correction of an error in the financial statements of a prior 
year
    (ii) Adjustments that result from realization of income tax benefits 
of preacquisition operating loss carryforwards of purchased 
subsidiaries.
    (2) All other items of profit and loss recognized during the year 
shall be included in the determination of net income for that year.
    (h) Unaudited items. (1) Whenever a financial statement is required 
by RUS, if it is known that a transaction has occurred which affects the 
accounts but the amount involved in the transaction and its effect upon 
the accounts cannot be determined with absolute accuracy, the amount 
shall be estimated and such estimated amount included in the proper 
accounts.
    (2) The utility is not required to anticipate minor items which 
would not appreciably affect the accounts.
    (i) Distribution of pay and expenses of employees. Charges to 
electric plant, operating expense, and other accounts for services and 
expenses of employees engaged in activities chargeable to various 
accounts, such as construction, maintenance, and operations, shall be 
based upon the actual time engaged in the respective classes of work, or 
in case that method is impracticable, upon the basis of a study of the 
time actually engaged during a representative period.
    (j) Payroll distribution. (1) Underlying accounting data shall be 
maintained so that the distribution of the cost of labor charged direct 
to the various accounts will be readily available.
    (2) Such underlying data shall permit a reasonably accurate 
distribution to be made of the cost of labor charged initially to 
clearing accounts so that the total labor cost may be classified among 
construction, cost of removal, electric operating functions (steam 
generation, nuclear generation, hydraulic generation, transmission, 
distribution, etc.) and nonutility operations.
    (k) Accounting on an accrual basis. (1) The utility is required to 
keep its accounts on the accrual basis.
    (i) This requires the inclusion, in its accounts, of all known 
transactions of appreciable amount which affect the accounts.
    (ii) If bills covering such transactions have not been received or 
rendered, the amounts shall be estimated and appropriate adjustments 
made when the bills are received.
    (2) When payments are made in advance for items such as insurance, 
rents, taxes, or interest, the amount applicable to future periods shall 
be charged to Account 165, Prepayments, and spread over the periods to 
which applicable, by credits to Account 165, and charges to the accounts 
appropriate for the expenditure.
    (l) Records for each plant. (1) Separate records shall be maintained 
by electric plant accounts of the book cost of each plant owned, 
including additions by the utility to plant leased from others, and of 
the cost of operating and maintaining each plant owned or operated.
    (2) The term ``plant'' as used herein includes each generating 
station and each transmission line or appropriate group of transmission 
lines.
    (m) Accounting for other departments. (1) If the utility also 
operates other utility departments, such as gas or water, it shall keep 
such accounts for the other departments as may be prescribed by proper 
authority and in the absence of prescribed accounts, it shall keep such 
accounts as are proper or necessary to reflect the results of operating 
each such department.

[[Page 696]]

    (2) It is not intended that proprietary and similar accounts which 
apply to the utility as a whole shall be departmentalized.
    (n) Transactions with associated companies. (1) Each utility shall 
keep its accounts and records so as to be able to furnish accurately and 
expeditiously statements of all transactions with associated companies.
    (2) The statements may be required to show the general nature of the 
transactions, the amounts involved therein and the amounts included in 
each account prescribed herein with respect to such transactions. 
Transactions with associated companies shall be recorded in the 
appropriate accounts for transactions of the same nature. Nothing herein 
contained, however, shall be construed as restraining the utility from 
subdividing accounts for the purpose of recording separately 
transactions with associated companies.
    (o) Contingent assets and liabilities. (1) Contingent assets 
represent a possible source of value to the utility contingent upon the 
fulfillment of conditions regarded as uncertain.
    (2) Contingent liabilities include items which may, under certain 
conditions, become obligations of the utility but which are neither 
direct nor assumed liabilities at the date of the balance sheet. The 
utility shall be prepared to give a complete statement of significant 
contingent assets and liabilities (including cumulative dividends on 
preference stock) in its audited financial statements; its RUS Form 7, 
Financial and Statistical Report, or its RUS Form 12, Operating Report--
Financial; and at such other times as may be requested by RUS.
    (p) Separate accounts or records for each licensed project. The 
accounts or records of each borrower shall be so kept as to show for 
each project (including pumped storage) under license:
    (1) The actual legitimate original cost of the project, including 
the original cost of the original project, the original cost of 
additions thereto and betterments thereof, and credits for property 
retired from service, as determined under RUS's regulations in 7 CFR 
chapter XVII;
    (2) The charges for operation and maintenance of the project 
property directly assignable to the project;
    (3) The credits and debits to the depreciation and amortization 
accounts, and the balances in such accounts; and
    (4) The credits and debits to the operating revenue, income, and 
retained earnings accounts that can be identified with and directly 
assigned to the project.
    Note: The purpose of this instruction is to insure that accounts or 
records are currently maintained by each borrower from which reports may 
be made to RUS for use in determining the net investment in each 
licensed project. The instruction covers only the debit and credit items 
appearing in the borrower's accounts which may be identified with and 
assigned directly to any project. In the determination of the net 
investment, allocations of items affecting the net investment may be 
required where direct assignment is not practicable.
    (q) Long-term debt: premium, discount and expense, and gain or loss 
on reacquisition--(1) Premium, discount and expense. (i) A separate 
premium, discount and expense account shall be maintained for each class 
and series of long-term debt (including receivers' certificates) issued 
or assumed by the utility.
    (ii) The premium will be recorded in Account 225, Unamortized 
Premium on Long-Term Debt, the discount will be recorded in Account 226, 
Unamortized Discount on Long-Term Debt--Debit, and the expense of 
issuance shall be recorded in Account 181, Unamortized Debt Expense.
    (iii) The premium, discount and expense shall be amortized over the 
life of the respective issues under a plan which will distribute the 
amounts equitably over the life of the securities.
    (A) The amortization shall be charged or credited on a monthly basis 
with the amounts relating to discount and expense charged to Account 
428, Amortization of Debt Discount and Expense.
    (B) The amounts relating to premium shall be credited to Account 
429, Amortization of Premium on Debt--Credit.
    (2) Reacquisition, without refunding. (i) When long-term debt is 
reacquired or redeemed without being converted into another form of 
long-term debt and when the transaction is not in connection with a 
refunding operation (primarily redemptions for sinking fund

[[Page 697]]

purposes), the difference between the amount paid upon reacquisition and 
the face value; plus any unamortized premium less any related 
unamortized debt expense and reacquisition costs; or less any 
unamortized discount, related debt expense and reacquisition costs 
applicable to the debt redeemed, retired and cancelled, shall be 
included in Account 189, Unamortized Loss on Reacquired Debt, or Account 
257, Unamortized Gain on Reacquired Debt, as appropriate.
    (ii) The utility shall amortize the recorded amounts equally on a 
monthly basis over the remaining life of the respective security issues 
(old original debt).
    (iii) The amount so amortized shall be charged to Account 428.1, 
Amortization of Loss on Reacquired Debt, or credited to Account 429.1, 
Amortization of Gain on Reacquired Debt--Credit, as appropriate.
    (3) Reacquisition, with refunding. (i) When the redemption of one 
issue or series of bonds or other long-term obligations is financed by 
another issue or series before the maturity date of the first issue, the 
difference between the amount paid upon refunding and the face value; 
plus any unamortized premium less related debt expense or less any 
unamortized discount and related debt expense, applicable to the debt 
refunded, shall be included in Account 189, Unamortized Loss on 
Reacquired Debt, or Account 257, Unamortized Gain on Reacquired Debt, as 
appropriate.
    (ii) The utility may elect to account for such amounts as follows:
    (A) Write them off immediately when the amounts are insignificant;
    (B) Amortize them by equal monthly amounts over the remainder of the 
original life of the issue retired; or
    (C) Amortize them by equal monthly amounts over the life of the new 
issue.
    (iii) Once an election is made, it shall be applied on a consistent 
basis.
    (iv) The amounts in paragraphs (q)(3)(ii)(A), (B), or (C) of this 
section shall be charged to Account 428.1, Amortization of Loss on 
Reacquired Debt, or credited to Account 429.1, Amortization of Gain on 
Reacquired Debt--Credit, as appropriate.
    (4) Under methods in paragraphs (q)(3)(ii)(B) and (C) of this 
section, the increase or reduction in current income taxes resulting 
from the reacquisition should be apportioned over the remainder of the 
original life of the issued retired or over the life of the new issue, 
as appropriate, as directed more specifically in paragraphs (q)(5) and 
(6) of this section.
    (5) When the utility recognizes the loss in the year of 
reacquisition as a tax deduction, Account 410.1, Provision for Deferred 
Income Taxes, Utility Operating Income, shall be debited and Account 
283, Accumulated Deferred Income Taxes--Other, shall be credited with 
the amount of the related tax effect, such amount to be allocated to the 
periods affected in accordance with the provisions of Account 283.
    (6) When the utility chooses to recognize the gain in the year of 
reacquisition as a taxable gain, Account 411.1, Provision for Deferred 
Income Taxes--Credit, Utility Operating Income, shall be debited with 
the amount of the related tax effect, such amount to be allocated to the 
periods affected in accordance with the provisions of Account 190, 
Accumulated Deferred Income Taxes.
    (7) When the utility chooses to use the optional privilege of 
deferring the tax on the gain attributable to the reacquisition of debt 
by reducing the depreciable basis of utility property for tax purposes, 
pursuant to Section 108 of the Internal Revenue Code (26 U.S.C. 108), 
the related tax effects shall be deferred as the income is recognized 
for accounting purposes, and the deferred amounts shall be amortized 
over the life of the associated property on a vintage year basis.
    (i) Account 410.1, Provision for Deferred Income Taxes, Utility 
Operating Income, shall be debited, and Account 282, Accumulated 
Deferred Income Taxes--Other Property, shall be credited with an amount 
equal to the estimated income tax effect applicable to the portion of 
the income, attributable to reacquired debt, recognized for accounting 
purposes during the period.
    (ii) Account 282 shall be debited and Account 411.1, Provision for 
Deferred Income Taxes--Credit, Utility Operating Income, shall be 
credited with an

[[Page 698]]

amount equal to the estimated income tax effects, during the life of the 
property, attributable to the reduction in the depreciable basis for tax 
purposes.
    (8) The tax effects relating to gain or loss shall be allocated as 
above to utility operations except in cases where a portion of the debt 
reacquired is directly applicable to nonutility operations.
    (i) In that event, the related portion of the tax effects shall be 
allocated to nonutility operations.
    (ii) Where it can be established that reacquired debt is generally 
applicable to both utility and nonutility operations, the tax effects 
shall be allocated between utility and nonutility operations based on 
the ratio of net investment in utility plant to net investment in 
nonutility plant.
    (9) Premium, discount, or expense on debt shall not be included as 
an element in the cost of construction or acquisition of property 
(tangible or intangible), except under the provisions of Account 432, 
Allowance for Borrowed Funds Used During Construction--Credit.
    (10) Alternate method. Where a regulatory authority or a group of 
regulatory authorities having prime rate jurisdiction over the utility 
specifically disallows the rate principle of amortizing gains or losses 
on reacquisition of long-term debt without refunding, and does not apply 
the gain or loss to reduce interest charges in computing the allowed 
rate of return for rate purposes, the following alternate method may be 
used to account for gains or losses relating to reacquisition of long-
term debt, with or without refunding:
    (i) The difference between the amount paid upon reacquisition of any 
long-term debt and the face value, adjusted for unamortized discount, 
expenses or premium, as the case may be, applicable to the debt redeemed 
shall be recognized currently in income and recorded in Account 421, 
Miscellaneous Nonoperating Income, or Account 426.5, Other Deductions.
    (ii) When this alternate method of accounting is used, the utility 
shall include a footnote to each financial statement, prepared for 
public use, explaining why this method is being used along with the 
treatment given for ratemaking purposes.
    (r) Comprehensive interperiod income tax allocation. (1) Where there 
are timing differences between the periods in which transactions affect 
taxable income and the periods in which they enter into the 
determination of pretax accounting income, the income tax effects of 
such transactions are to be recognized in the periods in which the 
differences between book accounting income and taxable income arise and 
in the periods in which the differences reverse using the deferred tax 
method.
    (2) Comprehensive interperiod tax allocation should be followed 
whenever transactions enter into the determination of pretax accounting 
income for the period even though some transactions may affect the 
determination of taxes payable in a different period.
    (3) Utilities are not required to utilize comprehensive interperiod 
income tax allocation until the deferred income taxes are included as an 
expense in the rate level by the regulatory authority having rate 
jurisdiction over the utility.
    (4) Where comprehensive interperiod tax allocation accounting is not 
practiced the utility shall include as a note to each financial 
statement, prepared for public use, a footnote explanation setting forth 
the utility's accounting policies with respect to interperiod tax 
allocation and describing the treatment for rate making purposes of the 
tax timing differences by regulatory authorities having rate 
jurisdiction.
    (5) Should the utility be subject to more than one agency having 
rate jurisdiction, its accounts shall appropriately reflect the 
ratemaking treatment (deferral or flow through) of each jurisdiction.
    (6) Once comprehensive interperiod tax allocation has been initiated 
either in whole or in **part** it shall be practiced on a consistent basis 
and shall not be changed or discontinued without prior RUS approval.
    (7) Tax effects deferred currently will be recorded as deferred 
debits or deferred credits in Accounts 190, Accumulated Deferred Income 
Taxes; 281, Accumulated Deferred Income Taxes--Accelerated Amortization 
Property; 282, Accumulated Deferred Income Taxes--

[[Page 699]]

Other Property, and 283, Accumulated Deferred Taxes--Other, as 
appropriate.
    (8) The resulting amounts recorded in these accounts shall be 
disposed of as prescribed in this system of accounts or as otherwise 
authorized by RUS.
    (s) Criteria for classifying leases. (1) If, at its inception, a 
lease meets one or more of the following criteria, the lease shall be 
classified as a capital lease:
    (i) The lease transfers ownership of the property to the lessee by 
the end of the lease term.
    (ii) The lease contains a bargain purchase option.
    (iii) The lease term is equal to 75 percent or more of the estimated 
economic life of the leased property. However, if the beginning of the 
lease term falls within the last 25 percent 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.
    (iv) The present value at the beginning of the lease term of the 
minimum lease payments, excluding that portion of the payments 
representing executory costs such as insurance, maintenance, and taxes 
to be paid by the lessor, including any profit thereon, equals or exceed 
90 percent of the excess of the fair value of the leased property to the 
lessor at the inception of the lease over any related investment tax 
credit retained by the lessor and expected to be realized by lessor.
    (A) However, if the beginning of the lease term falls within the 
last 25 percent 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) The lessee utility shall compute the present value of the 
minimum lease payments using its incremental borrowing rate, unless it 
is practicable for the utility to learn the implicit rate computed by 
the lessor, and the implicit rate computed by the lessor is less than 
the lessee's incremental borrowing rate. If both of those conditions are 
met, the lessee shall use the implicit rate.
    (2) If, at any time, the lessee and lessor agree to change the 
provisions of the lease, other than by renewing the lease or extending 
its term, in a manner that would have resulted in a different 
classification of the lease under the criteria in paragraph (s)(1) of 
this section had the changed terms been in effect at the inception of 
the lease, the revised agreement shall be considered as a new agreement 
over its term, and the criteria in paragraph (s)(1) of this section 
shall be applied for purposes of the expiration of the existing lease 
term, such as the exercise of a lease renewal option other than those 
already included in the lease term, shall be considered as a new 
agreement and shall be classified according to the above provision. 
Changes in estimates (for example, changes in estimates of the economic 
life or of the residual value of the leased property) or changes in 
circumstances (for example, default by the lessee) shall not give rise 
to a new classification of a lease for accounting purposes.
    (t) Accounting for leases. (1) All leases shall be classified as 
either capital or operating leases.
    (2) The utility shall record a capital lease as an asset in Account 
101.1, Property Under Capital Leases, and Account 120.6, Nuclear Fuel 
Under Capital Leases; as appropriate, and an obligation in Account 227, 
Obligations Under Capital Leases--Noncurrent, or Account 243, 
Obligations Under Capital Leases--Current, at an amount equal to the 
present 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 such as insurance, maintenance, and taxes 
to be paid by the lessor, together with any profit thereon. However, if 
the amount so determined exceeds the fair value of the leased property 
at the inception of the lease, the amount recorded as the asset and 
obligation shall be the fair value.
    (3) Rental payments on all leases shall be charged to rent expense, 
fuel expense, construction work in progress, or other appropriate 
accounts as they become payable.
    (4) For a capital lease, for each period during the lease term, the 
amounts recorded for the asset and obligation shall be reduced by an 
amount equal to the portion of each lease payment that

[[Page 700]]

would have been allocated to the reduction of the obligation, if the 
payment had been treated as a payment on an installment obligation 
(liability) and allocated between interest expense and a reduction of 
the obligation so as to produce a constant periodic rate of interest on 
the remaining balance.
    (u) Allowances. (1) Title IV of the Clean Air Act Amendments of 
1990, Pub. L. 101-549, 104 Stat. 2399, 2584 (42 U.S.C. 7407 and 42 
U.S.C. 7651), provides for the issuance of allowances as a means to 
limit the emissions of certain airborne pollutants by various entities, 
including utilities. Utilities owning allowances, other than those 
acquired for speculative purposes, shall account for such allowances at 
cost in Account 158.1, Allowance Inventory, or Account 158.2, Allowances 
Withheld, as appropriate. Allowances acquired for speculative purposes 
and identified as such in contemporaneous records at the time of 
purchase shall be accounted for in Account 124, Other Investments.
    (2) When purchased, allowances become eligible for use in different 
years, and the allocation of the purchase cost cannot be determined by 
fair value, the purchase cost allocated to allowances of each vintage 
shall be determined through use of a present-value based measurement. 
The interest rate used in the present-value measurement shall be the 
utility's incremental borrowing rate, in the month in which the 
allowances are acquired, for a loan with a term similar to the period 
that it will hold the allowances and in an amount equal to the purchase 
price.
    (3) The underlying records supporting Account 158.1 and Account 
158.2 shall be maintained in sufficient detail so as to provide the 
number of allowances and the related cost by vintage year.
    (4) Issuances from inventory included in Account 158.1 and Account 
158.2 shall be accounted for on a vintage basis using a monthly 
weighted-average method of cost determination. The cost of eligible 
allowances not used in the current year shall be transferred to the 
vintage for the immediately following year.
    (5) Account 158.1 shall be credited and Account 509, Allowances, 
debited so that the cost of the allowances to be remitted for the year 
is charged to expense monthly based on each month's emissions. This may, 
in certain circumstances, require allocation of the cost of an allowance 
between months on a fractional basis.
    (6) In any period in which actual emissions exceed the amount 
allowable based on eligible allowances owned, the utility shall estimate 
the cost to acquire the additional allowances needed and charge Account 
158.1 with the estimated cost. This estimated cost of future allowance 
acquisitions shall be credited to Account 158.1 and charged to Account 
509 in the same accounting period as the related charge to Account 
158.1. Should the actual cost of these allowances differ from the 
estimated cost, the differences shall be recognized in the then-current 
period's inventory issuance cost.
    (7) Any penalties assessed by the Environmental Protection Agency 
for the emission of excess pollutants shall be charged to Account 426.3, 
Penalties.
    (8) Gains on dispositions of allowances, other than allowances held 
for speculative purposes, shall be accounted for as follows. First, if 
there is uncertainty as to the regulatory treatment, the gain shall be 
deferred in Account 254, Other Regulatory Liabilities, pending 
resolution of the uncertainty. Second, if there is certainty as to the 
existence of a regulatory liability, the gain will be credited to 
Account 254, with subsequent recognition in income when reductions in 
charges to customers occur or the liability is otherwise satisfied. 
Third, all other gains will be credited to Account 411.8, Gains from 
Disposition of Allowances. Losses on disposition of allowances, other 
than allowances held for speculative purposes, shall be accounted for as 
follows. Losses that qualify as regulatory assets shall be charged 
directly to Account 182.3, Other Regulatory Assets. All other losses 
shall be charged to Account 411.9, Losses from Disposition of 
Allowances. (See the definition of regulatory assets and liabilities.) 
Gains or losses on disposition of allowances held for speculative 
purposes shall be recognized in Account 421, Miscellaneous Nonoperating 
Income, or Account 426.5, Other Deductions, as appropriate.

[[Page 701]]

    (9) The costs and benefits of exchange-traded allowance futures 
contracts used to protect the utility from the risk of unfavorable price 
changes (``hedging transactions'') shall be deferred in Account 186, 
Miscellaneous Deferred Debits, or Account 253, Other Deferred Credits, 
as appropriate. Such deferred amounts shall be included in Account 
158.1, Allowance Inventory, in the month in which the related allowances 
are acquired, sold or otherwise disposed of. Where the costs or benefits 
of hedging transactions are not identifiable with specific allowances, 
the amounts shall be included in Account 158.1 when the futures contract 
is closed. The costs and benefits of exchange-traded allowance futures 
contracts entered into as a speculating activity shall be charged or 
credited to Account 421, Miscellaneous Nonoperating Income, or Account 
426.5, Other Deductions, as appropriate.

Sec. 1767.16  Electric plant instructions.

    (a) Classification of electric plant at effective date of system of 
accounts. (1) The electric plant accounts provided herein are the same 
as those contained in the prior system of accounts except for inclusion 
of accounts for nuclear production plant and some changes in 
classification in the general equipment accounts. Except for these 
changes, the balances in the various plant accounts, as determined under 
the prior system of accounts, should be carried forward. Any remaining 
balance of plant which has not yet been classified, pursuant to the 
requirements of the prior system, shall be classified in accordance with 
the following instructions.
    (2) The cost to the utility of its unclassified plant shall be 
ascertained by analysis of the utility's records. Adjustments shall not 
be made to record in utility plant accounts amounts previously charged 
to operating expenses or to income deductions in accordance with the 
USoA in effect at the time or in accordance with the discretion of 
management as exercised under a USoA, or under accounting practices 
previously followed.
    (3) The detailed electric plant accounts (301 to 399, inclusive) 
shall be stated on the basis of cost to the utility of plant constructed 
by it and the original cost, estimated if not known, of plant acquired 
as an operating unit or system. The difference between the original 
cost, as above, and the cost to the utility of electric plant after 
giving effect to any accumulated provision for depreciation or 
amortization shall be recorded in Account 114, Electric Plant 
Acquisition Adjustments. The original cost of electric plant shall be 
determined by analysis of the utility's records or those of the 
predecessor or vendor companies with respect to electric plant 
previously acquired as operating units or systems and the difference 
between the original cost so determined, less accumulated provisions for 
depreciation and amortization and the cost to the utility with necessary 
adjustments for retirements from date of acquisition, shall be entered 
in Account 114, Electric Plant Acquisition Adjustments. Any difference 
between the cost of electric plant and its book cost, when not properly 
includible in other accounts, shall be recorded in Account 116, Other 
Electric Plant Adjustments.
    (b) Electric plant to be recorded at cost. (1) All amounts included 
in the accounts for electric plant acquired as an operating unit or 
system, except as otherwise provided in the texts of the intangible 
plant accounts, shall be stated at the cost incurred by the person who 
first devoted the property to utility service. All other electric plant 
shall be included in the accounts at the cost incurred by the utility 
except for property acquired by lease which qualifies as capital lease 
property under Sec. 1767.15 (s), Criteria for Classifying Leases, and is 
recorded in Account 101.1, Property Under Capital Lease, or Account 
120.6, Nuclear Fuel Under Capital Leases. Where the term ``cost'' is 
used in the detailed plant accounts, it shall have the meaning stated in 
this paragraph (b).
    (2) When the consideration given for property is other than cash, 
the value of such consideration shall be determined on a cash basis 
(see, however, the definition of cost in Sec. 1767.10). In the entry 
recording such transition, the actual consideration shall be described 
with sufficient particularity to identify it. The utility shall be 
prepared to furnish RUS the particulars of

[[Page 702]]

its determination of the cash value of the consideration if other than 
cash.
    (3) When property is purchased under a plan involving deferred 
payments, no charge shall be made to the electric plant accounts for 
interest, insurance, or other expenditures occasioned solely by such 
form of payment.
    (4) The electric plant accounts shall not include the cost or other 
value of electric plant contributed to the company. Contributions in the 
form of money or its equivalent toward the construction of electric 
plant shall be credited to accounts charged with the cost of such 
construction. Plant constructed from contributions of cash or its 
equivalent shall be shown as a reduction to gross plant constructed when 
assembling cost data in work orders for posting to plant ledgers of 
accounts. The accumulated gross costs of plant accumulated in the work 
order shall be recorded as a debit in the plant ledger of accounts along 
with the related amount of contributions concurrently be recorded as a 
credit.
    (c) Components of construction cost. The cost of construction 
properly includible in the electric plant accounts shall include, where 
applicable, the direct and overhead costs as listed and defined 
hereunder:
    (1) Contract work includes amounts paid for work performed under 
contract by other companies, firms, or individuals, costs incident to 
the award of such contracts, and the inspection of such work.
    (2) Labor includes the pay and expenses of employees of the utility 
engaged on construction work, and related workmen's compensation 
insurance, payroll taxes, and similar items of expense. It does not 
include the pay and expenses of employees which are distributed to 
construction through clearing accounts nor the pay and expenses included 
in other items hereunder.
    (3) Materials and supplies includes the purchase price at the point 
of free delivery plus customs duties, excise taxes, the cost of 
inspection, loading and transportation, the related stores expenses, and 
the cost of fabricated materials from the utility's shop. In determining 
the cost of materials and supplies used for construction, proper 
allowance shall be made for unused materials and supplies, for materials 
recovered from temporary structures used in performing the work 
involved, and for discounts allowed and realized in the purchase of 
materials and supplies.
    Note: The cost of individual items of equipment of small value (for 
example, $500 or less) or of short life, including small portable tools 
and implements, shall not be charged to utility plant accounts unless 
the correctness of the accounting therefor is verified by current 
inventories. The cost shall be charged to the appropriate operating 
expense or clearing accounts, according to the use of such items, or, if 
such items are consumed directly in construction work, the cost shall be 
included as **part** of the cost of the construction.
    (4) Transportation includes the cost of transporting employees, 
materials and supplies, tools, purchased equipment, and other work 
equipment (when not under own power) to and from points of construction. 
It includes amounts paid to others as well as the cost of operating the 
utility's own transportation equipment. (See Item in paragraph (c)(5) of 
this section.)
    (5) Special machine service includes the cost of labor (optional), 
materials and supplies, depreciation, and other expenses incurred in the 
maintenance, operation and use of special machines, such as steam 
shovels, pile drivers, derricks, ditchers, scrapers, material unloaders, 
and other labor saving machines; also expenditures for rental, 
maintenance and operation of machines of others. It does not include the 
cost of small tools and other individual items of small value or short 
life which are included in the cost of materials and supplies. (See Item 
in paragraph (c)(3) of this section.) When a particular construction job 
requires the use for an extended period of time of special machines, 
transportation or other equipment, the net book cost thereof, less the 
appraised or salvage value at time of release from the job, shall be 
include in the cost of construction.
    (6) Shop service includes the proportion of the expense of the 
utility's shop department assignable to construction work except that 
the cost of fabricated materials from the utility's shop shall be 
included in ``materials and supplies.''

[[Page 703]]

    (7) Protection includes the cost of protecting the utility's 
property from fire or other casualties and the cost of preventing 
damages to others, or to the property of others, including payments for 
discovery or extinguishment of fires, cost of apprehending and 
prosecuting incendiaries, witness fees in relation thereto, amounts paid 
to municipalities and others for fire protection, and other analogous 
items of expenditures in connection with construction work.
    (8) Injuries and damages includes expenditures or losses in 
connection with construction work on account of injuries to persons and 
damages to the property of others; also the cost of investigation of and 
defense against actions for such injuries and damages. Insurance 
recovered or recoverable on account of compensation paid for injuries to 
persons incident to construction shall be credited to the account or 
accounts to which such compensation is charged. Insurance recovered or 
recoverable on account of property damages incident to construction 
shall be credited to the account or accounts charged with the cost of 
the damages.
    (9) Privileges and permits includes payments for and expenses 
incurred in securing temporary privileges, permits or rights in 
connection with construction work, such as for the use of private or 
public property, streets, or highways, but it does not include rents, or 
amounts chargeable as franchises and consents for which see Account 302, 
Franchises and Consents.
    (10) Rents includes amounts paid for the use of construction 
quarters and office space occupied by construction forces and amounts 
properly includible in construction costs for such facilities jointly 
used.
    (11) Engineers and supervision includes the portion of the pay and 
expenses of engineers, surveyors, draftsmen, inspectors, superintendents 
and their assistants applicable to construction work.
    (12) General administration capitalized includes the portion of the 
pay and expenses of the general officers and administrative and general 
expenses applicable to construction work.
    (13) Engineering services includes amounts paid to other companies, 
firms, or individuals engaged by the utility to plan, design, prepare 
estimates, supervise, inspect, or give general advice and assistance in 
connection with construction work.
    (14) Insurance includes premiums paid or amounts provided or 
reserved as self-insurance for the protection against loss and damages 
in connection with construction, by fire or other casualty, injuries or 
deaths of persons other than employees, damages to property of others, 
defalcation of employees and agents, and the nonperformance of 
contractual obligations of others. It does not include workmen's 
compensation or similar insurance on employees included as ``labor'' in 
Item in paragraph (c)(2) of this section.
    (15) Law expenditures includes the general law expenditures incurred 
in connection with construction and the court and legal costs directly 
related thereto, other than law expenses included in ``Protection,'' 
Item in paragraph (c)(7) of this section, and in Injuries and damages, 
Item in paragraph (c)(8) of this section.
    (16) Taxes includes taxes on physical property (including land) 
during the period of construction and other taxes properly includible in 
construction costs before the facilities become available for service.
    (17) Allowance for funds used during construction includes the net 
cost for the period of construction of borrowed funds used for 
construction purposes and a reasonable rate on other funds when so used, 
not to exceed, without prior approval of RUS, allowances computed in 
accordance with the formula prescribed in Item in paragraph (c)(17)(i) 
of this section. No allowance for funds used during construction charges 
shall be included in these accounts upon expenditures for construction 
projects which have been abandoned.
    (i) The formula and elements for the computation of the allowance 
for funds used during construction shall be:

[[Page 704]]

[GRAPHIC] [TIFF OMITTED] TC16SE91.004

Where:

A<INF>i</INF> = Gross allowance for borrowed funds used during 
construction rate.
A<INF>c</INF> = Allowance for other funds used during construction rate.
S = Average short-term debt.
s = Short-term debt interest rate.
D = Long-term debt.
d = Long-term debt interest rate.
P = Preferred stock.
p = Preferred stock cost rate.
C = Patronage capital assigned.
c = Entity's incremental borrowing rate.
W = Average balance in construction work in progress plus nuclear fuel 
in process of refinement, conversion, enrichment, and fabrication.

    (ii) The rate shall be determined annually.
    (A) The balance for long-term debt, preferred stock, and patronage 
capital assigned shall be the actual book balances as of the end of the 
prior year.
    (B) The cost rate for long-term debt and preferred stock shall be 
the weighted average cost.
    (C) The cost rate for patronage capital assigned shall be the 
entity's incremental borrowing rate.
    (D) The short-term debt balances and related cost and the average 
balance for construction work in progress plus nuclear fuel in process 
of refinement, conversion, enrichment, and fabrication shall be 
estimated for the current year with appropriate adjustments as actual 
data becomes available.
    Note: When only a portion of a plant or project is placed in 
operation or is completed and ready for service but the construction 
work as a whole is incomplete, that **part** of the cost of the property 
placed in operation or ready for service shall be treated as ``Electric 
Plant in Service,'' and an allowance for funds used during construction 
thereon as a charge to construction shall cease. Allowance for funds 
used during construction on that **part** of the cost of the plant which is 
incomplete may continue to be charged to construction until such time as 
it is placed in operation or is ready for service, except as limited in 
Item in paragraph (c)(17) of this section.

    (18) Earnings and expenses during construction. The earnings and 
expenses during construction shall constitute a component of 
construction costs.
    (i) The earnings shall include revenues received or earned for power 
produced by generating plants during the construction period and sold or 
used by the utility.
    (A) Where such power is sold to an independent purchaser before 
intermingling with power generated by other plants, the credit shall 
consist of the selling price of the energy.
    (B) Where the power generated by a plant under construction is 
delivered to the utility's electric system for distribution and sale, or 
is delivered to an associated company, or is delivered to and used by 
the utility for purposes other than distribution and sale (for 
manufacturing or industrial use, for example), the credit shall be the 
fair value of the energy so delivered.
    (C) Revenue shall also include rentals for lands, buildings, and 
other property, and miscellaneous receipts not properly includible in 
other accounts.
    (ii) Expenses shall consist of the cost of operating the power 
plant, and other costs incident to the production and delivery of the 
power for which construction is credited under paragraph (c)(18)(i) of 
this section, including the cost of repairs and other expenses of 
operating and maintaining lands, buildings, and other property, and 
other miscellaneous and like expenses not properly includible in other 
accounts.
    (19) Training costs. (i) When it is necessary that employees be 
trained to operate or maintain plant facilities that are being 
constructed and such facilities are not conventional in nature, or are 
new to the company's operations,

[[Page 705]]

these costs may be capitalized as a component of construction cost.
    (ii) Once plant is placed in service, the capitalization of training 
costs shall cease and subsequent training costs shall be expensed. (See 
Sec. 1767.17 (d).)
    (20) Studies. (i) Studies include the costs of studies such as 
nuclear operational, safety, or seismic studies, or environmental 
studies mandated by regulatory bodies relative to plant under 
construction.
    (ii) Studies relative to facilities in service shall be charged to 
Account 183, Preliminary Survey and Investigation Charges.
    (d) Overhead construction costs. (1) All overhead construction 
costs, such as engineering, supervision, general office salaries and 
expenses, construction engineering and supervision performed by others 
than the accounting utility, law expenses, insurance, injuries and 
damages, relief and pensions, taxes and interest, shall be charged to 
particular jobs or units on the basis of the amounts of such overheads 
reasonably applicable thereto, to the end that each job or unit shall 
bear its equitable proportion of such costs and that the entire cost of 
the unit, both direct and overhead, shall be deducted from the plant 
accounts as the time the property is retired.
    (2) As far as practicable, the determination of payroll charges 
includible in construction overheads shall be based on time card 
distributions thereof.
    (i) Where this procedure is impractical, special studies shall be 
made periodically of the time of supervisory employees devoted to 
construction activities to the end that only such overhead costs as have 
a definite relation to construction shall be capitalized.
    (ii) The addition to direct construction cost of arbitrary 
percentages or amounts to cover assumed overhead costs is not permitted.
    (3) The records supporting the entries for overhead constructions 
costs shall be so kept as to show:
    (i) The total amount of each overhead for each year;
    (ii) The nature and amount of each overhead expenditure charged to 
each construction work order and to each electric plant account; and
    (iii) The bases of distribution of such costs.
    (e) Electric plant purchased or sold. (1) When electric plant 
constituting an operating unit or system is acquired by purchase, 
merger, consolidation, liquidation, or otherwise, after the effective 
date of this system of accounts, the costs of acquisition, including 
expenses incidental thereto properly includible in electric plant, shall 
be charged to Account 102, Electric Plant Purchased or Sold.
    (2) The accounting for the acquisition shall then be completed as 
follows:

    (i) The original cost of plant, estimated if not known, shall be 
credited to Account 102, Electric Plant Purchased or Sold, and 
concurrently charged to the appropriate electric plant in service 
accounts and to Account 104, Electric Plant Leased to Others; Account 
105, Electric Plant Held for Future Use; and Account 107, Construction 
Work in Progress--Electric, as appropriate.
    (ii) The depreciation and amortization applicable to the original 
cost of the properties purchased shall be charged to Account 102, 
Electric Plant Purchased or Sold, and concurrently credited to the 
appropriate account for accumulated provision for depreciation or 
amortization.
    (iii) The cost to the utility of any property includible in Account 
121, Nonutility Property, shall be transferred thereto.
    (iv) The amount remaining in Account 102, Electric Plant Purchased 
or Sold, shall then be closed to Account 114, Electric Plant Acquisition 
Adjustments.
    (3) If property acquired in the purchase of an operating unit or 
system is in such physical condition when acquired that it is necessary 
to substantially rehabilitate it in order to bring the property up to 
the standards of the utility, the cost of such work, except 
replacements, shall be accounted for as a **part** of the purchase price of 
the property.
    (4) When any property acquired as an operating unit or system 
includes duplicate or other plant which will be retired by the 
accounting utility in the

[[Page 706]]

reconstruction of the acquired property or its consolidation with 
previously owned property, the proposed accounting for such property 
shall be presented to RUS.
    (5) In connection with the acquisition of electric plant 
constituting an operating unit or system, the utility shall procure, if 
possible, all existing records relating to the property acquired or 
certified copies thereof, and shall preserve such records in conformity 
with regulations or practices governing the preservation of records of 
its own construction.
    (6) When electric plant constituting an operating unit or system is 
sold, conveyed, or transferred to another by sale, merger, 
consolidation, or otherwise, the book cost of the property sold or 
transferred to another shall be credited to the appropriate utility 
plant accounts, including amounts carried in Account 114, Electric Plant 
Acquisition Adjustments, and the amounts (estimated if not known) 
carried with respect thereto in the accounts for accumulated provision 
for depreciation and amortization and in Account 252, Customer Advances 
for Construction, shall be charged to such accounts and contra entries 
made to Account 102, Electric Plant Purchased or Sold. Unless otherwise 
ordered by RUS, the difference, if any, between:
    (i) The net amount of debits and credits, and
    (ii) The consideration received for the property (less commissions 
and other expenses of making the sale) shall be included in Account 
421.1, Gain on Disposition of Property, or Account 421.2, Loss on 
Disposition of Property. (See Account 102, Electric Plant Purchased or 
Sold.)
    Note: In cases where existing utilities merge or consolidate because 
of financial or operating reasons or statutory requirements rather than 
as a means of transferring title of purchased properties to a new owner, 
the accounts of the constituent utilities, with the approval of RUS, may 
be combined. In the event original cost has not been determined, the 
resulting utility shall proceed to determine such cost as outlined 
herein.
    (f) Expenditures on leased property. (1) The cost of substantial 
initial improvements (including repairs, rearrangements, additions, and 
betterments) made in the course of preparing for utility service 
property leased for a period of more than one year, and the cost of 
subsequent substantial additions, replacements, or betterments to such 
property, shall be charged to the electric plant account appropriate for 
the class of property leased.
    (i) If the service life of the improvements is terminable by action 
of the lease, the cost, less net salvage, of the improvements shall be 
spread over the life of the lease by charges to Account 404, 
Amortization of Limited-Term Electric Plant.
    (ii) If the service life is not terminated by action of the lease 
but by depreciation proper, the cost of the improvements, less net 
salvage, shall be accounted for as depreciable plant. The provisions of 
(1) are applicable to property leased under either capital leases or 
operating leases.
    (2) If improvements made to property leased for a period of more 
than one year are of relatively minor cost, or if the lease is for a 
period of not more than one year, the cost of the improvements shall be 
charged to the account in which the rent is included, either directly or 
by amortization thereof.
    (g) Land and land rights. (1) The accounts for land and land rights 
shall include the cost of land owned in fee by the utility and rights, 
interests, and privileges held by the utility in land owned by others, 
such as leaseholds, easements, water and water power rights, diversion 
rights, submersion rights, rights-of-way, and other like interests in 
land.
    (i) Do not include in the accounts for land and land rights and 
rights-of-way costs incurred in connection with first clearing and 
grading of land and rights-of-way and the damage costs associated with 
the construction and installation of plant.
    (ii) Such costs shall be included in the appropriate plant accounts 
directly benefited.
    (2) Where special assessments for public improvements provide for 
deferred payments, the full amount of the assessments shall be charged 
to the appropriate land account and the unpaid balance shall be carried 
in an appropriate liability account.

[[Page 707]]

    (i) Interest on unpaid balances shall be charged to the appropriate 
interest account.
    (ii) If any **part** of the cost of public improvements is included in 
the general tax levy, the amount thereof shall be charged to the 
appropriate tax account.
    (3) The net profit from the sale of timber, cord wood, sand, gravel, 
other resources or other property acquired with the rights-of-way or 
other lands shall be credited to the appropriate plant accounts to which 
related. Where land is held for a considerable period of time and timber 
and other natural resources on the land at the time of purchase increase 
in value, the net profit (after giving effect to the cost of the natural 
resources) from the sale of timber or its products or other natural 
resources shall be credited to the appropriate utility operating income 
account when such land has been recorded in Account 105, Electric Plant 
Held for Future Use, or classified as plant in service, otherwise to 
Account 421, Miscellaneous Nonoperating Income.
    (4) Separate entries shall be made for the acquisition, transfer, or 
retirement of each parcel of land, and each land right (except rights-
of-way for distribution lines), or water right, having a life of more 
than one year.
    (i) A record shall be maintained showing the nature of ownership, 
full legal description, area, map reference, purpose for which used, 
city, county, and tax district on which situated, from whom purchased or 
to whom sold, payment given or received, other costs, contract date and 
number, date of recording of deed, and book and page of record.
    (ii) Entries transferring or retiring land or land rights shall 
refer to the original entry recording its acquisition.
    (5) Any difference between the amount received from the sale of land 
or land rights, less agents' commissions and other costs incident to the 
sale, and the book cost of such land or rights, shall be included in 
Account 411.6, Gains from Disposition of Utility Plant, or 411.7, Losses 
from Disposition of Utility Plant, when such property has been recorded 
in Account 105, Electric Plant Held for Future Use, otherwise to Account 
421.1, Gain on Disposition of Property, or 421.2, Loss on Disposition of 
Property, as appropriate, unless a reserve therefor has been authorized 
and provided. Appropriate adjustments of the accounts shall be made with 
respect to any structures or improvements located on land sold.
    (6) The cost of buildings and other improvements (other than public 
improvements) shall not be included in the land accounts. If, at the 
time of acquisition of an interest in land, such interest extends to 
buildings or other improvements (other than public improvements) which 
are then devoted to utility operations, the land and improvements shall 
be separately appraised and a cost allocated to land and buildings or 
improvements on the basis of the appraisals. If the improvements are 
removed or wrecked without being used in operations, the cost of 
removing or wrecking shall be charged and the salvage credited to the 
account in which the cost of land is recorded.
    (7) When the purchase of land for electric operations requires the 
purchase of more land than needed for such purposes, the charge to the 
specific land account shall be based upon the cost of the land 
purchased, less the fair market value of that portion of the land which 
is not to be used in utility operations. The portion of the cost 
measured by the fair market value of the land not to be used shall be 
included in Account 105, Electric Plant Held for Future Use, or Account 
121, Nonutility Property, as appropriate.
    (8) Provisions shall be made for amortizing amounts carried in the 
accounts for limited-term interest in land so as to apportion equitably 
the cost of each interest over the life thereof. (See Account 111, 
Accumulated Provision for Amortization of Electric Utility Plant, and 
Account 404, Amortization of Limited-Term Electric Plant.)
    (9) The items of cost to be included in the accounts for land and 
land rights are as follows:
    (i) Bulkheads, buried, not requiring maintenance or replacement;
    (ii) First cost of acquisition including mortgages and other liens 
assumed (but not subsequent interest thereon);

[[Page 708]]

    (iii) Condemnation proceedings, including court and counsel costs;
    (iv) Consents and abutting damages;
    (v) Conveyancers' and notaries' fees;
    (vi) Fees, commissions, and salaries to brokers, agents, and other 
in connection with the acquisition of the land or land rights;
    (vii) Leases, cost of voiding upon purchase to secure possession of 
land;
    (viii) Removing, relocating, or reconstructing property of others, 
such as buildings, highways, railroads, bridges, cemeteries, churches, 
telephone and power lines, etc., in order to acquire quiet possession;
    (ix) Retaining walls unless identified with structures;
    (x) Special assessments levied by public authorities for public 
improvements on the basis of benefits for new roads, new bridges, new 
sewers, new curbing, new pavements, and other public improvements, but 
not taxes levied to provide for the maintenance of such improvements;
    (xi) Surveys in connection with the acquisition, but not amounts 
paid for topographical surveys and maps where such costs are 
attributable to structures or plant equipment erected or to be erected 
or installed on such land;
    (xii) Taxes assumed, accrued to date of transfer of title;
    (xiii) Title, examining, clearing, insuring, and registering in 
connection with the acquisition and defending against claims relating to 
the period prior to the acquisition;
    (xiv) Appraisals prior to closing title;
    (xv) Cost of dealing with distributees or legatees residing outside 
of the state or county, such as recording power of attorney, recording 
will or exemplification of will, recording satisfaction of state tax;
    (xvi) Filing satisfaction of mortgage;
    (xvii) Documentary stamps;
    (xviii) Photographs of property at acquisition;
    (xix) Fees and expenses incurred in the acquisition of water rights 
and grants;
    (xx) Cost of fill to extend bulkhead line over land under water, 
where riparian rights are held, which is not occasioned by the erection 
of a structure;
    (xxi) Sidewalks and curbs constructed by the utility on public 
property; and
    (xxii) Labor and expenses in connection with securing rights of way, 
where performed by company employees and company agents.
    (h) Structures and improvements. (1) The accounts for structures and 
improvements shall include the cost of all buildings and facilities to 
house, support, or safeguard property or persons, including all fixtures 
permanently attached to and made a **part** of buildings and which cannot be 
removed therefrom without cutting into the walls, ceilings, or floors, 
or without in some way impairing the buildings, and improvements of a 
permanent character on or to land.
    (2) Also include those costs incurred in connection with the first 
clearing and grading of land and rights-of-way and the damage costs 
associated with construction and installation of plant.
    (3) The cost of specially provided foundations not intended to 
outlast the machinery or apparatus for which provided, and the cost of 
angle irons, and castings installed at the base of an item of equipment, 
shall be charged to the same account as the cost of the machinery, 
apparatus, or equipment.
    (4) Minor buildings and structures, such as valve towers, 
patrolmen's towers, telephone stations, fish and wildlife, and 
recreation facilities which are used directly in connection with or form 
a **part** of a reservoir, dam or waterway shall be considered a **part** of the 
facility in connection with which constructed or operated and the cost 
thereof accounted for accordingly.
    (5) Where furnaces and boilers are used primarily for furnishing 
steam for some particular department and only incidentally for 
furnishing steam for heating a building and operating the equipment 
therein, the entire cost of such furnaces and boilers shall be charged 
to the appropriate plant account, and no **part** to the building account.
    (6) Where the structure of a dam forms also the foundation of the 
power plant building, such foundation shall be considered a **part** of the 
dam.

[[Page 709]]

    (7) The cost of disposing of materials excavated in connection with 
construction of structures shall be considered as a **part** of the cost of 
such work, except when such material is used for filling, the cost of 
loading, hauling, and dumping shall be equitably apportioned between the 
work in connection with which the removal occurs and the work in 
connection with which the material is used; and when such material is 
sold, the net amount realized from such sales shall be credited to the 
work in connection with which the removal occurs. If the amount realized 
from the sale of excavated materials exceeds the removal costs and the 
costs in connection with the sale, the excess shall be credited to the 
land account in which the site is carried.
    (8) Lighting or other fixtures temporarily attached to building for 
purposes of display or demonstration shall not be included in the cost 
of the building but in the appropriate equipment account.
    (9) The items of cost to be included in the accounts for structures 
and improvements are as follows:
    (i) Architects' plans and specifications including supervision;
    (ii) Ash pits (when located within the building);
    (iii) Athletic field structures and improvements;.
    (iv) Boilers, furnaces, piping, wiring, fixtures, and machinery for 
heating, lighting, signaling, ventilating, and air conditioning systems, 
plumbing, vacuum cleaning systems, incinerator and smoke pipe, flues, 
etc;
    (v) Bulkheads, including dredging, riprap fill, piling, decking, 
concrete, fenders, etc., when exposed and subject to maintenance and 
replacement;
    (vi) Chimneys;
    (vii) Coal bins and bunkers;
    (viii) Commissions and fees to brokers, agents, architects and 
others;
    (ix) Conduit (not to be removed) with its contents;
    (x) Damages to abutting property during construction;
    (xi) Docks;
    (xii) Door checks and door stops;
    (xiii) Drainage and sewerage systems;
    (xiv) Elevators, cranes, hoists, etc., and the machinery for 
operating them;
    (xv) Excavation, including shoring, bracing, bridging, refill and 
disposal of excess excavated material, cofferdams around foundation, 
pumping water from cofferdams during construction and test borings;
    (xvi) Fences and fence curbs (not including protective fences 
isolating items of equipment, which shall be charged to the appropriate 
equipment accounts);
    (xvii) Fire protection systems when forming a **part** of a structure;
    (xviii) Flagpole;
    (xix) Floor covering (permanently attached);
    (xx) Foundations and piers for machinery, constructed as a permanent 
**part** of a building or other item listed herein;
    (xxi) Grading and clearing when directly occasioned by the building 
of a structure;
    (xxii) Intrasite communication system, poles, pole fixtures, wires, 
and cable;
    (xxiii) Landscaping, lawns, shrubbery, etc.;
    (xxiv) Leases, voiding upon purchase to secure possession of 
structures;
    (xxv) Leased property, expenditures on;
    (xxvi) Lighting fixtures and outside lighting system;
    (xxvii) Mailchutes when **part** of a building;
    (xxviii) Marquee, permanently attached to the building;
    (xxix) Painting, first cost;
    (xxx) Permanent paving, concrete, brick, flagstone, asphalt, etc., 
within the property lines;
    (xxxi) Partitions, including movable;
    (xxxii) Permits and privileges;
    (xxxiii) Platforms, railings and gratings when constructed as a **part** 
of a structure;
    (xxxiv) Power boards for services to a building;
    (xxxv) Refrigerating systems for general use;
    (xxxvi) Retaining walls except when identified with land;
    (xxxvii) Roadways, railroads, bridges, and trestles intrasite except 
railroads provided for in equipment accounts;
    (xxxviii) Roofs;
    (xxxix) Scales, connected to and forming a **part** of a structure;

[[Page 710]]

    (xl) Screens;
    (xli) Sewer systems, for general use;
    (xlii) Sidewalks, culverts, curbs and streets constructed by the 
utility on its property;
    (xliii) Sprinkling systems;
    (xliv) Sump pumps and pits;
    (xlv) Stacks--brick, steel, or concrete, when set on foundation 
forming **part** of general foundation and steelwork of a building;
    (xlvi) Steel inspection during construction;
    (xlvii) Storage facilities constituting a **part** of a building;
    (xlviii) Storm doors and windows;
    (xlix) Subways, areaways, and tunnels, directly connected to and 
forming **part** of a structure;
    (l) Tanks, constructed as **part** of a building or as a distinct 
structural unit;
    (li) Temporary heating during construction (net cost);
    (lii) Temporary water connection during construction (net cost);
    (liii) Temporary shanties and other facilities used during 
construction (net cost);
    (liv) Topographical maps;
    (lv) Tunnels, intake and discharge, when constructed as **part** of a 
structure, including sluice gates, and those constructed to house mains;
    (lvi) Vaults constructed as **part** of a building;
    (lvii) Watchmen's sheds and clock systems (net cost when used during 
construction only);
    (lviii) Water basins or reservoirs;
    (lix) Water front improvements;
    (lx) Water meters and supply system for a building or for general 
company purposes;
    (lxi) Water supply piping, hydrants, and wells;
    (lxii) Wharves;
    (lxiii) Window shades and ventilators;
    (lxiv) Yard drainage system;
    (lxv) Yard lighting system; and
    (lxvi) Yard surfacing, gravel, concrete, or oil (First cost only).
    Note: Structures and improvements accounts shall be credited with 
the cost of coal bunkers, stacks, foundations, subways, and tunnels, the 
use of which has terminated with the removal of the equipment with which 
they are associated even though they have not been physically removed.
    (i) Equipment. (1) The cost of equipment chargeable to the electric 
plant accounts, unless otherwise indicated in the text of an equipment 
account, includes the net purchase price thereof, sales taxes, 
investigation and inspection expenses necessary to such purchase, 
expenses of transportation when borne by the utility, labor employed, 
materials, and supplies consumed, and expenses incurred by the utility 
in unloading and placing the equipment in readiness to operate.
    (2) Also include those costs incurred in connection with the first 
clearing and grading of land and rights-of-way and the damage costs 
associated with construction and installation of plant.
    (3) Exclude from equipment accounts hand and other portable tools, 
which are likely to be lost or stolen or which have relatively small 
value (for example, $500 or less) or short life, unless the correctness 
of the accounting therefor as electric plant is verified by current 
inventories.
    (i) Special tools acquired and included in the purchase price of 
equipment shall be included in the appropriate plant accounts.
    (ii) Portable drills and similar tool equipment when used in 
connection with the operation and maintenance of a particular plan or 
department, such as production, transmission, or distribution or in 
``stores'', shall be charged to the plant accounts appropriate for their 
use.
    (4) The equipment accounts shall include angle irons and similar 
items which are installed at the base of an item of equipment, but piers 
and foundations which are designed to be as permanent as the buildings 
which house the equipment, or which are constructed as a **part** of the 
building and which cannot be removed without cutting into the walls, 
ceilings, or floors or, without in some way impairing the building, 
shall be included in the building accounts.
    (5) The equipment accounts shall include the necessary costs of 
testing or running a plant or parts thereof during an experimental or 
test period prior to such plant becoming ready for or placed in service.
    (i) The utility shall furnish RUS with full particulars of and 
justification for

[[Page 711]]

any test or experimental run extending beyond a period of 120 days for 
nuclear plant, and a period of 90 days for all other plant.
    (ii) Such particulars shall include a detailed operational and 
downtime log showing days of production, gross kilowatts generated by 
hourly increments, types, and periods of outages by hours with 
explanation thereof, beginning with the first date the equipment was 
either tested or synchronized on the line to the end of the test period.
    (6) The cost of efficiency or other tests made subsequent to the 
date equipment becomes available for service shall be charged to the 
appropriate expense accounts, except that tests to determine whether 
equipment meets the specifications and requirements as to efficiency, or 
performance guaranteed by manufacturers, made after operations have 
commenced and within the period specified in the agreement or contract 
of purchase, may be charged to the appropriate electric plant accounts.
    (j) Additions and retirements of electric plant. (1) For the purpose 
of avoiding undue refinement in accounting for additions to and 
retirements and replacements of electric plant, all property shall be 
considered as consisting of retirement units and minor items of 
property.
    (2) The addition and retirement of retirement units shall be 
accounted for as follows:
    (i) When a retirement unit is added to electric plant, the cost 
thereof shall be added to the appropriate electric plant account, except 
that when units are acquired in the acquisition of any electric plant 
constituting an operating system, they shall be accounted for as 
provided in paragraph (e) of this section.
    (ii) When a retirement unit is retired from electric plant, with or 
without replacement, the book cost thereof shall be credited to the 
electric plant account in which it is included, determined in the manner 
set forth in Item in paragraph (j)(4) of this section. If the retirement 
unit is of a depreciable class, the book cost of the unit retired and 
credited to electric plant shall be charged to the accumulated provision 
for depreciation applicable to such property. The cost of removal and 
the salvage shall be charged or credited, as appropriate, to such 
depreciation account.
    (3) The addition and retirement of minor items of property shall be 
accounted for as follows:
    (i) When a minor item of property which did not previously exist is 
added to plant, the cost thereof shall be accounted for in the same 
manner as for the addition of a retirement unit, as set forth in Item in 
paragraph (j)(2)(i) of this section, if a substantial addition results, 
otherwise the charge shall be to the appropriate maintenance expense 
account.
    (ii) When a minor item of property is retired and not replaced, the 
book cost thereof shall be credited to the electric plant account in 
which it is included; and, in the event the minor item is a **part** of 
depreciable plant, the account for accumulated provision for 
depreciation shall be charged with the book cost and cost of removal and 
credited with the salvage. If, however, the book cost of the minor item 
retired and not replaced has been or will be accounted for by its 
inclusion in the retirement unit of which it is a **part** when such unit is 
retired, no separate credit to the property account is required when 
such minor item is retired.
    (iii) When a minor item of depreciable property is replaced 
independently of the retirement unit of which it is a **part**, the cost of 
replacement shall be charged to the maintenance account appropriate for 
the item, except that if the replacement effects a substantial 
betterment (the primary aim of which is to make the property affected 
more useful, more efficient, of greater durability, or of greater 
capacity), the excess cost of the replacement over the estimated cost at 
current prices of replacing without betterment shall be charged to the 
appropriate electric plant accounts.
    (4) The book cost of electric plant retired shall be the amount at 
which such property is included in the electric plant accounts, 
including all components of construction costs. The book cost shall be 
determined from the utility's records and if this cannot be done, it 
shall be estimated. When it is impracticable to determine the book

[[Page 712]]

cost of each unit, due to the relatively large number or small cost 
thereof, an appropriate average book cost of the units with due 
allowance for any differences in size and character, shall be used as 
the book cost of the units retired.
    (5) The book cost of land retired shall be credited to the 
appropriate land accounts. If the land is sold, the difference between 
the book cost (less any accumulated provision for depreciation or 
amortization therefore which has been authorized and provided) and the 
sale price of the land (less commissions and other expenses of making 
the sale) shall be recorded in Account 411.6, Gains from Disposition of 
Utility Plant, or Account 411.7, Losses from Disposition of Utility 
Plant, when the property has been recorded in Account 105, Electric 
Plant Held for Future Use, otherwise to Accounts 421.1, Gain on 
Disposition of Property, or 421.2, Loss on Disposition of Property, as 
appropriate. If the land is not used in utility service but is retained 
by the utility, the book cost shall be charged to Account 105, Electric 
Plant Held for Future Use, or Account 121, Nonutility Property, as 
appropriate.
    (6) The book cost less net salvage of depreciable electric plant 
retired shall be charged in its entirety to Account 108, Accumulated 
Provision for Depreciation of Electric Utility Plant in Service. Any 
amounts which, by approval or order of RUS, are charged to Account 
182.1, Extraordinary Property Losses, shall be credited to Account 108.
    (7) The accounting for the retirement of amounts included in Account 
302, Franchises and Consents, and Account 303, Miscellaneous Intangible 
Plant, and the items of limited-term interest in land included in the 
accounts for land and land rights, shall be as provided for in the text 
of Account 111, Accumulated Provision for Amortization of Electric 
Utility Plant in Service; Account 404, Amortization of Limited-Term 
Electric Plant; and Account 405, Amortization of Other Electric Plant.
    (k) Work order and property record system required. (1) Each utility 
shall record all construction and retirements of electric plant by means 
of work orders or job orders. Separate work orders may be opened for 
additions to and retirements of electric plant or the retirements may be 
included with the construction work order, provided, however, that all 
items relating to the retirements shall be kept separate from those 
relating to construction and provided, further, that any maintenance 
costs involved in the work shall likewise be segregated.
    (2) Each utility shall keep its work order system so as to show the 
nature of each addition to or retirement of electric plant, the total 
cost thereof, the source or sources of costs, and the electric plant 
account or accounts to which charged or credited. Work orders covering 
jobs of short duration may be cleared monthly.
    (3) Each utility shall maintain records in which, for each plant 
account, the amounts of the annual additions and retirements are 
classified so as to show the number and cost of the various record units 
or retirement units.
    (l) Transfers of property. When property is transferred from one 
electric plant account to another, from one utility department to 
another, such as from electric to gas, from one operating division or 
area to another, to or from Account 101, Electric Plant in Service; 
Account 104, Electric Plant Leased to Others; Account 105, Electric 
Plant Held for Future Use, and Account 121, Nonutility Property, the 
transfer shall be recorded by transferring the original cost thereof 
from the one account, department, or location to the other. Any related 
amounts carried in the accounts for accumulated provision for 
depreciation or amortization shall be transferred in accordance with the 
segregation of such accounts.
    (m) Common utility plant. (1) If the utility is engaged in more than 
one utility service, such as electric, gas, and water, and any of its 
utility plant is used in common for several utility services or for 
other purposes to such an extent and in such manner that it is 
impracticable to segregate it by utility services currently in the 
accounts, such property, with the approval of RUS, may be designated and 
classified as ``common utility plant.''
    (2) The book amount of utility plant designated as common plant 
shall be

[[Page 713]]

included in Account 118, Other Utility Plant, and if applicable in **part** 
to the electric department, shall be segregated and accounted for in 
subaccounts as electric plant is accounted for in Accounts 101 to 107, 
inclusive, and electric plant adjustments in Account 116, Other Electric 
Plant Adjustments; any amounts classifiable as common plant acquisition 
adjustments or common plant adjustments shall be subject to disposition 
as provided in Paragraphs C and B of Accounts 114 and 116, respectively, 
for amounts classified in those accounts. The original cost of common 
utility plant in service shall be classified according to the detailed 
utility plant accounts appropriate for the property.
    (3) The utility shall be prepared to show, at any time, and to 
report to RUS annually, or more frequently, if required, and by utility 
plant accounts (301 to 399) the book cost of common utility plant, the 
allocation of such cost to the respective departments using the common 
utility plant, and the basis of the allocation.
    (4) The accumulated provision for depreciation and amortization of 
the utility shall be segregated so as to show the amount applicable to 
the property classified as common utility plant.
    (5) The expenses of operation, maintenance, rents, depreciation and 
amortization of common utility plant shall be recorded in the accounts 
prescribed herein, but designated as common expenses, and the allocation 
of such expenses to the departments using the common utility plant shall 
be supported in such manner as to reflect readily the basis of 
allocation used.
    (n) Transmission and distribution plant. For the purpose of this 
system of accounts:
    (1) Transmission system is all land, conversion structures, and 
equipment employed at a primary source of supply (i.e. generating 
station, or point of receipt in the case of purchased power) to change 
the voltage or frequency of electricity for the purpose of its more 
efficient or convenient transmission; all land, structures, lines, 
switching and conversion stations, high tension apparatus, and their 
control and protective equipment between a generating or receiving point 
and the entrance to a distribution center or wholesale point; and all 
lines and equipment whose primary purpose is to augment, integrate or 
tie together the sources of power supply.
    (2) Distribution system is all land, structures, conversion 
equipment, lines, line transformers, and other facilities employed 
between the primary source of supply (i.e. generating station, or point 
of receipt in the case of purchased power) and of delivery to customers, 
which are not includible in transmission system, as defined in Item in 
paragraph (n)(1) of this section, whether or not such land, structures, 
and facilities are operated as **part** of a transmission system or as **part** 
of a distribution system.
    Note: Stations which change electricity from transmission to 
distribution voltage shall be classified as distribution stations.
    (3) Where poles or towers support both transmission and distribution 
conductors, the poles, towers, anchors, guys, and rights-of-way shall be 
classified as transmission system. The conductors, cross-arms, braces, 
grounds, tiewire, and insulators shall be classified as transmission or 
distribution facilities, according to the purpose for which used.
    (4) Where underground conduit contains both transmission and 
distribution conductors, the underground conduit and right-of-way shall 
be classified as distribution system. The conductors shall be classified 
as transmission or distribution facilities according to the purpose for 
which used.
    (5) Land (other than rights-of-way) and structures used jointly for 
transmission and distribution purposes shall be classified as 
transmission or distribution according to the major use thereof.
    (o) Hydraulic production plant. For purpose of this system of 
accounts hydraulic production plant is all land and land rights, 
structures and improvements used in connection with hydraulic power 
generation, reservoirs, dams and waterways, water wheels, turbines, 
generators, accessory electric equipment, roads, railroads, and bridges 
and structures and improvements used in connection with fish and 
wildlife, and recreation.

[[Page 714]]

    (p) Nuclear fuel records required. Each utility shall keep all the 
necessary records to support the entries to the various nuclear fuel 
plant accounts classified under ``Assets and Other Debits,'' Utility 
Plant Accounts 120.1 through 120.5, inclusive; Account 518, Nuclear Fuel 
Expense; and Account 157, Nuclear Materials Held for Sale. These records 
shall be so kept as to readily furnish the basis of the computation of 
the net nuclear fuel costs.

Sec. 1767.17  Operating expense instructions.

    (a) Supervision and engineering. The supervision and engineering 
includible in the operating expense accounts shall consist of the 
salary, employee pensions and benefits, social security and other 
payroll taxes, injuries and damages, and other expenses of 
superintendents, engineers, clerks, other employees, and consultants 
engaged in supervising and directing the operation and maintenance of 
each utility function. Whenever allocations are necessary in order to 
arrive at the amount to be included in any account, the method and basis 
of allocation shall be reflected by underlying records.
    (1) Labor items:
    (i) Special tests to determine efficiency of equipment operation;
    (ii) Preparing or reviewing budgets, estimates, and drawings 
relating to operation or maintenance for departmental approval;
    (iii) Preparing instructions for operations and maintenance 
activities;
    (iv) Reviewing and analyzing operating results;
    (v) Establishing organizational setup of departments and executing 
changes therein;
    (vi) Formulating and reviewing routines of departments and executing 
changes therein;
    (vii) General training and instruction of employees by supervisors 
whose pay is chargeable hereto. Specific instructions and training in a 
particular type of work is chargeable to the appropriate functional 
account (See paragraph (c)(19) of this section); and
    (viii) Secretarial work for supervisory personnel, but not general 
clerical and stenographic work chargeable to other accounts.
    (2) Expense items:
    (i) Employee pensions and benefits;
    (ii) Social security and other payroll taxes;
    (iii) Injuries and damages;
    (iv) Consultants' fees and expenses; and
    (v) Meals, traveling, and incidental expenses.
    (b) Maintenance. (1) The cost of maintenance chargeable to the 
various operating expense and clearing accounts includes labor, employee 
pensions and benefits, social security and other payroll taxes, injuries 
and damages, materials, overheads, and other expenses incurred in 
maintenance work. A list of work operations applicable generally to 
utility plant is included in this paragraph (b). Other work operations 
applicable to specific classes of plant are listed in functional 
maintenance expense accounts.
    (2) Materials recovered in connection with the maintenance of 
property shall be credited to the same account to which the maintenance 
cost was charged.
    (3) If the book cost of any property is carried in Account 102, 
Electric Plant Purchased or Sold, the cost of maintaining such property 
shall be charged to the accounts for maintenance of property of the same 
class and use, the book cost of which is carried in other electric plant 
in service accounts. Maintenance of property leased from others shall be 
treated as provided in paragraph (c) of this section.
    (4) Items:
    (i) Direct field supervision of maintenance;
    (ii) Inspecting, testing, and reporting on condition of plant 
specifically to determine the need for repairs, replacements, 
rearrangements, and changes and inspecting and testing the adequacy of 
repairs which have been made;
    (iii) Work performed specifically for the purpose of preventing 
failure, restoring serviceability or maintaining life of plant;
    (iv) Rearranging and changing the location of plant not retired;
    (v) Repairing for reuse materials recovered from plant;
    (vi) Testing for, locating, and clearing trouble;

[[Page 715]]

    (vii) Net cost of installing, maintaining, and removing temporary 
facilities to prevent interruptions in service; and
    (viii) Replacing or adding minor items of plant which do not 
constitute a retirement unit.
    (c) Rents. (1) The rent expense accounts provided under the several 
functional groups of expense accounts shall include all rents, including 
taxes paid by the lessee on leased property, for property used in 
utility operations, except minor amounts paid for occasional or 
infrequent use of any property or equipment and all amounts paid for use 
of equipment that, if owned, would be includible in plant Accounts 391 
to 398 inclusive, which shall be treated as an expense item and included 
in the appropriate function account and rents which are chargeable to 
clearing accounts, and distributed therefrom to the appropriate account.
    (2) If rents cover property used for more than one function such as 
production and transmission, or by more than one department, the rents 
shall be apportioned to the appropriate rent expense or clearing 
accounts of each department on an actual, or if necessary, an estimated 
basis.
    (3) When a portion of property or equipment rented from others for 
use in connection with utility operations is subleased, the revenue 
derived from such subleasing shall be credited to the rent revenue 
account in operating revenues; provided, however, that in case the rent 
was charged to a clearing account, amounts received from subleasing the 
property shall be credited to such clearing account.
    (4) The cost, when incurred by the lessee, of operating and 
maintaining leased property, shall be charged to the accounts 
appropriate for the expense if the property were owned.
    (5) The cost incurred by the lessee of additions and replacements to 
electric plant leased from others shall be account for as provided in 
Sec. 1767.16 (f).
    (d) Training costs. (1) When it is necessary that employees be 
trained to specifically operate or maintain plant facilities that are 
being constructed, the related costs shall be accounted for as a current 
operating and maintenance expense.
    (2) These expenses shall be charged to the appropriate functional 
accounts currently as they are incurred.
    (3) When the training costs involved relate to facilities which are 
not conventional in nature, or are new to the company's operations, see 
Sec. 1767.16 (c)(19), for the accounting.

[58 FR 59825, Nov. 10, 1993, as amended at 62 FR 42290, Aug. 6, 1997]

Sec. 1767.18  Assets and other debits.

    The asset and other debits accounts identified in this section shall 
be used by all RUS borrowers.

                         Assets and Other Debits

                              Utility Plant

101  Electric Plant in Service
101.1  Property Under Capital Leases
102  Electric Plant Purchased or Sold
103  Experimental Electric Plant Unclassified
104  Electric Plant Leased to Others
105  Electric Plant Held for Future Use
106  Completed Construction not Classified--Electric
107  Construction Work in Progress--Electric
107.1  Construction Work in Progress--Contract
107.2  Construction Work in Progress--Force Account
107.3  Construction Work in Progress--Special Equipment
108  Accumulated Provision for Depreciation of Electric Utility Plant
108.1  Accumulated Provision for Depreciation of Steam Production Plant
108.2  Accumulated Provision for Depreciation of Nuclear Production 
          Plant
108.3  Accumulated Provision for Depreciation of Hydraulic Production 
          Plant
108.4  Accumulated Provision for Depreciation of Other Production Plant
108.5  Accumulated Provision for Depreciation of Transmission Plant
108.6  Accumulated Provision for Depreciation of Distribution Plant
108.7  Accumulated Provision for Depreciation of General Plant
108.8  Retirement Work in Progress
109  [Reserved]
110  [Reserved]
111  Accumulated Provision for Amortization of Electric Utility Plant
112  [Reserved]
113  [Reserved]
114  Electric Plant Acquisition Adjustments
115  Accumulated Provision for Amortization of Electric Plant 
          Acquisition Adjustments
116  Other Electric Plant Adjustments

[[Page 716]]

118  Other Utility Plant
119  Accumulated Provision for Depreciation and Amortization of Other 
          Utility Plant
120.1  Nuclear Fuel in Process of Refinement, Conversion, Enrichment, 
          and Fabrication
120.2  Nuclear Fuel Materials and Assemblies--Stock Account
120.3  Nuclear Fuel Assemblies in Reactor
120.4  Spent Nuclear Fuel
120.5  Accumulated Provision for Amortization of Nuclear Fuel Assemblies
120.6  Nuclear Fuel Under Capital Leases

                     Other Property and Investments

121  Nonutility Property
122  Accumulated Provision for Depreciation and Amortization of 
          Nonutility Property
123  Investment in Associated Companies
123.1  Patronage Capital from Associated Cooperatives
123.3  Investment in Associated Organizations--Federal Economic 
          Development Loans
123.4  Investment in Associated Organizations--Non-Federal Economic 
          Development Loans
123.11  Investment in Subsidiary Companies
123.21  Subscriptions to Capital Term Certificates--Supplemental 
          Financing
123.22  Investments in Capital Term Certificates--Supplemental Financing
123.23  Other Investments in Associated Organizations
124  Other Investments
124.1  Other Investments--Federal Economic Development Loans
124.2  Other Investments--Non-Federal Economic Development Loans
125  Sinking Funds
126  Depreciation Fund
128  Other Special Funds

                       Current and Accrued Assets

131  Cash
131.1  Cash--General
131.2  Cash--Construction Fund--Trustee
131.3  Cash--Installation Loan and Collection Fund
131.4  Transfer of Cash
131.12  Cash--General--Economic Development Loan Funds
131.13  Cash--General--Economic Development Grant Funds
131.14  Cash--General--Economic Development Non-Federal Revolving Funds
132  Interest Special Deposits
133  Dividend Special Deposits
134  Other Special Deposits
135  Working Funds
136  Temporary Cash Investments
141  Notes Receivable
141.1  Accumulated Provision for Uncollectible Notes--Credit
142  Customer Accounts Receivable
142.1  Customer Accounts Receivable--Electric
142.2  Customer Accounts Receivable--Other
143  Other Accounts Receivable
144  Accumulated Provision for Uncollectible Accounts--Credit
144.1  Accumulated Provision for Uncollectible Customer Accounts--Credit
144.2  Accumulated Provision for Uncollectible Merchandising Accounts--
          Credit
144.3  Accumulated Provision for Uncollectible Accounts, Officers and 
          Employees--Credit
144.4  Accumulated Provision for Other Uncollectible Accounts--Credit 
          145 Notes Receivable from Associated Companies
145  Notes Receivable from Associated Companies
146  Accounts Receivable from Associated Companies
151  Fuel Stock
152  Fuel Stock Expenses Undistributed
153  Residuals
154  Plant Materials and Operating Supplies
155  Merchandise
156  Other Materials and Supplies
157  Nuclear Materials Held for Sale
158.1  Allowance Inventory
158.2  Allowances Withheld
163  Stores Expense Undistributed
165  Prepayments
165.1  Prepayments--Insurance
165.2  Other Prepayments
171  Interest and Dividends Receivable
172  Rents Receivable
173  Accrued Utility Revenues
174  Miscellaneous Current and Accrued Assets

                             Deferred Debits

181  Unamortized Debt Expense
182.1  Extraordinary Property Losses
182.2  Unrecovered Plant and Regulatory Study Costs
182.3  Other Regulatory Assets
183  Preliminary Survey and Investigation Charges
184  Clearing Accounts
184.1  Transportation Expense--Clearing
184.2  Clearing Accounts--Other
185  Temporary Facilities
186  Miscellaneous Deferred Debits
187  Deferred Losses from Disposition of Utility Plant
188  Research, Development, and Demonstration Expenditures
189  Unamortized Loss on Reacquired Debt
190  Accumulated Deferred Income Taxes

                         Assets and Other Debits

                              Utility Plant

                     101   Electric Plant in Service

    A. This account shall include the original cost of electric plant, 
included in Accounts 301 to 399, prescribed herein, owned and used

[[Page 717]]

by the utility in its electric utility operations, and having an 
expectation of life in service of more than one year from date of 
installation, including such property owned by the utility but held by 
nominees.
    B. (See also Account 106 for unclassified construction costs of 
completed plant actually in service.)
    C. The cost of additions to and betterments of property leased from 
others, which are includible in this account, shall be recorded in 
subdivisions separate and distinct from those relating to owned 
property. (See Sec. 1767.16 (f).)

                  101.1   Property Under Capital Leases

    A. This account shall include the amount recorded under capital 
leases for plant leased from others and used by the utility in its 
utility operations.
    B. The electric property included in this account shall be 
classified separately according to the detailed accounts (301 to 399) 
prescribed for electric plant in service.
    C. Records shall be maintained with respect to each capital lease 
reflection: (1) name of lessor, (2) basic details of lease, (3) terminal 
date, (4) original cost or fair market value of property leased, (5) 
future minimum lease payments, (6) executory costs, (7) present value of 
minimum lease payments, (8) the amount representing interest and the 
interest rate used, and (9) expenses paid.

                 102   Electric Plant Purchased or Sold

    A. This account shall be charged with the cost of electric plant 
acquired as an operating unit or system by purchase, merger, 
consolidation liquidation, or otherwise, and shall be credited with the 
selling price of like property transferred to others pending the 
distribution to appropriate accounts in accordance with Sec. 1767.16 
(e).
    B. Within 6 months from the date of acquisition or sale of property 
recorded herein, the borrower shall file with RUS the proposed journal 
entries to clear from this account the amounts recorded herein.

             103   Experimental Electric Plant Unclassified

    A. This account shall include the cost of electric plant which was 
constructed as a research, development, and demonstration plant under 
the provisions of Paragraph C, Account 107, Construction Work in 
Progress--Electric, and due to the nature of the plant, it is desirous 
to operate it for a period of time in an experimental status.
    B. Amounts in this account shall be transferred to Account 101, 
Electric Plant in Service, or Account 121, Nonutility Property, as 
appropriate when the project is no longer considered as experimental.
    C. The depreciation on property in this account shall be charged to 
Account 403, Depreciation Expense, and credited to Account 108, 
Accumulated Provision for Depreciation of Electric Utility Plant. The 
amounts herein shall be depreciated over a period which would correspond 
to the estimated useful life of the relevant project considering the 
characteristics involved. However, when projects are transferred to 
Account 101, Electric Plant in Service, a new depreciation rate based 
upon the remaining service life and undepreciated amounts, will be 
established.
    D. Records shall be maintained with respect to each unit of 
experiment so that full details may be obtained as to the cost, 
depreciation, and the experimental status.
    E. Should it be determined that experimental plant recorded in this 
account will fail to satisfactorily perform its function, the costs 
thereof shall be accounted for as directed or authorized by RUS.

                  104   Electric Plant Leased to Others

    A. This account shall include the original cost of electric plant 
owned by the utility, but leased to others as operating units or 
systems, where the lessee has exclusive possession.
    B. The property included in this account shall be classified 
according to the detailed accounts (301 to 399) prescribed for electric 
plant in service and this account shall be maintained in such detail as 
though the property were used by the owner in its utility operations.

                105   Electric Plant Held for Future Use

    A. This account shall include the original cost of electric plant 
(except land and land rights) owned and held for future use in electric 
service under a definite plan for such use, to include: (1) Property 
acquired (except land and land rights) but never used by the utility in 
electric service, but held for such service in the future under a 
definite plan, and (2) property (except land and land rights) previously 
used by the utility in service but retired from such service and held 
pending its reuse in the future, under a definite plan, in electric 
service.
    B. This account shall also include the original cost of land and 
land rights owned and held for future use in electric service under a 
plan for such use, to include land and land rights: (1) Acquired but 
never used by the utility in electric service, but held for such service 
in the future under a plan, and (2) previously held by the utility in 
service, but retired from such service and held pending its reuse in the 
future under a plan, in electric service. (See Sec. 1767.16 (g).)
    C. In the event that property recorded in this account shall no 
longer be needed or appropriate for future utility operations, the 
borrower shall notify RUS of such condition and request approval of 
journal entries to remove such property from this account.

[[Page 718]]

    D. Gains or losses from the sale of land and land rights or other 
disposition of such property previously recorded in this account and not 
placed in utility service shall be recorded directly in Accounts 411.6 
or 411.7, as appropriate, except when determined to be significant by 
RUS. Upon such a determination, the amounts shall be transferred to 
Account 256, Deferred Gains from Disposition of Utility Plant, or 
Account 187, Deferred Losses from Disposition of Utility Plant, and 
amortized to Account 411.6, Gains from Disposition of Utility Plant, or 
Account 411.7, Losses from Disposition of Utility Plant, as appropriate.
    E. The property included in this account shall be classified 
according to the detail accounts (301 to 399) prescribed for electric 
plant in service and the account shall be maintained in such detail as 
though the property were in service.
    Note: Materials and supplies, meters and transformers held in 
reserve, and normal spare capacity of plant in service shall not be 
included in this account.

          106   Completed Construction not Classified--Electric

    At the end of the year or such other date as a balance sheet may be 
required by RUS, this account shall include the total of the balances of 
work orders for electric plant which has been completed and placed in 
service but which work orders have not been classified for transfer to 
the detailed electric plant accounts.
    Note: For the purpose of reporting to RUS, the classification of 
electric plant in service by accounts is required, the utility shall 
also report the balance in this account tentatively classified as 
accurately as practicable according to prescribed account 
classifications. The purpose of this provision is to avoid any 
significant omissions in reported amounts of electric plant in service.

              107   Construction Work in Progress--Electric

    A. This account shall include the total of the balances of work 
orders for electric plant in process of construction.
    B. Work orders shall be cleared from this account as soon as 
practicable, after completion of the job. Further, if a project, such as 
a hydroelectric project, a steam station, or a transmission line, is 
designed to consist of two or more units or circuits which may be placed 
in service at different dates, any expenditures which are common to and 
which will be used in the operation of the project as a whole shall be 
included in electric plant in service upon the completion and the 
readiness for service of the first unit. Any expenditures which are 
identified exclusively with units of property not yet in service shall 
be included in this account.
    C. Expenditures on research, development, and demonstration projects 
for construction of utility facilities are to be included in a separate 
subdivision in this account. Records must be maintained to show 
separately each project along with complete detail of the nature and 
purpose of the research, development, and demonstration project together 
with the related costs.
    D. Account 107 shall be subaccounted as follows:

107.1  Construction Work in Progress--Contract
107.2  Construction Work in Progress--Force Account
107.3  Construction Work in Progress--Special Equipment

 108   Accumulated Provision for Depreciation of Electric Utility Plant

    A. This account shall be credited with the following:
    1. Amounts charged to Account 403, Depreciation Expense, or to 
clearing accounts for current depreciation expense for electric plant in 
service.
    2. Amounts charged to Account 421, Miscellaneous Nonoperating 
Income, for depreciation expense on property included in Account 105, 
Electric Plant Held for Future Use. Include, also, the balance of 
accumulated provision for depreciation on property when transferred to 
Account 105, Electric Plant Held for Future Use, from other property 
accounts. Normally, Account 108 will not be used for current 
depreciation provision because, as provided herein, the service life 
during which depreciation is computed commences with the date property 
is includible in electric plant in service; however, if special 
circumstances indicate the propriety of current accruals for 
depreciation, such charges shall be made to Account 421, Miscellaneous 
Nonoperating Income.
    3. Amounts charged to Account 413, Expenses of Electric Plant Leased 
to Others, for electric plant included in Account 104, Electric Plant 
Leased to Others.
    4. Amounts charged to Account 416, Costs and Expenses of 
Merchandising, Jobbing, and Contract Work, or to clearing accounts for 
current depreciation expense.
    5. Amounts of depreciation applicable to electric properties 
acquired as operating units or systems. (See Sec. 1767.16 (e).)
    6. Amounts charged to Account 182.1, Extraordinary Property Losses, 
when authorized by RUS.
    7. Amounts of depreciation applicable to electric plant donated to 
the utility.
    The utility shall maintain separate subaccounts for depreciation 
applicable to electric plant in service, electric plant leased to 
others, and electric plant held for future use.)

[[Page 719]]

    B. At the time of retirement of depreciable electric utility plant, 
this account shall be charged with the book cost of the property retired 
and the cost of removal and shall be credited with the salvage value and 
any other amounts recovered, such as insurance. When retirement, costs 
of removal and salvage are entered originally in retirement work orders, 
the net total of such work orders may be included in a separate 
subaccount hereunder. Upon completion of the work order, the proper 
distribution to subdivisions of this account shall be made as provided 
in the following paragraph.
    C. Account 108 shall be subaccounted as follows:

108.1  Accumulated Provision for Depreciation of Steam Production Plant
108.2  Accumulated Provision for Depreciation of Nuclear Production 
          Plant
108.3  Accumulated Provision for Depreciation of Hydraulic Production 
          Plant
108.4  Accumulated Provision for Depreciation of Other Production Plant
108.5  Accumulated Provision for Depreciation of Transmission Plant
108.6  Accumulated Provision for Depreciation of Distribution Plant
108.7  Accumulated Provision for Depreciation of General Plant
108.8  Retirement Work in Progress

    These subsidiary records shall reflect the current credits and 
debits to this account in sufficient detail to show separately for each 
such functional classification: (1) the amount of accrual for 
depreciation, (2) the book cost of property retired, (3) cost of 
removal, (4) salvage, and (5) other items, including recoveries from 
insurance.
    D. When transfers of plant are made from one electric plant account 
to another, or from or to another utility department, of from or to 
nonutility property accounts, the accounting for depreciation shall be 
as provided in Sec. 1767.16 (l).
    E. The utility is restricted in its use of the accumulated provision 
for depreciation to the purposes set forth above. It shall not transfer 
any portion of this account to retained earnings or make any other use 
thereof without authorization by RUS.

                             109  [Reserved]

                             110  [Reserved]

 111   Accumulated Provision for Amortization of Electric Utility Plant

    A. This account shall be credited with the following:
    1. Amounts charged to Account 404, Amortization of Limited-Term 
Electric Plant, for the current amortization of limited-term electric 
plant investments.
    2. Amounts charged to Account 421, Miscellaneous Nonoperating 
Income, for amortization expense on property included in Account 105, 
Electric Plant Held for Future Use. Include also the balance of 
accumulated provision for amortization on property when transferred to 
Account 105, Electric Plant Held for Future Use, from other property 
accounts. See also Paragraph A(2), Account 108, Accumulated Provision 
for Depreciation of Electric Utility Plant.
    3. Amounts charged to Account 405, Amortization of Other Electric 
Plant.
    4. Amounts charged to Account 413, Expenses of Electric Plant Leased 
to Others, for the current amortization of limited-term or other 
investments subject to amortization included in Account 104, Electric 
Plant Leased to Others.
    5. Amounts charged to Account 425, Miscellaneous Amortization, for 
the amortization of intangible or other electric plant which does not 
have a definite or terminable life and is not subject to charges for 
depreciation expense, with RUS approval.

    (The utility shall maintain subaccounts of this account for the 
amortization applicable to electric plant in service, electric plant 
leased to others and electric plant held for future use.)

    B. When any property to which this account applies is sold, 
relinquished, or otherwise retired from service, this account shall be 
charged with the amount previously credited in respect to such property. 
The book cost of the property so retired less the amount chargeable to 
this account and less the net proceeds realized at retirement shall be 
included in Account 421.1, Gain on Disposition of Property, or Account 
421.2, Loss on Disposition of Property, as appropriate.
    C. For general ledger and balance sheet purposes, this account shall 
be regarded and treated as a single composite provision for 
amortization. For purposes of analysis, however, each utility shall 
maintain subsidiary records in which this account is segregated 
according to the following functional classification for electric plant: 
(1) Steam production, (2) Nuclear production, (3) Hydraulic production, 
(4) Other production, (5) Transmission, (6) Distribution, and (7) 
General. These subsidiary records shall reflect the current credits and 
debits to this account in sufficient detail to show separately for each 
such functional classification: (1) the amount of accrual for 
amortization, (2) the book cost of property retired, (3) cost of 
removal, (4) salvage, and (5) other items, including recoveries from 
insurance.
    D. The utility is restricted in its use of the accumulated provision 
for amortization to the purposes set forth above. It shall not transfer 
any portion of this account to retained earnings or make any other use 
thereof without authorization by RUS.

[[Page 720]]

                             112  [Reserved]

                             113  [Reserved]

              114   Electric Plant Acquisition Adjustments

    A. This account shall include the difference between the cost to the 
accounting utility of electric plant acquired as an operating unit or 
system by purchase, merger, consolidation, liquidation, or otherwise, 
and the original cost, estimated, if not known, of such property, less 
the amount or amounts credited by the accounting utility at the time of 
acquisition to accumulated provisions for depreciation and amortization 
and contributions in aid of construction with respect to such property.
    B. With respect to acquisitions after the effective date of this 
system of accounts, this account shall be subdivided so as to show the 
amounts included herein for each property acquisition and to electric 
plant in service, electric plant held for future use, and electric plant 
leased to others. (See Sec. 1767.16 (e).)
    C. Debit amounts recorded in this account related to plant and land 
acquisition may be amortized to Account 425, Miscellaneous Amortization, 
over a period not longer than the estimated remaining life of the 
properties to which such amounts relate. Amounts related to the 
acquisition of land only may be amortized to Account 425 over a period 
of not more than 15 years. Should a utility wish to account for debit 
amounts in this account in any other manner, it shall petition RUS for 
authority to do so. Credit amounts recorded in this account shall be 
accounted for as directed by RUS.

     115   Accumulated Provision for Amortization of Electric Plant 
                         Acquisition Adjustments

    This account shall be credited or debited with amounts which are 
includible in Account 406, Amortization of Electric Plant Acquisition 
Adjustments, or Account 425, Miscellaneous Amortization, for the purpose 
of providing for the extinguishment of amounts in Account 114, Electric 
Plant Acquisition Adjustments, in instances where the amortization of 
Account 114 is not being made by direct write-off of the account.

                 116   Other Electric Plant Adjustments

    A. This account shall include the difference between the original 
cost, estimated if not known, and the book cost of electric plant to the 
extent that such difference is not properly includible in Account 114, 
Electric Plant Acquisition Adjustments. (See Sec. 1767.16 (a)(3))
    B. Amounts included in this account shall be classified in such 
manner as to show the origin of each amount and shall be disposed of as 
RUS may approve or direct.
    Note: The provisions of this account shall not be construed as 
approving or authorizing the recording of appreciation of electric 
plant.

                        118   Other Utility Plant

    This account shall include the balances in accounts for utility 
plant, other than electric plant, such as gas, or railway.

 119   Accumulated Provision for Depreciation and Amortization of Other 
                              Utility Plant

    This account shall include the accumulated provision for 
depreciation and amortization applicable to utility property other than 
electric plant.

 120.1   Nuclear Fuel in Process of Refinement, Conversion, Enrichment, 
                             and Fabrication

    A. This account shall include the original cost to the utility of 
nuclear fuel materials while in process of refinement, conversion, 
enrichment, and fabrication into nuclear fuel assemblies and components, 
including processing, fabrication, and necessary shipping costs. This 
account shall also include the salvage value of nuclear materials which 
are actually being reprocessed for use and were transferred from Account 
120.5, Accumulated Provision for Amortization of Nuclear Fuel 
Assemblies. (See Sec. 1767.10 (a)(27).)
    B. This account shall be credited and Account 120.2, Nuclear Fuel 
Materials and Assemblies--Stock Account, shall be debited for the cost 
of completed fuel assemblies delivered for use in refueling or to be 
held as spares. In the case of the initial core loading, the transfer 
shall be made directly to Account 120.3, Nuclear Fuel Assemblies in 
Reactor, upon the conclusion of the experimental or test period of the 
plant prior to its becoming available for service.

                                  Items

    1. Cost of natural uranium, uranium ores concentrates or other 
nuclear fuel sources, such as thorium, plutonium, and U-233.
    2. Value of recovered nuclear materials being reprocessed for use.
    3. Milling process costs.
    4. Sampling and weighing, and assaying costs.
    5. Purification and conversion process costs.
    6. Costs of enrichment by gaseous diffusion or other methods.
    7. Costs of fabrication into fuel forms suitable for insertion in 
the reactor.
    8. All shipping costs of materials and components, including 
shipping of fabricated fuel assemblies to the reactor site.
    9. Use charges on leased nuclear materials while in process of 
refinement, conversion, enrichment, and fabrication.

[[Page 721]]

      120.2   Nuclear Fuel Materials and Assemblies--Stock Account

    A. This account shall be debited and Account 120.1, Nuclear Fuel in 
Process of Refinement, Conversion, Enrichment and Fabrication, shall be 
credited with the cost of fabricated fuel assemblies delivered for use 
in refueling or to be carried in stock as spares. It shall also include 
the original cost of fabricated fuel assemblies purchased in completed 
form. This account shall also include the original cost of partially 
irradiated fuel assemblies being held in stock for reinsertion in a 
reactor which had been transferred from Account 120.3, Nuclear Fuel 
Assemblies in Reactor.
    B. When fuel assemblies included in this account are inserted in a 
reactor, this account shall be credited and Account 120.3, Nuclear Fuel 
Assemblies in Reactor, debited for the cost of such assemblies.
    C. This account shall also include the cost of nuclear materials and 
byproduct materials being held for future use and not actually in 
process in Account 120.1, Nuclear Fuel in Process of Refinement, 
Conversion, Enrichment and Fabrication.

               120.3   Nuclear Fuel Assemblies in Reactor

    A. This account shall include the cost of nuclear fuel assemblies 
when inserted in a reactor for the production of electricity. The 
amounts included herein shall be transferred from Account 120.2, Nuclear 
Fuel Materials and Assemblies--Stock Account, except for the initial 
core loading which will be transferred directly from Account 120.1, 
Nuclear Fuel in Process of Refinement, Conversion, Enrichment and 
Fabrication.
    B. Upon removal of fuel assemblies from a reactor, the original cost 
of the assemblies removed shall be transferred to Account 120.4, Spent 
Nuclear Fuel, or Account 120.2, Nuclear Fuel Materials and Assemblies--
Stock Account, as appropriate.

                       120.4   Spent Nuclear Fuel

    A. This account shall include the original cost of nuclear fuel 
assemblies, in the process of cooling, transferred from Account 120.3, 
Nuclear Fuel Assemblies in Reactor, upon removal from a reactor pending 
reprocessing.
    B. This account shall be credited and Account 120.5, Accumulated 
Provision for Amortization of Nuclear Fuel Assemblies, debited for fuel 
assemblies, after the cooling period is over, at the cost recorded in 
this account.

     120.5   Accumulated Provision for Amortization of Nuclear Fuel 
                               Assemblies

    A. This account shall be credited and Account 518, Nuclear Fuel 
Expense, shall be debited for the amortization of the net cost of 
nuclear fuel assemblies used in the production of energy. The net cost 
of nuclear fuel assemblies subject to amortization shall be the original 
cost of nuclear fuel assemblies, plus or less the expected net salvage 
value of uranium, plutonium, and other by-products.
    B. This account shall be credited with the net salvage value of 
uranium, plutonium, and other nuclear by-products when such items are 
sold, transferred or otherwise disposed. Account 120.1, Nuclear Fuel in 
Process of Refinement, Conversion, Enrichment and Fabrication, shall be 
debited with the net salvage value of nuclear materials to be 
reprocessed. Account 157, Nuclear Materials Held for Sale, shall be 
debited for the net salvage value of nuclear materials not to be 
reprocessed but to be sold or otherwise disposed of and Account 120.2, 
Nuclear Fuel Materials and Assemblies--Stock Account, will be debited 
with the net salvage value of nuclear materials that will be held for 
future use and not actually in process, in Account 120.1, Nuclear Fuel 
in Process of Refinement, Conversion, Enrichment, and Fabrication.
    C. This account shall be debited and Account 120.4, Spent Nuclear 
Fuel, shall be credited with the cost of fuel assemblies at the end of 
the cooling period.

                120.6   Nuclear Fuel Under Capital Leases

    A. This account shall include the amount recorded under capital 
leases for nuclear fuel leased from others for use by the utility in its 
utility operations.
    B. Records shall be maintained with respect to each capital lease 
reflecting: (1) name of lessor, (2) basic details of lease, (3) terminal 
date, (4) original cost or fair market value of nuclear fuel leased, (5) 
future minimum lease payments, (6) the amount representing interest and 
the interest rate used, and (7) expenses paid.

                     Other Property and Investments

                        121   Nonutility Property

    A. This account shall include the book cost of land, structures, 
equipment, or other tangible or intangible property owned by the 
utility, but not used in utility service and not properly includible in 
Account 105, Electric Plant Held for Future Use.
    B. This account shall also include the amount recorded under capital 
leases for property leased from others and used by the utility in its 
nonutility operations. Records shall be maintained with respect to each 
lease reflecting: (1) name of lessor, (2) basic details of lease, (3) 
terminal date, (4) original cost or fair market value of property 
leased, (5) future minimum lease payments, (6) executory costs, (7) 
present value of minimum lessee payments, (8) the amount representing 
interest and the interest rate used, and (9) expenses paid.

[[Page 722]]

    C. This account shall be subdivided so as to show the amount of 
property used in operations which are nonutility in character but 
nevertheless constitute a distinct operating activity of the company 
(such as operation of an ice department where such activity is not 
classed as a utility) and the amount of miscellaneous property not used 
in operations. The records in support of each subaccount shall be 
maintained so as to show an appropriate classification of the property.
    Note: The gain from the sale or other disposition of property 
included in this account which had been previously recorded in Account 
105, Electric Plant Held for Future Use, shall be accounted for in 
accordance with Paragraph C of Account 105.

    122   Accumulated Provision for Depreciation and Amortization of 
                           Nonutility Property

    This account shall include the accumulated provision for 
depreciation and amortization applicable to nonutility property.

                123   Investment in Associated Companies

    A. This account shall include the book cost of investments in 
securities issued or assumed by associated companies and investment 
advances to such companies, including interest accrued thereon when such 
interest is not subject to current settlement, provided that the 
investment does not relate to a subsidiary company. (If the investment 
relates to a subsidiary company, it shall be included in Account 123.11, 
Investment in Subsidiary Companies.) Include herein the offsetting entry 
to the recording of amortization of discount or premium on interest 
bearing investments. (See Account 419, Interest and Dividend Income.)
    B. This account shall be maintained in such manner as to show the 
investment in securities of, and advances to, each associated company 
together with full particulars regarding any of such investments that 
are pledged.
    Note A: Securities and advances of associated companies owned and 
pledged shall be included in this account, but such securities, if held 
in special deposits or in special funds, shall be included in the 
appropriate deposit or fund account. A complete record of securities 
pledged shall be maintained.
    Note B: Securities of associated companies held as temporary cash 
investments are includible in Account 136, Temporary Cash Investments.
    Note C: Balances in open accounts with associated companies, which 
are subject to current settlement, are includible in Account 146, 
Accounts Receivable from Associated Companies.
    Note D: The utility may write down the cost of any security in 
recognition of a decline in the value thereof. Securities shall be 
written off or written down to a nominal value if there is no reasonable 
prospect of substantial value. Fluctuations in market value shall not be 
recorded but a permanent impairment in the value of securities shall be 
recognized in the accounts. When securities are written off or written 
down, the amount of the adjustment shall be charged to Account 426.5, 
Other Deductions, or to an appropriate account for accumulated 
provisions for loss in value established as a separate subdivision of 
this account.
    C. Account 123 shall be subaccounted as follows:

123.1  Patronage Capital from Associated Cooperatives
123.3  Investment in Associated Organizations--Federal Economic 
          Development Loans
123.4  Investment in Associated Organizations--Non-Federal Economic 
          Development Loans
123.11  Investment in Subsidiary Companies
123.21  Subscriptions to Capital Term Certificates--Supplemental 
          Financing
123.22  Investment in Capital Term Certificates--Supplemental Financing
123.23  Other Investments in Associated Organizations

         123.1   Patronage Capital from Associated Cooperatives

    This account shall include patronage capital credits allocated to 
the accounting borrower by G&T cooperatives. It shall also include 
capital credits, deferred patronage refunds, or like items from other 
associated cooperatives. The account shall be maintained so as to 
reflect separately, the allocations of patronage capital and patronage 
refunds from each organization that makes such allocations to the 
borrower.

    123.3   Investment in Associated Organizations--Federal Economic 
                            Development Loans

    This account shall include investment advances of Federal funds 
received from a Rural Economic Development Grant to associated 
organizations for authorized rural economic development projects.

  123.4   Investment in Associated Organizations--Non-Federal Economic 
                            Development Loans

    This account shall include investment advances of non-Federal funds 
from the Rural Economic Development Grant revolving fund to associated 
organizations for authorized rural economic development projects.

               123.11   Investment in Subsidiary Companies

    A. This account shall include the cost of investments in securities 
issued or assumed by subsidiary companies and investment advances to 
such companies, including interest

[[Page 723]]

accrued thereon when such interest is not subject to current settlement, 
plus the equity in undistributed earnings or losses of such subsidiary 
companies since acquisition. This account shall be credited with any 
dividends declared by such subsidiaries.
    B. This account shall be maintained in such a manner as to show 
separately for each subsidiary: the cost of such investments in the 
securities of the subsidiary at the time of acquisition; the amount of 
equity in the subsidiary's undistributed net earnings or net losses 
since acquisition; advances or loans to such subsidiary; and full 
particulars regarding any such investments that are pledged.

   123.21   Subscriptions to Capital Term Certificates--Supplemental 
                                Financing

    This account shall include the total subscriptions to capital term 
certificates of CFC. When subscriptions are paid, this account shall be 
credited and Account 123.22, Investments in Capital Term Certificates--
Supplemental Financing, debited.

    123.22   Investments in Capital Term Certificates--Supplemental 
                                Financing

    This account shall include paid subscriptions in capital term 
certificates of CFC or other supplemental lenders.

         123.23   Other Investments in Associated Organizations

    This account shall include investments in capital stock, securities, 
membership fees, and investment advances to associated organizations 
other than provided for elsewhere. This account shall be maintained in 
such a manner as to show the investment in stock and securities of and 
advances to each associated organization.

                                  Items

    1. Investments in capital stock of associated organizations.
    2. Investments in securities issued by associated organizations.
    3. Membership fees in associated organizations, including NRECA, and 
Statewide associations of RUS-financed borrowers.
    4. Investment advances to associated organizations.

                         124   Other Investments

    A. This account shall include the book cost of investments in 
securities issued or assumed by nonassociated companies, investment 
advances to such companies, and any investments not accounted for 
elsewhere. Include also the offsetting entry to the recording of 
amortization of discount or premium on interest bearing investments. 
(See Account 419, Interest and Dividend Income.)
    B. The records shall be maintained in such manner as to show the 
amount of each investment and the investment advances to each person.
    C. Account 124 shall be subaccounted as follows:

124.1  Other Investments--Federal Economic Development Loans
124.2  Other Investments--Non-Federal Economic Development Loans
    Note A: Securities owned and pledged shall be included in this 
account, but securities held in special deposits or in special funds 
shall be included in appropriate deposit or fund accounts. A complete 
record of securities pledged shall be maintained.
    Note B: Securities held as temporary cash investments shall not be 
included in this account.
    Note C: See Note D of Account 123.

      124.1   Other Investments--Federal Economic Development Loans

    This account shall include investment advances of Federal funds 
received from a Rural Economic Development Grant to nonassociated 
organizations for authorized rural economic development projects.

    124.2   Other Investments--Non-Federal Economic Development Loans

    This account shall include investment advances of non-Federal funds 
from the Rural Economic Development Grant revolving fund to 
nonassociated organizations for authorized rural economic development 
projects.

                           125   Sinking Funds

    This account shall include the amount of cash and book cost of 
investments held in sinking funds. A separate account, with appropriate 
title, shall be kept for each sinking fund. Transfers from this account 
to special deposit accounts, may be made as necessary for the purpose of 
paying matured sinking fund obligations, or obligations called for 
redemption but not presented, or the interest thereon.

                         126   Depreciation Fund

    This account shall include the amount of cash and the book cost of 
investments which have been segregated in a special fund for the purpose 
of identifying such assets with the accumulated provisions for 
depreciation.

                        128   Other Special Funds

    This account shall include the amount of cash and book cost of 
investments which have been segregated in special funds for insurance, 
employee pensions, savings, relief, hospital, and other purposes not 
provided for elsewhere. A separate account, with appropriate title, 
shall be kept for each fund.
    Note: Amounts deposited with a trustee under the terms of an 
irrevocable trust agreement for pensions or other employee

[[Page 724]]

benefits shall not be included in this account.

                       Current and Accrued Assets

    Current and accrued assets are cash, those assets which are readily 
convertible into cash or are held for current use in operations or 
construction, current claims against others, payment of which is 
reasonably assured, and amounts accruing to the utility which are 
subject to current settlement, except such items for which accounts 
other than those designated as current and accrued assets are provided. 
There shall not be included in the category of accounts designated as 
current and accrued assets any item, the amount or collectibility of 
which is not reasonably assured, unless an adequate provision for 
possible loss has been made therefor. Items of current character but of 
doubtful value may be written down, and for record purposes carried in 
these accounts at nominal value.

                               131   Cash

    A. This account shall include the amount of current cash funds 
except working funds.
    B. Account 131 shall be subaccounted as follows:

131.1  Cash--General
131.2  Cash--Construction Fund--Trustee
131.3  Cash--Installation Loan and Collection Fund
131.4  Transfer of Cash
131.12  Cash--General--Economic Development Loan Funds
131.13  Cash--General--Economic Development Grant Funds
131.14  Cash--General--Economic Development Non-Federal Revolving Funds

                          131.1   Cash--General

    This account shall include all cash of the organization not provided 
for elsewhere. Separate subaccounts may be maintained for each bank 
account in which general cash is maintained. Funds held by others for 
current obligations shall be recorded in Account 134, Other Special 
Deposits.

                131.2   Cash--Construction Fund--Trustee

    This account shall include the cash received from the Rural 
Utilities Service, CFC, and any other source of supplemental financing 
for financing the construction, purchase, and operation of electric 
facilities. RUS construction loan fund advances shall be charged to this 
account and credited to Account 224.4, RUS Notes Executed--
Construction--Debit. CFC and other supplemental lender construction loan 
fund advances shall be charged to this account and credited to Account 
224.13, Supplemental Financing Notes Executed--Debit.

           131.3   Cash--Installation Loan and Collection Fund

    A. This account shall include the cash advanced on installation 
loans made subsequent to September 13, 1957. Such advances shall be 
debited to this account as received and credited to Account 224.10, RUS 
Notes Executed--Installation--Debit. This account shall also include 
interest and principal collections received on consumers' loans financed 
from RUS loans made subsequent to September 13, 1957.
    B. Payments shall be made from this account solely for financing 
consumers' loans for the purpose of wiring of consumers' premises, and 
the acquisition and installation of electrical and plumbing appliances 
and equipment by consumers. The cash in this account is also used for 
the payment of principal and interest on installation loans made by RUS, 
subsequent to September 13, 1957, in accordance with the terms of the 
loan agreement.

                        131.4   Transfer of Cash

    This account shall be used in transferring funds from one bank 
account to another. This account is charged when the check is drawn for 
the transfer and entered in the check register, and credited when the 
amount transferred is entered in the cash receipts book. This account is 
to be used as a clearing account and should not have a balance at the 
end of an accounting period.

           131.12   Cash--General--Economic Development Funds

    This account shall include the cash received from the Rural 
Utilities Service for Rural Economic Development Loans. Economic 
development loan advances shall be charged to this account and credited 
to Account 224.17, RUS Notes Executed--Economic Development--Debit.

        131.13   Cash--General--Economic Development Grant Funds

    This account shall include cash received from the Rural Utilities 
Service for Rural Economic Development Grants. Economic development 
grant funds shall be charged to this account and credited to Account 
224.18, Other Long-Term Debt--Grant Funds; Account 208, Donated Capital; 
or Account 421, Miscellaneous Nonoperating Income, as appropriate. This 
account shall be credited and either Account 123.3, Investment in 
Associated Organizations--Federal Economic Development Loans, or Account 
124.1, Other Investments--Federal Economic Development Loans, shall be 
debited, as appropriate, with the amount of an economic development 
revolving fund loan.

[[Page 725]]

131.14   Cash--General--Economic Development Non-Federal Revolving Funds

    This account shall include all non-Federal funds comprising the 
economic development revolving fund. It shall include all funds supplied 
by the borrower as well as all cash received from the repayment of loans 
made from the economic development revolving fund. This account shall be 
credited and either Account 123.4, Investment in Associated 
Organizations--Non-Federal Economic Development Loans, or Account 124.2, 
Other Investments--Non-Federal Economic Development Loans, shall be 
debited, as appropriate, with the amount of an economic development 
revolving fund loan.

                     132   Interest Special Deposits

    This account shall include special deposits with fiscal agents or 
others for the payment of interest.

                     133   Dividend Special Deposits

    This account shall include special deposits with fiscal agents or 
others for the payment of dividends.

                      134   Other Special Deposits

    This account shall include deposits with fiscal agents or others for 
special purposes other than the payment of interest and dividends. Such 
special deposits may include cash deposited with Federal, state, or 
municipal authorities as a guaranty for the fulfillment of obligations; 
cash deposited with trustees to be held until mortgaged property sold, 
destroyed, or otherwise disposed of is replaced; and cash realized from 
the sale of the accounting utility's securities and deposited with 
trustees to be held until invested in property of the utility. Entries 
to this account shall specify the purpose for which the deposit is made.
    Note: Assets available for general corporate purposes shall not be 
included in this account. Further, deposits for more than one year, 
which are not offset by current liabilities, shall not be charged to 
this account but to Account 128, Other Special Funds.

                           135   Working Funds

    This account shall include cash advanced to officers, agents, 
employees, and others as petty cash or working funds.

                    136   Temporary Cash Investments

    A. This account shall include the book cost of investments, such as 
demand and time loans, bankers' acceptances, United States Treasury 
certificates, marketable securities, and other similar investments, 
acquired for the purpose of temporarily investing cash.
    B. This account shall be so maintained as to show separately 
temporary cash investments in securities of associated companies and of 
others. Records shall be kept of any pledged investments.

                         141   Notes Receivable

    A. This account shall include the book cost, not includible 
elsewhere, of all collectible obligations in the form of notes 
receivable and similar evidences (except interest coupons) of money due 
on demand or within one year from the date of issue, except, however, 
notes receivable from associated companies. (See Account 136, Temporary 
Cash Investments, and Account 145, Notes Receivable from Associated 
Companies.)
    Note: The face amount of notes receivable discounted, sold, or 
transferred without releasing the utility from liability as endorser 
thereon, shall be credited to a separate subdivision of this account and 
appropriate disclosure shall be made in the financial statements of any 
contingent liability arising from such transactions.
    B. Account 141 shall be subaccounted as follows:

141.1  Accumulated Provision for Uncollectible Notes--Credit

      141.1   Accumulated Provision for Uncollectible Notes--Credit

    This account shall be credited with amounts provided for losses on 
notes receivable which may become uncollectible, and also with 
collections on notes previously charged hereto. Concurrent charges shall 
be made to Account 904, Uncollectible Accounts.

                   142   Customer Accounts Receivable

    A. This account shall include amounts due from customers for utility 
service and for merchandising, jobbing, and contract work. This account 
shall not include amounts due from associated companies.
    B. This account shall be maintained so as to permit ready 
segregation of the amounts due for merchandising, jobbing, and contract 
work.
    C. Account 142 shall be subaccounted as follows:

142.1  Customer Accounts Receivable--Electric
142.2  Customer Accounts Receivable--Other

             142.1   Customer Accounts Receivable--Electric

    This account shall include amounts due from customers for utility 
service.

               142.2   Customer Accounts Receivable--Other

    This account shall include amounts due from customers for 
merchandising, jobbing, and contract work.

[[Page 726]]

                     143   Other Accounts Receivable

    A. This account shall include amounts due the utility upon open 
accounts, other than amounts due from associated companies and from 
customers for utility services and merchandising, jobbing and contract 
work.
    B. This account shall be maintained so as to show separately amounts 
due on subscriptions to capital stock and from officers and employees. 
The account shall not include amounts advanced to officers or others as 
working funds. (See Account 135, Working Funds.)

     144   Accumulated Provision for Uncollectible Accounts--Credit

    A. This account shall include amounts provided for losses on 
accounts receivable which may become uncollectible, and also with 
collections on accounts previously charged hereto. Concurrent charges 
shall be made to Account 904, Uncollectible Accounts, for amounts 
applicable to utility operations, and to corresponding accounts for 
other operations. Records shall be maintained so as to show the write-
offs of accounts receivable for each utility department.
    B. Account 144 shall be subaccounted as follows:

144.1  Accumulated Provision for Uncollectible Customer Accounts--Credit
144.2  Accumulated Provision for Uncollectible Merchandising Accounts--
          Credit
144.3  Accumulated Provision for Uncollectible Accounts, Officers and 
          Employees--Credit
144.4  Accumulated Provision for Other Uncollectible Accounts--Credit

   144.1   Accumulated Provision for Uncollectible Customer Accounts--
                                 Credit

    This account shall be credited with amounts provided for losses on 
accounts receivable which may become uncollectible, and also with 
collections on accounts previously charged hereto. Concurrent charges 
shall be made to Account 904, Uncollectible Accounts.

144.2   Accumulated Provision for Uncollectible Merchandising Accounts--
                                 Credit

    This account shall be credited with amounts provided for losses on 
merchandising, jobbing, and contract work which may become 
uncollectible, and also with collections on accounts previously charged 
hereto. Concurrent charges shall be made to Account 904, Uncollectible 
Accounts, for amounts applicable to utility operations, and to 
corresponding accounts for other operations.

 144.3   Accumulated Provision for Uncollectible Accounts, Officers and 
                            Employees--Credit

    This account shall be credited with amounts provided for losses on 
accounts receivable from officers and employees which may become 
uncollectible and also with collections on accounts previously charged 
hereto. Concurrent charges shall be made to Account 904, Uncollectible 
Accounts.

 144.4   Accumulated Provision for Other Uncollectible Accounts--Credit

    This account shall be credited with amounts provided for losses on 
accounts receivable which may become uncollectible and for which the 
recording of this credit has not been provided for elsewhere. This 
account shall also be credited with collections on accounts previously 
charged hereto. Concurrent charges shall be made to Account 904, 
Uncollectible Accounts, for amounts applicable to utility operations and 
to corresponding accounts for other operations.

            145   Notes Receivable from Associated Companies

    This account shall include notes upon which associated companies are 
liable, and which mature and are expected to be paid in full not later 
than one year from the date of issue, together with any interest 
thereon, and debit balances subject to current settlement in open 
accounts with associated companies. Items which do not bear a specified 
due date but which have been carried for more than twelve months and 
items which are not paid within twelve months from due date shall be 
transferred to Account 123, Investment in Associated Companies.
    Note: The face amount of notes receivable discounted, sold or 
transferred without releasing the utility from liability as endorser 
thereon, shall be credited to a separate subdivision of this account and 
appropriate disclosure shall be made in the financial statements of any 
contingent liability arising from such transactions.

           146   Accounts Receivable from Associated Companies

    This account shall include drafts upon which associated companies 
are liable, and which mature and are expected to be paid in full not 
later than one year from the date of issue, together with any interest 
thereon, and debit balances subject to current settlement in open 
accounts with associated companies. Items which do not bear a specified 
due date but which have been carried for more than twelve months and 
items which are not paid within twelve months from due date shall be 
transferred to Account 123, Investment in Associated Companies.
    Note: On the balance sheet, accounts receivable from an associated 
company may be

[[Page 727]]

offset against accounts payable to the same company.

                            151   Fuel Stock

    This account shall include the book cost of fuel on hand.

                                  Items

    1. Invoice price of fuel less any cash or other discounts.
    2. Freight, switching, demurrage, and other transportation charges, 
not including, however, any charges for unloading from the shipping 
medium.
    3. Excise taxes, purchasing agents' commissions, insurance, and 
other expenses directly assignable to cost of fuel.
    4. Operating, maintenance and depreciation expenses, and ad valorem 
taxes on utility-owned transportation equipment used to transport fuel 
from the point of acquisition to the unloading point.
    5. Lease or rental costs of transportation equipment used to 
transport fuel from the point of acquisition to the unloading point.

                 152   Fuel Stock Expenses Undistributed

    A. This account may include the cost of labor and of supplies used 
and expenses incurred in unloading fuel from the shipping medium and in 
the handling thereof prior to its use, if such expenses are sufficiently 
significant in amount to warrant being treated as a **part** of the cost of 
fuel inventory rather than being charged direct to expense as incurred.
    B. Amounts included herein shall be charged to expense as the fuel 
is used to the end that the balance herein shall not exceed the expenses 
attributable to the inventory of fuel on hand.

                                  Items

    Labor:
    1. Procuring and handling of fuel.
    2. All routine fuel analyses.
    3. Unloading from shipping facility and placing in storage.
    4. Moving of fuel in storage and transferring from one station to 
another.
    5. Handling from storage or shipping facility to first bunker, 
hopper, bucket, tank, or holder of boiler house structure.
    6. Operation of mechanical equipment such as locomotives, trucks, 
cars, boats, barges, and cranes.
    Supplies and Expenses:
    1. Tools, lubricants and other supplies.
    2. Operating supplies for mechanical equipment.
    3. Transportation and other expenses in moving fuel.
    4. Stores expenses applicable to fuel.

                             153   Residuals

    This account shall include the book cost of any residuals produced 
in the production or manufacturing processes.

              154   Plant Materials and Operating Supplies

    A. This account shall include the cost of materials purchased 
primarily for use in the utility business for construction, operation 
and maintenance purposes. It shall also include the book cost of 
materials recovered in connection with construction, maintenance, or the 
retirement of property, such materials being credited to construction, 
maintenance, or accumulated depreciation provision, respectively, and 
included herein as follows:
    1. Reusable materials consisting of large individual items shall be 
included in this account at original cost, estimated if not known. The 
cost of repairing such items shall be charged to the maintenance account 
appropriate for the previous use.
    2. Reusable materials consisting of relatively small items, the 
identity of which (from the date of original installation to the final 
abandonment or sale thereof) cannot be ascertained without undue 
refinement in accounting, shall be included in this account at current 
prices new for such items. The cost of repairing such items shall be 
charged to the appropriate expense account as indicated by previous use.
    3. Scrap and nonusable materials included in this account shall be 
carried at the estimated net amount realizable therefrom. The difference 
between the amounts realized for scrap and nonusable materials sold and 
the net amount at which the materials were carried in this account, as 
far as practicable, shall be adjusted to the accounts credited when the 
materials were charged to this account.
    B. Materials and supplies issued shall be credited hereto and 
charged to the appropriate construction, operating expense, or other 
account on the basis of a unit price determined by the use of cumulative 
average, first-in-first-out, or such other method of inventory 
accounting as conforms with accepted accounting standards consistently 
applied.

                                  Items

    1. Invoice price of materials less cash or other discounts.
    2. Freight, switching, or other transportation charges when 
practicable to include as **part** of the cost of particular materials to 
which they relate.
    3. Customs duties and excise taxes.
    4. Costs of inspection and special tests prior to acceptance.
    5. Insurance and other directly assignable charges.
    Note: Where expenses applicable to materials purchased cannot be 
directly assigned

[[Page 728]]

to particular purchases, they shall be charged to Account 163, Stores 
Expense Undistributed.

                            155   Merchandise

    This account shall include the book cost of materials and supplies 
and appliances and equipment held primarily for merchandising, jobbing, 
and contract work. The principles prescribed in accounting for utility 
materials and supplies shall be observed with respect to items carried 
in this account.

                   156   Other Materials and Supplies

    This account shall include the book cost of materials and supplies 
held primarily for nonutility purposes. The principles prescribed in 
accounting for utility materials and supplies shall be observed with 
respect to items carried in this account.

                  157   Nuclear Materials Held for Sale

    This account shall include the net salvage value of uranium, 
plutonium, and other nuclear materials held by the company for sale or 
other disposition that are not to be reused by the company in its 
electric utility operations. This account shall be debited and Account 
120.5, Accumulated Provision for Amortization of Nuclear Fuel 
Assemblies, credited for such net salvage value. Any difference between 
the amount recorded in this account and the actual amount realized from 
the sale of materials shall be debited or credited, as appropriate, to 
Account 518, Nuclear Fuel Expense, at the time of such sale.

                       158.1   Allowance Inventory

    A. This account shall include the cost of allowances owned by the 
utility and not withheld by the Environmental Protection Agency. See 
Sec. 1767.15 (u) and Account 158.2, Allowances Withheld.
    B. This account shall be credited and Account 509, Allowances, shall 
be debited concurrent with the monthly emission of sulfur dioxide.
    C. Separate subdivisions of this account shall be maintained so as 
to separately account for those allowances usable in the current year 
and in each subsequent year. The underlying records of these 
subdivisions shall be maintained in sufficient detail so as to identify 
each allowance included; the origin of each allowance; and the 
acquisition cost, if any, of the allowance.

                       158.2   Allowances Withheld

    A. This account shall include the cost of allowances owned by the 
utility but withheld by the Environmental Protection Agency. (See 
Sec. 1767.15 (u).)
    B. The inventory cost of the allowances released by the 
Environmental Protection Agency for use by the utility shall be 
transferred to Account 158.1, Allowance Inventory.
    C. The underlying records of this account shall be maintained in 
sufficient detail so as to identify each allowance included; the origin 
of each allowance; and the acquisition cost, if any, of the allowances.

                   163   Stores Expense Undistributed

    A. This account shall include the cost of supervision, labor, and 
expenses incurred in the operation of general storerooms, including 
purchasing, storage, handling, and distribution of materials and 
supplies.
    B. This account shall be cleared by adding to the cost of materials 
and supplies issued, a suitable loading charge which will distribute the 
expense equitably over stores issues. The balance in the account at the 
close of the year shall not exceed the amount of stores expenses 
reasonably attributable to the inventory of materials and supplies, 
exclusive of fuel, as any amount applicable to fuel costs should be 
included in Account 152, Fuel Stock Expenses Undistributed.

                                  Items

    Labor:

    1. Inspecting and testing materials and supplies when not assignable 
to specific items.
    2. Unloading from shipping facility and placing in storage.
    3. Supervision of purchasing and stores department to extent 
assignable to materials handled through stores.
    4. Getting materials from stock and in readiness to go out.
    5. Inventorying stock received or stock on hand by stores employees 
but not including inventories by general department employees as **part** of 
internal or general audits.
    6. Purchasing department activities in checking material needs, 
investigating sources of supply, analyzing prices, preparing and placing 
orders, and related activities to extent applicable to materials handled 
through stores. (Optional: Purchasing department expenses may be 
included in administrative and general expenses.)
    7. Maintaining stores equipment.
    8. Cleaning and tidying storerooms and stores offices.
    9. Keeping stock records, including the recording and posting of 
material receipts and issues and maintaining inventory records of stock.
    10. Collecting and handling scrap materials in stores.

    Supplies and Expenses:

    1. Adjustments of inventories of materials and supplies but not 
including large differences which can readily be assigned to important 
classes of materials and equitably distributed among the accounts to 
which

[[Page 729]]

such classes of materials have been charged since the previous 
inventory.
    2. Cash and other discounts not practically assignable to specific 
materials.
    3. Freight and express charges when not assignable to specific 
items.
    4. Heat, light, and power for storerooms and store offices.
    5. Brooms, brushes, sweeping compounds and other supplies used in 
cleaning and tidying storerooms and stores offices.
    6. Injuries and damages.
    7. Insurance on materials and supplies and on stores equipment.
    8. Losses due to breakage, leakage, evaporation, fire or other 
causes, less credits for amounts received from insurance, transportation 
companies, or others in compensation of such losses.
    9. Postage, printing, stationery, and office supplies.
    10. Rent of storage space and facilities.
    11. Communication service.
    12. Excise and other similar taxes not assignable to specific 
materials.
    13. Transportation expense on inward movement of stores and on 
transfer between storerooms but not including charges on materials 
recovered from retirements which shall be accounted for as **part** of the 
cost of removal.
    Note: A physical inventory of each class of materials and supplies 
shall be made at least every two years.

                            165   Prepayments

    A. This account shall include amounts representing prepayments of 
insurance, rents, taxes, interest, and miscellaneous items, and shall be 
kept or supported in such manner as to disclose the amount of each class 
of prepayment.
    B. Account 165 shall be subaccounted as follows:

165.1  Prepayments--Insurance
165.2  Other Prepayments

                 171   Interest and Dividends Receivable

    This account shall include the amount of interest on bonds, 
mortgages, notes, commercial paper, loans, open accounts, and deposits, 
the payment of which is reasonably assured, and the amount of dividends 
declared or guaranteed on stocks owned.
    Note A: Interest which is not subject to current settlement shall 
not be included herein but in the account in which the associated 
principle is recorded.
    Note B: Interest and dividends receivable from associated companies 
shall be included in Account 146, Accounts Receivable from Associated 
Companies.

                         172   Rents Receivable

    This account shall include rents receivable or accrued on property 
rented or leased by the utility to others.
    Note: Rents receivable from associated companies shall be included 
in Account 146, Accounts Receivable from Associated Companies.

                     173   Accrued Utility Revenues

    At the option of the utility, the estimated amount accrued for 
service rendered, but not billed at the end of any accounting period, 
may be included herein. If accruals are made for unbilled revenues, 
accruals shall also be made for unbilled expenses, such as the purchase 
of energy.

             174   Miscellaneous Current and Accrued Assets

    This account shall include the book cost of all other current and 
accrued assets, appropriately designated and supported so as to show the 
nature of each asset included herein.

                             Deferred Debits

                     181   Unamortized Debt Expense

    This account shall include expenses related to the issuance or 
assumption of debt securities. Amounts recorded in this account shall be 
amortized over the life of each respective issue under a plan which will 
distribute the amount equitably over the life of the security. The 
amortization shall be on a monthly basis, and the amounts thereof shall 
be charged to Account 428, Amortization of Debt Discount and Expense. 
Any unamortized amounts outstanding at the time that the related debt is 
prematurely reacquired shall be accounted for as indicated in 
Sec. 1767.15 (q).

                  182.1   Extraordinary Property Losses

    A. When authorized or directed by RUS, this account shall include 
extraordinary losses which could not reasonably have been anticipated 
and which are not covered by insurance or other provisions, such as 
unforeseen damages to property.
    B. Application to RUS for permission to use this account shall be 
accompanied by a statement giving a complete explanation with respect to 
the items which it is proposed to include herein, the period over which, 
and the accounts to which it is proposed to write off the charges, and 
other pertinent information.

          182.2   Unrecovered Plant and Regulatory Study Costs

    A. This account shall include: (1) nonrecurring costs of studies and 
analyses mandated by regulatory bodies related to plants

[[Page 730]]

in service, transferred from Account 183, Preliminary Survey and 
Investigations Charges, and not resulting in construction; and (2) when 
authorized by RUS, significant unrecovered costs of plant facilities 
where construction has been cancelled or which have been prematurely 
retired.
    B. This account shall be credited and Account 407, Amortization of 
Property Losses, Unrecovered Plant and Regulatory Study Costs, shall be 
debited over the period specified by RUS.
    C. Any additional costs incurred, relative to the cancellation or 
premature retirement, may be included in this account and amortized over 
the remaining period of the original amortization period. Should any 
gains or recoveries be realized relative to the cancelled or prematurely 
retired plant, such amounts shall be used to reduce the unamortized 
amount of the costs recorded herein.
    D. In the event that the recovery of costs included herein is 
disallowed in the rate proceedings, the disallowed costs shall be 
charged to Account 426.5, Other Deductions, in the year of such 
disallowance.

                     182.3   Other Regulatory Assets

    A. This account shall include the amounts of regulatory-created 
assets, not includable in other accounts, resulting from the ratemaking 
actions of regulatory agencies. (See the definition of regulatory assets 
and liabilities.)
    B. The amounts included in this account are to be established by 
those charges which would have been included in net income 
determinations in the current period under the general requirements of 
the Uniform System of Accounts but for it being probable that such items 
will be included in a different period(s) for purposes of developing the 
rates that the utility is authorized to charge for its utility services. 
When specific identification of the particular source of a regulatory 
asset cannot be made, such as in plant phase-ins, rate moderation plans, 
or rate levelization plans, Account 407.4, Regulatory Credits, shall be 
credited. The amounts recorded in this account are generally to be 
charged, concurrently with the recovery of the amounts in rates, to the 
same account that would have been charged if included in income when 
incurred, except all regulatory assets established through the use of 
Account 407.4 shall be charged to Account 407.3, Regulatory Debits, 
concurrent with the recovery of the amounts in rates.
    C. If rate recovery of all or **part** of an amount included in this 
account is disallowed, the disallowed amount shall be charged to Account 
426.5, Other Deductions, or Account 435, Extraordinary Deductions, in 
the year of the disallowance.
    D. The records supporting the entries to this account shall be kept 
so that the utility can furnish full information as to the nature and 
amount of each regulatory asset included in this account, including 
justification for inclusion of such amounts in this account.

           183   Preliminary Survey and Investigation Charges

    A. This account shall be charged with all expenditures for 
preliminary surveys, plans, and investigations made for the purpose of 
determining the feasibility of utility projects under contemplation. If 
construction results, this account shall be credited and the appropriate 
utility plant account charged. If the work is abandoned, the charge 
shall be made to Account 426.5, Other Deductions, or to the appropriate 
operating expense account.
    B. This account shall also include costs of studies and analyses 
mandated by regulatory bodies related to plant in service. If 
construction results from such studies, this account shall be credited 
and the appropriate utility plant account charged with an equitable 
portion of such study costs directly attributable to new construction. 
The portion of such study costs not attributable to new construction or 
the entire cost if construction does not result shall be charged to 
Account 182.2, Unrecovered Plant and Regulatory Study Costs, or the 
appropriate operating expense account. The costs of such studies 
relative to plant under construction shall be included directly 
inAccount 107, Construction Work in Progress--Electric.
    C. The records supporting the entries to this account shall be so 
kept that the utility can furnish complete information as to the nature 
and the purpose of the survey, plans, or investigations, and the nature 
and amounts of the several charges.
    Note: The amount of preliminary survey and investigation charges 
transferred to utility plant shall not exceed the expenditures which may 
reasonably be determined to contribute directly and immediately and 
without duplication to utility plant.

                         184   Clearing Accounts

    A. This caption shall include undistributed balances in clearing 
accounts at the date of the balance sheet. Balances in clearing account 
shall be substantially cleared not later than the end of the calendar 
year unless items held therein relate to a future period.
    B. Account 184 shall be subaccounted as follows:

184.1  Transportation Expense--Clearing
184.2  Clearing Accounts--Other

                       185   Temporary Facilities

    This account shall include amounts shown by work orders for plant 
installed for temporary use in utility service for periods of less than 
one year. Such work orders shall be

[[Page 731]]

charged with the cost of temporary facilities and credited with payments 
received from customers and net salvage realized on removal of the 
temporary facilities. Any net credit or debit resulting shall be cleared 
to Account 451, Miscellaneous Service Revenues.

                   186   Miscellaneous Deferred Debits

    This account shall include all debits not elsewhere provided for, 
such as miscellaneous work in progress, and unusual or extraordinary 
expenses, not included in other accounts, which are in process of 
amortization and items the proper final disposition of which is 
uncertain.

         187   Deferred Losses from Disposition of Utility Plant

    This account shall include losses from the sale or other disposition 
of property previously recorded in Account 105, Electric Plant Held for 
Future Use, under the provisions of Paragraphs B, C, and D thereof, 
where such losses are significant and are to be amortized over a period 
of 5 years, unless otherwise authorized by RUS. The amortization of the 
amounts in this account shall be made by debits to Account 411.7, Losses 
from Disposition of Utility Plant. (See Account 105, Electric Plant Held 
for Future Use.)

       188   Research, Development, and Demonstration Expenditures

    A. This account shall be charged with the cost of all expenditures 
coming within the meaning of Research, Development, and Demonstration 
(RD&D) of this USoA (See Sec. 1767.10 (a)(34)) except those expenditures 
properly chargeable to Account 107, Construction Work in Progress--
Electric.
    B. Costs that are minor or of a general or recurring nature shall be 
transferred from this account to the appropriate operating expense 
function or if such costs are common to the overall operations or cannot 
be feasibly allocated to the various operating accounts, such costs 
shall be recorded in Account 930.2, Miscellaneous General Expenses.
    C. In certain instances, a company may incur large and significant 
research, development, and demonstration expenditures which are 
nonrecurring and which would distort the annual research, development, 
and demonstration charges for the period. In such a case, the portion of 
such amounts that cause the distortion may be amortized to the 
appropriate operating expense account over a period not to exceed 5 
years unless otherwise authorized by RUS.
    D. The entries in this account must be so maintained as to show 
separately each project along with complete detail of the nature and 
purpose of the research, development, and demonstration project together 
with the related costs.

                189   Unamortized Loss on Reacquired Debt

    This account shall include the losses on long-term debt reacquired 
or redeemed. The amounts in this account shall be amortized in 
accordance with Sec. 1767.15 (q).

                 190   Accumulated Deferred Income Taxes

    A. This account shall be debited and Account 411.1, Provision for 
Deferred Income Taxes--Credit, Utility Operating Income, or Account 
411.2, Provision for Deferred Income Taxes--Credit, Other Income and 
Deductions, as appropriate, shall be credited with an amount equal to 
that by which income taxes payable for the year are higher because of 
the inclusion of certain items in income for tax purposes, which items 
for general accounting purposes will not be fully reflected in the 
utility's determination of annual net income until subsequent years.
    B. This account shall be credited and Account 410.1, Provision for 
Deferred Income Taxes, Utility Operating Income, or Account 410.2, 
Provision for Deferred Income Taxes, Other Income and Deductions, as 
appropriate, shall be debited with an amount equal to that by which 
income taxes payable for the year are lower because of prior payment of 
taxes as provided by Paragraph A above, because of difference in timing 
for tax purposes of particular items of income or income deductions from 
that recognized by the utility for general accounting purposes. Such 
credit to this account and debit to Account 410.1 or Account 410.2 
shall, in general, represent the effect on taxes payable in the current 
year of the smaller amount of book income recognized for tax purposes as 
compared to the amount recognized in the utility's current accounts with 
respect to the item or class of items for which deferred tax accounting 
by the utility was authorized by RUS.
    C. Vintage year records with respect to entries to this account, as 
described above, and the account balance, shall be so maintained as to 
show the factor of calculation with respect to each annual amount of the 
item or class of items for which deferred tax accounting by the utility 
is utilized.
    D. The utility is restricted in its use of this account to the 
purpose set forth above. It shall not make use of the balance in this 
account or any portion thereof except as provided in the text of this 
account, without prior approval of RUS. Any remaining deferred tax 
account balance with respect to an amount for any prior year's tax 
deferral, the amortization of which or other recognition in the 
utility's income accounts has been completed, or other disposition made, 
shall

[[Page 732]]

be debited to Account 410.1, Provision for Deferred Income Taxes, 
Utility Operating Income, or Account 410.2, Provision for Deferred 
Income Taxes, Other Income and Deductions, as appropriate, or otherwise 
disposed of as RUS may authorize or direct. (See Sec. 1767.15 (t).)

[58 FR 59825, Nov. 10, 1993, as amended at 59 FR 27436, May 27, 1994; 60 
FR 55429, 55430, Nov. 1, 1995]

Sec. 1767.19  Liabilities and other credits.

    The liabilities and other credit accounts identified in this section 
shall be used by all RUS borrowers.

                      Liabilities and Other Credits

                          Margins and Equities

200  Memberships
200.1  Memberships Issued
200.2  Memberships Subscribed But Unissued
201  Patronage Capital
201.1  Patronage Capital Credits
201.2  Patronage Capital Assignable
202  [Reserved]
203  [Reserved]
204  [Reserved]
205  [Reserved]
206  [Reserved]
207  [Reserved]
208  Donated Capital
209  [Reserved]
210  [Reserved]
211  Consumers' Contributions for Debt Service
212  [Reserved]
213  [Reserved]
214  [Reserved]
215  Appropriated Margins
215.1  Unrealized Gains and Losses--Debt and Equity Securities
216  [Reserved]
216.1  Unappropriated Undistributed Subsidiary Earnings
217  Retired Capital Credits--Gain
218  Capital Gains and Losses
219  Other Margins and Equities
219.1  Operating Margins
219.2  Nonoperating Margins
219.3  Other Margins
219.4  Other Margins and Equities--Prior Periods

                             Long-Term Debt

221  Bonds
222  Reacquired Bonds
223  Advances from Associated Companies
224  Other Long-Term Debt
224.1  Long-Term Debt--RUS Construction Loan Contract
224.2  RUS Loan Contract--Construction--Debit
224.3  Long-Term Debt--RUS Construction Notes Executed
224.4  RUS Notes Executed--Construction--Debit
224.5  Interest Accrued--Deferred--RUS Construction
224.6  Advance Payments Unapplied--RUS Long-Term Debt--Debit
224.7  Long-Term Debt--Installation Loan Contract
224.8  RUS Loan Contract--Installation--Debit
224.9  Long-Term Debt--Installation Notes Executed
224.10  RUS Notes Executed--Installation--Debit
224.11  Other Long-Term Debt--Subscriptions
224.12  Other Long-Term Debt--Supplemental Financing
224.13  Supplemental Financing Notes Executed--Debit
224.14  Other Long-Term Debt--Miscellaneous
224.15  Notes Executed--Other--Debit
224.16  Long-Term Debt--RUS Economic Development Notes Executed
224.17  RUS Notes Executed--Economic Development--Debit
225  Unamortized Premium on Long-Term Debt
226  Unamortized Discount on Long-Term Debt--Debit

                      Other Noncurrent Liabilities

227  Obligations Under Capital Leases--Noncurrent
228.1  Accumulated Provision for Property Insurance
228.2  Accumulated Provision for Injuries and Damages
228.3  Accumulated Provision for Pensions and Benefits
228.4  Accumulated Miscellaneous Operating Provisions
229  Accumulated Provision for Rate Refunds

                     Current and Accrued Liabilities

231  Notes Payable
232  Accounts Payable
232.1  Accounts Payable--General
232.2  Accounts Payable--RUS Construction
232.3  Accounts Payable--Other
233  Notes Payable to Associated Companies
234  Accounts Payable to Associated Companies
235  Customer Deposits
236  Taxes Accrued
236.1  Accrued Property Taxes
236.2  Accrued U.S. Social Security Tax--Unemployment
236.3  Accrued U.S. Social Security Tax--F.I.C.A.
236.4  Accrued State Social Security Tax--Unemployment
236.5  Accrued State Sales Tax--Consumers
236.6  Accrued Gross Revenue or Gross Receipts Tax

[[Page 733]]

236.7  Accrued Taxes--Other
237  Interest Accrued
238  Patronage Capital and Patronage Refunds Payable
238.1  Patronage Capital Payable
238.2  Patronage Refunds Payable
239  Matured Long-Term Debt
240  Matured Interest
241  Tax Collections Payable
242  Miscellaneous Current and Accrued Liabilities
242.1  Accrued Rentals
242.2  Accrued Payroll
242.3  Accrued Employees' Vacations and Holidays
242.4  Accrued Insurance
242.5  Other Current and Accrued Liabilities
243  Obligations Under Capital Leases--Current

                            Deferred Credits

251  [Reserved]
252  Customer Advances for Construction
253  Other Deferred Credits
253.1  Other Deferred Credits--Consumers' Energy Prepayments
254  Other Regulatory Liabilities
255  Accumulated Deferred Investment Tax Credits
256  Deferred Gains from Disposition of Utility Plant
257  Unamortized Gain on Reacquired Debt
281  Accumulated Deferred Income Taxes--Accelerated Amortization 
          Property
282  Accumulated Deferred Income Taxes--Other Property
283  Accumulated Deferred Income Taxes--Other

                      Liabilities and Other Credits

                          Margins and Equities

                            200   Memberships

    A. This account shall include the total amount of memberships issued 
and subscribed.
    B. Account 200 shall be subaccounted as follows:

200.1  Memberships Issued
200.2  Memberships Subscribed But Unissued

                       200.1   Memberships Issued

    A. This account shall include the face value of membership 
certificates outstanding. A detailed record shall be maintained to show 
for each member, the name, address, date of payment, amount paid, and 
certificate number.
    B. If membership fees are applied against energy bills, this account 
shall be debited for the full amount of the membership with the 
offsetting credit to the appropriate accounts receivable, and to 
accounts payable for any refundable amounts. Any balances that cannot be 
refunded, due to inability to locate the member or because of bylaw 
restrictions, shall be credited to Account 208, Donated Capital. If 
determination of the ultimate disposition of the fees cannot be made 
immediately, the amount involved should be transferred to Account 253, 
Other Deferred Credits, until the determination is made.
    C. When a transfer fee is collected, the transaction shall be 
recorded by debiting Account 131.1, Cash--General, and crediting Account 
451, Miscellaneous Service Revenues, with the fee collected.

               200.2   Memberships Subscribed But Unissued

    This account shall include the face value of memberships subscribed 
for but not issued. When certificates are issued, the amount of the 
memberships shall be transferred to Account 200.1, Memberships Issued.

                         201   Patronage Capital

    A. This account shall include the total amount of patronage capital 
assignable and assigned.
    B. Account 201 shall be subaccounted as follows:

201.1  Patronage Capital Credits
201.2  Patronage Capital Assignable

                    201.1   Patronage Capital Credits

    A. This account shall include the amounts of patronage capital which 
have been assigned to individual patrons. A subsidiary record, 
``patronage capital ledger,'' shall be maintained, containing an account 
for each patron who has furnished capital under a capital credits plan.
    B. When the return of patrons' capital to individual patrons has 
been authorized by the board of directors (or trustees), the amounts 
authorized shall be transferred to Account 238.1, Patronage Capital 
Payable. (See also Account 217, Retired Capital Credits-Gain.)

                  201.2   Patronage Capital Assignable

    A. This account shall include all amounts transferred from Account 
219.1, Operating Margins; Account 219.2, Nonoperating Margins; Account 
219.3, Other Margins; and Account 219.4, Other Margins and Equities--
Prior Periods, which are assignable to individual patrons' capital 
accounts.
    B. Entries to this account shall be made so as to clearly disclose 
the nature and source of each transaction. Amounts so assigned shall be 
transferred to Account 201.1, Patronage Capital Credits.

[[Page 734]]

                             202  [Reserved]

                             203  [Reserved]

                             204  [Reserved]

                             205  [Reserved]

                             206  [Reserved]

                             207  [Reserved]

                          208   Donated Capital

    This account shall include credits arising from forfeiture of 
membership fees and from donations of capital not otherwise provided 
for. Entries to this account shall be made so as to clearly disclose the 
nature and source of each transaction.

                             209  [Reserved]

                             210  [Reserved]

             211   Consumers' Contributions for Debt Service

    This account shall include the amounts billed to consumers as 
``amortization charges'' for the purpose of servicing long-term debt.

                             212  [Reserved]

                             213  [Reserved]

                             214  [Reserved]

                        215  Appropriated Margins

    This account shall include all amounts appropriated as reserves from 
margins. The account shall be so maintained as to show the amount of 
each separate reserve and the nature and amounts of the debits and 
credits thereto.

     215.1  Unrealized Gains and Losses--Debt and Equity Securities

    This account shall include the unrealized holding gains and losses 
for available-for-sale securities.

                             216  [Reserved]

         216.1  Unappropriated Undistributed Subsidiary Earnings

    This account shall include the balances, either debit or credit, of 
undistributed retained earnings of subsidiary companies since their 
acquisition. When dividends are received from subsidiary companies 
relating to amounts included in this account, this account shall be 
debited and Account 219.2, Nonoperating Margins, credited.

                   217   Retired Capital Credits--Gain

    A. This account shall include credits resulting from the retirement 
of patronage capital through settlement of individual patrons' capital 
credits at less than 100 percent of the capital assigned to the patron. 
The portion of patronage capital not returned to the patrons, under such 
settlements, shall be debited to Account 201.1, Patronage Capital 
Credits, 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 maintained adequate to enable the cooperative to make payment to 
the patron if and when a claim has been established by the consumer.

                     218   Capital Gains and Losses

    No entries shall be made to this account without the prior approval 
of RUS unless it is to distribute past capital gains and losses as 
capital credits or to eliminate accumulated capital losses in 
conformance with the bylaws of the cooperative.

                    219   Other Margins and Equities

    A. This account shall include total amount of margins and equities 
from all sources.
    B. Account 219 shall be subaccounted as follows:

219.1   Operating Margins
219.2   Nonoperating Margins
219.3   Other Margins
219.4   Other Margins and Equities--Prior Periods

                        219.1   Operating Margins

    This account shall be debited or credited with the balances arising 
from transactions, the details of which have been recorded in Accounts 
400, 401, 402, 403, 404, 405, 406, 407, 408, 412, 413, 414, 423, 424, 
425, 426, 427, 428, and 431. Accounts 400, 401, and 402 are control 
accounts and, at the option of the borrower may or may not be used. If 
they are not used, the detailed revenue and expense accounts shall be 
closed directly to this account.

                      219.2   Nonoperating Margins

    This account shall be debited or credited with the balances arising 
from transactions, the details of which have been recorded in Accounts 
415, 416, 417, 417.1, 418, 419, 419.1, 421, 421.1, 421.2, 422, 434, and 
435.

                          219.3   Other Margins

    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.

            219.4   Other Margins and Equities--Prior Periods

    A. This account shall include significant nonrecurring transactions 
relating to prior

[[Page 735]]

periods. To be significant, the transaction must be of sufficient 
magnitude to justify redistribution of patronage capital credits already 
allocated for such prior periods.
    B. All entries to this account must receive RUS prior approval.
    C. These transactions are limited to items to (1) correct an error 
in the financial statements of a prior year, and (2) make adjustments 
that result from realization of income tax benefits of preacquisition 
operating loss carryforwards. This account shall also include the 
related income taxes (state and Federal) on items included herein.
    D. Amounts in this account shall be transferred at the end of the 
year to Account 219.1, Operating Margins, or Account 219.2, Nonoperating 
Margins, as appropriate. Also, at the end of the year, these amounts 
should be transferred from Account 219.1, or Account 219.2 to Account 
201.2, Patronage Capital Assignable, when appropriate.

                             Long-Term Debt

                               221   Bonds

    This account shall include, in a separate subdivision for each class 
and series of bonds, the face value of the actually issued and unmatured 
bonds which have not been retired or cancelled; also the face value of 
such bonds issued by others, the payment of which has been assumed by 
the utility.

                         222   Reacquired Bonds

    A. This account shall include the face value of bonds actually 
issued or assumed by the utility and reacquired by it and not retired or 
cancelled. The account for reacquired debt shall not include securities 
which are held by trustees in sinking or other funds.
    B. When bonds are reacquired, the difference between face value, 
adjusted for unamortized discount, expenses or premium, and the amount 
paid upon reacquisition, shall be included in Account 189, Unamortized 
Loss on Reacquired Debt, or Account 257, Unamortized Gain on Reacquired 
Debt, as appropriate. (See Sec. 1767.15 (q).)

                223   Advances from Associated Companies

    A. This account shall include the face value of notes payable to 
associated companies and the amount of open book accounts representing 
advances from associated companies. It does not include notes and open 
accounts representing indebtedness subject to current settlement which 
are includible in Account 233, Notes Payable to Associated Companies, or 
Account 234, Accounts Payable to Associated Companies.
    B. The records supporting the entries to this account shall be so 
kept that the utility can furnish complete information concerning each 
note and open account.

                       224   Other Long-Term Debt

    A. This account shall include, until maturity, all long-term debt 
not otherwise provided for. This covers such items as receivers' 
certificates, real estate mortgages executed or assumed, assessments for 
public improvements, notes and unsecured certificates of indebtedness 
not owned by associated companies, receipts outstanding for long-term 
debt, and other obligations maturing more than one year from the date of 
issue or assumption.
    B. Account 224 shall be subaccounted as follows:

224.1  Long-Term Debt--RUS Construction Loan Contract
224.2  RUS Loan Contract--Construction--Debit
224.3  Long-Term Debt--RUS Construction Notes Executed
224.4  RUS Notes Executed--Construction--Debit
224.5  Interest Accrued--Deferred--RUS Construction
224.6  Advance Payments Unapplied--RUS Long-Term Debt--Debit
224.7  Long-Term Debt--Installation Loan Contract
224.8  RUS Loan Contract--Installation--Debit
224.9  Long-Term Debt--Installation Notes Executed
224.10  RUS Notes Executed--Installation--Debit
224.11  Other Long-Term Debt--Subscriptions
224.12  Other Long-Term Debt--Supplemental Financing
224.13  Supplemental Lender Notes Executed--Debit
224.14  Other Long-Term Debt--Miscellaneous
224.15  Notes Executed--Other--Debit
224.16  Long-Term Debt--RUS Economic Development Notes Executed
224.17  RUS Notes Executed--Economic Development--Debit

         224.1   Long-Term Debt--RUS Construction Loan Contract

    A. This account shall include the contractual obligation to RUS on 
construction loans covered by loan contract but not by executed notes.
    B. This account is to be used at the option of the borrower.

             224.2   RUS Loan Contract--Construction--Debit

    A. This account shall include the total loans (for construction 
purposes) which are covered by loan contract but not by executed notes.

[[Page 736]]

    B. This account is to be used at the option of the borrower.

         224.3   Long-Term Debt--RUS Construction Notes Executed

    This account shall include the contractual liability to RUS on 
construction notes executed. Records shall be maintained to show 
separately for each class of obligation all details as to the date of 
obligation, date of maturity, interest date and rate, and securities for 
the obligation.

             224.4   RUS Notes Executed--Construction--Debit

    This account shall include the total amount of the unadvanced RUS 
loans for construction purposes, which are covered by executed notes. 
When advances are received from the RUS for construction, this account 
shall be credited and Account 131.2, Cash--Construction Fund--Trustee, 
debited with the amount of cash advanced.

          224.5   Interest Accrued--Deferred--RUS Construction

    This account shall include interest on RUS construction obligations 
deferred by the terms of mortgage notes or extension agreements.

      224.6   Advance Payments Unapplied--RUS Long-Term Debt--Debit

    A. This account shall include principal payments on mortgage notes 
paid in advance of the date due and not applied to a specific note. 
Also, include in this account interest savings which are accrued and 
added to the advance payment unapplied.
    B. At such time as these payments are applied to a specific note or 
loan balances, this account shall be credited and the long-term debt 
account debited with the amount so applied.

           224.7   Long-Term Debt--Installation Loan Contract

    A. This account shall include the contractual obligation to RUS on 
installation loans covered by loan contract but not covered by executed 
notes.
    B. This account is to be used at the option of the borrower.

             224.8   RUS Loan Contract--Installation--Debit

    A. This account shall include the total loans for installation 
purposes which are covered by loan contract but not by executed notes.
    B. This account is to be used at the option of the borrower.

           224.9   Long-Term Debt--Installation Notes Executed

    This account shall include the contractual liability to RUS on 
installation notes executed.

            224.10   RUS Notes Executed--Installation--Debit

    This account shall include the total amount of unadvanced loans for 
installation purposes, which are covered by executed note. When advances 
are received from RUS, this account shall be credited and Account 131.3, 
Cash--Installation Loan and Collection Fund, debited with the amount of 
cash advanced.

              224.11   Other Long-Term Debt--Subscriptions

    This account shall include the contractual obligation to purchase 
CFC Capital Term Certificates and any other similar obligation relating 
to supplemental financing.

          224.12   Other Long-Term Debt--Supplemental Financing

    This account shall include the contractual liability to CFC or other 
supplemental lenders for that portion of funds borrowed which mature in 
more than one year.

          224.13   Supplemental Financing Notes Executed--Debit

    This account shall include the total amount of the unadvanced loans 
for construction purposes, which are covered by executed notes to CFC or 
other supplemental lender. This account shall be debited with the face 
amount of notes executed. When advances are received from a supplemental 
lender for construction, this account shall be credited and Account 
131.2, Cash--Construction Fund--Trustee, debited with the amount of cash 
advanced.

              224.14   Other Long-Term Debt--Miscellaneous

    This account shall include the amount of other long-term debt not 
provided for elsewhere.

                  224.15   Notes Executed--Other--Debit

    This account shall include the total amount of the unadvanced loans 
for construction purposes, which are covered by executed notes to others 
not included in the foregoing accounts. When advances are received from 
such supplemental lender, this account shall be credited and Account 
131.2, Cash--Construction Fund--Trustee, debited with the amount of cash 
so advanced.

[[Page 737]]

    224.16   Long-Term Debt--RUS Economic Development Notes Executed

    This account shall include the contractual liability to RUS on rural 
economic development notes executed. Records shall be maintained to show 
separately for each class of obligation all details as to the date of 
obligation, date of maturity, interest date and rate, and securities for 
the obligation.

        224.17   RUS Notes Executed--Economic Development--Debit

    This account shall include the total amount of the unadvanced RUS 
loans for rural economic development purposes, which are covered by 
executed notes. When advances are received from the RUS for rural 
economic development projects, this account shall be credited and 
Account 131.12, Cash--General--Economic Development Funds, debited with 
the amount of cash advanced.

               225   Unamortized Premium on Long-Term Debt

    A. This account shall include the excess of the cash value of 
consideration received over the face value upon the issuance or 
assumption of long-term debt securities.
    B. Amounts recorded in this account shall be amortized over the life 
of each respective issue under a plan which will distribute the amount 
equitably over the life of the security. The amortization shall be on a 
monthly basis, with the amounts thereof to be credited to Account 429, 
Amortization of Premium on Debt--Credit. (See Sec. 1767.15 (q).)

           226   Unamortized Discount on Long-Term Debt--Debit

    A. This account shall include the excess of the face value of long-
term debt securities over the cash value of consideration received 
therefor, related to the issue or assumption of all types and classes of 
debt.
    B. Amounts recorded in this account shall be amortized over the life 
of the respective issues under a plan which will distribute the amount 
equitably over the life of the securities. The amortization shall be on 
a monthly basis, wit the amounts thereof charged to Account 428, 
Amortization of Debt Discount and Expense. (See Sec. 1767.15 (q).)

                      Other Noncurrent Liabilities

           227   Obligations Under Capital Leases--Noncurrent

    This account shall include the portion not due within one year, of 
the obligations recorded for the amounts applicable to leased property 
recorded as assets in Account 101.1, Property Under Capital Leases; 
Account 120.6, Nuclear Fuel Under Capital Leases; or Account 121, 
Nonutility Property.

                          Special Instructions

    No amounts shall be credited to Accounts 228.1 through 228.4 unless 
authorized by a regulatory authority or authorities to be collected in 
the utility's rates.

          228.1   Accumulated Provision for Property Insurance

    A. This account shall include amounts reserved by the utility for 
losses through accident, fire, flood, or other hazards to its own 
property or property leased from others, not covered by insurance. The 
amounts charged to Account 924, Property Insurance, or other appropriate 
accounts to cover such risks shall be credited to this account. A 
schedule of risks covered shall be maintained, giving a description of 
the property involved, the character of the risks covered and the rates 
used.
    B. Charges shall be made to this account for losses covered, not to 
exceed the account balance. Details of these charges shall be maintained 
according to the year the casualty occurred which gave rise to the loss.

         228.2   Accumulated Provision for Injuries and Damages

    A. This account shall be credited with amounts charged to Account 
925, Injuries and Damages, or other appropriate accounts, to meet the 
probable liability, not covered by insurance, for deaths or injuries to 
employees and others and for damages to property neither owned nor held 
under lease by the utility.
    B. When liability for any injury or damage is admitted by the 
utility either voluntarily or because of the decision of a court or 
other lawful authority, such as a workmen's compensation board, the 
admitted liability shall be charged to this account and credited to the 
appropriate current liability account. Details of these charges shall be 
maintained according to the year the casualty occurred which gave rise 
to the loss.
    Note: Recoveries or reimbursements for losses charged to this 
account shall be credited hereto; the cost of repairs to property of 
others, if provided for herein, shall be charged to this account.

         228.3   Accumulated Provision for Pensions and Benefits

    A. This account shall include provisions made by the utility and 
amounts contributed by employees for pensions, accident and death 
benefits, savings, relief, hospital, and other provident purposes, where 
the funds are included in the assets of the utility either in general or 
in segregated fund accounts.
    B. Amounts paid by the utility for the purpose for which this 
liability is established shall be charged hereto.

[[Page 738]]

    C. A separate account shall be kept for each kind of provision 
included herein.
    Note: If employee pension or benefit plan funds are not included 
among the assets of the utility but are held by outside trustees, 
payments into such funds, or accruals therefor, shall not be included in 
this account.

         228.4   Accumulated Miscellaneous Operating Provisions

    A. This account shall include all operating provisions which are not 
provided for elsewhere.
    B. This account shall be maintained in such a manner as to show the 
amount of each separate provision and the nature and amounts of the 
debits and credits thereto.
    Note: This account includes only provisions as may be created for 
operating purposes and does not include any reservations of income, the 
credits for which should be recorded in Account 215, Appropriated 
Margins.

              229   Accumulated Provision for Rate Refunds

    A. This account shall be credited with amounts charged to Account 
449.1, Provision for Rate Refunds, to provide for estimated refunds 
where the utility is collecting amounts in rates subject to refund.
    B. When a refund of any amount recorded in this account is ordered 
by a regulatory authority, such amount shall be charged hereto and 
credited to Account 242, Miscellaneous Current and Accrued Liabilities.
    C. Records supporting the entries to this account shall be kept so 
as to identify each amount recorded by the respective rate filing docket 
number.

                     Current and Accrued Liabilities

    Current and accrued liabilities are those obligations which have 
either matured or which become due within 1 year from the date thereof; 
except however, bonds, receivers' certificates, and similar obligations 
which shall be classified as long-term debt until date of maturity; 
accrued taxes, such as income taxes, which shall be classified as 
accrued liabilities even though payable more than one year from date; 
compensation awards, which shall be classified as current liabilities 
regardless of date due; and minor amounts payable in installments which 
may be classified as current liabilities. If a liability is due more 
than 1 year from the date of issuance or assumption by the utility, it 
shall be credited to a long-term debt account appropriate for the 
transaction; except however, the current liabilities previously 
mentioned.

                           231   Notes Payable

    This account shall include the face value of all notes, drafts, 
acceptances, or other similar evidences of indebtedness, payable on 
demand or within a time not exceeding 1 year from the date of issue, to 
other than associated companies.

                         232   Accounts Payable

    A. This account shall include all amounts payable by the utility 
within 1 year, which are not provided for in other accounts.
    B. Account 232 shall be subaccounted as follows:

232.1  Accounts Payable--General
232.2  Accounts Payable--RUS Construction
232.3  Accounts Payable--Other

               233   Notes Payable to Associated Companies

    This account shall include amounts owing to associated companies on 
notes, drafts, acceptances, or other similar evidences of indebtedness 
payable on demand or not more than 1 year from the date of issue or 
creation.
    Note: Notes which are includible in Account 223, Advances from 
Associated Companies, shall be excluded from this account.

             234   Accounts Payable to Associated Companies

    This account shall include amounts owing to associated companies on 
open accounts payable on demand.
    Note: Accounts which are includible in Account 223, Advances from 
Associated Companies, shall be excluded from this account.

                         235   Customer Deposits

    This account shall include all amounts deposited with the utility by 
its customers as security for the payment of bills.

                           236   Taxes Accrued

    A. This account shall be credited with the amount of taxes accrued 
during the accounting period, corresponding debits being made to the 
appropriate accounts for tax charges. Such credits may be based upon 
estimates, but from time to time during the year as the facts become 
known, the amount of the periodic credits shall be adjusted so as to 
include, as nearly as can be determined in each year, the taxes 
applicable thereto. Any amount representing a prepayment of taxes 
applicable to the period subsequent to the date of the balance sheet, 
shall be shown under Account 165, Prepayments.
    B. If accruals for taxes are found to be insufficient or excessive, 
correction therefor shall be made through current tax accruals.
    C. Accruals for taxes shall be based upon the net amounts payable 
after credit for any discounts, and shall not include any amounts for 
interest on tax deficiencies or refunds. Interest received on refunds 
shall be credited to Account 419, Interest and Dividend Income, and 
interest paid on deficiencies shall

[[Page 739]]

be charged to Account 431, Other Interest Expense.
    D. Account 236 shall be subaccounted as follows:

236.1  Accrued Property Taxes
236.2  Accrued U.S. Social Security Tax--Unemployment
236.3  Accrued U.S. Social Security Tax--F.I.C.A.
236.4  Accrued State Social Security Tax--Unemployment
236.5  Accrued State Sales Tax--Consumers
236.6  Accrued Gross Revenue or Gross Receipts Tax
236.7  Accrued Taxes--Other

                         237   Interest Accrued

    This account shall include the amount of interest accrued but not 
matured on all liabilities of the utility not including, however, 
interest which is added to the principal of the debt on which incurred. 
Supporting records shall be maintained so as to show the amount of 
interest accrued on each obligation.

          238   Patronage Capital and Patronage Refunds Payable

    A. This account shall include the total amount of patronage capital 
authorized to be returned and paid to patrons.
    B. Account 238 shall be subaccounted as follows:

238.1  Patronage Capital Payable
238.2  Patronage Refunds Payable

                    238.1   Patronage Capital Payable

    This account shall include the amount of patronage capital which has 
been authorized to be returned to the patron.

                    238.2   Patronage Refunds Payable

    This account shall include the amount of patronage refunds which 
have been authorized to be paid to patrons.

                      239   Matured Long-Term Debt

    This account shall include the amount of long-term debt (including 
any obligation for premiums) matured and unpaid, without specific 
agreement for extension of the time of payment and bonds called for 
redemption but not presented.

                         240   Matured Interest

    This account shall include the amount of matured interest on long-
term debt or other obligations of the utility at the date of the balance 
sheet unless such interest is added to the principal of the debt on 
which incurred.

                      241   Tax Collections Payable

    This account shall include the amount of taxes collected by the 
utility through payroll deductions or otherwise, pending transmittal of 
such taxes to the proper taxing authority.
    Note: Do not include liabilities for taxes assessed directly against 
the utility which are accounted for as **part** of the utility's own tax 
expense.

           242   Miscellaneous Current and Accrued Liabilities

    A. This account shall include the amount of all other current and 
accrued liabilities not provided for elsewhere appropriately designated 
and supported so as to show the nature of each liability.
    B. Account 242 shall be subaccounted as follows:

242.1  Accrued Rentals
242.2  Accrued Payroll
242.3  Accrued Employees' Vacations and Holidays
242.4  Accrued Insurance
242.5  Other Current and Accrued Liabilities

                         242.1   Accrued Rentals

    This account shall include unpaid joint use pole rentals and other 
rentals. The records supporting the entries to this account shall be 
maintained so as to show for each class of rental, the amount accrued, 
the basis for the accrual, the accounts to which charged, and the amount 
of rentals paid.

                         242.2   Accrued Payroll

    This account shall include the accrued liability for salaries and 
wages at the end of an accounting period for which the appropriate 
expense or other accounts have been charged. This account is to be used 
whether salaries and wages are paid on a weekly, semimonthly, or monthly 
basis.

            242.3   Accrued Employees' Vacations and Holidays

    This account shall include the liability for accrued wages for 
employees' vacation, holidays, and sick leave.

                        242.4   Accrued Insurance

    A. This account shall most commonly be used in case of workmen's 
compensation and public liability insurance for recording the excess 
amounts of earned premium over the advance premiums. Earned premiums are 
computed each month by applying the insurance rates to the actual 
payrolls.
    B. Until the amount of the advance premiums is exhausted, the earned 
premium is credited to Account 165, Prepayments. Earned premiums in 
excess of the advance premiums are credited to this account.

              242.5   Other Current and Accrued Liabilities

    This account shall include current and accrued liabilities not 
provided for elsewhere.

[[Page 740]]

             243   Obligations Under Capital Leases--Current

    This account shall include the portion, due within 1 year, of the 
obligations recorded for the amounts applicable to leased property 
recorded as assets in Account 101.1, Property Under Capital Leases; 
Account 120.6, Nuclear Fuel Under Capital Leases; or Account 121, 
Nonutility Property.

                            Deferred Credits

                             251  [Reserved]

                252   Customer Advances for Construction

    This account shall include consumer advances for construction which 
are to be refunded either wholly or in **part**. When a customer is refunded 
the entire amount to which he is entitled, according to the agreement or 
rule under which the advance was made, the balance, if any, remaining in 
this account shall be credited to the respective plant accounts.

                      253   Other Deferred Credits

    This account shall include advance billings and receipts and other 
deferred credit items, not provided for elsewhere, including amounts 
which cannot be entirely cleared or disposed of until additional 
information has been received.

      253.1   Other Deferred Credits--Consumers' Energy Prepayments

    This account shall include the amount of advance payments made by 
consumers in connection with electric service.

                   254   Other Regulatory Liabilities

    A. This account shall include the amounts of regulatory liabilities, 
not includible in other accounts, imposed on the utility by the 
ratemaking actions of regulatory agencies.
    B. The amounts included in this account are to be established by 
those credits which would have been included in net income 
determinations in the current period under the general requirements of 
the Uniform System of Accounts but for it being probable that: (1) such 
items will be included in a different period(s) for purposes of 
developing the rates that the utility is authorized to charge for its 
utility services; or (2) refunds to customers, not provided for in other 
accounts, will be required. When specific identification of the 
particular source of the regulatory liability cannot be made or when the 
liability arises from revenues collected pursuant to tariffs on file at 
a regulatory agency, Account 407.3, Regulatory Debits, shall be debited. 
The amounts recorded in this account generally are to be credited to the 
same account that would have been credited if included in income when 
earned except: (1) all regulatory liabilities established through the 
use of Account 407.3 shall be credited to Account 407.4, Regulatory 
Credits; and (2) in the case of refunds, a cash account or other 
appropriate account should be credited when the obligation is satisfied.
    C. If it is later determined that the amounts recorded in this 
account will not be returned to customers through rates or refunds, such 
amounts shall be credited to Account 421, Miscellaneous Nonoperating 
Income, or Account 434, Extraordinary Income, as appropriate, in the 
year such determination is made.
    D. The records supporting the entries to this account shall be kept 
in such a manner that the utility can furnish full information as to the 
nature and amount of each regulatory liability included in this account, 
including justification for inclusion of such amounts in this account.

            255   Accumulated Deferred Investment Tax Credits

    A. This account shall be credited with all investment tax credits 
deferred by companies which have elected to follow deferral accounting, 
partial or full, rather than recognizing, in the income statement, the 
total benefits of the tax credit as realized. After such election, a 
company may not transfer amounts from this account, except as authorized 
herein and in Account 411.4, Investment Tax Credit Adjustments, Utility 
Operations; Account 411.5, Investment Tax Credit Adjustments, Nonutility 
Operations; and Account 420, Investment Tax Credits, or with approval of 
RUS.
    B. Where the company's accounting provides that investment tax 
credits are to be passed on to customers, this account shall be debited 
and Account 411.4 credited with a proportionate amount determined in 
relation to the average useful life of electric utility property to 
which the tax credits relate or such lesser period of time as allowed by 
a regulatory agency having rate jurisdiction. If, however, the deferral 
procedure provides that investment tax credits are not to be passed on 
to customers, the proportionate restorations to income shall be credited 
to Account 420.
    C. Subdivisions of this account, by department, shall be maintained 
for deferred investment tax credits that are related to nonelectric 
utility or other operations. Contra entries affecting such account 
subdivisions shall be appropriately recorded in Account 413, Expenses of 
Electric Plant Leased to Others; or Account 414, Other Utility Operating 
Income. Use of deferral or nondeferral accounting procedures adopted for 
nonelectric utility or other operations are to be followed on a 
consistent basis.
    D. Separate records for electric and nonelectric utility or other 
operations shall be maintained identifying the properties giving

[[Page 741]]

rise to the investment tax credits for each year with the weighted-
average service life of such properties and any unused balances of such 
credits. Such records are not necessary unless the tax credits are 
deferred.

         256   Deferred Gains from Disposition of Utility Plant

    This account shall include gains from the sale or other disposition 
of property previously recorded in Account 105, Electric Plant Held for 
Future Use, under the provisions of Paragraphs B, C, and D thereof, 
where such gains are significant and are to be amortized over a period 
of 5 years, unless otherwise authorized by RUS. The amortization of the 
amounts in this account shall be made by credits to Account 411.6, Gains 
from Disposition of Utility Plant. (See Account 105, Electric Plant Held 
for Future Use.)

                257   Unamortized Gain on Reacquired Debt

    This account shall include the amounts of discount realized upon 
reacquisition or redemption of long-term debt. The amounts in this 
account shall be amortized in accordance with Sec. 1767.15 (q).

                          Special Instructions

                    Accumulated Deferred Income Taxes

    Before using the deferred tax accounts provided below, refer to 
Sec. 1767.15 (r), Comprehensive Interperiod Income Tax Allocation. The 
text of these accounts are designed primarily to cover deferrals of 
Federal income taxes. However, they are also to be used when making 
deferrals of state and local income taxes. Utilities and licensees 
which, in addition to an electric utility department, have another 
utility department, gas or water and nonutility property, and which have 
deferred taxes on income with respect thereto shall separately classify 
such deferrals in the accounts provided below so as to allow ready 
identification of items relating to each utility deductions.

   281   Accumulated Deferred Income Taxes--Accelerated Amortization 
                                Property

    A. This account shall include tax deferrals resulting from adoption 
of the principles of comprehensive interperiod tax allocation described 
in Sec. 1767.15 (s) that relate to property for which the utility has 
availed itself of the use of accelerated (5-year) amortization of (1) 
certified defense facilities as permitted by Section 168 of the Internal 
Revenue Code, and (2) certified pollution control facilities as 
permitted by Section 169 of the Internal Revenue Code.
    B. This account shall be credited and Account 410.1, Provision for 
Deferred Income Taxes, Utility Operating Income, or Account 410.2, 
Provision for Deferred Income Taxes, Other Income and Deductions, as 
appropriate, shall be debited with tax effects related to property 
described in Paragraph A above where taxable income is lower than pretax 
accounting income due to differences between the periods in which 
revenue and expense transactions affect taxable income and the periods 
in which they enter into the determination of pretax accounting income.
    C. This account shall be debited and Account 411.1, Provision for 
Deferred Income Taxes--Credit, Utility Operating Income, or Account 
411.2, Provision for Deferred Income Taxes-Credit, Other Income and 
Deductions, as appropriate, shall be credited with taxes related to 
property described in Paragraph A above where taxable income is higher 
than pretax accounting income due to differences between the periods in 
which revenue and expense transactions affect taxable income and the 
periods in which they enter into the determination of pretax accounting 
income.
    D. The utility is restricted in its use of this account to the 
purposes set forth above. It shall not transfer the balance in this 
account or any portion thereof to retained earnings or make any use 
thereof except as provided in the text of this account without prior 
approval of RUS. Upon the disposition by sale, exchange, transfer, 
abandonment, or premature retirement of plant on which there is a 
related balance therein, this account shall be charged with an amount 
equal to the related income tax expense, if any, arising from such 
disposition and Account 411.1, Provision for Deferred Income Taxes--
Credit, Utility Operating Income, or Account 411.2, Provision for 
Deferred Income Taxes--Credit, Other Income and Deductions, as 
appropriate, shall be credited. When the remaining balance, after 
consideration of any related income tax expense, is less than $25,000, 
this account shall be charged and Account 411.1 or Account 411.2, as 
appropriate, credited with such balance. If after consideration of any 
related income tax expense, there is a remaining amount of $25,000 or 
more, RUS shall authorize or direct how such amount shall be accounted 
for at the time approval for the disposition of accounting is granted. 
When plant is disposed of by transfer to a wholly owned subsidiary, the 
related balance in this account shall also be transferred. When the 
disposition relates to retirement of an item or items under a group 
method of depreciation where there is no tax effect in the year of 
retirement, no entries are required in this account if it can be 
determined that the related balances would be necessary to be retained 
to offset future group item tax deficiencies.

         282   Accumulated Deferred Income Taxes--Other Property

    A. This account shall include the tax deferrals resulting from 
adoption of the principle

[[Page 742]]

of comprehensive interperiod income tax allocation described in 
Sec. 1767.15 (r) which are related to all property other than 
accelerated amortization property.
    B. This account shall be credited and Account 410.1, Provision for 
Deferred Income Taxes, Utility Operating Income, or Account 410.2, 
Provision for Deferred Income Taxes, Other Income and Deductions, as 
appropriate, shall be debited with tax effects related to property 
described in Paragraph A above where taxable income is lower than pretax 
accounting income due to differences between the periods in which 
revenue and expense transactions affect taxable income and the periods 
in which they enter into the determination of pretax accounting income.
    C. This account shall be debited and Account 411.1, Provision for 
Deferred Income Taxes--Credit, Utility Operating Income, or Account 
411.2, Provision for Deferred Income Taxes--Credit, Other Income and 
Deductions, as appropriate, shall be credited with tax effects related 
to property described in Paragraph A above where taxable income is 
higher than pretax accounting income due to differences between the 
periods in which revenue and expense transactions affect taxable income 
and the periods in which they enter into the determination of pretax 
accounting income.
    D. The utility is restricted in its use of this account to the 
purposes set forth above. It shall not transfer the balance in this 
account or any portion thereof to retained earnings or make any use 
thereof except as provided in the text of this account without prior 
approval of RUS. Upon the disposition by sale, exchange, transfer, 
abandonment, or premature retirement of plant on which there is a 
related balance herein, this account shall be charged with an amount 
equal to the related income tax expense, if any, arising from such 
disposition and Account 411.1, Provision for Deferred Income Taxes--
Credit, Utility Operating Income, or Account 411.2, Provision for 
Deferred Income Taxes--Credit, Other Income and Deductions, shall be 
credited. When the remaining balance after consideration of any related 
tax expenses, is less than $25,000, this account shall be charged and 
Account 411.1 or Account 411.2, as appropriate, credited with such 
balance. If after consideration any related income tax expense, there a 
remaining amount of $25,00 or more, RUS shall authorize or direct how 
such amount shall be accounted for at the time approval for the 
disposition of accounting is granted. When plant is disposed of by 
transfer to a wholly owned subsidiary, the related balance in this 
account shall also be transferred. When the disposition relates to 
retirement of an item or items under a group method of depreciation 
where there is no tax effect in the year of retirement, no entries are 
required in this account if it can be determined that the related 
balance would be necessary to be retained to offset future group item 
tax deficiencies.

             283   Accumulated Deferred Income Taxes--Other

    A. This account shall include all credit tax deferrals resulting 
from the adoption of the principles of comprehensive interperiod income 
tax allocation described in Sec. 1767.15 (r) other than those deferrals 
which are includible in Account 281, Accumulated Deferred Income Taxes--
Accelerated Amortization Property, and Account 282, Accumulated Deferred 
Income Taxes--Other Property.
    B. This account shall be credited and Account 410.1, Provision for 
Deferred Income Taxes, Utility Operating Income, or Account 410.2, 
Provision for Deferred Income Taxes, Other Income and Deductions, as 
appropriate, shall be debited with tax effects related to items 
described in Paragraph A above where taxable income is lower than pretax 
accounting income due to differences between the periods in which 
revenue and expense transactions affect taxable income and the periods 
in which they enter into the determination of pretax accounting income.
    C. This account shall be debited and Account 411.1, Provision for 
Deferred Income Taxes--Credit, Utility Operating Income or Account 
411.2, Provision for Deferred Income Taxes--Credit, Other Income and 
Deductions, as appropriate, shall be credited with tax effects related 
to items described in Paragraph A above where taxable income is higher 
than pretax accounting income due to differences between the periods in 
which revenue and expense transactions affect taxable income and the 
periods in which they enter into the determination of pretax accounting 
income.
    D. Records with respect to entries to this account, as described 
above, and the account balance, shall be so maintained as to show the 
factors of calculation with respect to each annual amount of the item or 
class of items.
    E. The utility is restricted in its use of this account to the 
purposes set forth above. It shall not transfer the balance in the 
account or any portion thereof to retained earnings or to any other 
account or make any use thereof except as provided in the text of this 
account, without prior approval of RUS. Upon the disposition by sale, 
exchange, transfer, abandonment, or premature retirement of items on 
which there is a related balance herein, this account shall be charged 
with an amount equal to the related income tax effect, if any, arising 
from such disposition and Account 411.1, Provision For Deferred Income 
Taxes--Credit, Utility Operating Income, or Account 411.2, Provision For 
Deferred Income Taxes-Credit, Other Income and Deductions, as 
appropriate, shall be credited. When the remaining balance,

[[Page 743]]

after consideration of any related tax expenses, is less than $25,000, 
this account shall be charged and Account 411.1 or Account 411.2, as 
appropriate, credited with such balance. If after consideration of any 
related income tax expense, there is a remaining amount of $25,000 or 
more, RUS shall authorize or direct how such amount shall be accounted 
for at the time approval for the disposition of accounting is granted.
    When plant is disposed of by transfer to a wholly owned subsidiary, 
the related balance in this account shall also be transferred. When the 
disposition relates to retirement of an item or items under a group 
method of depreciation where there is no tax effect in the year of 
retirement, no entries are required in this account if it can be 
determined that the related balance would be necessary to be retained to 
offset future group item tax deficiencies.

[58 FR 59825, Nov. 10, 1993, as amended at 59 FR 27436, May 27, 1994; 60 
FR 55430, Nov. 1, 1995]

Sec. 1767.20  Plant accounts.

    The plant accounts identified in this section shall be used by all 
RUS borrowers.

                            Intangible Plant

301  Organization
302  Franchises and Consents
303  Miscellaneous Intangible Plant

                            Production Plant

                            Steam Production

310  Land and Land Rights
311  Structures and Improvements
312  Boiler Plant Equipment
313  Engines and Engine Driven Generators
314  Turbogenerator Units
315  Accessory Electric Equipment
316  Miscellaneous Power Plant Equipment

                           Nuclear Production

320  Land and Land Rights
321  Structures and Improvements
322  Reactor Plant Equipment
323  Turbogenerator Units
324  Accessory Electric Equipment
325  Miscellaneous Power Plant Equipment

                          Hydraulic Production

330  Land and Land Rights
331  Structures and Improvements
332  Reservoirs, Dams and Waterways
333  Water Wheels, Turbines and Generators
334  Accessory Electric Equipment
335  Miscellaneous Power Plant Equipment
336  Roads, Railroads and Bridges

                            Other Production

340  Land and Land Rights
341  Structures and Improvements
342  Fuel Holders, Producers and Accessories
343  Prime Movers
344  Generators
345  Accessory Electric Equipment
346  Miscellaneous Power Plant Equipment

                           Transmission Plant

350  Land and Land Rights
351  [Reserved]
352  Structures and Improvements
353  Station Equipment
354  Tower and Fixtures
355  Poles and Fixtures
356  Overhead Conductors and Devices
357  Underground Conduit
358  Underground Conductors and Devices
359  Roads and Trails

                           Distribution Plant

360  Land and Land Rights
361  Structures and Improvements
362  Station Equipment
363  Storage Battery Equipment
364  Poles, Towers and Fixtures
365  Overhead Conductors and Devices
366  Underground Conduit
367  Underground Conductors and Devices
368  Line Transformers
369  Services
370  Meters
371  Installations on Customers' Premises
372  Leased Property on Customers' Premises
373  Street Lighting and Signal Systems

                              General Plant

389  Land and Land Rights
390  Structures and Improvements
391  Office Furniture and Equipment
392  Transportation Equipment
393  Stores Equipment
394  Tools, Shop and Garage Equipment
395  Laboratory Equipment
396  Power Operated Equipment
397  Communication Equipment
398  Miscellaneous Equipment
399  Other Tangible Property

                            Intangible Plant

                           301   Organization

    This account shall include all fees paid to Federal or state 
governments for the privilege of incorporation and expenditures incident 
to organizing the corporation, partnership, or other enterprise and 
putting it into readiness to do business.

                                  Items

    1. Cost of obtaining certificates authorizing an enterprise to 
engage in the public-utility business.
    2. Fees and expenses for incorporation.
    3. Fees and expenses for mergers or consolidations.

[[Page 744]]

    4. Office expenses incident to organizing the utility.
    5. Stock and minute books and corporate seal.
    Note A: This account shall not include any discounts upon securities 
issued or assumed; nor shall it include any costs incident to 
negotiating loans, selling bonds or other evidences of debt or expenses 
in connection with the authorization, issuance, or sale of capital 
stock.
    Note B: Exclude from this account and include in the appropriate 
expense account the cost of preparing and filing papers in connection 
with the extension of the term of incorporation unless the first 
organization costs have been written off. When charges are made to this 
account for expenses incurred in mergers, consolidations, or 
reorganizations, amounts previously included herein or in similar 
accounts in the books of the companies concerned shall be excluded from 
this account.

                      302   Franchises and Consents

    A. This account shall include amounts paid to the Federal 
Government, to a state or to a political subdivision thereof in 
consideration for franchises, consents, water power licenses, or 
certificates, running in perpetuity or for a specified term of more than 
one year, together with necessary and reasonable expenses incident to 
procuring such franchises, consents, water power licenses, or 
certificates of permission and approval, including expenses of 
organizing and merging separate corporations, where statutes require, 
solely for the purpose of acquiring franchises.
    B. If a franchise, consent, water power license, or certificate is 
acquired by assignment, the charge to this account in respect thereof 
shall not exceed the amount paid therefor by the utility to the 
assignor, nor shall it exceed the amount paid by the original grantee, 
plus the expense of acquisition to such grantee. Any excess of the 
amount actually paid by the utility over the amount above specified 
shall be charged to Account 426.5, Other Deductions.
    C. When any franchise has expired, the book cost thereof shall be 
credited hereto and charged to Account 426.5, Other Deductions, or to 
Account 111, Accumulated Provision for Amortization of Electric Utility 
Plant, as appropriate.
    D. Records supporting this account shall be kept so as to show 
separately the book cost of each franchise or consent.
    Note:  Annual or other periodic payments under franchises shall not 
be included herein but in the appropriate operating expense account.

                  303   Miscellaneous Intangible Plant

    A. This account shall include the cost of patent rights, licenses, 
privileges, and other intangible property necessary or valuable in the 
conduct of utility operations and not specifically chargeable to any 
other account.
    B. When any item included in this account is retired or expires, the 
book cost thereof shall be credited hereto and charged to Account 426.5, 
Other Deductions, or Account 111, Accumulated Provision for Amortization 
of Electric Utility Plant, as appropriate.
    C. This account shall be maintained in such a manner that the 
utility can furnish full information with respect to the amounts 
included herein.

                            Production Plant

                            Steam Production

                       310   Land and Land Rights

    This account shall include the cost of land and land rights used in 
connection with steam-power generation. (See Sec. 1767.16 (g).)

                    311   Structures and Improvements

    This account shall include the cost, in place, of structures and 
improvements used in connection with steam-power generation. (See 
Sec. 1767.16 (h).)
    Note: Include steam production roads and railroads in this account.

                      312   Boiler Plant Equipment

    This account shall include the cost installed of furnaces, boilers, 
coal and ash handling and coal preparing equipment, steam and feed water 
piping, boiler apparatus, and accessories used in the production of 
steam, mercury, or other vapor, to be used primarily for generating 
electricity.

                                  Items

    1. Ash handling equipment, including hoppers, gates, cars, 
conveyors, hoists, sluicing equipment, including pumps and motors, 
sluicing water pipe and fittings, sluicing trenches and accessories, 
except sluices which are a **part** of a building.
    2. Boiler feed system, including feed water heaters, evaporator 
condensers, heater drain pumps, heater drainers, deaerators, and vent 
condensers, boiler feed pumps, surge tanks, feed water regulators, feed 
water measuring equipment, and all associated drives.
    3. Boiler plant cranes and hoists and associated drives.
    4. Boilers and equipment, including boilers and baffles, 
economizers, superheaters, soot blowers, foundations and settings, water 
walls, arches, grates, insulation, blowdown system, drying out of new 
boilers, also associated motors or other power equipment.
    5. Breeching and accessories, including breeching, dampers, soot 
spouts, hoppers and

[[Page 745]]

gates, cinder eliminators, breeching insulation, soot blowers and 
associated motors.
    6. Coal handling and storage equipment, including coal towers, coal 
lorries, coal cars, locomotives and tracks when devoted principally to 
the transportation of coal, hoppers, downtakes, unloading and hoisting 
equipment, skip hoists and conveyors, weighing equipment, magnetic 
separators, cable ways, and housings and supports for coal handling 
equipment.
    7. Draft equipment, including air preheaters and accessories, 
induced and forced draft fans, air ducts, combustion control mechanisms, 
and associated motors or other power equipment.
    8. Gas-burning equipment, including holders, burner equipment and 
piping, and control equipment.
    9. Instruments and devices, including all measuring, indicating, and 
recording equipment for boiler plant service together with mountings and 
supports.
    10. Lighting systems.
    11. Oil-burning equipment, including tanks, heaters, pumps with 
drive, burner equipment and piping, and control equipment.
    12. Pulverized fuel equipment, including pulverizers, accessory 
motors, primary air fans, cyclones and ducts, dryers, pulverized fuel 
bins, pulverized fuel conveyors and equipment, burners, burner piping, 
priming equipment, air compressors, and motors.
    13. Stacks, including foundations and supports, stack steel and 
ladders, stack brickwork, stack concrete, stack lining, stack painting 
(first), when set on separate foundations, independent of substructures 
or superstructures of building.
    14. Station piping, including pipe, valves, fittings, separators, 
traps, desuperheaters, hangers, excavation, and covering for station 
piping system, including all steam, condensate, boiler feed and water 
supply piping, but not condensing water, plumbing, building heating, 
oil, gas, air piping or piping specifically provided for in Account 313.
    15. Stoker or equivalent feeding equipment, including stokers and 
accessory motors, clinker grinders, fans and motors.
    16. Ventilating equipment.
    17. Water purification equipment, including softeners and 
accessories, evaporators and accessories, heat exchanges, filters, tanks 
for filtered or softened water, pumps, and motors.
    18. Water-supply systems, including pumps, motors, strainers, raw-
water storage tanks, boiler wash pumps, intake and discharge pipes, and 
tunnels not a **part** of a building.
    19. Wood fuel equipment, including hoppers, fuel hogs and 
accessories, elevators and conveyors, bins and gates, spouts, measuring 
equipment and associated drives.
    Note: When the system for supplying boiler or condenser water is 
elaborate, and when it includes a dam, reservoir, canal, pipe line, 
cooling ponds, or where gas or oil is used as a fuel for producing steam 
and is supplied through a pipe line system owned by the utility, the 
cost of such special facilities shall be charged to a subdivision of 
Account 311, Structures and Improvements.

               313   Engines and Engine Driven Generators

    This account shall include the cost installed of steam engines, 
reciprocating or rotary, and their associated auxiliaries; and engine-
driven main generators, except turbogenerator units.

                                  Items

    1. Air cleaning and cooling apparatus, including blowers, drive 
equipment, air ducts, not a **part** of building, louvers, pumps, and hoods.
    2. Belting, shafting, pulleys, and reduction gearing.
    3. Circulating pumps, including connections between condensers and 
intake and discharge tunnels.
    4. Cooling system, including towers, pumps, tank, and piping.
    5. Condensers, including condensate pumps, air and vacuum pumps, 
ejector unloading valves and vacuum breakers, expansion devices, and 
screens.
    6. Cranes and hoists, including items wholly identified with items 
listed herein.
    7. Engines, reciprocating or rotary.
    8. Fire-extinguishing systems.
    9. Foundations and settings, especially constructed for and not 
expected to outlast the apparatus for which provided.
    10. Generators-Main, a.c. or d.c., including field rheostats and 
connections for self-excited units, and excitation systems when 
identified with the generating unit.
    11. Governors.
    12. Lighting systems.
    13. Lubricating systems, including gauges, filters, tanks, pumps, 
piping, and motors.
    14. Mechanical meters, including gauges, recording instruments, 
sampling and testing equipment.
    15. Piping-main exhaust, including connections between generator and 
condenser and between condenser and hotwell.
    16. Piping-main stream, including connections from main throttle 
valve to turbine inlet.
    17. Platforms, railings, steps, and gratings appurtenant to 
apparatus listed herein.
    18. Pressure oil system, including accumulators, pumps, piping, and 
motors.
    19. Throttle and inlet valve.
    20. Tunnels, intake and discharge, for condenser system, when not a 
**part** of a structure.
    21. Water screens and motors.

[[Page 746]]

                       314   Turbogenerator Units

    This account shall include the cost installed of main turbine-driven 
units and accessory equipment used in generating electricity by steam.

                                  Items

    1. Air leaning and cooling apparatus, including blowers, drive 
equipment, air ducts not a **part** of building, louvers, pumps, and hoods.
    2. Circulating pumps, including connections between condensers and 
intake and discharge tunnels.
    3. Condensers, including condensate pumps, air and vacuum pumps, 
ejectors, unloading valves and vacuum breakers, expansion devices, and 
screens.
    4. Generator hydrogen, gas piping, and detrainment equipment.
    5. Cooling system, including towers, pumps, tanks, and piping.
    6. Cranes and hoists, including items wholly identified with items 
listed herein.
    7. Excitation system, when identified with main generating units.
    8. Fire-extinguishing systems.
    9. Foundations and settings, especially constructed for and not 
expected to outlast the apparatus for which provided.
    10. Governors.
    11. Lighting systems.
    12. Lubricating systems, including gauges, filters, water 
separators, tanks, pumps, piping, and motors.
    13. Mechanical meters, including gauges, recording instruments, 
sampling and testing equipment.
    14. Piping-main exhaust, including connections between 
turbogenerator and condenser and between condenser and hotwell.
    15. Piping-main steam, including connections from main throttle 
valve to turbine inlet.
    16. Platforms, railings, steps, and gratings appurtenant to 
apparatus listed herein.
    17. Pressure oil systems, including accumulators, pumps, and piping 
motors.
    18. Steelwork, specially constructed for apparatus listed herein.
    19. Throttle and inlet valve.
    20. Tunnels, intake and discharge, for condenser system, when not a 
**part** of structure, and water screens.
    21. Turbogenerators-main, including turbine and generator, field 
rheostats and electric connections for self-excited units.
    22. Water screens and motors.
    23. Moisture separator for turbine steam.
    24. Turbine lubricating oil (initial charge).

                   315   Accessory Electric Equipment

    This account shall include the cost installed of auxiliary 
generating apparatus, conversion equipment, and equipment used primarily 
in connection with the control and switching of electric energy produced 
by steam power, and the protection of electric circuits and equipment, 
except electric motors used to drive equipment included in other 
accounts. Such motors shall be included in the account in which the 
equipment with which they are associated is included.

                                  Items

    1. Auxiliary generators, including boards, compartments, switching 
equipment, control equipment, and connections to auxiliary power bus.
    2. Excitation system, including motor, turbine and dual-drive 
exciter sets and rheostats, storage batteries and charging equipment, 
circuit breakers, panels and accessories, knife switches and 
accessories, surge arresters, instrument shunts, conductors and conduit, 
special supports for conduit, generator field and exciter switch panels, 
exciter bus tie panels, generator and exciter rheostats and special 
housing and protective screens.
    3. Generator main connections, including oil circuit breakers and 
accessories, disconnecting switches and accessories, operating 
mechanisms and interlocks, current transformers, potential transformers, 
protective relays, isolated panels and equipment, conductors and 
conduit, special supports for generator main leads, grounding switch, 
and special housings and protective screens.
    4. Station buses including main, auxiliary, transfer, synchronizing 
and fault ground buses, including oil circuit breakers and accessories, 
disconnecting switches and accessories, operating mechanisms and 
interlocks, reactors and accessories, voltage regulators and 
accessories, compensators, resistors, starting transformers, current 
transformers, potential transformers, protective relays, storage 
batteries and charging equipment, isolated panels and equipment, 
conductors and conduit, special supports, special housings, concrete 
pads, general station grounding system, special fire-extinguishing 
system, and test equipment.
    5. Station control system, including station switchboards with panel 
wiring, panels with instruments and control equipment only, panels with 
switching equipment mounted or mechanically connected, truck-type boards 
complete, cubicles, station supervisory control boards, generator and 
exciter signal stands, temperature recording devices, frequency-control 
equipment, master clocks, watt-hour meters and synchronoscope in the 
turbine room, station totalizing wattmeter, boiler-room load indicator 
equipment, storage batteries, panels and charging sets, instrument 
transformers for supervisory metering, conductors and conduit, special 
supports for conduit, switchboards, batteries, special housing for 
batteries, protective screens, and doors.

[[Page 747]]

    Note A: Do not include in this account transformers and other 
equipment used for changing the voltage or frequency of electricity for 
the purposes of transmission or distribution.
    Note B: When any item of equipment listed herein is used wholly to 
furnish power to equipment included in another account, its cost shall 
be included in such other account.

                316   Miscellaneous Power Plant Equipment

    This account shall include the cost installed of miscellaneous 
equipment in and about the steam generating plant devoted to general 
station use, and which is not properly includible in any of the 
foregoing steam-power production accounts.

                                  Items

    1. Compressed air and vacuum cleaning systems, including tanks, 
compressors, exhausters, air filters, and piping.
    2. Cranes and hoisting equipment, including cranes, cars, crane 
rails, monorails, and hoists with electric and mechanical connections.
    3. Fire-extinguishing equipment for general station use.
    4. Foundations and settings specially constructed for and not 
expected to outlast the apparatus for which provided.
    5. Locomotive cranes not includible elsewhere.
    6. Locomotives not includible elsewhere.
    7. Marine equipment, including boats and barges.
    8. Miscellaneous belts, pulleys, and countershafts.
    9. Miscellaneous equipment, including atmospheric and weather 
indicating devices, intrasite communication equipment, laboratory 
equipment, signal systems, callophones, emergency whistles and sirens, 
fire alarms, insect-control equipment, and other similar equipment.
    10. Railway cars not includible elsewhere.
    11. Refrigerating systems, including compressors, pumps, and cooling 
coils.
    12. Station maintenance equipment, including lathes, shapers, 
planers, drill presses, hydraulic presses, and grinders with motors, 
shafting, hangers, and pulleys.
    13. Ventilating equipment, including items wholly identified with 
apparatus listed herein.
    Note: When any item of equipment listed herein is wholly used in 
connection with equipment included in another account, its cost shall be 
included in such other account.

                           Nuclear Production

                       320   Land and Land Rights

    This account shall include the cost of land and land rights used in 
connection with nuclear power generation. (See Sec. 1767.16(g).)

                    321   Structures and Improvements

    This account shall include the cost, in place, of structures and 
improvements used and useful in connection with nuclear power 
generation. (See Sec. 1767.16 (h).)
    Note: Include vapor containers and nuclear production roads and 
railroads in this account.

                      322   Reactor Plant Equipment

    This account shall include the installed cost of reactors, reactor 
fuel handling and storage equipment, pressurizing equipment, coolant 
charging equipment, purification and discharging equipment, radioactive 
waste treatment and disposal equipment, boilers, steam and feed water 
piping, reactor and boiler apparatus and accessories and other reactor 
plant equipment used in the production of steam to be used primarily for 
generating electricity, including auxiliary superheat boilers and 
associated equipment in systems which change temperatures or pressure of 
steam from the reactor system.

                                  Items

    1. Auxiliary superheat boilers and associated fuel storage handling 
preparation and burning equipment. (See Account 312, Boiler Plant 
Equipment, for items, but exclude water supply, water flow lines, and 
steam lines, as well as other equipment not strictly within the 
superheat function.)
    2. Boiler feed system, including feed water heaters, evaporator 
condensers, heater drain pumps, heater drainers, deaerators, and vent 
condensers, boiler feed pumps, surge tanks, feed water regulators, feed 
water measuring equipment, and all associated drivers.
    3. Boilers and heat exchangers.
    4. Instruments and devices, including all measuring, indicating, and 
recording equipment for reactor and boiler plant service together with 
mountings and supports.
    5. Lighting systems.
    6. Moderators, such as heavy water, and graphite, initial charge.
    7. Reactor coolant; primary and secondary systems, initial charge.
    8. Radioactive waste treatment and disposal equipment, including 
tanks, ion exchangers, incinerators, condensers, chimneys, and diluting 
fans and pumps.
    9. Foundations and settings, especially constructed for and not 
expected to outlast the apparatus for which provided.
    10. Reactor including shielding, control rods and mechanisms.
    11. Reactor fuel handling equipment, including manipulating and 
extraction tools, underwater viewing equipment, seal cutting and welding 
equipment, fuel transfer equipment, and fuel disassembly machinery.
    12. Reactor fuel element failure detection system.

[[Page 748]]

    13. Reactor emergency poison container and injection system.
    14. Reactor pressuring and pressure relief equipment, including 
pressurizing tanks and immersion heaters.
    15. Reactor coolant or moderator circulation charging, purification, 
and discharging equipment, including tanks, pumps, heat exchangers, 
demineralizers, and storage.
    16. Station piping, including pipes, valves, fittings, separators, 
traps, desuperheaters, hangers, excavation, and covering for station 
piping system, including all-reactor coolant, steam, condensate, boiler 
feed and water supply piping, but not condensing water, plumbing, 
building heating, oil, gas, or air piping.
    17. Ventilating equipment.
    18. Water purification equipment, including softeners, 
demineralizers and accessories, evaporators and accessories, heat 
exchangers, filters, tanks for filtered or softened water, pumps, and 
motors.
    19. Water supply systems, including pumps, motors, strainers, raw-
water storage tanks, boiler wash pumps, intake and discharge pipes and 
tunnels not a **part** of a building.
    20. Reactor plant cranes and hoists, and associated drives.
    Note: When the system for supplying boiler or condenser water is 
elaborate, as when it includes a dam, reservoir, canal, pipe lines, or 
cooling ponds, the cost of such special facilities shall be charged to a 
subdivision of Account 321, Structures and Improvements.

                       323   Turbogenerator Units

    This account shall include the cost installed of main turbine-driven 
units and accessory equipment used in generating electricity by steam.

                                  Items

    1. Air cleaning and cooling apparatus, including blowers, drive 
equipment, air ducts, not a **part** of building, louvers, pumps, and hoods.
    2. Circulating pumps, including connections between condensers, and 
intake and discharge tunnels.
    3. Condensers, including condensate pumps, air and vacuum pumps, 
ejectors, unloading valves and vacuum breakers, expansion devices, and 
screens.
    4. Generator hydrogen gas piping system and hydrogen detrainment 
equipment, and bulk hydrogen gas storage equipment.
    5. Cooling system, including towers, pumps, tanks, and piping.
    6. Cranes and hoists, including items wholly identified with items 
listed herein.
    7. Excitation system, when identified with main generating units.
    8. Fire extinguishing systems.
    9. Foundations and settings, especially constructed for and not 
expected to outlast the apparatus for which provided.
    10. Governors.
    11. Lighting systems.
    12. Lubricating systems, including gauges, filters, water 
separators, tanks, pumps, piping, and motors.
    13. Mechanical meters, including gauges, recording instruments, 
sampling and testing equipment.
    14. Piping-main steam, including connections between turbogenerator 
and condenser and between condenser and hotwell.
    15. Piping-main steam, including connections from main throttle 
valve to turbine inlet.
    16. Platforms, railings, steps, and gratings appurtenant to 
apparatus listed herein.
    17. Pressure oil systems, including accumulators, pumps, piping, and 
motors.
    18. Steelwork, specially constructed for apparatus listed herein.
    19. Throttle and inlet valve.
    20. Tunnels, intake and discharge, for condenser system, when not a 
**part** of structure, and water screens.
    21. Turbogenerators-main, including turbine and generator, field 
rheostats and electric connections for self-excited units.
    22. Water screens and motors.
    23. Moisture separators for turbine steam.
    24. Turbine lubricating oil, initial charge.

                   324   Accessory Electric Equipment

    This account shall include the cost installed of auxiliary 
generating apparatus, conversion equipment, and equipment used primarily 
in connection with the control and switching of electric energy produced 
by nuclear power, and the protection of electric circuits and equipment, 
except electric motors used to drive equipment included in other 
accounts. Such motors shall be included in the account in which the 
equipment with which they are associated is included.
    Note: Do not include in this account transformers and other 
equipment used for changing the voltage or frequency of electric energy 
for the purpose of transmission or distribution.

                                  Items

    1. Auxiliary generators, including boards, compartments, switching 
equipment, control equipment, and connections to auxiliary power bus.
    2. Excitation system, including motor, turbine and dual-drive 
exciter sets and rheostats, storage batteries, and charging equipment, 
circuit breakers, panels and accessories, knife switches and 
accessories, surge arresters, instrument shunts, conductors and conduit, 
special supports for conduit, generator field and exciter switch panels, 
exciter

[[Page 749]]

bus tie panels, generator and exciter rheostats and special housing and 
protective screens.
    3. Generator main connections, including oil circuit breakers and 
accessories, disconnecting switches and accessories, operating 
mechanisms and interlocks, current transformers, potential transformers, 
protective relays, isolated panels and equipment, conductors and 
conduit, special supports for generator main leads, grounding switch, 
special housings and protective screens.
    4. Station buses, including main, auxiliary, transfer, synchronizing 
and fault ground buses, including oil circuit breakers and accessories, 
operating mechanisms and interlocks, reactors and accessories, voltage 
regulators and accessories, compensators, resistors, starting 
transformers, current transformers, potential transformers, protective 
relays, storage batteries and charging equipment, isolated panels and 
equipment, conductors and conduit, special supports, special housings, 
concrete pads, general station grounding system, fire-extinguishing 
system, and test equipment.
    5. Station control system, including station switchboards with panel 
wiring, panels with instruments and control equipment only, panels with 
switching equipment mounted or mechanically connected, truck-type boards 
complete, cubicles, station supervisory control boards, generator and 
exciter signal stands, temperature recording devices, frequency-control 
equipment, master clocks, watt-hour meters and synchronoscope in the 
turbine room, station totalizing wattmeter, boiler-room load indicator 
equipment, storage batteries, panels and charging sets, instrument 
transformers for supervisory metering, conductors and conduit, special 
supports for conduit, switchboards, batteries, special housing for 
batteries, protective screens, and doors.
    Note: When any item of equipment listed herein is used wholly to 
furnish power to equipment included in another account, its cost shall 
be included in such other account.

                325   Miscellaneous Power Plant Equipment

    This account shall include the cost installed of miscellaneous 
equipment in and about the nuclear generating plant devoted to general 
station use, which is not properly includible in any of the foregoing 
nuclear-power production accounts.

                                  Items

    1. Compressed air and vacuum cleaning systems, including tanks, 
compressors, exhausters, air filters, and piping.
    2. Cranes and hoisting equipment, including cranes, cars, crane 
rails, monorails, and hoists with electric and mechanical connections.
    3. Fire-extinguishing equipment for general station and site use.
    4. Foundations and settings specially constructed for and not 
expected to outlast the apparatus for which provided.
    5. Locomotive cranes not includible elsewhere.
    6. Locomotives not included elsewhere.
    7. Marine equipment, including boats and barges.
    8. Miscellaneous belts, pulleys, and countershafts.
    9. Miscellaneous equipment, including atmospheric and weather 
recording devices, intrasite communication equipment, laboratory 
equipment, signal systems, callophones, emergency whistles and sirens, 
fire alarms, insect-control equipment, and other similar equipment.
    10. Railway cars or special shipping containers not includible 
elsewhere.
    11. Refrigerating systems, including compressors, pumps, and cooling 
coils.
    12. Station maintenance equipment, including lathes, shapers, 
planers, drill presses, hydraulic presses, and grinders with motors, 
shafting, hangers, and pulleys.
    13. Ventilating equipment, including items wholly identified with 
apparatus listed herein.
    14. Station and area radiation monitoring equipment.
    Note: When any item of equipment listed herein is wholly used in 
connection with equipment included in another account, its cost shall be 
included in such other account.

                          Hydraulic Production

                       330   Land and Land Rights

    This account shall include the cost of land and land rights used in 
connection with hydraulic power generation. (See Sec. 1767.16 (g).) It 
shall also include the cost of land and land rights used in connection 
with (1) the conservation of fish and wildlife, and (2) recreation. 
Separate subaccounts shall be maintained for each of the above.

                    331   Structures and Improvements

    This account shall include the cost, in place, of structures and 
improvements used in connection with hydraulic power generation. (See 
Sec. 1767.16 (h).) It shall also include the cost, in place, of 
structures and improvements used in connection with (1) the conservation 
of fish and wildlife, and (2) recreation. Separate subaccounts shall be 
maintained for each of the above.

                  332   Reservoirs, Dams, and Waterways

    This account shall include the cost in place of facilities used for 
impounding, collecting, storage, diversion, regulation, and delivery of 
water used primarily for generating electricity. It shall also include 
the cost in place

[[Page 750]]

of facilities used in connection with (1) the conservation of fish and 
wildlife, and (2) recreation. Separate subaccounts shall be maintained 
for each of the above. (See Sec. 1767.16 (h)(3).)

                                  Items

    1. Bridges and culverts, when not a **part** of roads or railroads.
    2. Clearing and preparing land.
    3. Dams, including wasteways, spillways, flash boards, spillway 
gates with operating and control mechanisms, tunnels, gate houses, and 
fish ladders.
    4. Dikes and embankments.
    5. Electric system, including conductors, control system, 
transformers, and lighting fixtures.
    6. Excavation, including shoring, bracing, bridging, refill, and 
disposal of excess excavated material.
    7. Foundations and settings specially constructed for and not 
expected to outlast the apparatus for which provided.
    8. Intakes, including trash racks, rack cleaners, control gates and 
valves with operating mechanisms, and intake house when not a **part** of 
station structure.
    9. Platforms, railings, steps, and gratings appurtenant to 
structures listed herein.
    10. Power line wholly identified with items included herein.
    11. Retaining walls.
    12. Water conductors and accessories, including canals, tunnels, 
flumes, penstocks, pipe conductors, forebays, tailraces, navigation 
locks and operating mechanisms, water-hammer and surge tanks, and 
supporting trestles and structures.
    13. Water storage reservoirs, including dams, flashboards, spillway 
gates and operating mechanisms, inlet and outlet tunnels, regulating 
valves and valve towers, silt and mud sluicing tunnels with valve or 
gate towers, and all other structures wholly identified with any of the 
foregoing items.

               333   Water Wheels, Turbines and Generators

    This account shall include the cost installed of water wheels and 
hydraulic turbines (from connection with penstock or flume to tailrace) 
and generators driven thereby devoted to the production of electricity 
by water power or for the production of power for industrial or other 
purposes, if the equipment used for such purposes is a **part** of the 
hydraulic power plant works.

                                  Items

    1. Exciter water wheels and turbines, including runners, gates, 
governors, pressure regulators, oil pumps, operating mechanisms, scroll 
cases, draft tubes, and draft-tube supports.
    2. Fire-extinguishing equipment.
    3. Foundations and settings, specially constructed for and not 
expected to outlast the apparatus for which provided.
    4. Generator cooling system, including air cooling and washing 
apparatus, air fans and accessories, and air ducts.
    5. Generators-main, a.c. or d.c., including field rheostats and 
connections for self-excited units and excitation system when identified 
with the generating unit.
    6. Lighting systems.
    7. Lubricating systems, including gauges, filters, tanks, pumps, and 
piping.
    8. Main penstock valves and appurtenances, including main valves, 
control equipment, bypass valves and fittings, and other accessories.
    9. Main turbines and water wheels, including runners, gates, 
governors, pressure regulators, oil pumps, operating mechanisms, scroll 
cases, draft tubes, and draft-tube supports.
    10. Mechanical meters and recording instruments.
    11. Miscellaneous water-wheel equipment, including gauges, 
thermometers, meters, and other instruments.
    12. Platforms, railings, steps, and gratings appurtenant to 
apparatus listed herein.
    13. Scroll case filling and drain system, including gates, pipe, 
valves, and fittings.
    14. Water-actuated pressure-regulator system, including tanks and 
housings, pipes, valves, fittings and insulators, piers and anchorage, 
and excavation and backfill.

                   334   Accessory Electric Equipment

    This account shall include the cost installed of auxiliary 
generating apparatus, conversion equipment, and equipment used primarily 
in connection with the control and switching of electric energy produced 
by hydraulic power and the protection of electric circuits and 
equipment, except electric motors used to drive equipment included in 
other accounts, such motors being included in the account in which the 
equipment with which they are associated is included.

                                  Items

    1. Auxiliary generators, including boards, compartments, switching 
equipment, control equipment, and connections to auxiliary power bus.
    2. Excitation system, including motor, turbine, and dual-drive 
exciter sets and rheostats, storage batteries and charging equipment, 
circuit breakers, panels and accessories, knife switches and 
accessories, surge arresters, instrument shunts, conductors and conduit, 
special supports for conduit, generator field and exciter switch panels, 
exciter bus tie panels, generator and exciter rheostats and special 
housings and protective screens.

[[Page 751]]

    3. Generator main connections, including oil circuit breakers and 
accessories, disconnecting switches and accessories, operating 
mechanisms and interlocks, current transformers, potential transformers, 
protective relays, isolated panels and equipment, conductors and 
conduit, special supports for generator main leads, grounding switch, 
and special housings and protective screens.
    4. Station buses, including main, auxiliary, transfer, 
synchronizing, and fault ground buses, including oil circuit breakers 
and accessories, disconnecting switches and accessories, operating 
mechanisms and interlocks, reactors and accessories, voltage regulators 
and accessories, compensators, resistors starting transformers, current 
transformers, potential transformers, protective relays, storage 
batteries, and charging equipment, isolated panels and equipment, 
conductors and conduit, special supports, special fire-extinguishing 
system, and test equipment.
    5. Station control system, including station switchboards with panel 
wiring, panels with instruments and control equipment only, panels with 
switching equipment mounted for mechanically connected, truck-type 
boards complete, cubicles, station supervisory control devices, 
frequency control equipment, master clocks, watt-hour meter, station 
totalizing watt-meter, storage batteries, panels and charging sets, 
instrument transformers for supervisory metering, conductors and 
conduit, special supports for conduit, switchboards, batteries, special 
housings for batteries, protective screens, and doors.
    Note A: Do not include in this account transformers and other 
equipment used for changing the voltage or frequency of electricity for 
the purpose of transmission or distribution.
    Note B: When any item of equipment listed herein is used wholly to 
furnish power to equipment, it shall be included in such equipment 
account.

                335   Miscellaneous Power Plant Equipment

    This account shall include the cost installed of miscellaneous 
equipment in and about the hydroelectric generating plant which is 
devoted to general station use and is not properly includible in other 
hydraulic production accounts. It shall also include the cost of 
equipment used in connection with (1) the conservation of fish and 
wildlife, and (2) recreation. Separate subaccounts shall be maintained 
for each of the above.

                                  Items

    1. Compressed air and vacuum cleaning systems, including tanks, 
compressors, exhausters, air filters, and piping.
    2. Cranes and hoisting equipment, including cranes, cars, crane 
rails, monorails, and hoists with electric and mechanical connections.
    3. Fire-extinguishing equipment for general station use.
    4. Foundations and settings, specially constructed for and not 
expected to outlast the apparatus for which provided.
    5. Locomotive cranes not includible elsewhere.
    6. Locomotives not includible elsewhere.
    7. Marine equipment, including boats and barges.
    8. Miscellaneous belts, pulleys, and countershafts.
    9. Miscellaneous equipment, including atmospheric and weather 
indicating devices. Intrasite communication equipment, laboratory 
equipment, insect control equipment, signal systems, callophones, 
emergency whistles and sirens, fire alarms, and other similar equipment.
    10. Railway cars, not includible elsewhere.
    11. Refrigerating system, including compressors, pumps, and cooling 
coils.
    12. Station maintenance equipment, including lathes, shapers, 
planers, drill presses, hydraulic presses, and grinders with motors, 
shafting, hangers, and pulleys.
    13. Ventilating equipment, including items wholly identified with 
apparatus listed herein.
    Note: When any item of equipment, listed herein, is used wholly in 
connection with equipment included in another account, its cost shall be 
included in such other account.

                   336   Roads, Railroads, and Bridges

    This account shall include the cost of roads, railroads, trails, 
bridges, and trestles used primarily as production facilities. It also 
includes those roads necessary to connect the plant with highway 
transportation systems, except when such roads are dedicated to public 
use and maintained by public authorities.

                                  Items

    1. Bridges, including foundations, piers, girders, trusses, and 
flooring.
    2. Clearing land.
    3. Railroads, including grading, ballast, ties, rails, culverts, and 
hoists.
    4. Roads, including grading, surfacing, and culverts.
    5. Structures, constructed and maintained in connection with items 
listed herein.
    6. Trails, including grading, surfacing, and culverts.
    7. Trestles, including foundations, piers, girders, trusses, and 
flooring.
    Note A: Roads intended primarily for connecting employees' houses 
with the power plant, and roads used primarily in connection with fish 
and wildlife, and recreation activities, shall not be included herein 
but in Account 331, Structures and Improvements.

[[Page 752]]

    Note B: The cost of temporary roads and bridges necessary during the 
period of construction but abandoned or dedicated to public use upon 
completion of the plant, shall not be included herein but shall be 
charged to the accounts appropriate for the construction.

                            Other Production

                       340   Land and Land Rights

    This account shall include the cost of land and land rights used in 
connection with other power generation. (See Sec. 1767.16 (g).)

                    341   Structures and Improvements

    This account shall include the cost in place of structures and 
improvements used in connection with other power generation. (See 
Sec. 1767.16 (h).)

             342   Fuel Holders, Producers, and Accessories

    This account shall include the cost installed of fuel handling and 
storage equipment used between the point of fuel delivery to the station 
and the intake pipe through which fuel is directly drawn to the engine, 
also the cost of gas producers and accessories devoted to the production 
of gas for use in prime movers driving main electric generators.

                                  Items

    1. Blower and fans.
    2. Boilers and pumps.
    3. Economizers.
    4. Exhauster outfits.
    5. Flues and piping.
    6. Pipe system.
    7. Producers.
    8. Regenerators.
    9. Scrubbers.
    10. Steam injectors.
    11. Tanks for storage of oil and gasoline.
    12. Vaporizers.

                           343   Prime Movers

    This account shall include the cost installed of Diesel or other 
prime movers devoted to the generation of electric energy, together with 
their auxiliaries.

                                  Items

    1. Air-filtering system.
    2. Belting, shafting, pulleys, and reduction gearing.
    3. Cooling system, including towers, pumps, tanks, and piping.
    4. Cranes and hoists, including items wholly identified with 
apparatus listed herein.
    5. Engines, Diesel, gasoline, gas, or other internal combustion.
    6. Foundations and settings specially constructed for and not 
expected to outlast the apparatus for which provided.
    7. Governors.
    8. Ignition system.
    9. Inlet valve.
    10. Lighting systems.
    11. Lubricating systems, including filters, tanks, pumps, and 
piping.
    12. Mechanical meters, including gauges, recording instruments, 
sampling, and testing equipment.
    13. Mufflers.
    14. Piping.
    15. Starting systems, compressed air, or other, including 
compressors and drives, tanks, piping, motors, boards and connections, 
and storage tanks.
    16. Steelwork, specially constructed for apparatus listed herein.
    17. Waste heat boilers and antifluctuators.

                            344   Generators

    This account shall include the cost installed of Diesel or other 
power driven main generators.

                                  Items

    1. Cranes and hoists, including items wholly identified with such 
apparatus.
    2. Fire-extinguishing equipment.
    3. Foundations and settings, specially constructed for and not 
expected to outlast the apparatus for which provided.
    4. Generator cooling system, including air cooling and washing 
apparatus, air fans and accessories, and air ducts.
    5. Generators-main, a.c. or d.c., including field rheostats and 
connections for self-excited units and excitation system when identified 
with the generating unit.
    6. Lighting systems.
    7. Lubricating system, including tanks, filters, strainers, pumps, 
piping, and coolers.
    8. Mechanical meters and recording instruments.
    9. Platforms, railings, steps, and gratings appurtenant to apparatus 
listed herein.
    Note: If prime movers and generators are so integrated that it is 
not practical to classify them separately, the entire unit may be 
included in Account 344, Generators.

                   345   Accessory Electric Equipment

    This account shall include the cost installed of auxiliary 
generating apparatus, conversion equipment, and equipment used primarily 
in connection with the control and switching of electric energy produced 
in other power generating stations, and the protection of electric 
circuits and equipment, except electric motors used to drive equipment 
included in other accounts. Such motors shall be included in the account 
in which the equipment with which it is associated is included.

[[Page 753]]

                                  Items

    1. Auxiliary generators, including boards, compartments, switching 
equipment, control equipment, and connections to auxiliary power bus.
    2. Excitation system, including motor, turbine and dual-drive 
exciter sets and rheostats, storage batteries and charging equipment, 
circuit breakers, panels and accessories, knife switches and 
accessories, surge arresters, instrument shunts, conductors and conduit, 
special supports for conduit, generator field and exciter switch panels, 
exciter bus tie panels, generator and exciter rheostats and special 
housings and protective screens.
    3. Generator main connections, including oil circuit breakers and 
accessories, disconnecting switches and accessories, operating 
mechanisms and interlocks, current transformers, potential transformers, 
protective relays, isolated panels and equipment, conductors and 
conduit, special supports for generator main leads, grounding switch, 
and special housing and protective screens.
    4. Station control system, including station switchboards with panel 
wiring, panels with instruments and control equipment only, panels with 
switching equipment mounted or mechanically connected, trunk-type boards 
complete, cubicles, station supervisory control boards, generator and 
exciter signal stands, temperature-recording devices, frequency control 
equipment, master clocks, watt-hour meter, station totalizing wattmeter, 
storage batteries, panels and charging sets, instrument transformers for 
supervisory metering, conductors and conduit, special supports for 
conduit, switchboards, batteries, special housing for batteries, 
protective screens, and doors.
    5. Station buses, including main, auxiliary, transfer, synchronizing 
and fault ground buses, including oil circuit breakers and accessories, 
disconnecting switches and accessories, operating mechanisms and 
interlocks, reactors and accessories, voltage regulators and 
accessories, compensators, resistors, starting transformers, current 
transformers, potential transformers, protective relays, storage 
batteries and charging equipment, isolated panels and equipment, 
conductors and conduit, special supports, special housings, concrete 
pads, general station ground system, special fire-extinguishing system, 
and test equipment.
    Note A: Do not include in this account transformers and other 
equipment used for changing the voltage or frequency of electric energy 
for the purpose of transmission or distribution.
    Note B: When any item of equipment listed herein is used wholly to 
furnish power to equipment included in another account, its cost shall 
be included in such other account.

                346   Miscellaneous Power Plant Equipment

    This account shall include the cost installed of miscellaneous 
equipment in and about the other power generating plant, devoted to 
general station use, and not properly includible in any of the foregoing 
other power production accounts.

                                  Items

    1. Compressed air and vacuum cleaning systems, including tanks, 
compressors, exhausters, air filters, and piping.
    2. Cranes and hoisting equipment, including cranes, cars, crane 
rails, monorails, and hoists with electric and mechanical connections.
    3. Fire-extinguishing equipment for general station use.
    4. Foundations and settings, specially constructed for and not 
expected to outlast the apparatus for which provided.
    5. Miscellaneous equipment, including atmospheric and weather 
indicating devices, intrasite communication equipment, laboratory 
equipment, signal systems, callophones, emergency whistles and sirens, 
fire alarms, and other similar equipment.
    6. Miscellaneous belts, pulleys, and countershafts.
    7. Refrigerating systems including compressors, pumps, and cooling 
coils.
    8. Station maintenance equipment, including lathes, shapers, 
planters, drill presses, hydraulic presses, and grinders with motors, 
shafting, hangers, or pulleys.
    9. Ventilating equipment, including items wholly identified with 
apparatus listed herein.
    Note: When any item of equipment, listed herein is used wholly in 
connection with equipment included in another account, its cost shall be 
included in such other account.

                           Transmission Plant

                       350   Land and Land Rights

    This account shall include the cost of land and land rights used in 
connection with transmission operations. (See Sec. 1767.16 (g).)

                             351  [Reserved]

                    352   Structures and Improvements

    This account shall include the cost, in place, of structures and 
improvements used in connection with transmission operations. (See 
Sec. 1767.16 (h).)

                         353   Station Equipment

    This account shall include the cost installed of transforming, 
conversion, and switching equipment used for the purpose of changing the 
characteristics of electricity in connection with its transmission or 
for controlling transmission circuits.

[[Page 754]]

                                  Items

    1. Bus compartments, concrete, brick, and sectional steel, including 
items permanently attached thereto.
    2. Conduit, including concrete and iron duct runs not a **part** of a 
building.
    3. Control equipment, including batteries, battery charging 
equipment, transformers, remote relay boards, and connections.
    4. Conversion equipment, including transformers, indoor and outdoor, 
frequency changers, motor generator sets, rectifiers, synchronous 
converters, motors, cooling equipment, and associated connections.
    5. Fences.
    6. Fixed and synchronous condensers, including transformers, 
switching equipment, blowers, motors and connections.
    7. Foundations and settings, specially constructed for and not 
expected to outlast the apparatus for which provided.
    8. General station equipment, including air compressors, motors, 
hoists, cranes, test equipment, and ventilating equipment.
    9. Platforms, railings, steps, and gratings appurtenant to apparatus 
listed herein.
    10. Primary and secondary voltage connections, including bus runs 
and supports, insulators, potheads, lightning arresters, cable and wire 
runs from and to outdoor connections or to manholes and the associated 
regulators, reactors, resistors, surge arresters, and accessory 
equipment.
    11. Switchboards, including meters, relays, and control wiring.
    12. Switching equipment, indoor and outdoor, including oil circuit 
breakers and operating mechanisms, truck switches, and disconnect 
switches.
    13. Tools and appliances.

                        354   Towers and Fixtures

    This account shall include the cost installed of towers and 
appurtenant fixtures used for supporting overhead transmission 
conductors.

                                  Items

    1. Anchors, guys, and braces.
    2. Brackets.
    3. Crossarms, including braces.
    4. Excavation, backfill, and disposal of excess excavated material.
    5. Foundations.
    6. Guards.
    7. Insulator pins and suspension bolts.
    8. Ladder and steps.
    9. Railings.
    10. Towers.

                        355   Poles and Fixtures

    This account shall include the cost installed of transmission line 
poles, wood, steel, concrete, or other material, together with 
appurtenant fixtures used for supporting overhead transmission 
conductors.

                                  Items

    1. Anchors, head arm and other guys, including guy guards, guy 
clamps, strain insulators, and pole plates.
    2. Brackets.
    3. Crossarms and braces.
    4. Excavation and backfill, including disposal of excess excavated 
material.
    5. Extension arms.
    6. Gaining, roofing, stenciling, and tagging.
    7. Insulator pins and suspension belts.
    8. Paving.
    9. Pole steps.
    10. Poles, wood, steel, concrete, or other material.
    11. Racks complete with insulators.
    12. Reinforcing and stubbing.
    13. Settings.
    14. Shaving and painting.

                  356   Overhead Conductors and Devices

    This account shall include the cost installed of overhead conductors 
and devices used for transmission purposes.

                                  Items

    1. Circuit breakers.
    2. Conductors, including insulated and bare wires and cables.
    3. Ground wires and ground clamps.
    4. Insulators, including pin, suspension, and other types.
    5. Lightning arresters.
    6. Switches.
    7. Other line devices.

                        357   Underground Conduit

    This account shall include the cost installed of underground conduit 
and tunnels used for housing transmission cables or wires. (See 
Sec. 1767.16 (n).)

                                  Items

    1. Conduit, concrete, brick or tile, including iron pipe, fiber 
pipe, Murray duct, and standpipe on pole or tower.
    2. Excavation, including shoring, bracing, bridging, backfill, and 
disposal of excess excavated material.
    3. Foundations and settings specially constructed for and not 
expected to outlast the apparatus for which provided.
    4. Lighting systems.
    5. Manholes, concrete or brick, including iron or steel, frames and 
covers, hatchways, gratings, ladders, cable racks and hangers, 
permanently attached to manholes.
    6. Municipal inspection.
    7. Pavement disturbed, including cutting and replacing pavement, 
pavement base and sidewalks.
    8. Permits.
    9. Protection of street openings.
    10. Removal and relocation of subsurface obstructions.

[[Page 755]]

    11. Sewer connections, including drains, traps, tide valves, and 
check valves.
    12. Sumps, including pumps.
    13. Ventilating equipment.

                358   Underground Conductors and Devices

    This account shall include the cost installed of underground 
conductors and devices used for transmission purposes.

                                  Items

    1. Armored conductors, buried, including insulators, insulating 
materials, splices, potheads, and trenching.
    2. Armored conductors, submarine, including insulators, insulating 
materials, splices in terminal chambers, and potheads.
    3. Cables in standpipe, including pothead and connection from 
terminal chamber of manhole to insulators on pole.
    4. Circuit breakers.
    5. Fireproofing, in connection with any items listed herein.
    6. Hollow-core oil-filled cable, including straight or stop joints, 
pressure tanks, auxiliary air tanks, feeding tanks, terminals, potheads 
and connections, and ventilating equipment.
    7. Lead and fabric covered conductors, including insulators, 
compound filled, oil filled, or vacuum splices, and potheads.
    8. Lightning arresters.
    9. Municipal inspection.
    10. Permits.
    11. Protection of street openings.
    12. Racking of cables.
    13. Switches.
    14. Other line devices.

                         359   Roads and Trails

    This account shall include the cost of roads, trails, and bridges 
used primarily as transmission facilities.

                                  Items

    1. Bridges, including foundation piers, girders, trusses, and 
flooring.
    2. Clearing land.
    3. Roads, including grading, surfacing, and culverts.
    4. Structures, constructed and maintained in connection with items 
included herein.
    5. Trails, including grading, surfacing, and culverts.
    Note: The cost of temporary roads, and bridges necessary during the 
period of construction but abandoned or dedicated to public use upon 
completion of the plant, shall be charged to the accounts appropriate 
for the construction.

                           Distribution Plant

                       360   Land and Land Rights

    This account shall include the cost of land and land rights used in 
connection with distribution operations. (See Sec. 1767.16 (g).)
    Note: Do not include the cost of permits to erect poles, or towers 
or to trim trees in this account. (See Account 364, Poles, Towers and 
Fixtures, and Account 365, Overhead Conductors and Devices.)

                    361   Structures and Improvements

    This account shall include the cost, in place, of structures and 
improvements used in connection with distribution operations. (See 
Sec. 1767.16 (h).)

                         362   Station Equipment

    This account shall include the cost installed of station equipment, 
including transformer banks, which are used for the purpose of changing 
the characteristics of electricity in connection with its distribution.

                                  Items

    1. Bus compartments, concrete, brick and sectional steel, including 
items permanently attached thereto.
    2. Conduit, including concrete and iron duct runs not **part** of 
building.
    3. Control equipment, including batteries, battery charging 
equipment, transformers, remote relay boards, and connections.
    4. Conversion equipment, indoor and outdoor, frequency changers, 
motor generator sets, rectifiers, synchronous converters, motors, 
cooling equipment, and associated connections.
    5. Fences.
    6. Fixed and synchronous condensers, including transformers, 
switching equipment, blowers, motors, and connections.
    7. Foundations and settings, specially constructed for and not 
expected to outlast the apparatus for which provided.
    8. General station equipment, including air compressors, motors, 
hoists, cranes, test equipment, and ventilating equipment.
    9. Platforms, railings, steps, and gratings appurtenant to apparatus 
listed herein.
    10. Primary and secondary voltage connections, including bus runs 
and supports, insulators, potheads, lightning arresters, cable and wire 
runs from and to outdoor connections or to manholes and the associated 
regulators, reactors, resistors, surge arresters, and accessory 
equipment.
    11. Switchboards, including meters, relays, and control wiring.
    12. Switching equipment, indoor and outdoor, including oil circuit 
breakers and operating mechanisms, truck switches, disconnect switches.

[[Page 756]]

    Note: The cost of rectifiers, series transformers, and other special 
station equipment devoted exclusively to street lighting service shall 
not be included in this account, but in Account 373, Street Lighting and 
Signal Systems.

    363   Storage Battery Equipmentis account shall include the cost 
installed of storage battery equipment used for the purpose of supplying 
             electricity to meet emergency or peak demands.

                                  Items

    1. Batteries, including elements, tanks, and tank insulators.
    2. Battery room connections, including cable or bus runs and 
connections.
    3. Battery room flooring, when specially laid for supporting 
batteries.
    4. Charging equipment, including motor generator sets and other 
charging equipment and connections, and cable runs from generator or 
station bus to battery room connections.
    5. Miscellaneous equipment, including instruments, and water stills.
    6. Switching equipment, including endcell switches and connections, 
boards and panels, used exclusively for battery control, not **part** of 
general station switchboard.
    7. Ventilating equipment, including fans and motors, louvers, and 
ducts not **part** of building.
    Note: Storage batteries used for control and general station 
purposes shall not be included in this account but in the account 
appropriate for their use.

                    364   Poles, Towers and Fixtures

    This account shall include the cost installed of poles, towers, and 
appurtenant fixtures used for supporting overhead distribution 
conductors and service wires.

                                  Items

    1. Anchors, head arm, and other guys, including guy guards, guy 
clamps, strain insulators, and pole plates.
    2. Brackets.
    3. Crossarms and braces.
    4. Excavation and backfill, including disposal of excess excavated 
material.
    5. Extension arms.
    6. Foundations.
    7. Guards.
    8. Insulator pins and suspension bolts.
    9. Paving.
    10. Permits for construction.
    11. Pole steps and ladders.
    12. Poles, wood, steel, concrete, or other material.
    13. Racks complete with insulators.
    14. Railings.
    15. Reinforcing and stubbing.
    16. Settings.
    17. Shaving, painting, gaining, roofing, stenciling, and tagging.
    18. Towers.
    19. Transformer racks and platforms.

                  365   Overhead Conductors and Devices

    This account shall include the cost installed of overhead conductors 
and devices used for distribution purposes.

                                  Items

    1. Circuit breakers.
    2. Conductors, including insulated and bare wires and cables.
    3. Ground wires and clamps.
    4. Insulators, including pin, suspension, and other types, and tie 
wire or clamps.
    5. Lightning arresters.
    6. Railroad and highway crossing guards.
    7. Splices.
    8. Switches.
    9. Tree trimming, initial cost including the cost of permits 
therefor.
    10. Other line devices.
    11. Oil circuit reclosers (OCR).
    12. Sectionalizers.
    13. Labor costs for installation of OCRs and Sectionalizers, first 
only.
    Note: The cost of conductors used solely for street lighting or 
signal systems shall not be included in this account but in Account 373, 
Street Lighting and Signal Systems.

                        366   Underground Conduit

    This account shall include the cost installed of underground conduit 
and tunnels used for housing distribution cables or wires.

                                  Items

    1. Conduit, concrete, brick and tile, including iron pipe, fiber 
pipe, Murray duct, and standpipe on pole or tower.
    2. Excavation, including shoring, bracing, bridging, backfill, and 
disposal of excess excavated material.
    3. Foundations and settings specially constructed for and not 
expected to outlast the apparatus for which constructed.
    4. Lighting systems.
    5. Manholes, concrete or brick, including iron or steel frames and 
covers, hatchways, gratings, ladders, cable racks, and hangers 
permanently attached to manholes.
    6. Municipal inspection.
    7. Pavement disturbed, including cutting and replacing pavement, 
pavement base, and sidewalks.
    8. Permits.
    9. Protection of street openings.
    10. Removal and relocation of subsurface obstructions.
    11. Sewer connections, including drains, traps, tide valves, and 
check valves.
    12. Sumps, including pumps.
    13. Ventilating equipment.

[[Page 757]]

    Note: The cost of underground conduit used solely for street 
lighting or signal systems shall be included in Account 373, Street 
Lighting and Signal Systems.

                367   Underground Conductors and Devices

    This account shall include the cost installed of underground 
conductors and devices used for distribution purposes.

                                  Items

    1. Armored conductors, buried, including insulators, insulating 
materials, splices, potheads, and trenching.
    2. Armored conductors, submarine, including insulators, insulating 
materials, splices in terminal chamber, and potheads.
    3. Cables in standpipe, including pothead and connection from 
terminal chamber or manhole to insulators on pole.
    4. Circuit breakers.
    5. Fireproofing, in connection with any items listed herein.
    6. Hollow-core oil-filled cable, including straight or stop joints, 
pressure tanks, auxiliary air tanks, feeding tanks, terminals, potheads 
and connections.
    7. Lead and fabric covered conductors, including insulators, 
compound-filled, oil-filled or vacuum splices, and potheads.
    8. Lightning arresters.
    9. Municipal inspection.
    10. Permits.
    11. Protection of street openings.
    12. Racking of cables.
    13. Switches.
    14. Other line devices.
    Note: The cost of underground conductors and devices used solely for 
street lighting or signal systems shall be included in Account 373, 
Street Lighting and Signal Systems.

                         368   Line Transformers

    A. This account shall include the cost installed of overhead and 
underground distribution line transformers and pole-type and underground 
voltage regulators owned by the utility, for use in transforming 
electricity to the voltage at which it is to be used by the customer, 
whether actually in service or held in reserve.
    B. When a transformer is permanently retired from service, the 
original installed cost thereof shall be credited to this account.
    C. The records covering line transformers shall be so kept that the 
utility can furnish the number of transformers of various capacities in 
service and those in reserve, and the location and the use of each 
transfer.

                                  Items

    1. Installation, labor of (first installation only).
    2. Transformer cut-out boxes.
    3. Transformer lightning arresters.
    4. Transformers, line and network.
    5. Capacitors.
    6. Network protectors.
    7. Voltage regulators.
    Note: The cost of removing and resetting line transformers shall not 
be charged to this account but to Account 583, Overhead Line Expenses, 
or Account 584, Underground Line Expenses, as appropriate. The cost of 
line transformers used solely for street lighting or signal systems 
shall be included in Account 373, Street Lighting and Signal Systems.

                             369   Services

    This account shall include the cost installed of overhead and 
underground conductors leading from a point where wires leave the last 
pole of the overhead system or the distribution box or manhole, or the 
top of the pole of the distribution line, to the point of connection 
with the customer's outlet or wiring. Conduit used for underground 
service conductors shall be included herein.

                                  Items

    1. Brackets.
    2. Cables and wires.
    3. Conduit.
    4. Insulators.
    5. Municipal inspection.
    6. Overhead to underground, including conduit or standpipe and 
conductor from last splice on pole to connection with customer's wiring.
    7. Pavement disturbed, including cutting and replacing pavement, 
pavement base, and sidewalks.
    8. Permits.
    9. Protection of street openings.
    10. Service switch.
    11. Suspension wire.

                              370   Meters

    A. This account shall include the cost installed of meters or 
devices and appurtenances thereto, for use in measuring the electricity 
delivered to its users, whether actually in service or held in reserve.
    B. When a meter is permanently retired from service, the installed 
cost included herein shall be credited to this account.
    C. The records covering meters shall be so kept that the utility can 
furnish information as to the number of meters of various capacities in 
service and in reserve as well as the location of each meter owned.

                                  Items

    1. Alternate current, watt-hour meters.
    2. Current limiting devices.
    3. Demand indicators.
    4. Demand meters.
    5. Direct current watt-hour meters.
    6. Graphic demand meters.
    7. Installation, labor of (first installation only).

[[Page 758]]

    8. Instrument transformers.
    9. Maximum demand meters.
    10. Meter badges and their attachments.
    11. Meter boards and boxes.
    12. Meter fittings, connections, and shelves (first set).
    13. Meter switches and cut-outs.
    14. Prepayment meters.
    15. Protective devices.
    16. Testing new meters.
    Note A: This account shall not include meters for recording output 
of a generating station, or substation meters. It includes only those 
meters used to record energy delivered to customers.
    Note B: The cost of removing and resetting meters shall be charged 
to Account 586, Meter Expenses.

               371   Installations on Customers' Premises

    This account shall include the cost installed of equipment on the 
customer's side of a meter when the utility incurs such cost and when 
the utility retains title to and assumes full responsibility for 
maintenance and replacement of such property. This account shall not 
include leased equipment. (See Account 372, Leased Property on 
Customers' Premises.)

                                  Items

    1. Cable vaults.
    2. Commercial lamp equipment.
    3. Foundations and settings specially provided for equipment 
included herein.
    4. Frequency changer sets.
    5. Motor generator sets.
    6. Motors.
    7. Switchboard panels, high or low tension.
    8. Wire and cable connections to incoming cables.
    Note: Do not include in this account any costs incurred in 
connection with merchandising, jobbing, or contract work activities.

              372   Leased Property on Customers' Premises

    This account shall include the cost of electric motors, 
transformers, and other equipment on customers' premises (including 
municipal corporations), leased or loaned to customers, but not 
including property held for sale.
    Note A: The cost of setting and connecting such appliances or 
equipment on the premises of customers and the cost of resetting or 
removal shall not be charged to this account but to operating expenses, 
Account 587, Customer Installations Expenses.
    Note B: Do not include in this account any costs incurred in 
connection with merchandising, jobbing, or contract work activities.

                373   Street Lighting and Signal Systems

    This account shall include the cost installed of equipment used 
wholly for public street and highway lighting or traffic, fire alarm, 
police, and other signal systems.

                                  Items

    1. Armored conductors, buried or submarine, including insulators, 
insulating materials, splices, and trenching.
    2. Automatic control equipment.
    3. Conductors, overhead or underground, including lead or fabric 
covered, parkway cables, including splices, and insulators.
    4. Lamps, arc, incandescent, or other types, including glassware, 
suspension fixtures, and brackets.
    5. Municipal inspection.
    6. Ornamental lamp posts.
    7. Pavement disturbed, including cutting and replacing pavement, 
pavement base, and sidewalks.
    8. Permits.
    9. Posts and standards.
    10. Protection of street openings.
    11. Relays or time clocks.
    12. Series contactors.
    13. Switches.
    14. Transformers, pole or underground.

                              General Plant

                       389   Land and Land Rights

    This account shall include the cost of land and land rights used for 
utility purposes, the cost of which is not properly includible in other 
land and land rights accounts. (See Sec. 1767.16 (g).)

                    390   Structures and Improvements

    This account shall include the cost, in place, of structures and 
improvements used for utility purposes, the cost of which is not 
properly includible in other structures and improvements accounts. (See 
Sec. 1767.16 (h).)

                  391   Office Furniture and Equipment

    This account shall include the cost of office furniture and 
equipment owned by the utility and devoted to utility service, and not 
permanently attached to buildings, except the cost of such furniture and 
equipment which the utility elects to assign to other plant accounts on 
a functional basis.

                                  Items

    1. Bookcases and shelves.
    2. Desks, chairs, and desk equipment.
    3. Drafting-room equipment.
    4. Filing, storage, and other cabinets.
    5. Floor covering.
    6. Library and library equipment.
    7. Mechanical office equipment, such as accounting machines, and 
typewriters.
    8. Safes.
    9. Tables.

[[Page 759]]

                     392   Transportation Equipment

    This account shall include the cost of transportation vehicles used 
for utility purposes.

                                  Items

    1. Airplanes.
    2. Automobiles.
    3. Bicycles.
    4. Electrical vehicles.
    5. Motor trucks.
    6. Motorcycles.
    7. Repair cars or trucks.
    8. Tractors and trailers.
    9. Other transportation vehicles.

                         393   Stores Equipment

    This account shall include the cost of equipment used for the 
receiving, shipping, handling, and storage of materials and supplies.

                                  Items

    1. Chain falls.
    2. Counters.
    3. Cranes (portable).
    4. Elevating and stacking equipment (portable).
    5. Hoists.
    6. Lockers.
    7. Scales.
    8. Shelving.
    9. Storage bins.
    10. Trucks, hand and power driven.
    11. Wheelbarrows.

                 394   Tools, Shop and Garage Equipment

    This account shall include the cost of tools, implements, and 
equipment used in construction, repair work, general shops and garages 
and not specifically provided for or includible in other accounts.

                                  Items

    1. Air compressors.
    2. Anvils.
    3. Automobile repair shop equipment.
    4. Battery charging equipment.
    5. Belts, shafts and countershafts.
    6. Boilers.
    7. Cable pulling equipment.
    8. Concrete mixers.
    9. Drill presses.
    10. Derricks.
    11. Electric equipment.
    12. Engines.
    13. Forges.
    14. Furnaces.
    15. Foundations and settings specially constructed for and not 
expected to outlast the equipment for which provided.
    16. Gas producers.
    17. Gasoline pumps, oil pumps, and storage tanks.
    18. Greasing tools and equipment.
    19. Hoists.
    20. Ladders.
    21. Lathes.
    22. Machine tools.
    23. Motor-driven tools.
    24. Motors.
    25. Pipe threading and cutting tools.
    26. Pneumatic tools.
    27. Pumps.
    28. Riveters.
    29. Smithing equipment.
    30. Tool racks.
    31. Vises.
    32. Welding apparatus.
    33. Work benches.

                       395   Laboratory Equipment

    This account shall include the cost installed of laboratory 
equipment used for general laboratory purposes and not specifically 
provided for or includible in other departmental or functional plant 
accounts.

                                  Items

    1. Ammeters.
    2. Current batteries.
    3. Frequency changers.
    4. Galvanometers.
    5. Inductometers.
    6. Laboratory standard millivolt meters.
    7. Laboratory standard volt meters.
    8. Meter-testing equipment.
    9. Millivolt meters.
    10. Motor generator sets.
    11. Panels.
    12. Phantom loads.
    13. Portable graphic ammeters, voltmeters, and wattmeters.
    14. Portable loading devices.
    15. Potential batteries.
    16. Potentiometers.
    17. Rotating standards.
    18. Standard cell, reactance, resistor, and shunt.
    19. Switchboards.
    20. Synchronous timers.
    21. Testing panels.
    22. Testing resistors.
    23. Transformers.
    24. Voltmeters.
    25. Other testing, laboratory, or research equipment not provided 
for elsewhere.

                     396   Power Operated Equipment

    This account shall include the cost of power operated equipment used 
in construction or repair work exclusive of equipment includible in 
other accounts. Include, also, the tools and accessories acquired for 
use with such equipment and the vehicle on which such equipment is 
mounted.

                                  Items

    1. Air compressors, including driving unit and vehicle.
    2. Back filling machines.

[[Page 760]]

    3. Boring machines.
    4. Bulldozers.
    5. Cranes and hoists.
    6. Diggers.
    7. Engines.
    8. Pile drivers.
    9. Pipe cleaning machines.
    10. Pipe coating or wrapping machines.
    11. Tractors-Crawler type.
    12. Trenchers.
    13. Other power operated equipment.
    Note:  It is intended that this account include only such large 
units as are generally self-propelled or mounted on movable equipment.

                      397   Communication Equipment

    This account shall include the cost installed of telephone, 
telegraph, and wireless equipment for general use in connection with 
utility operations.

                                  Items

    1. Antennae.
    2. Booths.
    3. Cables.
    4. Distributing boards.
    5. Extension cords.
    6. Gongs.
    7. Hand sets, manual and dial.
    8. Insulators.
    9. Intercommunicating sets.
    10. Loading coils.
    11. Operators' desks.
    12. Poles and fixtures used wholly for telephone or telegraph wire.
    13. Radio transmitting and receiving sets.
    14. Remote control equipment and lines.
    15. Sending keys.
    16. Storage batteries.
    17. Switchboards.
    18. Telautograph circuit connections.
    19. Telegraph receiving sets.
    20. Telephone and telegraph circuits.
    21. Testing instruments.
    22. Towers.
    23. Underground conduit used wholly for telephone or telegraph wires 
and cable wires.

                      398   Miscellaneous Equipment

    This account shall include the cost of equipment, and apparatus used 
in the utility operations, which is not includible in other accounts.

                                  Items

    1. Hospital and infirmary equipment.
    2. Kitchen equipment.
    3. Employees' recreation equipment.
    4. Radios.
    5. Restaurant equipment.
    6. Soda fountains.
    7. Operators' cottage furnishings.
    8. Other miscellaneous equipment.
    Note: Miscellaneous equipment of the nature indicated above wherever 
practicable, shall be included in the utility plant accounts on a 
functional basis.

                      399   Other Tangible Property

    This account shall include the cost of tangible utility plant not 
provided for elsewhere.

Sec. 1767.21  Operating income.

    The operating income accounts identified in this section shall be 
used by all RUS borrowers.

                        Utility Operating Income

400  Operating Revenues
401  Operation Expense
402  Maintenance Expense
403  Depreciation Expense
403.1  Depreciation Expense--Steam Production Plant
403.2  Depreciation Expense--Nuclear Production Plant
403.3  Depreciation Expense--Hydraulic Production Plant
403.4  Depreciation Expense--Other Production Plant
403.5  Depreciation Expense--Transmission Plant
403.6  Depreciation Expense--Distribution Plant
403.7  Depreciation Expense--General Plant
404  Amortization of Limited-Term Electric Plant
405  Amortization of Other Electric Plant
406  Amortization of Electric Plant Acquisition Adjustments
407  Amortization of Property Losses, Unrecovered Plant and Regulatory 
          Study Costs
407.3  Regulatory Debits
407.4  Regulatory Credits
408  Taxes Other than Income Taxes
408.1  Taxes--Property
408.2  Taxes--U.S. Social Security--Unemployment
408.3  Taxes--U.S. Social Security--F.I.C.A.
408.4  Taxes--State Social Security--Unemployment
408.5  Taxes--State Sales--Consumers
408.6  Taxes--Gross Revenue or Gross Receipts Tax
408.7  Taxes--Other
409  [Reserved]
409.1  Income Taxes, Utility Operating Income
409.2  Income Taxes, Other Income and Deductions
409.3  Income Taxes, Extraordinary Items
410  [Reserved]
410.1  Provision for Deferred Income Taxes, Utility Operating Income
410.2  Provision for Deferred Income Taxes, Other Income and Deductions
411  [Reserved]
411.1  Provision for Deferred Income Taxes--Credit, Utility Operating 
          Income

[[Page 761]]

411.2  Provision for Deferred Income Taxes--Credit, Other Income and 
          Deductions
411.3  [Reserved]
411.4  Investment Tax Credit Adjustments, Utility Operations
411.5  Investment Tax Credit Adjustments, Nonutility Operations
411.6  Gains from Disposition of Utility Plant
411.7  Losses from Disposition of Utility Plant
411.8  Gains from Disposition of Allowances
411.9  Losses from Disposition of Allowances
412  Revenues from Electric Plant Leased to Others
413  Expenses of Electric Plant Leased to Others
414  Other Utility Operating Income

                        Utility Operating Income

                        400   Operating Revenues

    There shall be shown under this caption the total amount included in 
the electric operating revenue accounts provided herein.

                         401   Operation Expense

    There shall be shown under this caption the total amount included in 
the electric operation expense accounts provided herein. (See note to 
Sec. 1767.17 (c).)

                        402   Maintenance Expense

    There shall be shown under this caption the total amount included in 
the electric maintenance expense accounts provided herein.

                       403   Depreciation Expense

    A. This account shall include the amount of depreciation expense for 
all classes of depreciable electric plant in service except such 
depreciation expense as is chargeable to clearing accounts or to Account 
416, Costs and Expenses of Merchandising, Jobbing and Contract Work.
    B. The utility shall keep such records of property and property 
retirements as will reflect the service life of property which has been 
retired and aid in estimating probable service life by mortality, 
turnover, or other appropriate methods; and also such records as will 
reflect the percentage of salvage and costs of removal for property 
retired from each account, or subdivision thereof, for depreciable 
electric plant.
    Note A: Depreciation expense applicable to property included in 
Account 104, Electric Plant Leased to Others, shall be charged to 
Account 413, Expenses of Electric Plant Leased to Others.
    Note B: Depreciation expenses applicable to transportation 
equipment, shop equipment, tools, work equipment, power operated 
equipment, and other general equipment may be charged to clearing 
accounts as necessary in order to obtain a proper distribution of 
expenses between construction and operation.
    Note C: Depreciation expense applicable to transportation equipment 
used for transportation of fuel from the point of acquisition to the 
unloading point shall be charged to Account 151, Fuel Stock.
    C. Account 403 shall be subaccounted as follows:

403.1  Depreciation Expense--Steam Production Plant
403.2  Depreciation Expense--Nuclear Production Plant
403.3  Depreciation Expense--Hydraulic Production Plant
403.4  Depreciation Expense--Other Production Plant
403.5  Depreciation Expense--Transmission Plant
403.6  Depreciation Expense--Distribution Plant
403.7  Depreciation Expense--General Plant

            404   Amortization of Limited-Term Electric Plant

    This account shall include amortization charges applicable to 
amounts included in the electric plant accounts for limited-term 
franchises, licenses, patent rights, limited-term interests in land, and 
expenditures on leased property where the service life of the 
improvements is terminable by action of the lease. The charges to this 
account shall be such as to distribute the book cost of each investment 
as evenly as may be over the period of its benefit to the utility. (See 
Account 111, Accumulated Provision for Amortization of Electric Utility 
Plant.)

               405   Amortization of Other Electric Plant

    A. When authorized by RUS, this account shall include charges for 
amortization of intangible or other electric utility plant which does 
not have a definite or terminable life and which is not subject to 
charges for depreciation expense.
    B. This account shall be supported in such detail as to show the 
amortization applicable to each investment being amortized, together 
with the book cost of the investment and the period over which it is 
being written off.

      406   Amortization of Electric Plant Acquisition Adjustments

    This account shall be debited or credited, as appropriate, with 
amounts includible in operating expenses, pursuant to approval or order 
of RUS, for the purpose of providing for the extinguishment of the 
amount in Account 114, Electric Plant Acquisition Adjustments.

[[Page 762]]

 407   Amortization of Property Losses, Unrecovered Plant and Recovery 
                               Study Costs

    This account shall be charged with amounts credited to Account 
182.1, Extraordinary Property Losses, when RUS has authorized the amount 
in the latter account to be amortized by charges to electric operations.

                        407.3   Regulatory Debits

    This account shall be debited, when appropriate, with the amounts 
credited to Account 254, Other Regulatory Liabilities, to record 
regulatory liabilities imposed on the utility by the ratemaking actions 
of regulatory agencies. This account shall also be debited, when 
appropriate, with the amounts credited to Account 182.3, Other 
Regulatory Assets, concurrent with the recovery of such amounts in 
rates.

                       407.4   Regulatory Credits

    This account shall be credited, when appropriate, with the amounts 
debited to Account 182.3, Other Regulatory Assets, to establish 
regulatory assets. This account shall also be credited, when 
appropriate, with the amounts debited to Account 254, Other Regulatory 
Liabilities, concurrent with the return of such amounts to customers 
through rates.

                   408  Taxes Other Than Income Taxes

    A. This account shall include the amounts of ad valorem, gross 
revenue, or gross receipts taxes, state unemployment insurance, 
franchise taxes, Federal excise taxes, social security taxes, and all 
other taxes assessed by Federal, state, county, municipal, or other 
local governmental authorities, except income taxes.
    B. These accounts shall be charged in each accounting period with 
the amounts of taxes which are applicable thereto, with concurrent 
credits to Account 236, Taxes Accrued, or Account 165, Prepayments, as 
appropriate. When it is not possible to determine the exact amounts of 
taxes, the amounts shall be estimated and adjustments made in current 
accruals as the actual tax levies become known.
    C. The charges to these accounts shall be made or supported so as to 
show the amount of each tax and the basis upon which each charge is 
made. In the case of a utility rendering more than one utility service, 
taxes of the kind includible in these accounts shall be assigned 
directly to the utility department the operation of which gave rise to 
the tax, in so far as practicable. Where the tax is not attributable to 
a specific utility department, it shall be distributed among the utility 
departments or nonutility operations on an equitable basis after 
appropriate study to determine such basis.

    Note A: Special assessments for street and similar improvements 
shall be included in the appropriate utility plant or nonutility 
property account.
    Note B: Taxes specifically applicable to construction and retirement 
activities shall be included in the cost of construction or the 
retirement.
    Note C: Gasoline and other sales taxes shall be charged as far as 
practicable to the same account as the materials on which the tax is 
levied.
    Note D: Social security and other forms of payroll taxes shall be 
charged to nonutility operations, the specific functional operations, 
maintenance, and administrative expense accounts, and to construction 
and retirement activities on a basis related to payroll either directly 
or by transfers from this account.
    Note E: Property taxes applicable to the various utility functions 
shall be charged to the specific functional operations and 
administrative expense accounts either directly or by transfers from 
this account.
    Note F: Interest on tax refunds or deficiencies shall not be 
included in these accounts but in Account 419, Interest and Dividend 
Income, or Account 431, Other Interest Expense, as appropriate.

    D. Account 408 shall be subaccounted as follows:

408.1  Taxes--Property
408.2  Taxes--U.S. Social Security--Unemployment
408.3  Taxes--U.S. Social Security--F.I.C.A.
408.4  Taxes--State Social Security--Unemployment
408.5  Taxes--State Sales--Consumers
408.6  Taxes--Gross Revenue or Gross Receipts Tax
408.7  Taxes--Other

                             409  [Reserved]

                          Special Instructions

                    Accounts 409.1, 409.2, and 409.3

    A. These accounts shall include the amount of local, state, and 
Federal income taxes on income properly accruable during the period 
covered by the income statement to meet the actual liability for such 
taxes. Concurrent credits for the tax accruals shall be made to Account 
236, Taxes Accrued, and as the exact amounts of taxes become known, the 
current tax accruals shall be adjusted by charges or credits to these 
accounts.
    B. The accruals for income taxes shall be apportioned among utility 
departments and to Other Income and Deductions so that, as nearly as 
practicable, each tax shall be included in the expenses of the utility 
department or Other Income and Deductions, the income from which gave 
rise to the tax. The

[[Page 763]]

tax effects relating to interest charges shall be allocated between 
utility and nonutility operations. The basis for this allocation shall 
be the ratio of net investment in utility plant to net investment in 
nonutility plant.
    Note A: Taxes assumed by the utility on interest shall be charged to 
Account 431, Other Interest Expense.
    Note B: Interest on tax refunds or deficiencies shall not be 
included in these accounts but in Account 419, Interest and Dividend 
Income, or Account 431, Other Interest Expense, as appropriate.

             409.1   Income Taxes, Utility Operating Income

    This account shall include the amount of those local, state, and 
Federal income taxes which relate to utility operating income. This 
account shall be maintained so as to allow ready identification of tax 
effects (both positive and negative) relating to Utility Operating 
Income (by department), Utility Plant Leased to Others, and Other 
Utility Operating Income.

            409.2   Income Taxes, Other Income and Deductions

    This account shall include the amount of those local, state, and 
Federal income taxes (both positive and negative), which relate to Other 
Income and Deductions.

                409.3   Income Taxes, Extraordinary Items

    This account shall include the amount of those local, state, and 
Federal income taxes (both positive and negative), which relate to 
Extraordinary Items.

                             410  [Reserved]

                          Special Instructions

                 Accounts 410.1, 410.2, 411.1, and 411.2

    A. Accounts 410.1 and 410.2 shall be debited, and Accumulated 
Deferred Income Taxes, shall be credited, with amounts equal to any 
current deferrals of taxes on income or any allocations of deferred 
taxes originating in prior periods, as provided by the texts of Accounts 
190, 281, 282, and 283. There shall not be netted against entries 
required to be made to these accounts any credit amounts appropriately 
includible in Account 411.1 or Account 411.2.
    B. Accounts 411.1 or 411.2 shall be credited, and Accumulated 
Deferred Income Taxes, shall be debited, with amounts equal to any 
allocations of deferred taxes originating in prior periods or any 
current deferrals of taxes on income, as provided by the texts of 
Accounts 190, 281, 282, and 283. There shall not be netted against 
entries required to be made to these accounts any debit amounts 
appropriately includible in Account 410.1 or Account 410.2.

  410.1   Provision for Deferred Income Taxes, Utility Operating Income

    This account shall include the amounts of those deferrals of taxes 
and allocations of deferred taxes which relate to Utility Operating 
Income (by department).

410.2   Provision for Deferred Income Taxes, Other Income and Deductions

    This account shall include the amounts of those deferrals of taxes 
and allocations of deferred taxes which relate to Other Income and 
Deductions.

                             411  [Reserved]

 411.1   Provision for Deferred Income Taxes--Credit, Utility Operating 
                                 Income

    This account shall include the amounts of those allocations of 
deferred taxes and deferrals of taxes, credit, which relate to Utility 
Operating Income (by department).

 411.2   Provision for Deferred Income Taxes--Credit, Other Income and 
                               Deductions

    This account shall include the amounts of those allocations of 
deferred taxes and deferrals of taxes, credit, which relate to Other 
Income and Deductions.

                           411.3   [Reserved]

                          Special Instructions

                        Accounts 411.4 and 411.5

    A. Account 411.4 shall be debited with the amounts of investment tax 
credits related to electric utility property that are credited to 
Account 255, Accumulated Deferred Investment Tax Credits, by companies 
which do not apply the entire amount of the benefits of the investment 
credit as a reduction of the overall income tax expense in the year in 
which such credit is realized. (See Account 255).
    B. Account 411.4 shall be credited with the amounts debited to 
Account 255 for proportionate amounts of tax credit deferrals allocated 
over the average useful life of electric utility property to which the 
tax credits relate or such lesser period of time as may be adopted and 
consistently followed by the company.
    C. Account 411.5 shall be debited and credited as directed in 
paragraphs A and B, for investment tax credits related to nonutility 
property.

[[Page 764]]

      411.4   Investment Tax Credit Adjustments, Utility Operations

    This account shall include the amount of those investment tax credit 
adjustments related to property used in Utility Operations (by 
department).

    411.5   Investment Tax Credit Adjustments, Nonutility Operations

    This account shall include the amount of those investment tax credit 
adjustments related to property used in Nonutility Operations.

             411.6   Gains from Disposition of Utility Plant

    This account shall include, as approved by RUS, amounts relating to 
gains from the disposition of future use utility plant including amounts 
which were previously recorded in and transferred from Account 105, 
Electric Plant Held for Future Use, under the Provisions of Paragraphs 
B, C, and D thereof. Income taxes relating to gains recorded in this 
account shall be recorded in Account 409.1, Income Taxes, Utility 
Operating Income.

            411.7   Losses from Disposition of Utility Plant

    This account shall include, as approved by RUS, amounts relating to 
losses from the disposition of future use utility plant including 
amounts which were previously recorded in and transferred from Account 
105, Electric Plant Held for Future Use, under the provisions of 
Paragraphs B, C, and D thereof. Income taxes relating to losses recorded 
in this account shall be recorded in Account 409.1, Income Taxes, 
Utility Operating Income.

              411.8   Gains from Disposition of Allowances

    This account shall be credited with the gain on the sale, exchange, 
or other disposition of allowances in accordance with Sec. 1767.15 
(u)(8). Income taxes relating to gains recorded in this account shall be 
recorded in Account 409.1, Income Taxes, Utility Operating Income.

              411.9   Losses from Disposition of Allowances

    This account shall be debited with the loss on the sale, exchange, 
or other disposition of allowances in accordance with Sec. 1767.15 
(u)(8). Income taxes relating to losses recorded in this account shall 
be recorded in Account 409.1, Income Taxes, Utility Operating Income.

           412   Revenues from Electric Plant Leased to Others

    This account shall include revenues from electric property 
constituting a distinct operating unit or system leased by the utility 
to others, and which property is properly includible in Account 104, 
Electric Plant Leased to Others.
    Note: Related taxes shall be recorded in Account 408, Taxes Other 
Than Income Taxes, or Account 409.1, Income Taxes, Utility Operating 
Income, as appropriate.

            413   Expenses of Electric Plant Leased to Others

    A. This account shall include expenses from electric property 
constituting a distinct operating unit or system leased by the utility 
to others, and which property is properly includible in Account 104, 
Electric Plant Leased to Others.
    B. The detail of expenses shall be kept or supported so as to show 
separately the following:

    1. Operation.
    2. Maintenance.
    3. Depreciation.
    4. Amortization.
    Note: Related taxes shall be recorded in Account 408, Taxes Other 
Than Income Taxes, or Account 409.1, Income Taxes, Utility Operating 
Income, as appropriate.

                  414   Other Utility Operating Income

    A. This account shall include the revenues received and expenses 
incurred in connection with the operations of utility plant, the book 
cost of which is included in Account 118, Other Utility Plant.
    B. The expenses shall include every element of cost incurred in such 
operations, including depreciation, rents, and insurance.
    Note: Related taxes shall be recorded in Account 408, Taxes Other 
Than Income Taxes, or Account 409.1, Income Taxes, Utility Operating 
Income, as appropriate.

[58 FR 59825, Nov. 10, 1993, as amended at 62 FR 42290, Aug. 6, 1997]

Sec. 1767.22  Other income and deductions.

    The other income and deductions accounts identified in this section 
shall be used by all RUS borrowers.

                       Other Income and Deductions

415  Revenues from Merchandising, Jobbing, and Contract Work
416  Costs and Expenses of Merchandising, Jobbing, and Contract Work
417  Revenues from Nonutility Operations
417.1  Expenses of Nonutility Operations
418  Nonoperating Rental Income
418.1  Equity in Earnings of Subsidiary Companies
419  Interest and Dividend Income
419.1  Allowance for Funds Used During Construction
420  Investment Tax Credits
421  Miscellaneous Nonoperating Income
421.1  Gain on Disposition of Property

[[Page 765]]

421.2  Loss on Disposition of Property
422  Nonoperating Taxes
423  Generation and Transmission Cooperative Capital Credits
424  Other Capital Credits and Patronage Capital Allocations
425  Miscellaneous Amortization
426  [Reserved]
426.1  Donations
426.2  Life Insurance
426.3  Penalties
426.4  Expenditures for Certain Civic, Political, and Related Activities
426.5  Other Deductions

                       Other Income and Deductions

      415   Revenues from Merchandising, Jobbing and Contract Work

    A. This account shall include all revenues derived from the sale of 
merchandise and jobbing or contract work, including any profit or 
commission accruing to the utility on jobbing work performed by it as 
agent under contracts whereby it does jobbing work for another for a 
stipulated profit or commission. Interest related income from 
installment sales shall be recorded in Account 419, Interest and 
Dividend Income.
    B. Records in support of this account shall be so kept as to permit 
ready summarization of revenues by such major items as are feasible.
    Note: The classification of revenues of merchandising, jobbing, and 
contract work as nonoperating, and thus included in this account, is for 
accounting purposes. It does not preclude consideration of justification 
to the contrary for ratemaking or other purposes.

                                  Items

    1. Revenues from sale of merchandise and from jobbing and contract 
work.
    2. Discounts and allowances made in settlement of bills for 
merchandise and jobbing work.

  416   Costs and Expenses of Merchandising, Jobbing and Contract Work

    A. This account shall include all expenses derived from the sale of 
merchandise and jobbing or contract work.
    B. Records in support of this account shall be so kept as to permit 
ready summarization of costs and expenses by such major items as are 
feasible.
    Note: The classification of costs and expenses of merchandising, 
jobbing, and contract work as nonoperating, and thus included in this 
account, is for accounting purposes. It does not preclude consideration 
of justification to the contrary for ratemaking or other purposes.

                                  Items

    Labor:

    1. Canvassing and demonstrating appliances in homes and other places 
for the purpose of selling appliances.
    2. Demonstrating and selling activities in sales rooms.
    3. Installing appliances on customer premises where such work is 
done only for purchasers of appliances from the utility.
    4. Installing wire, piping, or other property work, on a jobbing or 
contract basis.
    5. Preparing advertising materials for appliance sales purposes.
    6. Receiving and handling customer orders for merchandise or for 
jobbing services.
    7. Cleaning and tidying sales rooms.
    8. Maintaining display counters and other equipment used in 
merchandising.
    9. Arranging merchandise in sales rooms and decorating display 
windows.
    10. Reconditioning repossessed appliances.
    11. Bookkeeping and other clerical work in connection with 
merchandise and jobbing activities.
    12. Supervising merchandise and jobbing operations.
    13. Advertising in newspapers, periodicals, radio, and television.
    14. Cost of merchandise sold and of materials used in jobbing work.
    15. Stores expenses on merchandise and jobbing stocks.
    16. Fees and expenses of advertising and commercial artists' 
agencies.
    17. Printing booklets, dodgers, and other advertising data.
    18. Premiums given as inducement to buy appliances.
    19. Light, heat, and power.
    20. Depreciation on equipment used primarily for merchandise and 
jobbing operations.
    21. Rent of sales rooms or of equipment.
    22. Transportation expense in delivery and pick-up of appliances by 
utility's facilities or by others.
    23. Stationery and office supplies and expenses.
    24. Losses from uncollectible merchandise and jobbing accounts.

                417   Revenues from Nonutility Operations

    This account shall include revenues applicable to operations which 
are nonutility in character but nevertheless constitute a distinct 
operating activity of the enterprise as a whole, such as the operation 
of an ice department where applicable statutes do not define such 
operation as a utility, or the operation of a servicing organization for 
furnishing supervision, management, engineering, and similar services to 
others.
    Note: Related taxes shall be recorded in Account 408, Taxes Other 
Than Income

[[Page 766]]

Taxes, or Account 409.2, Income Taxes, Other Income and Deductions, as 
appropriate.

                417.1   Expenses of Nonutility Operations

    A. This account shall include expenses applicable to operations 
which are nonutility in character but nevertheless constitute a distinct 
operating activity of the enterprise as a whole, such as the operation 
of an ice department where applicable statutes do not define such 
operation as a utility, or the operation of a servicing organization for 
furnishing supervision, management, engineering, and similar services to 
others.
    B. The expenses shall include all elements of costs incurred in such 
operations, and the accounts shall be maintained so as to permit ready 
summarization as follows:

    1. Operation.
    2. Maintenance.
    3. Rents.
    4. Depreciation.
    5. Amortization.

    Note: Related taxes shall be recorded in Account 408, Taxes Other 
Than Income Taxes, or Account 409.2, Income Taxes, Other Income and 
Deductions, as appropriate.

                    418   Nonoperating Rental Income

    A. This account shall include all rent revenues and related expenses 
of land, buildings, or other property included in Account 121, 
Nonutility Property, which is not used in operations covered by Account 
417 or Account 417.1.
    B. The expenses shall include all elements of costs incurred in the 
ownership and rental of property and the accounts shall be maintained so 
as to permit ready summarization as follows:

    1. Operation.
    2. Maintenance.
    3. Rents.
    4. Depreciation.
    5. Amortization.
    Note: Related taxes shall be recorded in Account 408, Taxes Other 
Than Income Taxes, or Account 409.2, Income Taxes, Other Income and 
Deductions, as appropriate.

           418.1   Equity in Earnings of Subsidiary Companies

    This account shall include the utility's equity in the earnings or 
losses of subsidiary companies for the year.

                   419   Interest and Dividend Income

    A. This account shall include interest revenues on securities, 
loans, notes, advances, special deposits, tax refunds, and all other 
interest-bearing assets, and dividends on stocks of other companies, 
whether the securities on which the interest and dividends are received 
are carried as investments or included in sinking or other special fund 
accounts.
    Note A: Related taxes shall be recorded in Account 408, Taxes Other 
Than Income Taxes, or Account 409.2, Income Taxes, Other Income and 
Deductions, as appropriate.
    Note B: Interest accrued, the payment of which is not reasonably 
assured, dividends receivable which have not been declared or 
guaranteed, and interest or dividends upon reacquired securities issued 
or assumed by the utility shall not be credited to this account.

          419.1   Allowance for Funds Used During Construction

    This account shall include concurrent credits for allowance for 
funds other than borrowed funds used for construction purposes during 
the period of construction, based upon a reasonable rate. (See 
Sec. 1767.16 (c)(17).)

                      420   Investment Tax Credits

    This account shall be credited as follows with investment tax credit 
amounts not passed on to customers:
    1. By amounts equal to debits to Account 411.4, Investment Tax 
Credit Adjustments, Utility Operations, and Account 411.5, Investment 
Tax Credit Adjustments, Nonutility Operations, for investment tax 
credits used in calculating income taxes for the year when the company's 
accounting provides for non-deferral of all or a portion of such 
credits.
    2. By amounts equal to debits to Account 255, Accumulated Deferred 
Investment Tax Credits, for proportionate amounts of tax credit 
deferrals allocated over the average useful life of the property to 
which the tax credits relate, or such lesser period of time as may be 
adopted and consistently used by the company.

                 421   Miscellaneous Nonoperating Income

    This account shall include all revenue and expense items, except 
taxes properly includible in the income account, not provided for 
elsewhere. Related taxes shall be recorded in Account 408, Taxes Other 
Than Income Taxes, or Account 409.2, Income Taxes, Other Income and 
Deductions, as appropriate.

                                  Items

    1. Profit on sale of timber. (See Sec. 1767.16 (g)(3).)
    2. Profits from operations of others realized by the utility under 
contracts.
    3. Gains on disposition of investments. Also, gains on reacquisition 
and resale or retirement of the utility's debt securities when the gain 
is not amortized or used by a jurisdictional regulatory agency to reduce 
embedded debt cost in establishing rates. (See Sec. 1767.15 (q).)

[[Page 767]]

                 421.1   Gain on Disposition of Property

    This account shall be credited with the gain on the sale, 
conveyance, exchange, or transfer of utility or other property to 
another. Amounts relating to gains on land and land rights held for 
future use recorded in Account 105, Electric Plant Held for Future Use, 
will be accounted for as prescribed in Paragraphs B, C, and D thereof. 
(See Sec. 1767.16 (e)(6), (g)(5), and (j)(5).) Income taxes on gains 
recorded in this account shall be recorded in Account 409.2, Income 
Taxes, Other Income and Deductions.

                 421.2   Loss on Disposition of Property

    This account shall be charged with the loss on the sale, conveyance, 
exchange, or transfer of utility or other property to another. Amounts 
relating to losses on land and land rights held for future use recorded 
in Account 105, Electric Plant Held for Future Use, will be accounted 
for as prescribed in Paragraphs B, C, and D thereof. (See Sec. 1767.16 
(e)(6), (g)(5), and (j)(5).) The reduction in income taxes relating to 
losses recorded in this account shall be recorded in Account 409.2, 
Income Taxes, Other Income and Deductions.

                        422   Nonoperating Taxes

    This account shall be charged with taxes relating to nonoperating 
income.

      423   Generation and Transmission Cooperative Capital Credits

    This account shall be credited with the annual capital furnished the 
power supply cooperative through payment of power bills. The amount of 
capital furnished the power supply cooperative should be recorded in the 
applicable year even though, in most cases, the power supplier's notice 
of the allocation will not have been received until after the close of 
the year to which it relates.

      424   Other Capital Credits and Patronage Capital Allocations

    This account shall be credited with the capital furnished in 
connection with patronage of cooperative or mutual-type service 
organization such as CFC and other financing cooperatives, and 
insurance, oil product, telephone, and data processing cooperatives. 
This account should be credited in the year in which the notice of the 
capital credit or patronage capital allocation is received.

                    425   Miscellaneous Amortization

    This account shall include amortization charges not includible in 
other accounts which are properly deductible in determining the income 
of the utility before interest charges. Charges includible herein, if 
significant in amount, must be in accordance with an orderly and 
systematic amortization program.

                                  Items

    1. Amortization of utility plant acquisition adjustments, or of 
intangibles included in utility plant in service when not authorized to 
be included in utility operating expenses by RUS.
    2. Other miscellaneous amortization charges allowed to be included 
in this account by RUS.

                             426  [Reserved]

                          Special Instructions

             Accounts 426.1, 426.2, 426.3, 426.4, and 426.5

    These accounts shall include miscellaneous expense items which are 
nonoperating in nature but which are properly deductible before 
determining total income before interest charges.
    Note: The classification of expenses as nonoperating and their 
inclusion in these accounts is for accounting purposes. It does not 
preclude RUS consideration of proof to the contrary for ratemaking or 
other purposes.

                            426.1   Donations

    This account shall include all payments or donations for charitable, 
social, or community welfare purposes.

                         426.2   Life Insurance

    This account shall include all payments for life insurance of 
officers and employees where the company is the beneficiary (net 
premiums less the increase in the cash surrender value of policies.)

                            426.3   Penalties

    This account shall include payments by the company for penalties or 
fines for violation of any regulatory statutes by the company or its 
officials.

     426.4   Expenditures for Certain Civic, Political, and Related 
                               Activities

    This account shall include 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 repeal or modification of existing referenda, legislation 
or ordinances) or approval, modification, or revocation of franchises; 
or for the purpose of influencing the decisions of public officials, but 
shall not include such expenditures which are directly related to 
appearances before regulatory or other governmental bodies in connection 
with the reporting utility's existing or proposed operations.

[[Page 768]]

                        426.5   Other Deductions

    This account shall include other miscellaneous expenses which are 
nonoperating in nature, but which are properly deductible before 
determining total income before interest charges.

                                  Items

    1. Loss relating to investments in securities written-off or 
written-down.
    2. Loss on sale of investments.
    3. Loss on reacquisition, resale, or retirement of the utility's 
debt securities, when the loss is not amortized and used by a 
jurisdictional regulatory agency to increase embedded debt cost in 
establishing rates. (See Sec. 1767.15 (q).)
    4. Preliminary survey and investigation expenses related to 
abandoned projects, when not written-off to the appropriate operating 
expense account.
    5. Costs of preliminary abandonment costs recorded in Account 182.1, 
Extraordinary Property Losses, and Account 182.2, Unrecovered Plant and 
Regulatory Study Costs, not allowed to be amortized to Account 407, 
Amortization of Property Losses, Unrecovered Plant and Regulatory Study 
Costs.

Sec. 1767.23  Interest charges.

    The interest charges accounts identified in this section shall be 
used by all RUS borrowers.

                            Interest Charges

427  Interest on Long-Term Debt
427.3  Interest Charged to Construction--Credit
428  Amortization of Debt Discount and Expense
428.1  Amortization of Loss on Reacquired Debt
429  Amortization of Premium on Debt--Credit
429.1  Amortization of Gain on Reacquired Debt--Credit
430  Interest on Debt to Associated Companies
431  Other Interest Expense
432  Allowance for Borrowed Funds Used During Construction--Credit

                            Interest Charges

                    427   Interest on Long-Term Debt

    A. This account shall include the amount of interest on outstanding 
long-term debt issued or assumed by the utility, the liability for which 
included in Account 221, Bonds, or Account 224, Other Long-Term Debt.
    B. This account shall be so kept or supported as to show the 
interest accruals on each class and series of long-term debt.
    Note: This account shall not include interest on nominally issued or 
nominally outstanding long-term debt, including securities assumed.

            427.3   Interest Charged to Construction--Credit

    This account shall include concurrent credits for interest charged 
to construction based upon the net cost for the period of construction 
of borrowed funds used for construction purposes.

             428   Amortization of Debt Discount and Expense

    A. This account shall include the amortization of unamortized debt 
discount and expense on outstanding long-term debt. Amounts charged to 
this account shall be credited concurrently to Account 181, Unamortized 
Debt Expense, and Account 226, Unamortized Discount on Long-Term Debt--
Debit.
    B. This account shall be so kept or supported as to show the debt 
discount and expense on each class and series of long-term debt.

             428.1   Amortization of Loss on Reacquired Debt

    A. This account shall include the amortization of the losses on 
reacquisition of debt. Amounts charged to this account shall be credited 
concurrently to Account 189, Unamortized Loss on Reacquired Debt.
    B. This account shall be maintained so as to allow ready 
identification of the loss amortized applicable to each class and series 
of long-term debt reacquired. (See Sec. 1767.15 (q).)

              429   Amortization of Premium on Debt--Credit

    A. This account shall include the amortization of unamortized net 
premium on outstanding long-term debt. Amounts credited to this account 
shall be charged concurrently to Account 225, Unamortized Premium on 
Long-Term Debt.
    B. This account shall be so kept or supported as to show the premium 
on each class and series of long-term debt.

         429.1   Amortization of Gain on Reacquired Debt--Credit

    A. This account shall include the amortization of the gains realized 
from reacquisition of debt. Amounts credited to this account shall be 
charged concurrently to Account 257, Unamortized Gain on Reacquired 
Debt.
    B. This account shall be maintained so as to allow ready 
identification of the amortized gains applicable to each class and 
series of long-term debt reacquired. (See Sec. 1767.15 (q).)

[[Page 769]]

             430   Interest on Debt to Associated Companies

    A. This account shall include the interest accrued on amounts 
included in Account 223, Advances from Associated Companies, and on all 
other obligations to associated companies.
    B. The records supporting the entries to this account shall be so 
kept as to show to whom the interest is to be paid, the period covered 
by the accrual, the rate of interest, and the principal amount of the 
advances or other obligations on which the interest is accrued.

                      431   Other Interest Expense

    This account shall include all interest charges not provided for 
elsewhere.

                                  Items

    1. Interest on notes payable on demand or maturing one year or less 
from date and on open accounts, except notes and accounts with 
associated companies.
    2. Interest on customers' deposits.
    3. Interest on claims and judgments, tax assessments, and 
assessments for public improvements past due.
    4. Income and other taxes levied upon bondholders of the utility and 
assumed by it.

   432   Allowance for Borrowed Funds Used During Construction--Credit

    This account shall include concurrent credits for allowance for 
borrowed funds used during construction, not to exceed amounts computed 
in accordance with the formula prescribed in Sec. 1767.16 (c)(17).

Sec. 1767.24  Extraordinary items.

    The extraordinary items accounts identified in this section shall be 
used by all RUS borrowers.

                           Extraordinary Items

434  Extraordinary Income
435  Extraordinary Deductions
435.1  Cumulative Effect on Prior Years of a Change in Accounting 
          Principle

                           Extraordinary Items

                       434   Extraordinary Income

    This account shall be credited with nontypical, noncustomary, 
infrequently recurring gains which would significantly distort the 
current year's income computed before extraordinary items, if reported 
other than as extraordinary items. Income tax relating to the amounts 
recorded in this account shall be recorded in Account 409.3, Income 
Taxes, Extraordinary Items. (See Sec. 1767.15 (g).)

                     435   Extraordinary Deductions

    This account shall be debited with nontypical, noncustomary, 
infrequently recurring losses which would significantly distort the 
current year's income computed before extraordinary items, if reported 
other than as extraordinary items. Income tax relating to the amounts 
recorded in this account shall be recorded in Account 409.3, Income 
Taxes, Extraordinary Items. (See Sec. 1767.15 (f).)

   435.1   Cumulative Effect on Prior Years of a Change in Accounting 
                                Principle

    This account shall include the cumulative effect on margins of prior 
periods as a result of a change in accounting principle from one that is 
no longer generally accepted to one that is generally accepted.

Sec. 1767.25  Retained earnings.

    The retained earnings accounts identified in this section shall be 
used by all RUS borrowers.

                            Retained Earnings

433  [Reserved]
436  [Reserved]
437  [Reserved]
438  [Reserved]
439  [Reserved]

                            Retained Earnings

                             433  [Reserved]

                             436  [Reserved]

                             437  [Reserved]

                             438  [Reserved]

                             439  [Reserved]

Sec. 1767.26  Operating revenue.

    The operating revenue accounts identified in this section shall be 
used by all RUS borrowers.

                            Operating Revenue

                          Sales of Electricity

440  Residential Sales
440.1  Residential Sales--Excluding Seasonal
440.2  Residential Sales--Seasonal
441  Irrigation Sales
442  Commercial and Industrial Sales
442.1  Commercial and Industrial Sales--1000 kVA or Less
442.2  Commercial and Industrial Sales--Over 1000 kVA
444  Public Street and Highway Lighting
445  Other Sales to Public Authorities
446  Sales to Railroads and Railways
447  Sales for Resale
447.1  Sales for Resale--RUS Borrowers
447.2  Sales for Resale--Other

[[Page 770]]

448  Interdepartmental Sales
449.1  Provision for Rate Refunds

                        Other Operating Revenues

450  Forfeited Discounts
451  Miscellaneous Service Revenues
453  Sales of Water and Water Power
454  Rent from Electric Property
455  Interdepartmental Rents
456  Other Electric Revenues

                            Operating Revenue

                          Sales of Electricity

                         440   Residential Sales

    A. This account shall include the net billing for electricity 
supplied for residential or domestic purposes.
    Note: When electricity supplied through a single meter is used for 
both residential and commercial purposes, the total revenue shall be 
included in this account, or Account 442, Commercial and Industrial 
Sales, according to the rate schedule that is applied. If the same rate 
schedules apply to residential and commercial and industrial service, 
classification shall be made according to principal use.
    B. Account 440 shall be subaccounted as follows:

440.1  Residential Sales--Excluding Seasonal
440.2  Residential Sales--Seasonal

              440.1   Residential Sales--Excluding Seasonal

    A. This account shall include the net billing for electricity 
supplied for residential and domestic purposes.
    B. This account shall also include net billings for single phase 
service to schools, churches, lodges, and other public buildings.
    C. Records shall be maintained so that the quantity of electricity 
sold and the revenue received under each rate schedule shall be readily 
available.
    Note: Net billings for multiphase service to schools, churches, 
lodges, and other public buildings shall be included in the appropriate 
subaccount of Account 442, Commercial and Industrial Sales.

                   440.2   Residential Sales--Seasonal

    This account shall include the net billings for electricity supplied 
for residential and domestic purposes to seasonal consumers.

                         441   Irrigation Sales

    This account shall include the net billings for electricity supplied 
for irrigation pumping. It need not be used unless such service is 
provided under a special irrigation rate.

                  442   Commercial and Industrial Sales

    A. This account shall include the net billing for electricity 
supplied to customers for commercial and industrial purposes.
    Note A: If the utility classifies large commercial and industrial 
customers and related revenues on a lesser basis than 1000 kilowatts of 
demand, or segregates industrial customers and related revenues 
according to a recognized definition of an industrial customer, such 
classifications are acceptable in lieu of those otherwise required by 
the text of this account on the basis of 1000 kilowatts of demand.
    Note B: When electricity supplied through a single meter is used for 
both commercial and residential purposes, the total revenue shall be 
included in this account, or Account 440, Residential Sales, according 
to the rate schedule that is applied. If the same rate schedules apply 
to residential and commercial and industrial service, classification 
shall be made according to principal use.
    B. Account 442 shall be subaccounted as follows:

442.1  Commercial and Industrial Sales--1000 kVA or Less
442.2  Commercial and Industrial Sales--Over 1000 kVA

        442.1   Commercial and Industrial Sales--1000 kVA or Less

    A. This account shall include the net billing for electricity 
supplied to consumers for commercial and industrial purposes requiring 
transformer capacity of 1000 kVA or less.
    B. Records shall be maintained so that the quantity of electricity 
sold and the revenue received under each rate schedule shall be readily 
available.
    Note: When electricity supplied through a single meter is used for 
both commercial and residential purposes, the total revenue shall be 
included in this account or in Account 440, Residential Sales, based 
upon primary use.

         442.2   Commercial and Industrial Sales--Over 1000 kVA

    A. This account shall include the net billing for electricity 
supplied to consumers for commercial and industrial purposes requiring 
transformer capacity in excess of 1000 kVA.
    B. Records shall be maintained so that the quantity of electricity 
sold and the revenue received under each rate schedule shall be readily 
available.

                444   Public Street and Highway Lighting

    A. This account shall include the net billing for electricity 
supplied and services rendered for the purposes of lighting streets, 
highways, parks, and other public places or for traffic or signal system 
service, for municipalities or other divisions or agencies of state of 
Federal Governments.
    B. Records shall be maintained so that the quantity of electricity 
sold and the revenue received from each customer shall be readily

[[Page 771]]

available. In addition, the records shall be maintained so as to show 
the revenues from (1) contracts which include both electricity and 
services, and (2) contracts which include sales of electricity only.

                 445   Other Sales to Public Authorities

    A. This account shall include the net billing for electricity 
supplied to municipalities or divisions or agencies of Federal or state 
governments, under special contracts or agreements or service 
classifications applicable only to public authorities, except such 
revenues as are includible in Account 444 and Account 447.
    B. Records shall be maintained so as to show the quantity of 
electricity sold and the revenues received from each customer.

                  446   Sales to Railroads and Railways

    A. This account shall include the net billing for electricity 
supplied to railroads and interurban and street railways, for general 
railroad use, including the propulsion of cars or locomotives, where 
such electricity is supplied under separate and distinct rate schedules.
    B. Records shall be maintained so that the quantity of electricity 
sold and the revenue received from each customer shall be readily 
available.
    Note: Revenues from incidental use of electricity furnished under a 
contract for propulsion of cars or locomotives shall be included herein.

                         447   Sales for Resale

    A. This account shall include the net billing for electricity 
supplied to other electric utilities or to public authorities for resale 
purposes.
    Note: Revenues from electricity supplied to other utilities for use 
by them and not for distribution, shall be included in Account 442, 
Commercial and Industrial Sales, unless supplied under the same 
contracts as and not readily separable from revenues includible in this 
account.
    B. Account 447 shall be subaccounted as follows:

447.1  Sales for Resale--RUS Borrowers
447.2  Sales for Resale--Other

                 447.1   Sales for Resale--RUS Borrowers

    A. This account shall include the net billing for electricity 
supplied to RUS borrowers for resale.
    B. Records shall be maintained so as to show the quantity of 
electricity sold and the revenue received from each customer.
    Note: Revenues from electricity supplied to other utilities for use 
by them and not for distribution, shall be included in Account 442, 
Commercial and Industrial Sales, unless supplied under the same contract 
as and not readily separable from revenues includible in this account.

                     447.2   Sales for Resale--Other

    A. This account shall include the net billing for electricity 
supplied for resale to utilities not financed by RUS.
    B. Records shall be maintained so as to show the quantity of 
electricity sold and the revenue received from each customer.
    Note: Revenues from electricity supplied to other utilities for use 
by them and not for distribution, shall be included in Account 442, 
Commercial and Industrial Sales, unless supplied under the same contract 
as and not readily separable from revenues includible in this account.

                      448   Interdepartmental Sales

    A. This account shall include amounts charged by the electric 
department at tariff or other specified rates for electricity supplied 
by it to other utility departments.
    B. Records shall be maintained so that the quantity of electricity 
supplied each other department and the charges therefor shall be readily 
available.

                   449.1   Provision for Rate Refunds

    A. This account shall be charged with provisions for the estimated 
pretax effects on net income of the portions of amounts being collected 
subject to refund which are estimated to be required to be refunded. 
Such provisions shall be credited to Account 229, Accumulated Provision 
for Rate Refunds.
    B. This account shall also be charged with amounts refunded when 
such amounts had not been previously accrued.
    C. Income tax effects relating to the amounts recorded in this 
account shall be recorded in Account 410.1, Provision for Deferred 
Income Taxes, Utility Operating Income, or Account 411.1, Provision for 
Deferred Income Taxes--Credit, Utility Operating Income, as appropriate.

                        Other Operating Revenues

                        450   Forfeited Discounts

    This account shall include the amount of discounts forfeited or 
additional charges imposed because of the failure of customers to pay 
their electric bills on or before a specified date.

                  451   Miscellaneous Service Revenues

    This account shall include revenues for all miscellaneous services 
and charges billed to customers which are not specifically provided for 
in other accounts.

                                  Items

    1. Fees for changing, connecting, or disconnecting service.

[[Page 772]]

    2. Profit on maintenance of appliances, wiring, piping, or other 
installations on customers' premises.
    3. Net credit or debit (cost less net salvage and less payment from 
customers) on closing of work orders for plant installed for temporary 
service of less than one year. (See Account 185, Temporary Facilities.)
    4. Recovery of expenses in connection with current diversion cases 
(billing for the electricity consumed shall be included in the 
appropriate electric revenue account).

                  453   Sales of Water and Water Power

    A. This account shall include revenues derived from the sale of 
water for irrigation, domestic, industrial, or other uses or for the 
development by others of water power or for headwater benefits; also, 
revenues derived from furnishing water power for mechanical purposes 
when the investment in the property used in supplying such water or 
water power is carried as electric plant in service.
    B. The records for this account shall be kept in such manner as to 
permit an analysis of the rates charged and the purposes for which the 
water was used.

                    454   Rent from Electric Property

    A. This account shall include rents received for the use by others 
of land, buildings, and other property devoted to electric operations by 
the utility.
    B. When property owned by the utility is operated jointly with 
others under a definite arrangement for apportioning the actual expenses 
among the parties to the arrangement, any amount received by the utility 
for interest or return or in reimbursement of taxes or depreciation on 
the property shall be credited to this account.
    Note: Do not include in this account rents from property 
constituting an operating unit or system. (See Account 412, Revenues 
from Electric Plant Leased to Others.)

                      455   Interdepartmental Rents

    This account shall include rents credited to the electric department 
on account of rental charges made against other departments (gas, water, 
etc.) of the utility. In the case of property operated under a definite 
arrangement to allocate the costs among the departments using the 
property, any reimbursement to the electric department for interest or 
return and depreciation and taxes shall be credited to this account.

                      456   Other Electric Revenues

    This account shall include revenues derived from electric operations 
not includible in any of the foregoing accounts. It shall also include, 
in a separate subaccount, revenues received from operation of fish and 
wildlife and recreation facilities whether operated by the company or by 
contract concessionaires, such as revenues from leases or rentals of 
land for cottages, homes, or campsites.

                                  Items

    1. Commission on sale or distribution of electricity of others when 
sold under rates filed by such others.
    2. Compensation for minor or incidental services provided for others 
such as customer billing, and engineering.
    3. Profit or loss on the sale of material and supplies not 
ordinarily purchased for resale and not handled through merchandising 
and jobbing accounts.
    4. Sale of steam, but not including sales made by a steamheating 
department or transfers of steam under joint facility operations.
    5. Revenues from transmission of electricity of others over 
transmission facilities of the utility.
    6. Include in a separate subaccount, revenues in payment for rights 
and/or benefits received from others which are realized through 
research, development, and demonstration ventures. In the event the 
amounts received are so large as to distort revenues for the year in 
which received (5 percent of net income before application of the 
benefit), the amounts shall be credited to Account 253, Other Deferred 
Credits, and amortized by credits to this account over a period not to 
exceed 5 years.

Sec. 1767.27  Operation and maintenance expenses.

    The operation and maintenance expense accounts identified in this 
section shall be used by all RUS borrowers.

               Operation and Maintenance Expense Accounts

                        Power Production Expenses

                         Steam Power Generation

                               (Operation)

500  Operation Supervision and Engineering
501  Fuel
502  Steam Expenses
503  Steam from Other Sources
504  Steam Transferred--Credit
505  Electric Expenses
506  Miscellaneous Steam Power Expenses
507  Rents
509  Allowances

                              (Maintenance)

510  Maintenance Supervision and Engineering
511  Maintenance of Structures
512  Maintenance of Boiler Plant
513  Maintenance of Electric Plant

[[Page 773]]

514  Maintenance of Miscellaneous Steam Plant

                        Nuclear Power Generation

                               (Operation)

517  Operation Supervision and Engineering
518  Nuclear Fuel Expense
519  Coolants and Water
520  Steam Expenses
521  Steam from Other Sources
522  Steam Transferred--Credit
523  Electric Expenses
524  Miscellaneous Nuclear Power Expenses
525  Rents

                              (Maintenance)

528  Maintenance Supervision and Engineering
529  Maintenance of Structures
530  Maintenance of Reactor Plant Equipment
531  Maintenance of Electric Plant
532  Maintenance of Miscellaneous Nuclear Plant

                       Hydraulic Power Generation

                               (Operation)

535  Operation Supervision and Engineering
536  Water for Power
537  Hydraulic Expenses
538  Electric Expenses
539  Miscellaneous Hydraulic Power Generation Expenses
540  Rents

                              (Maintenance)

541  Maintenance Supervision and Engineering
542  Maintenance of Structures
543  Maintenance of Reservoirs, Dams, and Waterways
544  Maintenance of Electric Plant
545  Maintenance of Miscellaneous Hydraulic Plant

                         Other Power Generation

                               (Operation)

546  Operation Supervision and Engineering
547  Fuel
548  Generation Expenses
549  Miscellaneous Other Power Generation Expenses
550  Rents

                              (Maintenance)

551  Maintenance Supervision and Engineering
552  Maintenance of Structures
553  Maintenance of Generating and Electric Equipment
554  Maintenance of Miscellaneous Other Power Generation Plant

                       Other Power Supply Expenses

555  Purchased Power
556  System Control and Load Dispatching
557  Other Expenses

                          Transmission Expenses

                               (Operation)

560  Operation Supervision and Engineering
561  Load Dispatching
562  Station Expenses
563  Overhead Line Expenses
564  Underground Line Expenses
565  Transmission of Electricity by Others
566  Miscellaneous Transmission Expenses
567  Rents

                              (Maintenance)

568  Maintenance Supervision and Engineering
569  Maintenance of Structures
570  Maintenance of Station Equipment
571  Maintenance of Overhead Lines
572  Maintenance of Underground Lines
573  Maintenance of Miscellaneous Transmission Plant

                          Distribution Expenses

                               (Operation)

580  Operation Supervision and Engineering
581  Load Dispatching
582  Station Expenses
583  Overhead Line Expenses
584  Underground Line Expenses
585  Street Lighting and Signal System Expenses
586  Meter Expenses
587  Customer Installations Expenses
588  Miscellaneous Distribution Expenses
589  Rents

                              (Maintenance)

590  Maintenance Supervision and Engineering
591  Maintenance of Structures
592  Maintenance of Station Equipment
593  Maintenance of Overhead Lines
594  Maintenance of Underground Lines
595  Maintenance of Line Transformers
596  Maintenance of Street Lighting and Signal Systems
597  Maintenance of Meters
598  Maintenance of Miscellaneous Distribution Plant

[[Page 774]]

               Operation and Maintenance Expense Accounts

                        Power Production Expenses

                         Steam Power Generation

                               (Operation)

               500  Operation Supervision and Engineering

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
and expenses incurred in the general supervision and direction of the 
operation of steam power generating stations. Direct supervision of 
specific activities, such as fuel handling, boiler-room operations, and 
generator operations shall be charged to the appropriate account. (See 
Sec. 1767.17(a).)

                                501  Fuel

    A. This account shall include the cost of fuel used in the 
production of steam for the generation of electricity, including 
expenses in unloading fuel from the shipping media and handling thereof 
up to the point where the fuel enters the first boiler plant bunker, 
hopper, bucket, tank, or holder of the boiler-house structure. Records 
shall be maintained to show the quantity, B.t.u. content and cost of 
each type of fuel used.
    B. The cost of fuel shall be charged initially to Account 151, Fuel 
Stock, and cleared to this account on the basis of the fuel used. Fuel 
handling expenses may be charged to this account as incurred or charged 
initially to Account 152, Fuel Stock Expenses Undistributed. In the 
latter event, they shall be cleared to this account on the basis of the 
fuel used. Respective amounts of fuel stock and fuel stock expenses 
shall be readily available.

                                  Items

Labor:

    1. Supervising, purchasing, and handling of fuel.
    2. All routine fuel analyses.
    3. Unloading from shipping facility and placing in storage.
    4. Moving of fuel in storage and transferring fuel from one station 
to another.
    5. Handling from storage or shipping facility to first bunker, 
hopper, bucket, tank, or holder of boiler-house structure.
    6. Operation of mechanical equipment, such as locomotives, trucks, 
cars, boats, barges, and cranes.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    3. Property.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.
    2. Amounts credited to Account 228.1, Accumulated Provision for 
Property Insurance, for similar protection.
    3. Special costs incurred in procuring insurance.
    4. Insurance inspection service.
    5. Insurance counsel, brokerage fees, and expenses.
    6. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    7. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    8. Fees and expenses of claim investigators.
    9. Payment of awards to claimants for court costs and attorneys' 
services.
    10. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    11. Compensation payments under workmen's compensation laws.
    12. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    13. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:


[[Page 775]]


    1. Operating, maintenance, and depreciation expenses and ad valorem 
taxes on utility-owned transportation equipment used to transport fuel 
from the point of acquisition to the unloading point.
    2. Lease or rental costs of transportation equipment used to 
transport fuel from the point of acquisition to the unloading point.
    3. Cost of fuel including freight, switching, demurrage, and other 
transportation charges.
    4. Excise taxes, insurance, purchasing commissions, and similar 
items.
    5. Stores expenses to extent applicable to fuel.
    6. Transportation and other expenses in moving fuel in storage.
    7. Tools, lubricants, and other supplies.
    8. Operating supplies for mechanical equipment.
    9. Residual disposal expenses less any proceeds from sale of 
residuals.

    Note: Abnormal fuel handling expenses occasioned by emergency 
conditions shall be charged to expense as incurred.

                           502  Steam Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
property insurance, property taxes, materials used, and expenses 
incurred in production of steam for electric generation. This includes 
all expenses of handling and preparing fuel beginning at the point where 
the fuel enters the first boiler plant bunker, hopper, tank, or holder 
of the boiler-house structure.

                                  Items

Labor:
    1. Supervising steam production.
    2. Operating fuel conveying, storage, weighing, and processing 
equipment within boiler plant.
    3. Operating boiler and boiler auxiliary equipment.
    4. Operating boiler feed water purification and treatment equipment.
    5. Operating ash-collecting and disposal equipment located inside 
the plant.
    6. Operating boiler plant electrical equipment.
    7. Keeping boiler plant log and records and preparing reports on 
boiler plant operations.
    8. Testing boiler water.
    9. Testing, checking, and adjusting meters, gauges, and other 
instruments and equipment in boiler plant.
    10. Cleaning boiler plant equipment when not incidental to 
maintenance work.
    11. Repacking glands and replacing gauge glasses where the work 
involved is of a minor nature and is performed by regular operating 
crews. Where the work is of a major character, such as that performed on 
high-pressure boilers, the item should be considered as maintenance.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    3. Property.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.
    2. Amounts credited to Account 228.1, Accumulated Provision for 
Property Insurance, for similar protection.
    3. Special costs incurred in procuring insurance.
    4. Insurance inspection service.
    5. Insurance counsel, brokerage fees, and expenses.
    6. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    7. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    8. Fees and expenses of claim investigators.
    9. Payment of awards to claimants for court costs and attorneys' 
services.
    10. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.

[[Page 776]]

    11. Compensation payments under workmen's compensation laws.
    12. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    13. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Chemicals and boiler inspection fees.
    2. Lubricants.
    3. Boiler feed water purchased and pumping supplies.

                     503   Steam from Other Sources

    This account shall include the cost of steam purchased or 
transferred from another department of the utility or from others under 
a joint facility operating arrangement for use in prime movers devoted 
to the production of electricity.
    Note: The records shall be so kept as to show separately for each 
company from which stem is purchased, the point of delivery, the 
quantity, the price, and the total charge. When steam is transferred 
from another department or from others under a joint operating 
arrangement, the utility shall be prepared to show full details of the 
cost of producing such steam, the basis of the charge to electric 
generation, and the extent and manner of use by each department or party 
involved.

                     504   Steam Transferred--Credit

    A. This account shall include credits for expenses of producing 
steam which are charged to others or to other utility departments under 
a joint operating arrangement. Include also credits for steam expenses 
chargeable to other electric accounts outside of the steam generation 
group. Full details of the basis of determination of the cost of steam 
transferred shall be maintained.
    B. If the charges to others or to other departments of the utility 
include an amount for depreciation, taxes, and return on the joint steam 
facilities, such portion of the charge shall be credited, in the case of 
others, to Account 454, Rent from Electric Property, and in the case of 
other departments of the utility, to Account 455, Interdepartmental 
Rents.

                         505  Electric Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
property insurance, property taxes, and materials used, and expenses 
incurred in operating prime movers, generators, and their auxiliary 
apparatus, switch gear, and other electric equipment to the points where 
electricity leaves for conversion for transmission or distribution.

                                  Items

Labor:

    1. Supervising electric production.
    2. Operating turbines, engines, generators, and exciters.
    3. Operating condensers, circulating water systems, and other 
auxiliary apparatus.
    4. Operating generator cooling system.
    5. Operating lubrication and oil control system, including oil 
purification.
    6. Operating switchboards, switch gear and electric control, and 
protective equipment.
    7. Keeping electric plant log and records and preparing reports on 
electric plant operations.
    8. Testing, checking, and adjusting meters, gauges, and other 
instruments, relays, controls, and other equipment in the electric 
plant.
    9. Cleaning electric plant equipment when not incidental to 
maintenance work.
    10. Repacking glands and replacing gauge glasses.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    3. Taxes.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.
    2. Amounts credited to Account 228.1, Accumulated Provision for 
Property Insurance, for similar protection.
    3. Special costs incurred in procuring insurance.

[[Page 777]]

    4. Insurance inspection service.
    5. Insurance counsel, brokerage fees, and expenses.
    6. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    7. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    8. Fees and expenses of claim investigators.
    9. Payment of awards to claimants for court costs and attorneys' 
services.
    10. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    11. Compensation payments under workmen's compensation laws.
    12. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    13. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Lubricants and control system oils.
    2. Generator cooling gases.
    3. Circulating water purification supplies.
    4. Cooling water purchased.
    5. Motor and generator brushes.

                 506  Miscellaneous Steam Power Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
and materials used and expenses incurred which are not specifically 
provided for or not readily assignable to other steam generation 
operation expense accounts.

                                  Items

Labor:

    1. General clerical and stenographic work.
    2. Guarding and patrolling plant and yard.
    3. Building service.
    4. Care of grounds including snow removal, and grass cutting.
    5. Miscellaneous labor.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    2. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    3. Fees and expenses of claim investigators.
    4. Payment of awards to claimants for court costs and attorneys' 
services.
    5. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    6. Compensation payments under workmen's compensation laws.
    7. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    8. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. General operating supplies, such as tools, gaskets, packing 
waste, gauge glasses, hose, indicating lamps, record and report forms.
    2. First-aid supplies and safety equipment.
    3. Employees' service facilities expenses.
    4. Building service supplies.
    5. Communication service.
    6. Miscellaneous office supplies and expenses, printing, and 
stationery.
    7. Transportation expenses.
    8. Meals, traveling, and incidental expenses.
    9. Research, development, and demonstration expenses.

[[Page 778]]

                               507   Rents

    This account shall include all rents of property of others used, 
occupied or operated in connection with steam power generation. (See 
Sec. 1767.17 (c).)

                            509   Allowances

    This account shall include the cost of allowances expensed 
concurrent with the monthly emission of sulfur dioxide. (See 
Sec. 1767.15 (u).)

                              (Maintenance)

              510  Maintenance Supervision and Engineering

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
and expenses incurred in the general supervision and direction of 
maintenance of steam generation facilities. Direct field supervision of 
specific jobs shall be charged to the appropriate maintenance account. 
(See Sec. 1767.17(a).)

                     511  Maintenance of Structures

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
and materials used and expenses incurred in the maintenance of steam 
structures, the book cost of which is includible in Account 311, 
Structures and Improvements. (See Sec. 1767.17(b).)

                    512  Maintenance of Boiler Plant

    A. This account shall include the cost of labor, employee pensions 
and benefits, social security and other payroll taxes, injuries and 
damages, and materials used and expenses incurred in the maintenance of 
steam plant, the book cost of which is includible in Account 312, Boiler 
Plant Equipment. (See Sec. 1767.17(b).)
    B. For the purpose of making charges hereto and to Account 513, 
Maintenance of Electric Plant, the point at which steam plant is 
distinguished from electric plant is defined as follows:
    1. Inlet flange of throttle valve on prime mover.
    2. Flange of all steam extraction lines on prime mover.
    3. Hotwell pump outlet on condensate lines.
    4. Inlet flange of all turbine-room auxiliaries.
    5. Connection to line side of motor starter for all boiler-plant 
equipment.

                   513  Maintenance of Electric Plant

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
and materials used and expenses incurred in the maintenance of electric 
plant, the book cost of which is includible in Account 313, Engines and 
Engine-Driven Generators; Account 314, Turbogenerator Units; and Account 
315, Accessory Electric Equipment. (See Sec. 1767.17(b) and Paragraph B 
of Account 512.)

              514  Maintenance of Miscellaneous Steam Plant

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
and materials used and expenses incurred in maintenance of miscellaneous 
steam generation plant, the book cost of which is includible in Account 
316, Miscellaneous Power Plant Equipment. (See Sec. 1767.17(b).)

                        Nuclear Power Generation

                               (Operation)

               517  Operation Supervision and Engineering

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
and expenses incurred in the general supervision and direction of the 
operation of nuclear power generating stations. Direct supervision of 
specific activities, such as fuel handling, reactor operations, and 
generator operations shall be charged to the appropriate account. (See 
Sec. 1767.17(a).)

                       518   Nuclear Fuel Expense

    A. This account shall be debited and Account 120.5, Accumulated 
Provision for Amortization of Nuclear Fuel Assemblies, credited for the 
amortization of the net cost of nuclear fuel assemblies used in the 
production of energy. The net cost of nuclear fuel assemblies subject to 
amortization shall be the cost of nuclear fuel assemblies plus or less 
the expected net salvage of uranium, plutonium, and other byproducts and 
unburned fuel. The utility shall adopt the necessary procedures to 
assure that charges to this account are distributed according to the 
thermal energy produced in such periods.
    B. This account shall also include the costs involved when fuel is 
leased.
    C. This account shall also include the cost of other fuels, used for 
ancillary steam facilities, including superheat.
    D. This account shall be debited or credited as appropriate for 
significant changes in the amounts estimated as the net salvage value of 
uranium, plutonium, and other byproducts contained in Account 157, 
Nuclear Materials Held for Sale, and the amount realized upon the final 
disposition of the materials. Significant declines in the estimated 
realizable value of items carried in Account 157 may be recognized at 
the time of market

[[Page 779]]

price declines by charging this account and crediting Account 157. When 
the declining change occurs while the fuel is recorded in Account 120.3, 
Nuclear Fuel Assemblies in Reactor, the effect shall be amortized over 
the remaining life of the fuel.

                         519  Coolants and Water

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
property insurance, property taxes, and materials used and expenses 
incurred for heat transfer materials and water used for steam and 
cooling purposes.

                                  Items

Labor:

    1. Operation of water supply facilities.
    2. Handling of coolants and heat transfer materials.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    3. Taxes.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.
    2. Amounts credited to Account 228.1, Accumulated Provision for 
Property Insurance, for similar protection.
    3. Special costs incurred in procuring insurance.
    4. Insurance inspection service.
    5. Insurance counsel, brokerage fees, and expenses.
    6. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    7. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    8. Fees and expenses of claim investigators.
    9. Payment of awards to claimants for court costs and attorneys' 
services.
    10. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    11. Compensation payments under workmen's compensation laws.
    12. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    13. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Chemicals.
    2. Additions to or refining of fluids used in reactor systems.
    3. Lubricants.
    4. Pumping supplies and expenses.
    5. Miscellaneous supplies and expenses.
    6. Purchased water.

    Note: Do not include in this account water for general station use 
or the initial charge for coolants, heat transfer, or moderator fluids, 
chemicals, or other supplies capitalized.

                           520  Steam Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
property insurance, property taxes, and materials used and expenses 
incurred in production of steam through nuclear processes, and similar 
expenses for operation of any auxiliary superheat facilities.

                                  Items

Labor:

    1. Supervising steam production.
    2. Fuel handling including removal, insertion, disassembly, and 
preparation for cooling operations and shipment.
    3. Testing instruments and gauges.
    4. Health, safety, monitoring, and decontamination activities.
    5. Waste disposal.
    6. Operating steam boilers and auxiliary steam, superheat 
facilities.

Taxes:


[[Page 780]]


    1. Federal and state unemployment.
    2. F.I.C.A.
    3. Property.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.
    2. Amounts credited to Account 228.1, Accumulated Provision for 
Property Insurance, for similar protection.
    3. Special costs incurred in procuring insurance.
    4. Insurance inspection service.
    5. Insurance counsel, brokerage fees, and expenses.
    6. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    7. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    8. Fees and expenses of claim investigators.
    9. Payment of awards to claimants for court costs and attorneys' 
services.
    10. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    11. Compensation payments under workmen's compensation laws.
    12. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    13. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Chemical supplies.
    2. Charts and logs.
    3. Health, safety, monitoring, and decontamination supplies.
    4. Boiler inspection fees.
    5. Lubricants.

                     521   Steam from Other Sources

    This account shall include the cost of steam purchased or 
transferred from another department of the utility or from others under 
a joint facility operating arrangement for use in prime movers devoted 
to the production of electricity.
    Note: The records shall be so kept as to show separately for each 
company from which steam is purchased, the point of delivery, the 
quantity, the price, and the total charge. When steam is transferred 
from another operating department, the utility shall be prepared to show 
full details of the cost of producing such steam, the basis of the 
charges to electric generation, and the extent and manner of use by each 
department involved.

                     522   Steam Transferred--Credit

    A. This account shall include credits for expenses of producing 
steam which are charged to others or to other utility departments under 
a joint operating arrangement. Include also credits for steam expenses 
chargeable to other electric accounts outside of the steam generation 
group. Full details of the basis of determination of the cost of steam 
transferred shall be maintained.
    B. If the charges to others or to other departments of the utility 
include an amount for depreciation, taxes, and return on the joint steam 
facilities, such portion of the charge shall be credited in the case of 
others, to Account 454, Rent from Electric Property, and in the case of 
other departments of the utility, to Account 455, Interdepartmental 
Rents.

                         523  Electric Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
property insurance, property taxes, materials used, and expenses 
incurred in operating turbogenerators, steam turbines and their 
auxiliary apparatus, switch gear, and other electric equipment to the 
points where electricity leaves for conversion for transmission or 
distribution.

[[Page 781]]

                                  Items

Labor:

    1. Supervising electric production.
    2. Operating turbines, engines, generators, and exciters.
    3. Operating condensers, circulating water systems, and other 
auxiliary apparatus.
    4. Operating generator cooling system.
    5. Operating lubrication and oil control system, including oil 
purification.
    6. Operating switchboards, switch gear, and electric control and 
protective equipment.
    7. Keeping plant log and records and preparing reports on electric 
plant operations.
    8. Testing, checking and adjusting meters, gauges, and other 
instruments, relays, controls, and other equipment in the electric 
plant.
    9. Cleaning electric plant equipment when not incidental to 
maintenance.
    10. Repacking glands and replacing gauge glasses.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    3. Property.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.
    2. Amounts credited to Account 228.1, Accumulated Provision for 
Property Insurance, for similar protection.
    3. Special costs incurred in procuring insurance.
    4. Insurance inspection service.
    5. Insurance counsel, brokerage fees, and expenses.
    6. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    7. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    8. Fees and expenses of claim investigators.
    9. Payment of awards to claimants for court costs and attorneys' 
services.
    10. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    11. Compensation payments under workmen's compensation laws.
    12. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    13. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Lubricants and control system oils.
    2. Generator cooling gases.
    3. Log sheets and charts.
    4. Motor and generator brushes.

                524  Miscellaneous Nuclear Power Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred which are not specifically 
provided for or are not readily assignable to other nuclear generation 
operation accounts.

                                  Items

Labor:

    1. General clerical and stenographic work.
    2. Plant security.
    3. Building service.
    4. Care of grounds, including snow removal, and grass cutting
    5. Miscellaneous labor.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:

[[Page 782]]

    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    2. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    3. Fees and expenses of claim investigators.
    4. Payment of awards to claimants for court costs and attorneys' 
services.
    5. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    6. Compensation payments under workmen's compensation laws.
    7. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    8. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. General operating supplies, such as tools, gaskets, hose, 
indicating lamps, records and reports forms.
    2. First-aid supplies and safety equipment.
    3. Employees' service facilities expenses.
    4. Building service supplies.
    5. Communication service.
    6. Miscellaneous office supplies and expenses, printing and 
stationery.
    7. Transportation expenses.
    8. Meals, traveling, and incidental expenses.
    9. Research, development, and demonstration expenses.

                               525   Rents

    This account shall include all rents of property of others used, 
occupied, or operated in connection with nuclear generation. (See 
Sec. 1767.17 (c).)

                              (Maintenance)

              528  Maintenance Supervision and Engineering

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
and expenses incurred in the general supervision and direction of 
maintenance of nuclear generation facilities. Direct field supervision 
of specific jobs shall be charged to the appropriate maintenance 
account. (See Sec. 1767.17(a).)

                     529  Maintenance of Structures

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in the maintenance of structures, 
the book cost of which is includible in Account 321, Structures and 
Improvements. (See Sec. 1767.17(b).)

               530  Maintenance of Reactor Plant Equipment

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in the maintenance of reactor 
plant, the book cost of which is includible in Account 322, Reactor 
Plant Equipment. (See Sec. 1767.17(b).)

                   531  Maintenance of Electric Plant

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in the maintenance of electric 
plant, the book cost of which is includible in Account 323, 
Turbogenerator Units, and Account 324, Accessory Electric Equipment. 
(See Sec. 1767.17(b).)

             532  Maintenance of Miscellaneous Nuclear Plant

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in maintenance of miscellaneous 
nuclear generating plant, the book cost of which is includible in 
Account 325, Miscellaneous Power Plant Equipment. (See Sec. 1767.17(b).)

                       Hydraulic Power Generation

                               (Operation)

               535  Operation Supervision and Engineering

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and

[[Page 783]]

damages, and expenses incurred in the general supervision and direction 
of the operation of hydraulic power generating stations. Direct 
supervision of specific activities, such as hydraulic operation, and 
generator operation shall be charged to the appropriate account. (See 
Sec. 1767.17(a).)

                          536   Water for Power

    This account shall include the cost of water used for hydraulic 
power generation.

                                  Items

    1. Cost of water purchased from others, including water tolls paid 
reservoir companies.
    2. Periodic payments for licenses or permits from any governmental 
agency for water rights, or payments based on the use of the water.
    3. Periodic payments for riparian rights.
    4. Periodic payments for headwater benefits or for detriments to 
others.
    5. Cloud seeding.

                         537  Hydraulic Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
property insurance, property taxes, materials used, and expenses 
incurred in operating hydraulic works including reservoirs, dams, and 
waterways, and in activities directly relating to the hydroelectric 
development outside the generating station. It shall also include the 
cost of labor, materials used, and other expenses incurred in connection 
with the operation of (1) fish and wildlife, and (2) recreation 
facilities. Separate subaccounts shall be maintained for each of the 
above.

                                  Items

Labor:

    1. Supervising hydraulic operation.
    2. Removing debris and ice from trash racks, reservoirs, and 
waterways.
    3. Patrolling reservoirs and waterways.
    4. Operating intakes, spillways, sluiceways, and outlet works.
    5. Operating bubbler, heater, or other deicing systems.
    6. Ice and log jam work.
    7. Operating navigation facilities.
    8. Operations relating to conservation of game, fish, and forests.
    9. Insect control activities.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    3. Property.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.
    2. Amounts credited to Account 228.1, Accumulated Provision for 
Property Insurance, for similar protection.
    3. Special costs incurred in procuring insurance.
    4. Insurance inspection service.
    5. Insurance counsel, brokerage fees, and expenses.
    6. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    7. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    8. Fees and expenses of claim investigators.
    9. Payment of awards to claimants for court costs and attorneys' 
services.
    10. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    11. Compensation payments under workmen's compensation laws.
    12. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    13. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Insect control materials.

[[Page 784]]

    2. Lubricants, packing, and other supplies used in the operation of 
hydraulic equipment.
    3. Transportation expense.

                         538  Electric Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
property insurance, property taxes, materials used, and expenses 
incurred in operating prime movers, generators, and their auxiliary 
apparatus, switchgear, and other electric equipment, to the point where 
electricity leaves for conversion for transmission or distribution.

                                  Items

Labor:

    1. Supervising electric production.
    2. Operating prime movers, generators, and auxiliary equipment.
    3. Operating generator cooling system.
    4. Operating lubrication and oil control systems, including oil 
purification.
    5. Operating switchboards, switchgear, and electric control and 
protection equipment.
    6. Keeping plant log and records and preparing reports on plant 
operations.
    7. Testing, checking and adjusting meters, gauges, and other 
instruments, relays, controls, and other equipment in the plant.
    8. Cleaning plant equipment when not incidental to maintenance work.
    9. Repacking glands.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    3. Property.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.
    2. Amounts credited to Account 228.1, Accumulated Provision for 
Property Insurance, for similar protection.
    3. Special costs incurred in procuring insurance.
    4. Insurance inspection service.
    5. Insurance counsel, brokerage fees, and expenses.
    6. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    7. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    8. Fees and expenses of claim investigators.
    9. Payment of awards to claimants for court costs and attorneys' 
services.
    10. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    11. Compensation payments under workmen's compensation laws.
    12. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    13. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Lubricants and control system oils.
    2. Motor and generator brushes.

         539  Miscellaneous Hydraulic Power Generation Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred which are not specifically 
provided for or are not readily assignable to other hydraulic generation 
operation expense accounts.

                                  Items

Labor:

    1. General clerical and stenographic work.
    2. Guarding and patrolling plant and yard.
    3. Building service.
    4. Care of grounds including snow removal, and grass cutting.
    5. Snow removal from roads and bridges.

[[Page 785]]

    6. Miscellaneous labor.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    2. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    3. Fees and expenses of claim investigators.
    4. Payment of awards to claimants for court costs and attorneys' 
services.
    5. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    6. Compensation payments under workmen's compensation laws.
    7. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    8. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. General operating supplies, such as tools, gaskets, packing, 
waste, hose, indicating lamps, record and report forms.
    2. First-aid supplies and safety equipment.
    3. Employees' service facilities expenses.
    4. Building service supplies.
    5. Communication service.
    6. Office supplies, printing and stationery.
    7. Transportation expenses.
    8. Fuel.
    9. Meals, traveling, and incidental expenses.
    10. Research, development, and demonstration expenses.

                               540   Rents

    This account shall include all rents of property of others used, 
occupied, or operated in connection with hydraulic power generation, 
including amounts payable to the United States for the occupancy of 
public lands and reservations for reservoirs, dams, flumes, forebays, 
penstocks, and power houses but not including transmission right-of-way. 
(See Sec. 1767.17 (c).)

                              (Maintenance)

              541  Maintenance Supervision and Engineering

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
and expenses incurred in the general supervision and direction of the 
maintenance of hydraulic power generating stations. Direct field 
supervision of specific jobs shall be charged to the appropriate 
maintenance account. (See Sec. 1767.17(a).)

                     542  Maintenance of Structures

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in maintenance of hydraulic 
structures, the book cost of which is includible in Account 331, 
Structures and Improvements. (See Sec. 1767.17 (b).) However, the cost 
of labor, materials used, and expenses incurred in the maintenance of 
fish and wildlife and recreation facilities, the book cost of which is 
includible in Account 331, Structures and Improvements, shall be charged 
to Account 545, Maintenance of Miscellaneous Hydraulic Plant.

           543  Maintenance of Reservoirs, Dams, and Waterways

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in maintenance of plant includible 
in Account 332, Reservoirs, Dams, and Waterways. (See Sec. 1767.17(b).) 
However, the cost of labor, materials used, and expenses incurred in the 
maintenance of fish and wildlife and recreation facilities, the book 
cost of which is includible in Account 332, Reservoirs, Dams, and 
Waterways, shall be charged to

[[Page 786]]

Account 545, Maintenance of Miscellaneous Hydraulic Plant.

                   544  Maintenance of Electric Plant

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in maintenance of plant includible 
in Account 333, Water Wheels, Turbines and Generators, and Account 334, 
Accessory Electric Equipment, (See Sec. 1767.17(b).)

            545  Maintenance of Miscellaneous Hydraulic Plant

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in maintenance of plant, the book 
cost of which is includible in Account 335, Miscellaneous Power Plant 
Equipment, and Account 336, Roads Railroads and Bridges. (See 
Sec. 1767.17(b).) It shall also include the cost of labor, materials 
used, and other expenses incurred in the maintenance of (1) fish and 
wildlife, and (2) recreation facilities. Separate subaccounts shall be 
maintained for each of the above.

                         Other Power Generation

                               (Operation)

               546  Operation Supervision and Engineering

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
and expenses incurred in the general supervision and direction of the 
operation of other power generating stations. Direct supervision of 
specific activities, such as fuel handling and engine and generator 
operation shall be charged to the appropriate account. (See 
Sec. 1767.17(a).)

                               547   Fuel

    This account shall include the cost delivered at the station (See 
Account 151, Fuel Stock) of all fuel, such as gas, oil, kerosene, and 
gasoline used in other power generation.

                        548  Generation Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
property insurance, property taxes, materials used, and expenses 
incurred in operating prime movers, generators, and electric equipment 
in other power generating stations, to the point where electricity 
leaves for conversion for transmission or distribution.

                                  Items

Labor:

    1. Supervising other power generation operation.
    2. Operating prime movers, generators, and auxiliary apparatus and 
switching and other electric equipment.
    3. Keeping plant log and records and preparing reports on plant 
operations.
    4. Testing, checking, cleaning, oiling, and adjusting equipment.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    3. Property.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.
    2. Amounts credited to Account 228.1, Accumulated Provision for 
Property Insurance, for similar protection.
    3. Special costs incurred in procuring insurance.
    4. Insurance inspection service.
    5. Insurance counsel, brokerage fees, and expenses.
    6. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    7. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.

[[Page 787]]

    8. Fees and expenses of claim investigators.
    9. Payment of awards to claimants for court costs and attorneys' 
services.
    10. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    11. Compensation payments under workmen's compensation laws.
    12. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    13. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Dynamo, motor, and generator brushes.
    2. Lubricants and control system oils.
    3. Water for cooling engines and generators.

           549  Miscellaneous Other Power Generation Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in the operation of other power 
generating stations which are not specifically provided for or are not 
readily assignable to other generation expense accounts.

                                  Items

Labor:

    1. General clerical and stenographic work.
    2. Guarding and patrolling plant and yard.
    3. Building service.
    4. Care of grounds, including snow removal, and grass cutting.
    5. Miscellaneous labor.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    2. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    3. Fees and expenses of claim investigators.
    4. Payment of awards to claimants for court costs and attorneys' 
services.
    5. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    6. Compensation payments under workmen's compensation laws.
    7. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    8. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Building service supplies.
    2. First-aid supplies and safety equipment.
    3. Communication service.
    4. Employees' service facilities expenses.
    5. Office supplies, printing and stationery.
    6. Transportation expense.
    7. Meals, traveling, and incidental expenses.
    8. Fuel for heating.
    9. Water for fire protection or general use.
    10. Miscellaneous supplies, such as hand tools, drills, saw blades, 
and files.
    11. Research, development, and demonstration expenses.

                               550   Rents

    This account shall include all rents of property of others used, 
occupied, or operated in connection with other power generation. (See 
Sec. 1767.17 (c).)

                              (Maintenance)

              551  Maintenance Supervision and Engineering

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
and expenses incurred in the general supervision and direction of the 
maintenance of other power generating stations. Direct field supervision 
of specific jobs shall be

[[Page 788]]

charged to the appropriate maintenance account. (See Sec. 1767.17(a).)

                     552  Maintenance of Structures

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in maintenance of facilities used 
and expenses incurred in maintenance of facilities used in other power 
generation, the book cost of which is includible in Account 341, 
Structures and Improvements, and Account 342, Fuel Holders, Producers 
and Accessories. (See Sec. 1767.17(b).)

          553  Maintenance of Generating and Electric Equipment

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in maintenance of plant, the book 
cost of which is includible in Account 343, Prime Movers; Account 344, 
Generators; and Account 345, Accessory Electric Equipment. (See 
Sec. 1767.17(b).)

     554  Maintenance of Miscellaneous Other Power Generation Plant

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in maintenance of other power 
generation plant, the book cost of which is includible in Account 346, 
Miscellaneous Power Plant Equipment. (See Sec. 1767.17(b).)

                       Other Power Supply Expenses

                          555   Purchased Power

    A. This account shall include the cost at point of receipt by the 
utility of electricity purchased for resale. It shall also include, net 
settlements for exchange of electricity or power, such as economy 
energy, off-peak energy for on-peak energy, and spinning reserve 
capacity. In addition, the account shall include the net settlements for 
transactions under pooling or interconnection agreements wherein there 
is a balancing of debits and credits for energy, or capacity. Distinct 
purchases and sales shall not be recorded as exchanges and net amounts 
only recorded merely because debit and credit amounts are combined in 
the voucher settlement.
    B. The records supporting this account shall show, by months, the 
demands and demand charges, kilowatt-hours and prices thereof under each 
purchase contract and the charges and credits under each exchange or 
power pooling contract.

                556  System Control and Load Dispatching

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
property insurance, property taxes, and expenses incurred in load 
dispatching activities for system control. Utilities having an 
interconnected electric system or operating under a central authority 
which controls the production and dispatching of electricity may 
apportion these costs to this account and Account 561, Load Dispatching, 
and Account 581, Load Dispatching.

                                  Items

Labor:

    1. Allocating loads to plants and interconnections with others.
    2. Directing switching.
    3. Arranging and controlling clearances for construction, 
maintenance, test, and emergency purposes.
    4. Controlling system voltages.
    5. Recording loadings, and water conditions.
    6. Preparing operating reports and data for billing and budget 
purposes.
    7. Obtaining reports on the weather and special events.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    3. Property.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:


[[Page 789]]


    1. Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.
    2. Amounts credited to Account 228.1, Accumulated Provision for 
Property Insurance, for similar protection.
    3. Special costs incurred in procuring insurance.
    4. Insurance inspection service.
    5. Insurance counsel, brokerage fees, and expenses.
    6. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    7. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    8. Fees and expenses of claim investigators.
    9. Payment of awards to claimants for court costs and attorneys' 
services.
    10. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    11. Compensation payments under workmen's compensation laws.
    12. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    13. Cost of safety, accident prevention, and similar educational 
activities.

Expenses:

    1. Communication service provided for system control purposes.
    2. System record and report forms.
    3. Meals, traveling, and incidental expenses.
    4. Obtaining weather and special events reports.

                          557   Other Expenses

    A. This account shall be charged with any production expenses 
including expenses incurred directly in connection with the purchase of 
electricity, which are not specifically provided for in other production 
expense accounts. Charges to this account shall be supported so that a 
description of each type of charge will be readily available.
    B. Recoveries from insurance companies, under use and occupancy 
provisions of policies, of amounts in reimbursement of excessive or 
added productions costs for which the insurance company is liable under 
the terms of the policy shall be credited to this account.

                          Transmission Expenses

                               (Operation)

               560  Operation Supervision and Engineering

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
and expenses incurred in the general supervision and direction of the 
operation of the transmission system as a whole. Direct supervision of 
specific activities, such as station operation and line operation shall 
be charged to the appropriate account. (See Sec. 1767.17(a).)

                          561  Load Dispatching

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
property insurance, property taxes, materials used, and expenses 
incurred in load dispatching operations pertaining to the transmission 
of electricity.

                                  Items

Labor:

    1. Direct switching.
    2. Arranging and controlling clearances for construction, 
maintenance, test, and emergency purposes.
    3. Controlling system voltages.
    4. Obtaining reports on the weather and special events.
    5. Preparing operating reports and data for billing and budget 
purposes.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    3. Property.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.

[[Page 790]]

    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.
    2. Amounts credited to Account 228.1, Accumulated Provision for 
Property Insurance, for similar protection.
    3. Special costs incurred in procuring insurance.
    4. Insurance inspection service.
    5. Insurance counsel, brokerage fees, and expenses.
    6. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    7. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    8. Fees and expenses of claim investigators.
    9. Payment of awards to claimants for court costs and attorneys' 
services.
    10. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    11. Compensation payments under workmen's compensation laws.
    12. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    13. Cost of safety, accident prevention, and similar educational 
activities.

Expenses:

    1. Communication service provided for system control purposes.
    2. System record and report forms.
    3. Meals, traveling, and incidental expenses.
    4. Obtaining weather and special events reports.

                          562  Station Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
property insurance, property taxes, materials used, and expenses 
incurred in operating transmission substations and switching stations. 
If transmission station equipment is located in or adjacent to a 
generating station, the expenses applicable to transmission station 
operations shall nevertheless be charged to this account.

                                  Items

Labor:

    1. Supervising station operation.
    2. Adjusting station equipment where such adjustment primarily 
affects performance, such as regulating the flow of cooling water, 
adjusting current in fields of a machine or changing voltage of 
regulators, changing station transformer taps.
    3. Inspecting, testing, and calibrating station equipment for the 
purpose of checking its performance.
    4. Keeping station log and records and preparing records on station 
operation.
    5. Operating switching and other station equipment.
    6. Standing watch, guarding, and patrolling station and station 
yard.
    7. Sweeping, mopping, and tidying station.
    8. Care of grounds, including snow removal, and grass cutting.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    3. Property.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.
    2. Amounts credited to Account 228.1, Accumulated Provision for 
Property Insurance, for similar protection.
    3. Special costs incurred in procuring insurance.
    4. Insurance inspection service.

[[Page 791]]

    5. Insurance counsel, brokerage fees, and expenses.
    6. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    7. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    8. Fees and expenses of claim investigators.
    9. Payment of awards to claimants for court costs and attorneys' 
services.
    10. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    11. Compensation payments under workmen's compensation laws.
    12. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    13. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Building service expenses.
    2. Operating supplies, such as lubricants, commutator brushes, 
water, and rubber goods.
    3. Station meter and instrument supplies, such as ink and charts.
    4. Station record and report forms.
    5. Tool expense.
    6. Transportation expenses.
    7. Meals, traveling, and incidental expenses.

                       563  Overhead Line Expenses

                     564  Underground Line Expenses

    A. These accounts shall include the cost of labor, employee pensions 
and benefits, social security and other payroll taxes, injuries and 
damages, property insurance, property taxes, materials used, and 
expenses incurred in the operation of transmission lines.
    B. If the expenses are not substantial for both overhead and 
underground lines, these accounts may be combined.

                                  Items

Labor:

    1. Supervising line operation.
    2. Inspecting and testing lightning arresters, circuit breakers, 
switches, and grounds.
    3. Load tests of circuits.
    4. Routine line patrolling.
    5. Routine voltage surveys made to determine the condition or 
efficiency of transmission system.
    6. Transferring loads, switching and reconnecting circuits and 
equipment for operating purposes. (Switching for construction or 
maintenance purposes is not includible in this account.)
    7. Routine inspection and cleaning of manholes, conduit, network, 
and transformer vaults.
    8. Electrolysis surveys.
    9. Inspecting and adjusting line-testing equipment, such as 
voltmeters, ammeters, and wattmeters.
    10. Regulation and addition of oil or gas in high-voltage cable 
systems.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    3. Property.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.
    2. Amounts credited to Account 228.1, Accumulated Provision for 
Property Insurance, for similar protection.
    3. Special costs incurred in procuring insurance.
    4. Insurance inspection service.
    5. Insurance counsel, brokerage fees, and expenses.
    6. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.

[[Page 792]]

    7. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    8. Fees and expenses of claim investigators.
    9. Payment of awards to claimants for court costs and attorneys' 
services.
    10. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    11. Compensation payments under workmen's compensation laws.
    12. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    13. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Transportation expenses.
    2. Meals, traveling, and incidental expenses.
    3. Tool expenses.
    4. Operating supplies, such as instrument charts, and rubber goods.

               565   Transmission of Electricity by Others

    This account shall include amounts payable to others for the 
transmission of the utility's electricity over transmission facilities 
owned by others.

                566  Miscellaneous Transmission Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damage, 
materials used, and expenses incurred in transmission map and record 
work, transmission office expenses, and other transmission expenses not 
provided for elsewhere.

                                  Items

Labor:

    1. General records of physical characteristics of lines and 
stations, such as capacities.
    2. Ground resistance records.
    3. Janitor work at transmission office buildings, including care of 
grounds, snow removal, and grass cutting.
    4. Joint pole maps and records.
    5. Line load and voltage records.
    6. Preparing maps and prints.
    7. General clerical and stenographic work.
    8. Miscellaneous labor.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    2. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    3. Fees and expenses of claim investigators.
    4. Payment of awards to claimants for court costs and attorneys' 
services.
    5. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    6. Compensation payments under workmen's compensation laws.
    7. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    8. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Communication service.
    2. Building service supplies.
    3. Map and record supplies.
    4. Transmission office supplies and expenses, printing and 
stationery.
    5. First-aid supplies.
    6. Research, development, and demonstration expenses.

                               567   Rents

    This account shall include rents of property of others used, 
occupied, or operated in connection with the transmission system, 
including payments to the United States and others for use of public or 
private lands and reservations for transmission line rights-of-way. (See 
Sec. 1767.17 (c).)

[[Page 793]]

                              (Maintenance)

              568  Maintenance Supervision and Engineering

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
and expenses incurred in the general supervision and direction of 
maintenance of the transmission system. Direct field supervision of 
specific jobs shall be charged to the appropriate maintenance account. 
(See Sec. 1767.17(a).)

                     569  Maintenance of Structures

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in the maintenance of structures, 
the book cost of which is includible in Account 352, Structures and 
Improvements. (See Sec. 1767.17(b).)

                  570  Maintenance of Station Equipment

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in maintenance of station 
equipment, the book cost of which is includible in Account 353, Station 
Equipment. (See Sec. 1767.17(b).)

                   571  Maintenance of Overhead Lines

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in maintenance of transmission 
plant, the book cost of which is includible in Accounts 354, Towers and 
Fixtures; 355, Poles and Fixtures; 356, Overhead Conductors and Devices; 
and 359, Roads and Trails. (See Sec. 1767.17(b).)

                                  Items

    1. Work of the following character on poles, towers, and fixtures:
    a. Installing or removing additional clamps or strain insulators on 
guys in place.
    b. Moving line or guy pole in relocation of the same pole or section 
of line.
    c. Painting poles, towers, crossarms, or pole extensions.
    d. Readjusting and changing position of guys or braces.
    e. Realigning and straightening poles, crossarms braces, and other 
pole fixtures.
    f. Reconditioning reclaimed pole fixtures.
    g. Relocating crossarms, racks, brackets, and other fixtures on 
poles.
    h. Repairing or realigning pins, racks, or brackets.
    i. Repairing pole supported platform.
    j. Repairs by others to jointly owned poles.
    k. Shaving, cutting rot, or testing poles or crossarms in use or 
salvaged for reuse.
    l. Stubbing poles already in service.
    m. Supporting fixtures and conductors and transferring them to new 
poles during pole replacements.
    n. Maintenance of pole signs, stencils, and tags.
    2. Work of the following character on overhead conductors and 
devices:
    a. Overhauling and repairing line cutouts, line switches, and line 
breakers.
    b. Cleaning insulators and bushings.
    c. Refusing cutouts.
    d. Repairing line oil circuit breakers and associated relays and 
control wiring.
    e. Repairing grounds.
    f. Resagging, retyping, or rearranging position or spacing of 
conductors.
    g. Standing by phones, going to calls, cutting faulty lines clear, 
or similar activities at times of emergencies.
    h. Sampling, testing, changing, purifying, and replenishing 
insulating oil.
    i. Repairing line testing equipment.
    j. Transferring loads, switching and reconnecting circuits and 
equipment for maintenance purposes.
    k. Trimming trees and clearing brush.
    l. Chemical treatment of right of way areas when occurring 
subsequent to construction of line.
    3. Work of the following character on roads and trails:
    a. Repairing roadways and bridges.
    b. Trimming trees and brush to maintain previous roadway clearance.
    c. Snow removal from roads and trails.
    d. Maintenance work on publicly owned roads and trails when done by 
utility at its expense.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result

[[Page 794]]

of occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

    Insurance:

    1. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    2. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    3. Fees and expenses of claim investigators.
    4. Payment of awards to claimants for court costs and attorneys' 
services.
    5. Medical and hospital services and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    6. Compensation payments under workmen's compensation laws.
    7. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    8. Cost of safety, accident prevention, and similar educational 
activities.

                  572  Maintenance of Underground Lines

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in maintenance of transmission 
plant, the book cost of which is includible in Accounts 357, Underground 
Conduit, and Account 358, Underground Conductors and Devices. (See 
Sec. 1767.17(b).)

                                  Items

    1. Work of the following character on underground conduit:
    a. Cleaning ducts, manholes, and sewer connections.
    b. Minor alterations of handholes, manholes, or vaults.
    c. Refastening, repairing, or moving racks, ladders, hangers in 
manholes, or vaults.
    d. Plugging and shelving or replugging ducts.
    e. Repairs to sewers and drains, walls and floors, rings and covers.
    2. Work of the following character on underground conductors and 
devices:
    a. Repairing oil circuit breakers, switches, cutouts, and control 
wiring.
    b. Repairing grounds.
    c. Retraining and reconnecting cables in manholes, including 
transfer of cables from one duct to another.
    d. Repairing conductors and splices.
    e. Repairing or moving junction boxes and potheads.
    f. Refireproofing of cables and repairing supports.
    g. Repairing electrolysis preventive devices for cables.
    h. Repairing cable bonding systems.
    i. Sampling, testing, changing, purifying, and replenishing 
insulating oil.
    j. Transferring loads, switching and reconnecting circuits, and 
equipment for maintenance purposes.
    k. Repairing line testing equipment.
    l. Repairs to oil or gas equipment in high-voltage cable system and 
replacement of oil or gas.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance: 

    1. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    2. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    3. Fees and expenses of claim investigators.
    4. Payment of awards to claimants for court costs and attorneys' 
services.

[[Page 795]]

    5. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    6. Compensation payments under workmen's compensation laws.
    7. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    8. Cost of safety, accident prevention, and similar educational 
activities.

          573  Maintenance of Miscellaneous Transmission Plant

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in maintenance of owned or leased 
plant which is assignable to transmission operations and is not provided 
for elsewhere. (See Sec. 1767.17(b).)

                          Distribution Expenses

                               (Operation)

               580  Operation Supervision and Engineering

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
and expenses incurred in the general supervision and direction of the 
operation of the distribution system. Direct supervision of specific 
activities, such as station operation, line operation, and meter 
department operation shall be charged to the appropriate account. (See 
Sec. 1767.17(a).)

                          581  Load Dispatching

    This account (the keeping of which is optional with the utility) 
shall include the cost of labor, employee pensions and benefits, social 
security and other payroll taxes, injuries and damages, property 
insurance, property taxes, materials used, and expenses incurred in load 
dispatching operations pertaining to the distribution of electricity.

                                  Items

Labor: 

    1. Direct switching.
    2. Arranging and controlling clearances for construction, 
maintenance, test, and emergency purposes.
    3. Controlling system voltages.
    4. Preparing operating reports.
    5. Obtaining reports on the weather and special events.

Taxes: 

    1. Federal and state unemployment.
    2. F.I.C.A.
    3. Property.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance: 

    1. Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.
    2. Amounts credited to Account 228.1, Accumulated Provision for 
Property Insurance, for similar protection.
    3. Special costs incurred in procuring insurance.
    4. Insurance inspection service.
    5. Insurance counsel, brokerage fees, and expenses.
    6. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    7. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    8. Fees and expenses of claim investigators.
    9. Payment of awards to claimants for court costs and attorneys' 
services.
    10. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    11. Compensation payments under workmen's compensation laws.
    12. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    13. Cost of safety, accident prevention, and similar educational 
activities.

Expenses: 


[[Page 796]]


    1. Communication service provided for system control purposes.
    2. System record and report forms.
    3. Meals, traveling, and incidental expenses.

                          582  Station Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
property insurance, property taxes, materials used, and expenses 
incurred in the operation of distribution substations.

                                  Items

Labor: 

    1. Supervising station operation.
    2. Adjusting station equipment where such adjustment primarily 
affects performance, such as regulating the flow of cooling water, 
adjusting current in fields of a machine, changing voltage of 
regulators, or changing station transformer taps.
    3. Keeping station log and records and preparing reports on station 
operation.
    4. Inspecting, testing, and calibrating station equipment for the 
purpose of checking its performance.
    5. Operating switching and other station equipment.
    6. Standing watch, guarding, and patrolling station and station 
yard.
    7. Sweeping, mopping, and tidying station.
    8. Care of grounds, including snow removal, and grass cutting.

Taxes: 

    1. Federal and state unemployment.
    2. F.I.C.A.
    3. Property.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.
    2. Amounts credited to Account 228.1, Accumulated Provision for 
Property Insurance, for similar protection.
    3. Special costs incurred in procuring insurance.
    4. Insurance inspection service.
    5. Insurance counsel, brokerage fees, and expenses.
    6. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    7. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    8. Fees and expenses of claim investigators.
    9. Payment of awards to claimants for court costs and attorneys' 
services.
    10. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    11. Compensation payments under workmen's compensation laws.
    12. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    13. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Building service expenses.
    2. Operating, supplies, such as lubricants, commutator brushes, 
water, and rubber goods.
    3. Station meter and instrument supplies, such as ink and charts.
    4. Station record and report forms.
    5. Tool expense.
    6. Transportation expense.
    7. Meals, traveling, and incidental expenses.

    Note: If the utility owns storage battery equipment used for 
supplying electricity to customers in periods of emergency, the cost of 
operating labor and of supplies, such as acid, gloves, hydrometers, 
thermometers, soda, automatic cell fillers, and acid proof shoes shall 
be included in this account. If significant in amount, a separate 
subdivision shall be maintained for such expenses.

[[Page 797]]

                       583  Overhead Line Expenses

                     584  Underground Line Expenses

    These accounts shall include, respectively, the cost of labor, 
employee pensions and benefits, social security and other payroll taxes, 
injuries and damages, property insurance, property taxes, materials 
used, and expenses incurred in the operation of overhead and underground 
distribution lines.

                                  Items

Labor:

    1. Supervising line operation.
    2. Changing line transformer taps.
    3. Inspecting and testing lightning arresters, line circuit 
breakers, switches, and grounds.
    4. Inspecting and testing line transformers for the purpose of 
determining load, temperature, or operation performance.
    5. Patrolling lines.
    6. Load tests and voltage surveys of feeders, circuits, and line 
transformers.
    7. Removing line transformers and voltage regulators with or without 
replacement.
    8. Installing line transformers or voltage regulators with or 
without change in capacity provided that the cost of first installation 
of these items is included in Account 368, Line Transformers.
    9. Voltage surveys, either routine or upon request of customers, 
including voltage tests at customer's main switch.
    10. Transferring loads, switching and reconnecting circuits and 
equipment for operation purpose.
    11. Electrolysis surveys.
    12. Inspecting and adjusting line testing equipment.

Taxes: 

    1. Federal and State unemployment.
    2. F.I.C.A,
    3. Property.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.
    2. Amounts credited to Account 228.1, Accumulated Provision for 
Property Insurance, for similar protection.
    3. Special costs incurred in procuring insurance.
    4. Insurance inspection service.
    5. Insurance counsel, brokerage fees, and expenses.
    6. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    7. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    8. Fees and expenses of claim investigators.
    9. Payment of awards to claimants for court costs and attorneys' 
services.
    10. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    11. Compensation payments under workmen's compensation laws.
    12. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    13. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Tool expense.
    2. Transportation expense.
    3. Meals, traveling, and incidental expenses.
    4. Operating supplies, such as instrument charts, and rubber goods.

             585  Street Lighting and Signal System Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
property insurance, property taxes, materials used, and expenses 
incurred in: (1) The operation of street lighting and signal system 
plant which is owned or leased by the utility; and (2) the operation and 
maintenance of such plant owned by customers where such work is done 
regularly as a **part**

[[Page 798]]

of the street lighting and signal system service.

                                  Items

Labor: 

    1. Supervising street lighting and signal systems operation.
    2. Replacing lamps and incidental cleaning of glassware and fixtures 
in connection therewith.
    3. Routine patrolling for lamp outages, extraneous nuisances, or 
encroachments.
    4. Testing lines and equipment including voltage and current 
measurement.
    5. Winding and inspection of time switch and other controls.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    3. Property.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.
    2. Amounts credited to Account 228.1, Accumulated Provision for 
Property Insurance, for similar protection.
    3. Special costs incurred in procuring insurance.
    4. Insurance inspection service.
    5. Insurance counsel, brokerage fees, and expenses.
    6. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    7. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    8. Fees and expenses of claim investigators.
    9. Payment of awards to claimants for court costs and attorneys' 
services.
    10. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    11. Compensation payments under workmen's compensation laws.
    12. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    13. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses: 

    1. Street lamp renewals.
    2. Transportation and tool expense.
    3. Meals, traveling, and incidental expenses.

                           586  Meter Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
property insurance, property taxes, materials used, and expenses 
incurred in the operation of customer meters and associated equipment.

                                  Items

Labor:

    1. Supervising meter operation.
    2. Clerical work on meter history and associated equipment record 
cards, test cards, and reports.
    3. Disconnecting and reconnecting, removing and reinstalling, 
sealing and unsealing meters and other metering equipment in connection 
with initiating or terminating services including the cost of obtaining 
meter readings, if incidental to such operation.
    4. Consolidating meter installations due to elimination of separate 
meters for different rates of service.
    5. Changing or relocating meters, instrument transformers, time 
switches, and other metering equipment.
    6. Resetting time controls, checking operation of demand meters and 
other metering equipment, when done as an independent operation.
    7. Inspecting and adjusting meter testing equipment.
    8. Inspecting and testing meters, instrument transformers, time 
switches, and other metering equipment on premises or in shops

[[Page 799]]

excluding inspecting and testing incidental to maintenance.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    3. Property.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.
    2. Amounts credited to Account 228.1, Accumulated Provision for 
Property Insurance, for similar protection.
    3. Special costs incurred in procuring insurance.
    4. Insurance inspection service.
    5. Insurance counsel, brokerage fees, and expenses.
    6. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    7. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    8. Fees and expenses of claim investigators.
    9. Payment of awards to claimants for court costs and attorneys' 
services.
    10. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    11. Compensation payments under workmen's compensation laws.
    12. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    13. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses

    1. Meter seals and miscellaneous meter supplies.
    2. Transportation expenses.
    3. Meals, traveling, and incidental expenses.
    4. Tool expenses.

    Note: The cost of the first setting and testing of a meter is 
chargeable to utility plant, Account 370, Meters.

                  587  Customer Installations Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
property insurance, property taxes, materials used, and expenses 
incurred in work on customer installations in inspecting premises and in 
rendering services to customers of the nature of those indicated by the 
list of items hereunder.

                                  Items

Labor:

    1. Supervising customer installations work.
    2. Inspecting premises, including the check of wiring for code 
compliance.
    3. Investigating, locating, and clearing grounds on customers' 
wiring.
    4. Investigating service complaints, including load tests of motors 
and lighting and power circuits on customers' premises; field 
investigations of complaints on bills or of voltage.
    5. Installing, removing, renewing, and changing lamps and fuses.
    6. Radio, television, and similar interference work including 
erection of new aerials on customers' premises and patrolling of lines, 
testing of lightning arresters, inspection of pole hardware, and 
examination on or off premises of customers' appliances, wiring, or 
equipment to locate cause of interference.
    7. Installing, connecting, reinstalling, or removing leased property 
on customers' premises.
    8. Testing, adjusting, and repairing customers' fixtures and 
appliances in the shop or on premises.
    9. Cost of changing customers' equipment due to changes in service 
characteristics.
    10. Investigation of current diversion including setting and removal 
of check meters and securing special readings thereon; special calls by 
employees in connection with

[[Page 800]]

discovery and settlement of current diversion; changes in customer 
wiring; and any other labor cost identifiable as caused by current 
diversion.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    3. Property.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance: 

    1. Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.
    2. Amounts credited to Account 228.1, Accumulated Provision for 
Property Insurance, for similar protection.
    3. Special costs incurred in procuring insurance.
    4. Insurance inspection service.
    5. Insurance counsel, brokerage fees, and expenses.
    6. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    7. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    8. Fees and expenses of claim investigators.
    9. Payment of awards to claimants for court costs and attorneys' 
services.
    10. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    11. Compensation payments under workmen's compensation laws.
    12. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    13. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Lamp and fuse renewals.
    2. Materials used in servicing customers' fixtures, appliances, and 
equipment.
    3. Power, light, heat, telephone, and other expenses of the 
appliance repair department.
    4. Tool expense.
    5. Transportation expense, including pickup and delivery charges.
    6. Meals, traveling, and incidental expenses.
    7. Rewards paid for discovery of current diversion.

    Note A:  Amounts billed customers for any work, the cost of which is 
charged to this account, shall be credited to this account. Any excess 
over costs resulting therefrom, shall be transferred to Account 451, 
Miscellaneous Service Revenues.
    Note B:  Do not include in this account expenses incurred in 
connection with merchandising, jobbing, and contract work.

                 588 Miscellaneous Distribution Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in distribution system operation 
not provided for elsewhere.

                                  Items

Labor:

    1. General records of physical characteristics of lines and 
substations, such as capacities.
    2. Ground resistance records.
    3. Joint pole maps and records.
    4. Distribution system voltage and load records.
    5. Preparing maps and prints.
    6. Service interruption and trouble records.
    7. General clerical and stenographic work except that chargeable to 
Account 586, Meter Expenses.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct

[[Page 801]]

labor dollars or direct labor hours, applicable to the labor items 
detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    2. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    3. Fees and expenses of claim investigators.
    4. Payment of awards to claimants for court costs and attorneys' 
services.
    5. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    6. Compensation payments under workmen's compensation laws.
    7. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    8. Cost of safety, accident prevention, and similar educational 
activities.

Expenses:

    1. Operating records covering poles, transformers, manholes, cables, 
and other distribution facilities. Exclude meter records chargeable to 
Account 586, Meter Expenses, and station records chargeable to Account 
582, Station Expenses, and stores records chargeable to Account 163, 
Stores Expense Undistributed.
    2. Janitor work at distribution office buildings including snow 
removal and grass cutting.
    3. Communication service.
    4. Building service expenses.
    5. Miscellaneous office supplies and expenses, printing and 
stationery, maps and records, and first-aid supplies.
    6. Research, development, and demonstration expenses.

                               589   Rents

    This account shall include rents of property of others used, 
occupied, or operated in connection with the distribution system, 
including payments to the United States and others for the use and 
occupancy of public lands and reservations for distribution line rights 
of way. (See Sec. 1767.17 (c).)

                              (Maintenance)

               590 Maintenance Supervision and Engineering

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
and expenses incurred in the general supervision and direction of 
maintenance of the distribution system. Direct field supervision of 
specific jobs shall be charged to the appropriate maintenance account. 
(See Sec. 1767.17(a).)

                     591  Maintenance of Structures

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in maintenance of structures, the 
book cost of which is includible in Account 361, Structures and 
Improvements. (See Sec. 1767.17(b).)

                  592 Maintenance of Station Equipment

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in maintenance of plant, the book 
cost of which is includible in Account 362, Station Equipment, and 
Account 363, Storage Battery Equipment. (See Sec. 1767.17(b).)

                    593 Maintenance of Overhead Lines

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in the maintenance of overhead 
distribution line facilities, the book cost of which is includible in 
Account 364, Poles, Towers and Fixtures; Account 365, Overhead 
Conductors and Devices; and Account 369, Services. (See 
Sec. 1767.17(b).)

                                  Items

    1. Work of the following character on poles, towers, and fixtures:
    a. Installing additional clamps or removing clamps or strain 
insulators on guys in place.
    b. Moving line or guy pole in relocation of pole or section of line.

[[Page 802]]

    c. Painting poles, towers, crossarms, or pole extensions.
    d. Readjusting and changing position of guys or braces.
    e. Realigning and straightening poles, crossarms, braces, pins, 
racks, brackets, and other pole fixtures.
    f. Reconditioning reclaimed pole fixtures.
    g. Relocating crossarms, racks, brackets, and other fixtures on 
poles.
    h. Repairing pole supported platform.
    i. Repairs by others to jointly owned poles.
    j. Shaving, cutting rot, or treating poles or crossarms in use or 
salvaged for reuse.
    k. Stubbing poles already in service.
    l. Supporting conductors, transformers, and other fixtures and 
transferring them to new poles during pole replacements.
    m. Maintaining pole signs, stencils, and tags.
    2. Work of the following character on overhead conductors and 
devices:
    a. Overhauling and repairing line cutouts, line switches, line 
breakers, and capacitor installations.
    b. Cleaning insulators and bushings.
    c. Refusing line cutouts.
    d. Repairing line oil circuit breakers and associated relays and 
control wiring.
    e. Repairing grounds.
    f. Resagging, retying, or rearranging position or spacing of 
conductors.
    g. Standing by phones, going to calls, cutting faulty lines clear, 
or similar activities at times of emergency.
    h. Sampling, testing, changing, purifying, and replenishing 
insulating oil.
    i. Transferring loads, switching, and reconnecting circuits and 
equipment for maintenance purposes.
    j. Repairing line testing equipment.
    k. Trimming trees and clearing brush.
    l. Chemical treatment of right-of-way area when occurring subsequent 
to construction of line.
    3. Work of the following character on overhead services:
    a. Moving position of service either on pole or on customers' 
premises.
    b. Pulling slack in service wire.
    c. Retying service wire.
    d. Refastening or tightening service bracket.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    2. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    3. Fees and expenses of claim investigators.
    4. Payment of awards to claimants for court costs and attorneys' 
services.
    5. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    6. Compensation payments under workmen's compensation laws.
    7. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    8. Cost of safety, accident prevention, and similar educational 
activities.

                  594  Maintenance of Underground Lines

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in the maintenance of underground 
distribution line facilities, the book cost of which is includible in 
Account 366, Underground Conduit; Account 367, Underground Conductors 
and Devices; and Account 369, Services. (See Sec. 1767.17(b).)

                                  Items

    1. Work of the following character on underground conduit:
    a. Cleaning ducts, manholes, and sewer connections.
    b. Moving or changing position of conduit or pipe.

[[Page 803]]

    c. Minor alterations of handholes, manholes, or vaults.
    d. Refastening, repairing, or moving racks, ladders, or hangers in 
manholes or vaults.
    e. Plugging and shelving ducts.
    f. Repairs to sewers, drains, walls, and floors, rings, and covers.
    2. Work of the following character on underground conductors and 
devices:
    a. Repairing circuit breakers, switches, cutouts, network 
protectors, and associated relays and control wiring.
    b. Repairing grounds.
    c. Retraining and reconnecting cables in manholes including transfer 
of cables from one duct to another.
    d. Repairing conductors and splices.
    e. Repairing or moving junction boxes and potheads.
    f. Refireproofing cables and repairing supports.
    g. Repairing electrolysis preventive devices for cables.
    h. Repairing cable bonding systems.
    i. Sampling, testing, changing, purifying, and replenishing 
insulating oil.
    j. Transferring loads, switching and reconnecting circuits and 
equipment for maintenance purposes.
    k. Repairing line testing equipment.
    l. Repairing oil or gas equipment in high voltage cable systems and 
replacement of oil or gas.
    3. Work of the following character on underground services:
    a. Cleaning ducts.
    b. Repairing any underground service plant.

Taxes: 

    1. Federal and state unemployment.
    2. F.I.C.A.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance: 

    1. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    2. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    3. Fees and expenses of claim investigators.
    4. Payment of awards to claimants for court costs and attorneys' 
services.
    5. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    6. Compensation payments under workmen's compensation laws.
    7. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    8. Cost of safety, accident prevention, and similar educational 
activities.

                  595  Maintenance of Line Transformers

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in maintenance of distribution 
line transformers, the book cost of which is includible in Account 368, 
Line Transformers. (See Sec. 1767.17(b).)

         596  Maintenance of Street Lighting and Signal Systems

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in maintenance of plant, the book 
cost of which is includible in Account 373, Street Lighting and Signal 
Systems. (See Sec. 1767.17(b).)

                       597  Maintenance of Meters

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in the maintenance of meters and 
meter testing equipment, the book cost of which is includible in Account 
370, Meters, and Account 395, Laboratory Equipment, respectively. (See 
Sec. 1767.17(b).)

[[Page 804]]

          598  Maintenance of Miscellaneous Distribution Plant

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in maintenance of plant, the book 
cost of which is includible in Accounts 371, Installations on Customers' 
Premises, and Account 372, Leased Property on Customers' Premises, and 
any other plant the maintenance of which is assignable to the 
distribution function and is not provided for elsewhere. (See 
Sec. 1767.17(b).)

                                  Items

    1. Work of similar nature to that listed in other distribution 
maintenance accounts.
    2. Maintenance of office furniture and equipment used by 
distribution system department.

Taxes: 

    1. Federal and state unemployment.
    2. F.I.C.A.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance: 

    1. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    2. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    3. Fees and expenses of claim investigators.
    4. Payment of awards to claimants for court costs and attorneys' 
services.
    5. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    6. Compensation payments under workmen's compensation laws.
    7. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    8. Cost of safety, accident prevention, and similar educational 
activities.

[58 FR 59825, Nov. 10, 1993, as amended at 62 FR 42291, Aug. 6, 1997]

Sec. 1767.28  Customer accounts expenses.

    The customer accounts expense accounts identified in this section 
shall be used by all RUS borrowers.

                       Customer Accounts Expenses

                               (Operation)

901  Supervision
902  Meter Reading Expenses
903  Customer Records and Collection Expenses
904  Uncollectible Accounts
905  Miscellaneous Customer Accounts Expenses

                       Customer Accounts Expenses

                               (Operation)

                            901  Supervision

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
and expenses incurred in the general direction and supervision of 
customer accounting and collecting activities. Direct supervision of a 
specific activity shall be charged to Account 902, Meter Reading 
Expenses, or Account 903, Customer Records and Collection Expenses, as 
appropriate. (See Sec. 1767.17(a).)

                       902  Meter Reading Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in reading customer meters, and 
determining consumption when performed by employees engaged in reading 
meters.

                                  Items

    Labor:
    1. Addressing forms for obtaining meter readings by mail.
    2. Changing and collecting meter charts used for billing purposes.

[[Page 805]]

    3. Inspecting time clocks and checking seals when performed by meter 
readers and the work represents a minor activity incidental to regular 
meter reading routine.
    4. Reading meters, including demand meters, and obtaining load 
information for billing purposes. Exclude and charge to Account 586, 
Meter Expenses, or to Account 903, Customer Records and Collection 
Expenses, as applicable, the cost of obtaining meter readings, first and 
final, if incidental to the operation of removing or resetting, sealing 
or locking, and disconnecting or reconnecting meters.
    5. Computing consumption from meter reader's book or from reports by 
mail when done by employees engaged in reading meters.
    6. Collecting from prepayment meters when incidental to meter 
reading.
    7. Maintaining record of customers' keys.
    8. Computing estimated or average consumption when performed by 
employees engaged in reading meters.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    2. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    3. Fees and expenses of claim investigators.
    4. Payment of awards to claimants for court costs and attorneys' 
services.
    5. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    6. Compensation payments under workmen's compensation laws.
    7. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    8. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Badges, lamps, and uniforms.
    2. Demand charts, meter books and binders and forms for recording 
readings, but not the cost of preparation.
    3. Postage and supplies used in obtaining meter readings by mail.
    4. Transportation, meals, and incidental expenses.

              903  Customer Records and Collection Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in work on customer applications, 
contracts, orders, credit investigations, billing and accounting, 
collections and complaints.

                                  Items

Labor:

    1. Receiving, preparing, recording, and handling routine orders for 
service, disconnections, transfers or meter tests initiated by the 
customer, excluding the cost of carrying out such orders, which is 
chargeable to the account appropriate for the work called for by such 
orders.
    2. Investigations of customers' credit and keeping of records 
pertaining thereto, including records of uncollectible accounts written 
off.
    3. Receiving, refunding, or applying customer deposits and 
maintaining customer deposit, line extension, and other miscellaneous 
records.
    4. Checking consumption shown by meter readers' reports where 
incidental to preparation of billing date.
    5. Preparing address plates and addressing bills and delinquent 
notices.
    6. Preparing billing data.
    7. Operating billing and bookkeeping machines.
    8. Verifying billing records with contracts or rate schedules.
    9. Preparing bills for delivery and mailing or delivering bills.

[[Page 806]]

    10. Collecting revenues, including collection from prepayment 
meters, unless incidental to meter-reading operations.
    11. Balancing collections, preparing collections for deposit, and 
preparing cash reports.
    12. Posting collections and other credits or charges to customer 
accounts and extending unpaid balances.
    13. Balancing customer accounts and controls.
    14. Preparing, mailing, or delivering delinquent notices and 
preparing reports of delinquent accounts.
    15. Final meter reading of delinquent accounts when done by 
collectors incidental to regular activities.
    16. Disconnecting and reconnecting service because of nonpayment 
bills.
    17. Receiving, recording, and handling of inquiries, complaints, and 
requests for investigations from customers, including preparation of 
necessary orders, but excluding the cost of carrying out such orders, 
which is chargeable to the account appropriate for the work called for 
by such orders.
    18. Statistical and tabulating work on customer accounts and 
revenues, but not including special analyses for sales department, rate 
department, or other general purposes, unless incidental to regular 
customer accounting routines.
    19. Preparing and periodically rewriting meter reading sheets.
    20. Determining consumption and computing estimated or average 
consumption when performed by employees other than those engaged in 
reading meters.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:
    1. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    2. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    3. Fees and expenses of claim investigators.
    4. Payment of awards to claimants for court costs and attorneys' 
services.
    5. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    6. Compensation payments under workmen's compensation laws.
    7. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    8. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Address plates and supplies.
    2. Cash overages and shortages.
    3. Commissions or fees to others for collecting.
    4. Payments to credit organizations for investigations and reports.
    5. Postage.
    6. Transportation expenses, including transportation of customer 
bills and meter books under centralized billing procedures.
    7. Transportation, meals expenses, and incidental expenses.
    8. Bank charges, exchange, and other fees for cashing and depositing 
customers' checks.
    9. Forms for recording orders for services, or removals.
    10. Rent of mechanical equipment.

    Note:  The cost of work on meter history and meter location records 
in chargeable to Account 586, Meter Expenses.

                      904   Uncollectible Accounts

    This amount shall be charged with amounts sufficient to provide for 
losses from uncollectible utility revenues. Concurrent credits shall be 
made to Account 144, Accumulated Provision for Uncollectible Accounts--
Credit. Losses from uncollectible accounts shall be charged to Account 
144.

[[Page 807]]

              905  Miscellaneous Customer Accounts Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
property insurance, property taxes, materials used, and expenses 
incurred not provided for in other accounts.

                                  Items

Labor:

    1. General clerical and stenographic work.
    2. Miscellaneous labor.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    3. Property.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein, or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.
    2. Amounts credited to Account 228.1, Accumulated Provision for 
Property Insurance, for similar protection.
    3. Special costs incurred in procuring insurance.
    4. Insurance inspection service.
    5. Insurance counsel, brokerage fees, and expenses.
    6. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    7. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    8. Fees and expenses of claim investigators.
    9. Payment of awards to claimants for court costs and attorneys' 
services.
    10. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    11. Compensation payments under workmen's compensation laws.
    12. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    13. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Communication service.
    2. Miscellaneous office supplies and expenses and stationery and 
printing other than those specifically provided for in Account 902 and 
Account 903.

[58 FR 59825, Nov. 10, 1993, as amended at 62 FR 42311, Aug. 6, 1997; 62 
FR 43201, Aug. 12, 1997]

Sec. 1767.29  Customer service and informational expenses.

    The customer service and informational expense accounts identified 
in this section shall be used by all RUS borrowers.

               Customer Service and Informational Expenses

                               (Operation)

907  Supervision
908  Customer Assistance Expenses
909  Informational and Instructional Advertising Expenses
910  Miscellaneous Customer Service and Informational Expenses

               Customer Service and Informational Expenses

                               (Operation)

                            907  Supervision

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
and expenses incurred in the general direction and supervision of 
customer service activities, the object of which is to encourage safe, 
efficient, and economical use of the utility's service. Direct 
supervision of a specific activity within customer service and 
informational expense classification shall be charged to the account 
wherein the

[[Page 808]]

costs of such activity are included. (See Sec. 1767.17(a).)

                    908  Customer Assistance Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in providing instructions or 
assistance to customers, the object of which is to encourage safe, 
efficient, and economical use of the utility's service.

                                  Items

Labor:

    1. Direct supervision of department.
    2. Processing customer inquiries relating to the proper use of 
electric equipment, the replacement of such equipment, and information 
related to such equipment.
    3. Advice directed to customers as to how they may achieve the most 
efficient and safest use of electric equipment.
    4. Demonstrations, exhibits, lectures, and other programs designed 
to instruct customers in the safe, economical, or efficient use of 
electric service, and/or oriented toward conservation of energy.
    5. Engineering and technical advice to customers, the object of 
which is to promote safe, efficient, and economical use of the utility's 
service.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    2. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    3. Fees and expenses of claim investigators.
    4. Payment of awards to claimants for court costs and attorneys' 
services.
    5. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    6. Compensation payments under workmen's compensation laws.
    7. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    8. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Supplies and expenses pertaining to demonstrations, exhibits, 
lectures, and other programs.
    2. Loss in value on equipment and appliances used for customer 
assistance programs.
    3. Office supplies and expenses.
    4. Transportation, meals, and incidental expenses.

    Note: Do not include in this account expenses that are provided for 
elsewhere, such as Accounts 416, Costs and Expenses of Merchandising, 
Jobbing, and Contract Work; 587, Customer Installations Expenses; and 
912, Demonstrating and Selling Expenses.

        909  Informational and Instructional Advertising Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in activities which primarily 
convey information as to what the utility urges or suggests customers 
should do in utilizing electric service to protect health and safety, to 
encourage environmental protection, to utilize their electric equipment 
safely and economically, or to conserve electric energy.

                                  Items

Labor:

    1. Direct supervision of information activities.
    2. Preparing informational materials for newspapers, periodicals, 
and billboards and preparing and conducting informational motion 
pictures, radio and television programs.

[[Page 809]]

    3. Preparing informational booklets and bulletins used in direct 
mailings.
    4. Preparing informational window and other displays.
    5. Employing agencies, selecting media, and conducting negotiations 
in connection with the placement and subject matter of information 
programs.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance: 

    1. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    2. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    3. Fees and expenses of claim investigators.
    4. Payment of awards to claimants for court costs and attorneys' 
services.
    5. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    6. Compensation payments under workmen's compensation laws.
    7. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    8. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Use of newspapers, periodicals, billboards, and radio for 
informational purposes.
    2. Postage on direct mailings to customers exclusive of postage 
related to billings.
    3. Printing of informational booklets, dodgers, and bulletins.
    4. Supplies and expenses in preparing informational materials by the 
utility.
    5. Office supplies and expenses.

    Note A:  Exclude from this account and charge to Account 930.2, 
Miscellaneous General Expenses, the cost of publication of stockholder 
reports, dividend notices, bond redemption notices, financial 
statements, and other notices of a general corporate character. Also 
exclude all expenses of a promotional, institutional, goodwill, or 
political nature, which are includible in such accounts as 913, 
Advertising Expenses; 930.1, General Advertising Expenses; and 426.4, 
Expenditures for Certain Civic, Political and Related Activities.
    Note B:  Entries relating to informational advertising included in 
this account shall contain or refer to supporting documents which 
identify the specific advertising message. If references are used, 
copies of the advertising message shall be readily available.

     910  Miscellaneous Customer Service and Informational Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
property insurance, property taxes, materials used, and expenses 
incurred in connection with customer service and informational 
activities which are not includible in other customer information 
expense accounts.

                                  Items

Labor:

    1. General clerical and stenographic work not assigned to specific 
customer service and informational programs.
    2. Miscellaneous labor.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    3. Property.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.

[[Page 810]]

    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.
    2. Amounts credited to Account 228.1, Accumulated Provision for 
Property Insurance, for similar protection.
    3. Special costs incurred in procuring insurance.
    4. Insurance inspection service.
    5. Insurance counsel, brokerage fees, and expenses.
    6. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    7. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    8. Fees and expenses of claim investigators.
    9. Payment of awards to claimants for court costs and attorneys' 
services.
    10. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    11. Compensation payments under workmen's compensation laws.
    12. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    13. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Communication service.
    2. Printing, postage, and office supplies expenses.

[58 FR 59825, Nov. 10, 1993, as amended at 62 FR 42313, Aug. 6, 1997]

Sec. 1767.30  Sales expenses.

    The sales expense accounts identified in this section shall be used 
by all RUS borrowers.

                             Sales Expenses

                               (Operation)

911  Supervision
912  Demonstrating and Selling Expenses
913  Advertising Expenses
916  Miscellaneous Sales Expenses

                             Sales Expenses

                               (Operation)

                            911  Supervision

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
and expenses incurred in the general direction and supervision of sales 
activities, except merchandising. Direct supervision of a specific 
activity, such as demonstrating, selling, or advertising shall be 
charged to the account wherein the costs of such activity are included. 
(See Sec. 1767.17(a).)

                 912  Demonstrating and Selling Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in promotional, demonstrating, and 
selling activities, except by merchandising, the object of which is to 
promote or retain the use of utility services by present and prospective 
customers.

                                  Items

Labor:

    1. Demonstrating uses of utility services.
    2. Conducting cooking schools, preparing recipes, and related home 
service activities.
    3. Exhibitions, displays, lectures, and other programs designed to 
promote use of utility services.
    4. Experimental and development work in connection with new and 
improved appliances and equipment, prior to general public acceptance.
    5. Solicitation of new customers or of additional business from old 
customers, including commissions paid employees.
    6. Engineering and technical advice to present or prospective 
customers in connection with promoting or retaining the use of utility 
services.
    7. Special customer canvasses when their primary purpose is the 
retention of business or the promotion of new business.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated

[[Page 811]]

on the more equitable basis of either direct labor dollars or direct 
labor hours, applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    2. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    3. Fees and expenses of claim investigators.
    4. Payment of awards to claimants for court costs and attorneys' 
services.
    5. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    6. Compensation payments under workmen's compensation laws.
    7. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    8. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Supplies and expenses pertaining to demonstration, experimental, 
and development activities.
    2. Booth and temporary space rental.
    3. Loss in value on equipment and appliances used for demonstration 
purposes.
    4. Transportation, meals, and incidental expenses.

                        913 Advertising Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in advertising designed to promote 
or retain the use of utility service, except advertising the sale of 
merchandise by the utility.

                                  Items

Labor:

    1. Direct supervision of department.
    2. Preparing advertising material for newspapers, periodicals, and 
billboards, and preparing and conducting motion pictures, radio, and 
television programs.
    3. Preparing booklets and bulletins used in direct mail advertising.
    4. Preparing window and other displays.
    5. Clerical and stenographic work.
    6. Investigating advertising agencies and media and conducting 
negotiations in connection with the placement and subject matter of 
sales advertising.

Taxes: 

    1. Federal and state unemployment.
    2. F.I.C.A.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance: 

    1. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    2. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    3. Fees and expenses of claim investigators.
    4. Payment of awards to claimants for court costs and attorneys' 
services.

[[Page 812]]

    5. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    6. Compensation payments under workmen's compensation laws.
    7. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    8. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Advertising in newspapers, periodicals, billboards, and radio for 
sales promotion purposes, but not including institutional or goodwill 
advertising includible in Account 930.1, General Advertising Expenses.
    2. Materials and services given as prizes or otherwise in connection 
with civic lighting contests, canning, or cooking contests, and bazaars 
in order to publicize and promote the use of utility services.
    3. Fees and expenses of advertising agencies and commercial artists.
    4. Novelties for general distribution.
    5. Postage on direct mail advertising.
    6. Premiums distributed generally, such as recipe books when not 
offered as inducement to purchase appliances.
    7. Printing booklets, dodgers, and bulletins.
    8. Supplies and expenses in preparing advertising material.
    9. Office supplies and expenses.

    Note A:  The cost of advertisements which set forth the value or 
advantages of utility service without reference to specific appliances, 
or, if reference is made to appliances, invites the reader to purchase 
appliances from his dealer or refer to appliances not carried for sale 
by the utility, shall be considered sales promotion advertising and 
charged to this account. However, advertisements which are limited to 
specific makes of appliances sold by the utility and price and terms, 
thereof, without referring to the value or advantages of utility 
service, shall be considered as merchandise advertising and the cost 
shall be charged to Costs and Expenses of Merchandising, Jobbing and 
Contract Work, Account 416.
    Note B: Advertisements which substantially mention or refer to the 
value or advantages of utility service, together with specific reference 
to makes of appliance sold by the utility and the price, and terms, 
thereof, and designed for the joint purpose of increasing the use of 
utility service and the sales of appliances, shall be considered as a 
combination advertisement and the costs shall be distributed between 
this account and Account 416 on the basis of space, time, or other 
proportional factors.
    Note C:  Exclude from this account and charge to Account 930.2, 
Miscellaneous General Expenses, the cost of publication of stockholder 
reports, dividend notices, bond redemption notices, financial 
statements, and other notices of a general corporate character. Also 
exclude all institutional or goodwill advertising. (See Account 930.1, 
General Advertising Expenses.)

                    916  Miscellaneous Sales Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
property insurance, property taxes, materials used, and expenses 
incurred in connection with sales activities, except merchandising, 
which are not includible in other sales expense accounts.

                                  Items

Labor:

    1. General clerical and stenographic work not assigned to specific 
functions.
    2. Special analysis of customer accounts and other statistical work 
for sales purposes not a **part** of the regular customer accounting and 
billing routine.
    3. Miscellaneous labor.

Taxes: 

    1. Federal and state unemployment.
    2. F.I.C.A.
    3. Property.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance: 

    1. Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.

[[Page 813]]

    2. Amounts credited to Account 228.1, Accumulated Provision for 
Property Insurance, for similar protection.
    3. Special costs incurred in procuring insurance.
    4. Insurance inspection service.
    5. Insurance counsel, brokerage fees, and expenses.
    6. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    7. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    8. Fees and expenses of claim investigators.
    9. Payment of awards to claimants for court costs and attorneys' 
services.
    10. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    11. Compensation payments under workmen's compensation laws.
    12. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    13. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Communication service.
    2. Printing, postage, office supplies, and expenses applicable to 
sales activities, except those chargeable to Account 913, Advertising 
Expenses.

[58 FR 59825, Nov. 10, 1993, as amended at 62 FR 42315, Aug. 6, 1997]

Sec. 1767.31  Administrative and general expenses.

    The administrative and general expense accounts identified in this 
section shall be used by all RUS borrowers.

                       Administrative and General

                               (Operation)

920  Administrative and General Salaries
921  Office Supplies and Expenses
922  Administrative Expenses Transferred--Credit
923  Outside Services Employed
924  Property Insurance
925  Injuries and Damages
926  Employee Pensions and Benefits
927  Franchise Requirements
928  Regulatory Commission Expenses
929  Duplicate Charges--Credit
930.1  General Advertising Expenses
930.2  Miscellaneous General Expenses
931   Rents

                              (Maintenance)

935  Maintenance of General Plant

                       Administrative and General

                               (Operation)

                920  Administrative and General Salaries

    A. This account shall include the compensation (salaries, bonuses, 
employee pensions and benefits, social security and other payroll taxes, 
injuries and damages, and other consideration for services, but not 
including directors' fees) of officers, executives, and other employees 
of the utility properly chargeable to utility operations and not 
chargeable directly to a particular operating function.
    B. This account may be subdivided in accordance with a 
classification appropriate to the departmental or other functional 
organization of the utility.

                   921   Office Supplies and Expenses

    A. This account shall include office supplies and expenses incurred 
in connection with the general administration of the utility's 
operations which are assignable to specific administrative or general 
departments and are not specifically provided for in other accounts. 
This includes the expenses of the various administrative and general 
departments, the salaries and wages of which are includible in Account 
920.
    B. This account may be subdivided in accordance with a 
classification appropriate to the departmental or other functional 
organization of the utility.
    Note: Office expenses which are clearly applicable to any category 
of operating expenses other than the administrative and general category 
shall be included in the appropriate account in such category. Further, 
general expenses which apply to the utility as a whole rather than to a 
particular administrative function, shall be included in Account 930.2, 
Miscellaneous General Expenses.

                                  Items

    1. Automobile service, including charges through clearing account.
    2. Bank messenger and service charges.
    3. Books, periodicals, bulletins, and subscriptions to newspapers, 
newsletters, and tax services.
    4. Building service expenses for customer accounts, sales, and 
administrative and general purposes.
    5. Communication service expenses.
    6. Cost of individual items of office equipment used by general 
departments which are of small value or short life.

[[Page 814]]

    7. Membership fees and dues in trade, technical, and professional 
associations paid by a utility for employees. (Company memberships are 
includible in Account 930.2.)
    8. Office supplies and expenses.
    9. Payment of court costs, witness fees, and other expenses of legal 
department.
    10. Postage, printing, and stationery.
    11. Meals, traveling, and incidental expenses.

            922   Administrative Expenses Transferred--Credit

    This account shall be credited with administrative expenses recorded 
in Account 920 and Account 921 which are transferred to construction 
costs or to nonutility accounts. (See Sec. 1767.16 (d).)

                     923   Outside Services Employed

    A. This account shall include the fees and expenses of professional 
consultants and others for general services which are not applicable to 
a particular operating function or other accounts. It shall include also 
the pay and expenses of persons engaged for a special or temporary 
administrative or general purpose in circumstances where the person so 
engaged is not considered as an employee of the utility.
    B. This account shall be so maintained as to permit ready 
summarization according to the nature of service and the person 
furnishing the same.

                                  Items

    1. Fees, pay, and expenses of accountants and auditors, actuaries, 
appraisers, attorneys, engineering consultants, management consultants, 
negotiators, public relations counsel, and tax consultants.
    2. Supervision fees and expenses paid under contracts for general 
management services.
    Note: Do not include inspection and brokerage fees and commissions 
chargeable to other accounts or fees and expenses in connection with 
security issues which are includible in the expenses of issuing 
securities.

                         924  Property Insurance

    A. This account shall include the cost of insurance or reserve 
accruals to protect the utility against losses and damages to owned or 
leased property used in its utility operations. It shall also include 
the cost of labor, employee pensions and benefits, social security and 
other payroll taxes, injuries and damages, and the related supplies and 
expenses incurred in property insurance activities.
    B. Recoveries from insurance companies or others for property 
damages shall be credited to the account charged with the cost of the 
damage. If the damaged property has been retired, the credit shall be to 
the appropriate account for accumulated provision for depreciation.
    C. Records shall be kept so as to show the amount of coverage for 
each class of insurance carried, the property covered, and the 
applicable premiums. Any dividends distributed by mutual insurance 
companies shall be credited to the accounts to which the insurance 
premiums were charged.

                                  Items

    1. Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.
    2. Amounts credited to Account 228.1, Accumulated Provision for 
Property Insurance, for similar protection.
    3. Special costs incurred in procuring insurance.
    4. Insurance inspection service.
    5. Insurance counsel, brokerage fees, and expenses.
    Note A:  The cost of insurance or reserve accruals capitalized, 
shall be charged to construction and retirement either directly or by 
transfers to construction and retirement work orders from this account.
    Note B:  The cost of insurance or reserve accruals for the following 
classes of property shall be charged as indicated:
    1. Materials, supplies, and stores equipment to Account 163, Stores 
Expense Undistributed, or appropriate materials account.
    2. Transportation and other general equipment to appropriate 
clearing accounts that may be maintained.
    3. Electric plant leased to others to Account 413, Expenses of 
Electric Plant Leased to Others.
    4. Nonutility property to the appropriate nonutility income account.
    5. Merchandise and jobbing property to Account 416, Costs and 
Expenses of Merchandising, Jobbing and Contract Work.
    Note C:  The cost of labor, employee pensions and benefits, social 
security and other payroll taxes, and the related supplies and expenses 
of administrative and general employees who are only incidentally 
engaged in property insurance work may be included in Account 920 and 
Account 921, as appropriate.
    Note D:  The cost of insurance or reserve accruals applicable to the 
various utility functions shall be charged to the specific functional 
operations and the appropropriate miscellaneous administrative expense 
accounts either directly or by transfers from this account.

                        925  Injuries and Damages

    A. This account shall include the cost of insurance or reserve 
accruals to protect the utility against injuries and damages claims of 
employees or others, losses of such character not covered by insurance, 
and expenses

[[Page 815]]

incurred in settlement of injuries and damages claims. It shall also 
include the cost of labor, employee pensions and benefits, social 
security and other payroll taxes, injuries and damages, related 
supplies, and expenses incurred in injuries and damages activities.
    B. Reimbursements from insurance companies or others for expenses 
charged hereto on account of injuries, damages, and insurance dividends 
or refunds shall be credited to this account.

                                  Items

    1. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    2. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    3. Fees and expenses of claim investigators.
    4. Payment of awards to claimants for court costs and attorneys' 
services.
    5. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    6. Compensation payments under workmen's compensation laws.
    7. Compensation paid while incapacitated as the result of 
occupational injuries. (See Note A.)
    8. Cost of safety, accident prevention, and similar educational 
activities.
    Note A:  Payments to or in behalf of employees for accident or death 
benefits, hospital expenses, medical expenses, or for salaries while 
incapacitated for service or on leave of absence beyond periods normally 
allowed, when not the result of occupational injuries, shall be charged 
to Account 926, Employee Pensions and Benefits. (See also Note B of 
Account 926.)
    Note B: The cost of injuries and damages or reserve accruals 
capitalized shall be charged to construction and retirement activities 
either directly or by transfers from this account to the applicable 
construction and retirement work orders.
    Note C: The cost of insurance or reserve accruals applicable to the 
various utility functions shall be charged to the specific functional 
operations and the appropropriate miscellaneous administrative expense 
accounts either directly or by transfers from this account.
    Note D: Exclude herefrom the time and expenses of employees (except 
those engaged in injuries and damages activities) spent in attendance at 
safety and accident prevention educational meetings, if occurring during 
the regular work period.
    Note E: The cost of labor, employee pensions and benefits, social 
security and other payroll taxes, and the related supplies and expenses 
of administrative and general employees who are only incidentally 
engaged in injuries and damages activities, may be included in Account 
920 and Account 921, as appropriate.

                   926  Employee Pensions and Benefits

    A. This account shall include pensions paid to or on behalf of 
retired employees or accruals to provide for pensions or payments for 
the purchase of annuities for this purpose, when the utility has 
definitely, by contract, committed itself to a pension plan under which 
the pension funds are irrevocably devoted to pension purposes and 
payments for employee accident, sickness, hospital, and death benefits, 
or insurance therefor. Include, also, expenses incurred in medical, 
educational, or recreational activities for the benefit of employees and 
administrative expenses in connection with employee pensions and 
benefits.
    B. The utility shall maintain a complete record of accruals or 
payments for pensions and be prepared to furnish full information to RUS 
of the plan under which it has created or proposes to create a pension 
fund and a copy of the declaration of trust or resolution under which 
the pension plan is established.
    C. There shall be credited to this account, the portion of pensions 
and benefits expenses which is applicable to nonutility operations, the 
specific functional operations, maintenance, and administrative expense 
accounts, and to construction and retirement activities unless such 
amounts are distributed directly to the accounts involved and are not 
included herein in the first instance.
    D. Records in support of this account shall be so kept that the 
total pensions expense, the total benefits expense, the administrative 
expenses included herein, and the amounts of pensions and benefits 
expenses transferred to the operations, maintenance, administrative, 
construction or retirement accounts will be readily available.

                                  Items

    1. Payment of pensions to retirees on a nonaccrual basis.
    2. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    3. Group and life insurance premiums (credit dividends received).
    4. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    5. Payments for accident, sickness, hospital, and death benefits or 
insurance.

[[Page 816]]

    6. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    7. Expenses in connection with educational and recreational 
activities for the benefit of employees.
    Note A:  The cost of labor, employee pensions and benefits, social 
security and other payroll taxes, injuries and damages, and the related 
supplies and expenses of administrative and general employees who are 
only incidentally engaged in employee pension and benefit activities may 
be included in Account 920 and Account 921, as appropriate.
    Note B: Salaries paid to employees during periods of nonoccupational 
sickness may be charged to the appropriate labor account rather than to 
employee benefits.

                      927   Franchise Requirements

    A. This account shall include payments to municipal or other 
governmental authorities and the cost of materials, supplies, and 
services furnished such authorities without reimbursement in compliance 
with franchise, ordinance, or similar requirements; provided, however, 
that the utility may charge to this account at regular tariff rates, 
instead of cost, utility service furnished without charge under 
provisions of franchises.
    B. When no direct outlay is involved, concurrent credit for such 
charges shall be made to Account 929, Duplicate Charges--Credit.
    C. The account shall be maintained so as to readily reflect the 
amounts of cash outlays, utility service supplied without charge, and 
other items furnished without charge.
    Note A: Franchise taxes shall not be charged to this account, but to 
Account 408.1, Taxes Other Than Income Taxes, Utility Operating Income.
    Note B: Any amount paid as initial consideration for a franchise 
running for more than one year shall be charged to Account 302, 
Franchises and Consents.

                  928   Regulatory Commission Expenses

    A. This account shall include all expense (except pay of regular 
employees only incidentally engaged in such work) properly includible in 
utility operating expenses, incurred by the utility in connection with 
formal cases before regulatory commissions or other regulatory bodies or 
cases in which such a body is a party, including payments made to a 
regulatory commission for fees assessed against the utility for pay and 
expenses of such commission, its officers, agents, and employees, and 
also including payments made to the United States for the administration 
of the Federal Power Act.
    B. Amounts of regulatory commission expenses which, by approval or 
direction of RUS, are to be spread over future periods shall be charged 
to Account 182.3, Other Regulatory Assets, and amortized by charges to 
this account.
    C. The utility shall be prepared to show the cost of each formal 
case.

                                  Items

    1. Salaries, fees, retainers, and expenses of counsel, solicitors, 
attorneys, accountants, engineers, clerks, attendants, witnesses, and 
others engaged in the prosecution of or defence against petitions or 
complaints presented to regulatory bodies or in the valuation of 
property owned or used by the utility in connection with such cases.
    2. Office supplies and expenses, payments to public service or other 
regulatory commissions, stationery and printing, traveling expenses, and 
other expenses incurred directly in connection with formal cases before 
regulatory commissions.
    Note A: Exclude from this account and include in other appropriate 
operating expense accounts, expenses incurred in the improvement of 
service, additional inspection, or rendering reports which are made 
necessary by the rules and regulations, or orders, of regulatory bodies.
    Note B:Do not include in this account amounts includible in Account 
302, Franchises and Consents; Account 181, Unamortized Debt Expense; or 
Account 214, Capital Stock Expense.

                     929   Duplicate Charges--Credit

    This account shall include concurrent credits for charges which may 
be made to operating expenses or to other accounts for the use of 
utility service from its own supply. Include, also, offsetting credits 
for any other charges made to operating expenses for which there is no 
direct money outlay.

                   930.1  General Advertising Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
materials used, and expenses incurred in advertising and related 
activities, the cost of which by their content and purpose are not 
provided for elsewhere.

                                  Items

Labor:

    1. Supervision.
    2. Preparing advertising material for newspapers, periodicals, and 
billboards and preparing or conducting motion pictures, radio, and 
television programs.
    3. Preparing booklets and bulletins used in direct mail advertising.
    4. Preparing window and other displays.
    5. Clerical and stenographic work.
    6. Investigating and employing advertising agencies, selecting 
media, and conducting

[[Page 817]]

negotiations in connection with the placement and subject matter of 
advertising.

Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).
    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.
Insurance:

    1. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    2. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    3. Fees and expenses of claim investigators.
    4. Payment of awards to claimants for court costs and attorneys' 
services.
    5. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    6. Compensation payments under workmen's compensation laws.
    7. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    8. Cost of safety, accident prevention, and similar educational 
activities.

Materials and Expenses:

    1. Advertising in newspapers, periodicals, billboards, and radios.
    2. Advertising matter such as posters, bulletins, booklets, and 
related items.
    3. Fees and expenses of advertising agencies and commercial artists.
    4. Postage and direct mail advertising.
    5. Printing of booklets, dodgers, and bulletins.
    6. Supplies and expenses in preparing advertising materials.
    7. Office supplies and expenses.
    Note A:  Properly includible in this account is the cost of 
advertising activities on a local or national basis of a goodwill or 
institutional nature, which is primarily designed to improve the image 
of the utility or the industry, including advertisements which inform 
the public concerning matters affecting the company's operations, such 
as, the cost of providing service, the company's efforts to improve the 
quality of service, and the company's efforts to improve and protect the 
environment. Entries relating to advertising included in this account 
shall contain or refer to supporting documents which identify the 
specific advertising message. If references are used, copies of the 
advertising message shall be readily available.
    Note B:  Exclude from this account and include in Account 426.4, 
Expenditures for Certain Civic, Political and Related Activities, 
expenses for advertising activities, which are designed to solicit 
public support or the support of public officials in matters of a 
political nature.

                  930.2  Miscellaneous General Expenses

    This account shall include the cost of labor, employee pensions and 
benefits, social security and other payroll taxes, injuries and damages, 
property insurance, property taxes, and expenses incurred in connection 
with the general management of the utility not provided for elsewhere.

                                  Items

Labor:
    1. Miscellaneous labor not elsewhere provided for.
Taxes:

    1. Federal and state unemployment.
    2. F.I.C.A.
    3. Property.
    Employee Pensions and Benefits: The portion of employee pensions and 
benefits specifically identifiable with employees' labor costs charged 
herein or, in the absence of specific employee identification, the 
portion of employee pensions and benefits, allocated on the more 
equitable basis of either direct labor dollars or direct labor hours, 
applicable to the labor items detailed above, including:
    1. Accruals for or payments to pension funds or to insurance 
companies for pension purposes.
    2. Group and life insurance premiums (credit dividends received).

[[Page 818]]

    3. Payments for medical and hospital services and expenses of 
employees when not the result of occupational injuries.
    4. Payments for accident, sickness, hospital, and death benefits or 
insurance.
    5. Payments to employees incapacitated for service or on leave of 
absence beyond periods normally allowed when not the result of 
occupational injuries or in excess of statutory awards.
    6. Expenses in connection with educational and recreational 
activities for the benefit of employees.

Insurance:

    1. Premiums payable to insurance companies for fire, storm, 
burglary, boiler explosion, lightning, fidelity, riot, and similar 
insurance.
    2. Amounts credited to Account 228.1, Accumulated Provision for 
Property Insurance, for similar protection.
    3. Special costs incurred in procuring insurance.
    4. Insurance inspection service.
    5. Insurance counsel, brokerage fees, and expenses.
    6. Premiums payable to insurance companies for protection against 
claims from injuries and damages by employees or others, such as public 
liability, property damages, casualty, employee liability, etc., and 
amounts credited to Account 228.2, Accumulated Provision for Injuries 
and Damage, for similar protection.
    7. Losses not covered by insurance or reserve accruals on account of 
injuries or deaths to employees or others and damages to the property of 
others.
    8. Fees and expenses of claim investigators.
    9. Payment of awards to claimants for court costs and attorneys' 
services.
    10. Medical and hospital service and expenses for employees as the 
result of occupational injuries or resulting from claims of others.
    11. Compensation payments under workmen's compensation laws.
    12. Compensation paid while incapacitated as the result of 
occupational injuries. (See Account 924, Note A.)
    13. Cost of safety, accident prevention, and similar educational 
activities.

Expenses:

    1. Industry association dues for company memberships.
    2. Contributions for conventions and meetings of the industry.
    3. Research, development, and demonstration expenses not charged to 
other operation and maintenance expense accounts on a functional basis.
    4. Communication service not chargeable to other accounts.
    5. Trustee, registrar, and transfer agent fees and expenses.
    6. Stockholders meeting expenses.
    7. Dividend and other financial notices.
    8. Printing and mailing dividend checks.
    9. Directors' fees and expenses.
    10. Publishing and distributing annual reports to stockholders.
    11. Public notices of financial, operating, and other data required 
by regulatory statutes, not including, however, notices required in 
connection with security issues or acquisitions of property.

                               931   Rents

    This account shall include rents properly includible in utility 
operating expenses for the property of others used, occupied, or 
operated in connection with the customer accounts, customer service and 
informational, sales, general, and administrative functions of the 
utility. (See Sec. 1767.17 (c).)

                              (Maintenance)

                    935  Maintenance of General Plant

    A. This account shall include the cost assignable to customer 
accounts, sales, administrative, and general functions of labor, 
employee pensions and benefits, social security and other payroll taxes, 
injuries and damages, materials used, and expenses incurred in the 
maintenance of property, the book cost of which is includible in Account 
390, Structures and Improvements; Account 391, Office Furniture and 
Equipment; Account 397, Communication Equipment; and Account 398, 
Miscellaneous Equipment. (See Sec. 1767.17(b).)
    B. Maintenance expenses on office furniture and equipment used 
elsewhere than in general, commercial, and sales offices shall be 
charged to the following accounts:
    1. Steam Power Generation, Account 514.
    2. Nuclear Power Generation, Account 532.
    3. Hydraulic Power Generation, Account 545.
    4. Other Power Generation, Account 554.
    5. Transmission, Account 573.
    6. Distribution, Account 598.
    7. Merchandise and Jobbing, Account 416.
    8. Garages, Shops, etc., Appropriate clearing account, if used.
    Note: Maintenance of plant included in other general equipment 
accounts shall be included herein unless charged to clearing accounts or 
to the particular functional maintenance expense account indicated by 
the use of the equipment.

[58 FR 59825, Nov. 10, 1993, as amended at 62 FR 42317, Aug. 6, 1997]

Secs. 1767.32-1767.40  [Reserved]

Sec. 1767.41  Accounting methods and procedures required of all RUS 
          borrowers.

    All RUS borrowers shall maintain and keep their books of accounts 
and

[[Page 819]]

all other books and records which support the entries in such books of 
accounts in accordance with the accounting principles prescribed in this 
section. Interpretations Nos. 133, 134, 137, 403, 404, 602, 606, 618, 
627, 628, and 629 adopt and implement the provisions of standards issued 
by the Financial Accounting Standards Board (FASB). Each interpretation 
includes a synopsis of the requirements of the standard as well as 
specific accounting requirements and interpretations required by RUS. 
The synopsis provides general information to assist borrowers in 
determining whether the standard applies to an individual cooperative's 
operations. The synopsis is not intended to change the requirements of 
the FASB standards unless it is set forth in the section entitled RUS 
Accounting Requirements in each interpretation. If a particular borrower 
believes a conflict exists between the FASB standard and an RUS 
interpretation, the borrower shall contact the Director, PASD, to seek 
resolution of the issue.

                             Numerical Index

            Num- ber                               Title

101                               Work Order Procedures
102                               Line Conversion
103                               Sacrificial Anodes and the Replacement
                                   of a Neutral
104                               Terminal Facilities
105                               Pole Top Disconnect Switch
106                               Steel Pole Reinforcers
107                               Mobile Substations
108                               Security Lights
109                               Joint Use
110                               First Clearing and Grading of Land and
                                   Rights of Way
111                               Engineering Contracts for System
                                   Planning
112                               Determination of Availability of
                                   Service
113                               Temporary Facilities (Services)
114                               Construction Work-in-Progress Damaged
                                   or Destroyed by Storm
115                               Liquidated Damages
116                               Nonrefundable Payments for
                                   Construction
117                               Refunds of Overpayments for Materials
                                   and Equipment
118                               Load Control Equipment
119                               Special Equipment
120                               Meter Sockets and Meters
121                               Minimum--Maximum Voltmeters
122                               Retrofitting Demand Meters
123                               Transformer Conversions
124                               Transclosures
125                               Retirement Units
126                               Establishment of Continuing Property
                                   Records
127                               Continuing Property Records for
                                   Buildings
128                               Sale of Property
129                               Gain or Loss on the Sale of an Office
                                   Building
130                               Salvage and Obsolete Material
131                               Plant Acquisition Adjustments
132                               General Plant
133                               Plant Abandonments and Disallowances
                                   of Plant Cost
134                               Utility Plant Phase-in Plans
135                               Accounting for Removal or Relocation
                                   of Electric Facilities Resulting from
                                   the Action of Others
136                               Storm Damage
137                               Impairment of Long-Lived Assets.
138                               Automatic Meter Reading Systems-
                                   Turtles.
139                               Global Positioning Systems.
140                               Radio-Based Automatic Meter Reading
                                   Systems.
201                               Supplemental Financing
301                               Forfeited Customers' Deposits
401                               Computer Software Costs
402                               Legal Expenses
403                               Leases
404                               Consolidated Financial Statements
501                               Patronage Capital Assignments
502                               Patronage Capital Retirements
503                               Operating and Nonoperating Margins
504                               Patronage Capital from G&T
                                   Cooperatives
505                               Patronage Capital Furnished by Other
                                   Cooperative Service Organizations
506                               Forfeited Membership Fees
601                               Employee Benefits
602                               Compensated Absences
603                               Employee Retirement and Group
                                   Insurance
604                               Deferred Compensation
605                               Life Insurance Premium on Life of a
                                   Borrower Employee
606                               Pension Costs
607                               Unproductive Time
608                               Training Costs, Attendance at
                                   Meetings, etc.
609                               Maintenance and Operations
610                               Financial Forecast
611                               Advertising Expense
612                               Special Power Cost Study
613                               Mapping Costs
614                               Member Relations Costs
615                               Statewide Fees
616                               Power Supply/Distribution Cooperative
                                   Borrowings

[[Page 820]]


617                               Rate Discount Allowed by the Power
                                   Cooperative to Distribution
                                   Cooperative Owning Connecting
                                   Transmission Lines
618                               Theft Losses not Covered by Insurance
619                               Self Billing
620                               Purchase Rebates
621                               Integrity Fund
622                               In-Substance Defeasance
623                               Satellite or Cable Television Services
624                               Pollution Control Bonds
625                               Prepayment of Debt
626                               Rural Economic Development Loan and
                                   Grant Program
627                               Postretirement Benefits
628                               Postemployment Benefits
629                               Investments in Debt and Equity
                                   Securities
630                               Split Dollar Life Insurance.
631                               Special Early Retirement Plan.



                          Subject Matter Index

                                                                  Number

                                A

Abandonments--Plant.............................................     133
Acquisition Adjustments--Plant..................................     131
Advertising Expenses............................................     611
Assignments--Patronage Capital..................................     501
Attendance at Meetings..........................................     608
Automatic Meter Reading Systems--Radio-Based....................     140
Automatic Meter Reading Systems--Turtles........................     138
Availability of Service--Determination of.......................     112
                                B

Benefits--Employee..............................................     601
Bonds--Pollution Control........................................     624
Borrowing--Power Supply Cooperative/Distribution Cooperative....     616
Buildings--Continuing Property Records..........................     127
Buildings, Office--Gain or Loss on Sale of......................     129
                                C

Cable Television Services.......................................     623
Capital Credits--Assignment.....................................     501
Capital Credits--G&T Cooperative................................     504
Capital Credits--Other Service Cooperatives.....................     505
Capital Credits--Retirement.....................................     502
Compensated Absences............................................     602
Computer Software Costs.........................................     401
Consolidated Financial Statements...............................     404
Construction Work in Progress Damaged or Destroyed by Storm.....     114
Continuing Property Records--Buildings..........................     127
Continuing Property Records--Establishment of...................     126
Contributions--Nonrefundable....................................     116
Conversion--Line................................................     102
Conversion--Transformer.........................................     123
Customers' Deposits--Forfeited..................................     301
                                D

Damaged or Destroyed Construction Work in Progress..............     114
Damages--Liquidated.............................................     115
Debt--Prepayment of.............................................     625
Debt Securities--Investments in.................................     629
Deferred Compensation...........................................     604
Demand Meters--Retrofitting.....................................     122
Determination of Availability of Service........................     113
Disallowances of Plant Costs....................................     133
Disconnect Switch--Pole Top.....................................     105
Discounts Allowed by Power Cooperative to Distribution               617
 Cooperative Owning Transmission Lines..........................
Distribution Cooperative/Power Supply Cooperative Borrowing.....     616
                                E

Early Retirement Plan...........................................    631.
Economic Development Loan and Grant Program.....................     626
Employee Benefits...............................................     601
Equity Securities--Investments in...............................     629
                                F

Fees--Statewide.................................................     615
Financial Forecast..............................................     610
Financial Statements--Consolidated..............................     404
Financing--Supplemental.........................................     201
First Clearing and Grading of Land and Rights of Way............     110
Forfeited Customer Deposits.....................................     301
Forfeited Membership Fees.......................................     506
                                G

Gain or Loss on Sale of Office Building.........................     129
General Plant...................................................     132
Generation and Transmission (G&T) Capital Credits...............     504
Global Positioning Systems......................................     139
                                I

Impairment of Long-Lived Assets.................................     137
In-substance Defeasance.........................................     622
Insurance--Employee Retirement and Group........................     603
Insurance--Premium on Life of a Borrower Employee...............     605
Insurance--Split Dollar.........................................     630
Integrity Fund..................................................     621
Investments in Debt and Equity Securities.......................     629

[[Page 821]]


                                J

Joint Use.......................................................     109
                                L

Land--First Clearing and Grading................................     110
Leases..........................................................     403
Legal Expenses..................................................     402
Life Insurance Premiums on Life of a Borrower Employee..........     605
Life Insurance--Split Dollar....................................     630
Line Conversion.................................................     102
Line Relocations................................................     135
Liquidated Damages..............................................     115
Load Control Equipment..........................................     118
Long-Lived Assets-Impairment....................................     137
                                M

Maintenance and Operations......................................     609
Mapping Costs...................................................     613
Margins--Operating and Nonoperating.............................     503
Material--Salvage and Obsolete..................................     130
Materials and Supplies--Refund for Overpayments.................     117
Member Relation Costs...........................................     614
Membership Fees--Forfeited......................................     506
Meter Reading Systems--Radio-Based..............................     140
Meter Reading Systems--Turtles..................................     138
Meter Sockets and Meters........................................     120
Minimum--Maximum Voltmeters.....................................     121
Mobile Substations..............................................     107
                                N

Neutral--Replacement of.........................................     103
Nonoperating Margins............................................     503
Nonrefundable Payments for Construction.........................     116
                                O

Obsolete Material...............................................     130
Operating and Nonoperating Margins..............................     503
Operations Costs................................................     609
                                P

Patronage Capital Assignments...................................     501
Patronage Capital Furnished by Other Cooperative Service             505
 Organizations..................................................
Patronage Capital from G&T Cooperatives.........................     504
Patronage Capital Retirements...................................     502
Payments for Construction--Nonrefundable........................     116
Pension Costs...................................................     606
Phase-in Plans..................................................     134
Plant Abandonments..............................................     133
Plant Acquisition Adjustments...................................     131
Plant Costs--Disallowances......................................     133
Plant--General..................................................     132
Pole Reinforcers--Steel.........................................     106
Pole Top Disconnect Switch......................................     105
Pollution Control Bonds.........................................     624
Postemployment Benefits.........................................     628
Postretirement Benefits.........................................     627
Power Cost Study................................................     612
Power Supply/Distribution Cooperative Borrowing.................     616
Prepayment of Debt..............................................     625
Property--Sale of...............................................     128
Purchase Rebates................................................     620
                                R

Radio-Based Automatic Meter Reading Systems.....................     140
Rate Discount Allowed by Power Cooperative to a Distribution         617
 Cooperative Owning Transmission Lines..........................
Rebates--Purchase...............................................     620
Refunds for Overpayments for Materials and Supplies.............     117
Reimbursement for Line Relocations..............................     135
Relocations of Lines............................................     135
Replacement of a Neutral........................................     103
Retirement Units................................................     125
Retirements--Patronage Capital..................................     502
Retrofitting Demand Meters......................................     122
Rights of Way--First Clearing and Grading.......................     110
Rural Economic Development Loan and Grant Program...............     626
                                S

Sacrificial Anodes and the Replacement of a Neutral.............     103
Sale of an Office Building......................................     129
Sale of Property................................................     128
Salvage and Obsolete Material...................................     130
Satellite Television Services...................................     623
Securities--Investments in Debt and Equity......................     136
Security Lights.................................................     108
Self Billing....................................................     619
Software Costs..................................................     401
Special Early Retirement Plan...................................     631
Special Equipment...............................................     119
Special Power Cost Study........................................     612
Split Dollar Life Insurance.....................................     630
Statewide Fees..................................................     615
Steel Pole Reinforcers..........................................     106
Storm Damage....................................................     136
Substation--Mobile..............................................     107
Supplemental Financing..........................................     201
System Planning--Engineering Contracts..........................     111
                                T

Temporary Facilities (Services).................................     113
Terminal Facilities.............................................     104
Theft Losses not Covered by Insurance...........................     618
Training Costs, Attendance at Meetings, etc.....................     608
Transclosures...................................................     124
Transformer Conversions.........................................     123
Turtles--Automatic Meter Reading Systems........................     138

[[Page 822]]


                                U

Unproductive Time...............................................     607
                                V

Voltmeters--Minimum/Maximum.....................................     121
                                W

Work Order Procedures...........................................     101



                       101   Work Order Procedures

    When a minor item of property is removed from service and not 
replaced, a retirement work order is not required except in the case of 
a conductor. The cost of the minor item shall remain in the appropriate 
plant account until the retirement unit, of which it is a **part**, is 
retired. However, as conductor is recorded in feet and is not **part** of 
any specific retirement unit, conductor shall be retired even though the 
amount taken down and not replaced is less than a retirement unit (two 
spans).
    When minor items of plant are removed and not replaced, material 
salvaged shall be recorded on a material salvage ticket. Items of 
material recorded on this ticket shall be charged to the materials and 
supplies account and credited in the miscellaneous columns of the 
Materials Register to the Accumulated Provision for Depreciation. In 
this example, it is assumed that the cost of removal is nil. If, 
however, costs are incurred during the removal of minor items of plant, 
these costs shall reduce the credit to the Accumulated Provision for 
Depreciation.
    When a staking sheet supporting a single work order reflects a 
combination of new construction and replacements, or system 
improvements, the predominant cost shall be the governing factor in 
determining the amount of cost RUS will finance. To illustrate, assume 
that a service is to be run to a new home near the end of an existing 
line. On inspection, the pole from which the service is to be run is 
found to be in very poor physical condition and must be replaced. In 
addition, a single span of wire and a service are presently connected to 
this pole which serve no purpose. The home originally served has been 
demolished and the existing span, pole, and service were retired. In 
other words, what started out to be simply the installation of a new 
service now includes the retirement of a span of wire, a pole, and a 
service; the replacement of a pole; and the running of a new service. 
Assuming the replacement of the pole is the costliest **part** of this 
project, the construction and retirement activity shall be classified as 
an ordinary replacement even though the work includes new construction 
and retirements without replacement.

                          102   Line Conversion

    If it is necessary to move a conductor from one location to another 
on a pole assembly during the conversion of a line from one phase to 
another phase, the cost of moving the conductor is capitalizable as a 
system improvement.

        103   Sacrificial Anodes and the Replacement of a Neutral

    Many utilities conduct studies to determine whether sacrificial 
anodes are needed to protect underground cable against corrosion. The 
following procedures shall be followed to account for sacrificial anodes 
and the replacement of a neutral:
    1. If the study results in the installation of sacrificial anodes, 
the cost of the study shall be capitalized to Account 367, Underground 
Conductors and Devices. If the study does not result in the installation 
of anodes, the cost shall be charged to Account 594, Maintenance of 
Underground Lines.
    2. Costs incurred in the first installation are capitalizable even 
though anodes are considered minor items of property. However, only the 
first costs of installation shall be capitalized. All subsequent 
replacements of anodes shall be expensed.
    3. Sacrificial anodes do not constitute a record unit; therefore, 
the cost of anodes shall be added to the cost of the underground cable 
unit.
    4. Because a neutral is **part** of an underground cable record unit, 
and is not, in and of itself, a record unit, the cost to replace a 
corroded neutral shall be charged to Account 594, Maintenance of 
Underground Lines.

[[Page 823]]

                        104  Terminal Facilities

    Borrowers are sometimes required to construct terminal facilities in 
the transmission line of another utility in order to receive power from 
their power supplier. The document executed between the borrower and the 
utility is normally referred to as a ``License Agreement''. The license 
agreement may stipulate that certain items of the terminal facilities 
are to be transferred to, and become the property of, the other utility 
upon completion of the construction. The accounting for this type of 
transaction shall be as follows:
    1. All construction costs incurred shall be charged to a work order. 
Upon completion of the construction and accumulation of all costs, the 
cost of the facilities that become the property of another utility shall 
be transferred from construction work-in-progress to Account 303, 
Miscellaneous Intangible Plant. The cost of the plant for which the 
borrower retains title shall be charged to the appropriate plant 
accounts.
    2. The cost of the facilities recorded in Account 303 shall be 
amortized to Account 405, Amortization of Other Electric Plant, over the 
contract term or the estimated useful service life of the plant, 
whichever is shorter. If the related contract or contracts for this 
power supply are terminated, the unamortized balance shall be expensed, 
in the current period, in Account 557.

                    105   Pole Top Disconnect Switch

    The installation of pole top service disconnect switches, where 
title is retained by the utility, shall be capitalized in Account 371, 
Installations on Customers' Premises. If a switch cabinet is purchased 
with a current transformer included as an integral **part** of the cabinet, 
the entire cost of the switch shall be charged to Account 371. If the 
current transformer is installed outside of the switch cabinet, the 
transformer, meter, and meter base, together with the first installation 
costs, shall be capitalized, upon purchase, in Account 370, Meters.
    Payments received from the customer toward construction costs shall 
be credited to Account 371, Installations on Customers' Premises. Such 
payments, together with any amount not financed by RUS, shall be entered 
in column 9 of the RUS Form 219, Inventory of Work Orders. The 
associated maintenance costs shall be charged to Account 587, Customer 
Installations Expenses, or to Account 597, Maintenance of Meters, as 
appropriate.
    When pole top disconnect switches are installed and title is held by 
the customer, the cost of the material shall be charged to Account 456, 
Other Electric Revenues and the receipts from the sale of line material 
shall be credited to Account 456. The portion of the receipts for resale 
material as well as that for installation shall be credited to Account 
415, Revenues from Merchandising, Jobbing, and Contract Work. The cost 
of resale material sold and the cost of installation shall be charged to 
Account 416, Costs and Expenses of Merchandising, Jobbing and Contract 
Work.
    Future maintenance costs incurred by the cooperative that are not 
billed to the customer shall be charged to Account 587, Customer 
Installations Expenses.

                      106   Steel Pole Reinforcers

    The cost associated with the purchase and installation of steel pole 
reinforcers shall be charged to Account 593, Maintenance of Overhead 
Lines.

                        107   Mobile Substations

    Mobile substations shall be accounted for in a manner similar to 
that for a spare and are, therefore, included as **part** of transmission or 
distribution station equipment, depending upon the use of the mobile 
substation. The mobile substation, together with the trailer on which it 
is permanently mounted, shall be capitalized upon purchase. A general 
purpose truck or tractor used to relocate a mobile substation and 
trailer shall be classified as transportation equipment.
    The composite depreciation rate used for transmission plant or 
distribution plant, as appropriate, shall be applied to the mobile 
substation.

                          108   Security Lights

    Where a pole supports both a secondary wire and a security light, 
the

[[Page 824]]

cost of the pole shall be charged to Account 364, Poles, Towers, and 
Fixtures, even though the plant investment in security lights is 
recorded in Account 371, Installations on Customers' Premises.

                             109   Joint Use

    There are many cases in which an electric utility and a 
communications utility enter into an agreement that provides for joint 
use of poles. Under the terms of these agreements, either utility may 
occupy the poles of the other upon payment of a stipulated annual 
rental. If such joint occupancy necessitates the use of a higher than 
standard pole, the new pole shall be provided at the expense of the 
utility having the need for the higher pole.
    When an electric utility replaces, at its own expense, a standard 
pole belonging to the communications utility with a higher pole, the 
cost of the higher pole, less net salvage (if any) of the pole replaced, 
shall be charged to the account in which the pole rental is included.
    Contributions made to an electric utility by a communications 
utility for the costs incurred in stubbing joint use electric poles 
shall be credited to Account 593, Maintenance of Overhead Lines. The 
cost of pole stubbing on electric plant distribution facilities shall be 
charged to Account 593.
    An investment in outside plant that is held in joint ownership shall 
be recorded in the appropriate plant accounts at its cost to the 
utility. For continuing property record purposes, jointly owned property 
units shall be priced at their cost to the utility and shall be 
appropriately segregated in the CPRs to indicate joint ownership.

       110   First Clearing and Grading of Land and Rights of Way

    Utility accounting practice requires the costs associated with the 
first clearing and grading of land and rights of way and any resulting 
damage thereto, to be included in the accounts for structures and 
improvements or equipment to which such costs relate. Since the first 
clearing, as well as clearing which is ``directly occasioned by the 
building of a structure,'' is done, not for the purpose of enhancing the 
value of the land or the rights of way, but for the purpose of 
constructing plant, these costs are more directly related to the 
construction of plant than to the purchase of land or rights of way. The 
accounts shall be charged as follows:

    1. For overhead transmission pole lines, Account 356, Overhead 
Conductors and Devices;
    2. For overhead distribution lines, Account 365, Overhead Conductors 
and Devices; and
    3. For underground distribution lines, Account 366, Underground 
Conduit, for a conduit installation; or Account 367, Underground 
Conductors and Devices, for a direct burial installation.

             111   Engineering Contracts for System Planning

    Engineering costs for long-range system plans shall be charged to 
Account 183, Preliminary Survey and Investigation Charges, as incurred. 
The cost of engineering services incurred in preparing a long-range 
system plan represents a legitimate component of the total cost of 
construction of all system improvements detailed in the plan. The amount 
of engineering costs to be associated with any specific system 
improvement is the annual costs incurred up to the time of the 
allocation (not previously allocated), plus that portion of the initial 
cost which relates to the particular construction in question. If any 
major system improvement included in the engineering plan is not 
constructed, or if the study is superseded by another complete study, 
the cost of that portion of the original study not resulting in 
construction shall be charged to Account 182.2, Unrecovered Plant and 
Regulatory Study Costs, if the costs are to be recovered through future 
rates. Costs recorded in Account 182.2 shall be amortized to Account 
407, Amortization of Property Losses, Unrecovered Plant and Regulatory 
Study Costs, as the costs are recovered through the rates. Any costs 
included in Account 182.2 that are disallowed for rate-making purposes 
shall be charged to Account 426.5, Other Deductions.
    The allocation of engineering services to the various construction

[[Page 825]]

projects requires the exercise of judgment. In some cases, system 
improvements are continuous over a period of months or years, thus 
permitting the engineering cost to be spread monthly as overhead in 
relation to the direct costs incurred in construction. (If a substantial 
amount of retirement work is performed in connection with system 
improvements, a proportionate share of the engineering cost shall be 
allocated on the basis of direct retirement labor.) If the system 
improvements detailed in the plan are not performed in a continuous 
manner, the engineering cost shall be allocated on the basis of the 
estimated costs of the various larger system improvement projects which 
result from the long-range plan.
    If construction is performed by contract, the engineering cost 
applicable thereto shall be transferred from Account 183 to Account 107, 
Construction Work-in-Progress--Electric, and thereby spread to the 
appropriate plant accounts on the basis of contract costs.
    In the case of system improvement construction performed on the 
basis of work orders, engineering costs shall be transferred to Account 
107, Construction Work-in-Progress--Electric, and included in total work 
order costs as either overhead or special services. If engineering 
services are not readily identifiable with individual work orders, they 
shall be capitalized as overhead. If engineering costs for each work 
order are readily separable from the engineering costs for all other 
work orders, they shall be capitalized as special services.
    In summarizing system improvement work orders on the RUS Form 219, 
Inventory of Work Orders, the amount of engineering costs previously 
approved for advance on the long range plan, if any, shall be deducted 
to determine the balance of loan funds subject to advance by RUS.

             112   Determination of Availability of Service

    Costs relating to the determination of availability of service, 
rates, and similar items for individual applicants shall be charged to 
Account 912, Demonstrating and Selling Expenses. If it is expected that 
construction will result, the costs incurred to provide service, 
including staking, shall be charged to Account 107, Construction Work-
in-Progress--Electric. If construction does not result, Account 107 
shall be credited and Account 426.5, Other Deductions, shall be charged.

                  113   Temporary Facilities (Services)

    Plant installed for temporary use, a period of less than 1.ar, shall 
be recorded in Account 185, Temporary Facilities, net of any payments 
received from customers. Upon retirement, this net cost plus cost of 
removal, less any salvage value, shall be cleared to Account 451, 
Miscellaneous Service Revenues.
    When a temporary service is installed at the site of a building 
under construction, the location of the permanent service entrance and 
the load and its characteristics are usually known. The temporary 
service is of the proper capacity and is so located or has sufficient 
slack, that it can be relocated to serve the new building as a permanent 
service. Under these conditions, the service shall be charged to Account 
369, Services, when first installed. The cost of moving and attaching 
the service to the permanent service entrance shall be charged to 
Account 593, Maintenance of Overhead Lines or Account 594, Maintenance 
of Underground Lines, as appropriate.

    114   Construction Work-in-Progress Damaged or Destroyed by Storm

    When installed plant, not yet completed or completed but not yet 
placed in service, has been damaged or destroyed by storm, the cost of 
the repair and restoration shall be added to the cost of construction 
and capitalized if the plant was constructed under force account or work 
order construction, and the utility paid for the cost of the repairs. If 
the plant was constructed under contract, the contractor is required to 
deliver the plant in new condition. Therefore, any repairs required 
prior to the completion of construction and acceptance by the utility, 
are ordinarily borne by the contractor.

                        115   Liquidated Damages

    Liquidated damages are amounts paid by or assessed against 
contractors

[[Page 826]]

for the completion of construction after an agreed upon date. Liquidated 
damages shall be credited to Account 107, Construction Work-in-
Progress--Electric. Since these damages accrue during the construction 
period, they become one of the components of construction cost. Even 
though a portion of these damages may compensate the utility for costs 
which are not ``identifiable,'' no portion of the damages shall be 
credited to revenue or expense.
    When a contractor has been paid in full from loan funds or from 
funds to be reimbursed by loan funds without a deduction for liquidated 
damages, the amount of liquidated damages received shall be deposited in 
the Construction Fund. This amount shall be reflected by a decrease in 
column 5, ``Total Expenditures to Date,'' of the RUS Form 595, Financial 
Requirement and Expenditure Statement, and as an increase in column 6, 
``Cash Balance.'' If liquidated damages are obtained by withholding an 
equivalent amount from the contractor's payment, the net result will be 
the same.

              116   Nonrefundable Payments for Construction

    Nonrefundable payments (contributions) from customers and developers 
for underground construction shall first be credited to Account 107.2, 
Construction Work-in-Progress--Force Account. When the constructed plant 
is unitized and distributed to the individual plant accounts, the 
contributions shall be credited to those plant accounts which gave rise 
to the contribution.
    When a customer or developer furnishes a trench or other service in 
connection with buried plant, the cooperative shall debit Account 107.2 
with the actual or estimated cost of the service performed, and account 
for the credit as set forth above.

        117   Refunds of Overpayments for Materials and Equipment

    Refunds of overpayments for materials and equipment previously 
purchased are occasionally received as the result of legal action 
brought against electrical suppliers for price fixing in violation of 
antitrust laws. Such refunds shall be accounted for as follows:

    1. The refund shall first be applied to any litigation costs that 
were incurred.
    2. Refunds for special equipment items shall be accounted for, in 
detail, on the Summary of Special Equipment Costs and credited against 
the appropriate plant accounts.
    3. Other material or equipment items that were installed through 
work orders or a materials furnished contract shall be adjusted on an 
amended work order. The amended work order shall include full details of 
the refund.
    4. Continuing property records shall be adjusted to reflect the 
above transactions.
    5. Amounts approved for advance on the RUS Form 595, Financial 
Requirement and Expenditure Statement, and on the loan budget records, 
shall be adjusted. For special equipment items, the adjustment shall be 
requested in a letter to RUS. For materials installed by work order or 
contract, the adjustments shall be made through credits shown on the RUS 
Form 219, Inventory of Work Orders.
    6. Refunds for material currently in stock shall be credited to 
Account 154, Plant Materials and Operating Supplies.
    7. If the material was used in maintenance activities or operations, 
the refund shall be credited to the appropriate maintenance or 
operations expense account.
    8. Refunds for materials or equipment financed from loan funds shall 
be deposited in the Construction Fund--Trustee Account or remitted to 
RUS as a special payment on a note. Other refunds shall be deposited in 
the general funds.

                      118   Load Control Equipment

    The primary purpose of a Load Management System is to optimize load 
dispatch and to reduce or minimize system peaks in order to reduce 
purchases of power or to delay or eliminate the need for construction of 
new plant. A Load Management System may be used on integrated systems, 
or on generation, transmission, or distribution systems separately. The 
telemetry equipment used for data acquisition and interpretation may be 
included at various points on a system, such as generation, 
transmission, or

[[Page 827]]

distribution substation, switchyards or on consumers' premises.
    An effective load control program should be coordinated with the G&T 
and requires full participation of all member distribution systems. The 
G&T monitors the power load of the total member distribution system to 
predict the time of the system's peak load. An optimal load control 
strategy is developed by the G&T and is passed on from the G&T computer 
system to the load control computer systems of the member distribution 
cooperatives.
    The equipment at the member distribution system level is the type 
actually being used by an integrated power system to operate a load 
control program. The equipment used may vary from one integrated power 
system to another. The selection of equipment used is determined by the 
information needs of the integrated power system, and the method 
selected to operate the load control system.
    Some equipment performs only SCADA-type functions. This equipment is 
included with the equipment that performs only load control functions 
because SCADA-type equipment is an integral **part** of a load control 
program. An effective load control strategy requires current information 
on loads so that member distribution systems can determine the actual 
loads to be shed and the duration of the load control.
    The function and location of the load control equipment are the 
primary factors in determining the account in which the equipment shall 
be recorded. The following example depicts a common load control system 
and the associated accounting. Equipment type may vary, thereby 
necessitating the use of accounts not prescribed below. In all 
instances, however, the function and location of the equipment shall 
dictate the appropriate account classification.

                              G&T Borrower

    1. Coordinating System Equipment

    Coordinating System Equipment is the data acquisition, processing 
and control hardware and software used to coordinate the load control 
efforts of the member distribution system. Generally, this equipment is 
dedicated to load control use and is not shared with other electric 
utility activities.
    The purpose of the G&T load control computer system is to reduce or 
minimize the peak power requirements of the entire member distribution 
system. This involves load dispatching to control transmission circuits 
and breakers. The computer system for load control shall, therefore, be 
recorded in Account 353, Station Equipment, with the associated 
operating expenses recorded in Account 561, Load Dispatching, and 
maintenance expenses recorded in Account 570, Maintenance of Station 
Equipment.
    2. Coordinating System Communications Link

    The G&T load control computer system is usually linked to the load 
control computer system for each member distribution system by a radio 
or telephone link that is dedicated to that purpose and is not shared 
with other communication activities. Under such circumstances, 
communications equipment shall be classified in Account 353, Station 
Equipment. If the communications equipment is shared with general use or 
voice communications equipment, however, the equipment shall be 
classified in Account 397, Communication Equipment.

    3. Depreciation

    Load control equipment shall be recorded in separate subaccounts of 
the primary plant accounts detailed above and shall be depreciated based 
upon the owner's estimate of the equipment's useful service life.

                          Distribution Borrower

    1. Member System Equipment

    Member system equipment is the data acquisition, processing and 
control hardware and software used as a subset to the overall load 
control efforts by the integrated power system.
    The member system computer for each distribution member system 
accepts the control strategy from the G&T coordinating system and 
develops the tables that determine the control loads that are to be shed 
and the duration of the load control. The member system computer for 
each distribution system monitors the usage at each of its delivery 
points. This usage data is

[[Page 828]]

then transmitted to the G&T coordinating system for use in developing 
load projects and evaluating control strategies for the integrated power 
system. The member system computer is generally dedicated to load 
control use and is not shared with other electric utility operations.
    The member computer system shall be recorded in Account 362, Station 
Equipment. The associated operating expenses shall be recorded in 
Account 581, Load Dispatching, and maintenance expenses shall be 
recorded in Account 592, Maintenance of Station Equipment.

    2. Substation Remote Controllers

    Substation Remote Controllers are located at the distribution 
substation. They accept control signals from the member system computer 
and couple the signal to the portion of the distribution system to which 
it is connected. Substation Remote Controllers also serve as a receiver 
of inbound signals from transponders located in the distribution system. 
They also send data back to the member system computer.
    Substation Remote Controllers shall be recorded in Account 362, 
Station Equipment. The associated operating expenses shall be recorded 
in Account 582, Station Expenses, and maintenance expenses shall be 
recorded in Account 592, Maintenance of Station Equipment.

    3. Substation Injection Units

    Substation Injection Units are used only in power line based systems 
and are located in distribution substations. A major function of the 
Substation Injection Unit is to receive load control signals from the 
member system computer and inject them into the power line based system 
to be transmitted to the Load Control Receivers. Substation Injection 
Units can also perform control and SCADA functions similar to those 
performed by Substation Remote Controllers.
    Substation Injection Units shall be recorded in Account 362, Station 
Equipment. The associated operating expenses shall be recorded in 
Account 582, Station Expenses, and maintenance expenses shall be 
recorded in Account 592, Maintenance of Station Equipment.

    4. Remote Terminal Units

    Remote Terminal Units perform electric utility SCADA functions in a 
distribution substation or delivery point. These functions include 
monitoring equipment for abnormal operating conditions, monitoring 
analog quantities such as conductor voltage or substation load, and 
controlling of certain equipment within the substation.
    Remote Terminal Units shall be recorded in Account 362, Station 
Equipment. The associated operating expenses shall be recorded in 
Account 582, Station Expenses, and maintenance expenses shall be 
recorded in Account 592, Maintenance of Station Equipment.

    5. Line Device Transponder

    A Line Device Transponder directly controls a piece of distribution 
apparatus, such as a voltage regulator or a power factor correction 
capacitor, located on a distribution feeder and not accessible to a 
Remote Terminal Unit. The Line Device Transponder actuates the control 
functions and reports back to the member system computer upon completion 
of the requested action. This transponder is located at the site of the 
distribution apparatus being controlled.
    Line Device Transponders shall be recorded in Account 368, Line 
Transformers. The associated operating expense shall be recorded in 
Account 583, Overhead Line Expenses, or Account 584, Underground Line 
Expenses, as appropriate, and maintenance expenses shall be recorded in 
Account 595, Maintenance of Line Transformers.

    6. Communications Verification Transponders

    Communication Verification Transponders are used to respond to 
inquiries from Substation Remote Controllers. In power line based 
systems, these transponders are used to verify the performance of the 
communications system. They are also used during adverse system 
operations to isolate sections of the distribution system that are 
experiencing an outage.
    Communication Verification Transponders shall be recorded in Account 
362, Station Equipment. The associated operating expenses shall be 
recorded in Account 582, Station Expenses, and

[[Page 829]]

maintenance expenses shall be recorded in Account 592, Maintenance of 
Station Equipment.

    7. Load Control Receivers

    The Load Control Receiver, also known as a load control switch, is 
located at the site of the consumer's load. These receivers directly 
control the electric supply to an end-use appliance, such as an electric 
water heater, central air conditioning compressor, or irrigation pump. 
The amount of time that an appliance will be turned off by the load 
control receiver is preset. When the member system computer determines 
that load shedding is necessary, it sends a signal to the communication 
link which then sends signals directly to the Load Control Receivers. In 
a power line based system, the signal from the communications link is 
sent by radio or telephone line to the Substation Injection Units, which 
then signals the Load Control Receivers to shut down the appliances for 
the present time. In nonpower line based systems, the signal from the 
communications link is sent by radio directly to the Load Control 
Receivers.
    Load Control Receivers are located on the consumer's side of the 
meter. When the member distribution system retains title to the Load 
Control Receivers and assumes full responsibility for maintenance and 
replacement of the equipment, it shall be classified in Account 371, 
Installations on Customer's Premises. Load Control Receivers that are 
donated or given to consumers shall be charged to Account 908, Customer 
Assistance Expenses.
    Operating and maintenance expenses applicable to Load Control 
Receivers recorded in Account 371 shall be charged to Account 587, 
Customer Installations Expenses, and Account 598, Maintenance of 
Miscellaneous Distribution Plant, respectively. Expenses applicable to 
Load Control Receivers donated or given to consumers shall be recorded 
in Account 908, Customer Assistance Expenses.
    Load Control Receivers may be moved on a continual basis from one 
customer location to another and are, therefore, considered to be 
special equipment items. When ownership is maintained by the member 
distribution cooperative, Load Control Receivers shall be accounted for 
in accordance with the special equipment procedures outlined in 
Accounting Interpretation No. 119 of this section.

    8. Communication Links

    The communication link in the member distribution systems between 
the Member System Computer, the Substation Remote Controllers or 
Substation Injection Units, Remote Terminal Units, Line Device 
Transponders, Communication Verification Transponders, and Load Control 
Receivers is usually accomplished by radio, telephone line, or power 
line based system. The communication links are normally dedicated to the 
SCADA and load control functions being served. Under such circumstances, 
communications equipment shall be recorded in Account 362, Station 
Equipment. If, however, the communication equipment used is shared with 
general use or voice communications equipment, the equipment shall be 
charged to Account 397, Communication Equipment.

    9. Depreciation

    Load control equipment shall be recorded in separate subaccounts of 
the primary plant accounts detailed above and shall be depreciated based 
upon the manufacturer's estimate of the equipment's useful service life.

                         119   Special Equipment

    Special Equipment items are classified as such because they are 
continually being moved from one location to another due to load changes 
and maintenance practices. The USoA provides accounting that differs 
from that used for other types of materials. The cost, new, of special 
equipment items shall be capitalized at the time of purchase; it shall 
not be charged to Account 154 as is the case with other materials. The 
first installation cost, as well as all incidental costs necessary to 
prepare the equipment for use, shall be capitalized with the material 
upon purchase. All subsequent costs of removing, resetting, changing, 
renewing oil, and repairing constitute operations and maintenance 
expenses. The capitalized cost of special equipment items, including the 
first installation, shall be

[[Page 830]]

removed from the electric plant accounts only when the items are 
abandoned or retired from the system.
    Meters, line-type transformers, oil circuit reclosers, 
sectionalizers, current and potential transformers, meter sockets, and 
other metering equipment listed in Account 370, Meters, as well as pole-
type and underground voltage regulators in Account 368, Line 
Transformers, are considered to be special equipment items. Similarly, 
load control receivers (load control switches) recorded in Account 371, 
Installations on Customers' Premises, are considered to be items of 
special equipment. (See Interpretation No. 118.) Transformers, voltage 
regulators, metering equipment, and current and potential transformers 
for substations are not.
    Special equipment items which are classified as nonusable shall be 
segregated in the warehouse and retired from service. The Summary of 
Special Equipment Costs shall be retitled Summary of Special Equipment 
Costs Retired and used for this purpose. A journal entry reflecting this 
information shall be prepared and posted to the books. Since loan funds 
for special equipment, including first installation costs, are approved 
for advance by RUS upon receipt of the borrower's written estimate of 
funds required, and not on the basis of an Inventory of Work Orders, it 
is improper to take a credit for any salvage involved in the retirement 
of special equipment on the Inventory of Work Orders.

                     120   Meter Sockets and Meters

    When a utility furnishes meter sockets, ownership by the utility of 
the meter socket or base, as well as the meter itself, is established by 
virtue of them being furnished without cost to the consumer by the 
cooperative. While no agreement as to ownership between the cooperative 
and the property owner exists, cooperative ownership is implied by long 
standing practice and tradition in the electric utility industry.

                    121   Minimum--Maximum Voltmeters

    A minimum--maximum voltmeter is used to record the minimum and 
maximum voltages at a specific line location over a period of time. It 
is normally installed on a pole in connection with a 1\1/2\ kVA 
transformer, a meter base and connecting wires, and other small items of 
materials. Meter bases are ordinarily set for these voltmeters 
throughout the system, and a lesser number of voltmeters are rotated 
among them periodically to obtain voltage readings. An average system 
may have one voltmeter to two installations, with a maximum of 20 or 25 
voltmeters for the whole system.
    Minimum--maximum voltmeters shall be recorded, through work orders, 
in Account 370, Meters, when installed. The cost of the transformers 
shall remain in Account 368, Line Transformers, with the cost of the 
meter bases remaining in Account 370, Meters. The miscellaneous material 
used in installing the transformer and the meter base shall be charged 
to Account 370, Meters.
    Maintenance expense shall be charged to either Account 595, 
Maintenance of Line Transformers, or Account 597, Maintenance of Meters, 
as appropriate. Costs associated with reading the voltmeters shall be 
charged to Account 583, Overhead Line Expenses, and the cost of 
relocating or changing the complete installation or any **part** thereof, 
other than retirement of the meter base, shall be charged to Account 
583, Overhead Line Expenses, or Account 586, Meter Expenses.

                    122   Retrofitting Demand Meters

    A demand meter measures the amount of electricity used over a period 
of time in kilowatt-hours (kWh) and indicates the maximum kilowatts (kW) 
required at any one time by means of a pointer.
    Electronic or solid state demand meters have a direct readout which 
reads kilowatt demand to two decimal places. The use of a direct readout 
demand meter may result in increased revenues as pointer readings tend 
to register lower than actual usages.
    The process of retrofitting a demand meter replaces the pointer with 
a direct readout. The cost of such a replacement is usually expensed as 
a minor item of property; however, since the use of a direct readout 
results in a substantial betterment, the excess cost of the replacement 
over the estimated

[[Page 831]]

cost, at current prices, of replacing the pointer without the betterment 
is capitalized.

                      123   Transformer Conversions

    The conversion of an overhead transformer to an underground 
transformer constitutes a betterment and shall, therefore, be 
capitalized.

                           124   Transclosures

    Transclosures are enclosures or cabinets in which line transformers 
are mounted. The cost of transclosures that are purchased separately 
from the transformer shall be charged to Account 154, Plant Materials 
and Operating Supplies, when received, and capitalized, upon 
installation, to Account 368, Line Transformers, as a separate unit of 
property. If the case and the transformer are inseparable, the unit is 
considered a transformer and shall be capitalized upon purchase.

                         125   Retirement Units

                                Services

    A retirement unit shall consist of a complete service rather than 
the individual wires comprising that service. If each separate wire of a 
service were treated as a retirement unit, the retirement unit would 
represent a comparatively small cost. Such a small unit of property 
would substantially increase the number of retirement work orders. The 
complete service shall, therefore, be considered a retirement unit.

                               Minor Items

    When minor items of property are added separately from complete 
retirement units, the costs of these items shall be included in work 
orders, and by unitizing all costs of completed construction for a 
month, these minor items shall be spread to the retirement units of 
which they normally form a **part**. For example, to convert a two-phase 
line to a three-phase line requires the addition of a conductor, an 
insulator and a pole-top pin. A pole-top pin is typically capitalized as 
a component of the cost of the pole to which it is attached. Assuming 
this is the only work order for the month, the cost of this pin shall be 
charged to the conductor, so that its cost is included in the total cost 
of the project. In actual practice, however, this does not happen as it 
is normal to have a number of work orders for a given month, which 
include the setting of poles. In allocating the cost of all construction 
projects for the month, **part** of the cost of pole-top pins shall be 
allocated to poles even though the work orders on which they were 
capitalized did not include poles.
    The retirement and replacement of isolated single retirement units 
cannot be charged to maintenance; a retirement and construction work 
order shall be used.

           126   Establishment of Continuing Property Records

    The costs of installing a system of continuing property records 
shall be charged to Account 930.2, Miscellaneous General Expenses, and 
may include:

    1. Labor and expenses incurred in developing an inventory of 
property;
    2. Labor and material costs incurred in connection with developing 
pole records including map preparation and pole cards; and
    3. Labor and material costs (ledger sheets, etc.) incurred in 
connection with the installation of the record system.

             127   Continuing Property Records for Buildings

    When establishing continuing property records for a building where 
there is no detailed breakdown of contract costs, it is necessary to 
estimate the cost of the each component **part**. It should be noted that 
the establishment of continuing property records is not required for 
buildings; however, if CPRs are not maintained, all repairs including 
the replacement of major component parts shall be expensed in the period 
incurred.

                         128   Sale of Property

    All proceeds deposited in the Construction Fund account from the 
sale of property, regardless of materiality, shall be reflected on the 
RUS Form 595,

[[Page 832]]

Financial Requirement and Expenditure Statement. Proceeds from the sale 
of property shall be reported on the Form 595, by budget purpose, as a 
reduction in total expenditures to date, column 5; and an increase in 
the cash balance, column 6.
    Proceeds from the sale of property shall not be used to maintain an 
``Employee Fund.'' A utility may, pursuant to board policy, use general 
funds for employee welfare equivalent in amount to proceeds received 
from the sale of scrap property. If general funds, in an amount 
equivalent to proceeds received from the sale of scrap property, are 
used for employee welfare, Account 926, Employee Pensions and Benefits, 
shall be charged.

          129   Gain or Loss on the Sale of an Office Building

    A gain on the sale of an office building shall be recorded in 
Account 421.1, Gain on the Disposition of Property, with a loss recorded 
in Account 421.2, Loss on the Disposition of Property. If the gain or 
loss will materially distort current year's net margins, such gain or 
loss is reportable as an extraordinary item in Account 434, 
Extraordinary Income, or Account 435, Extraordinary Deductions.

                   130   Salvage and Obsolete Material

    The value of material salvaged from the retirement of units of 
property reduces the loss on the retirement and shall be so applied. The 
value assigned to salvage shall be credited to Account 108.8, Retirement 
Work-in-Progress, which results in reducing net charges to the provision 
for depreciation when the work order is completed and cleared.
    If salvage is sold, any difference between the realized value and 
the estimated value of the salvaged material shall be charged or 
credited to the appropriate provision for depreciation.
    Salvage resulting from maintenance where no retirement units are 
involved shall be debited to the materials and supplies account, and 
credited to the appropriate maintenance account.
    Occasionally a utility will have a loss due to obsolescence of 
materials on hand. If the loss is due to obsolescence of new material, 
the loss shall be charged to Account 426.5, Other Deductions. If the 
loss is due to obsolescence of used material, the loss shall be charged 
to the appropriate subaccount of Account 108, Accumulated Provision for 
Depreciation.

                   131   Plant Acquisition Adjustments

    Plant acquisition adjustments shall be amortized to the operating 
expense accounts. These adjustments are recorded in Account 114, 
Electric Plant Acquisition Adjustments, and amortized to Account 406, 
Amortization of Electric Plant Acquisition Adjustments, or Account 425, 
Miscellaneous Amortization, as required by the regulatory commission 
having jurisdiction. Accounts 406 and 425 shall be closed to operating 
margins.

                           132   General Plant

    When the unit method of depreciation is used for general plant 
items, gains and losses on sales, trades or disposals of equipment shall 
be recorded as such. If the composite method of depreciation is used, 
gains or losses on the disposal of general plant items shall be recorded 
in the appropriate depreciation reserve account.
    A truck which is used only for transporting power operated equipment 
mounted thereon shall be charged, together with the installed equipment, 
to Account 396, Power Operated Equipment. If the same type of truck is 
used for transporting materials and supplies, tools and work equipment, 
personnel, or other items, the cost of the truck shall be charged to 
Account 392, Transportation Equipment.
    Depreciation and other expenses relating to power operated equipment 
shall be accumulated in a subaccount of Account 184, Clearing Accounts, 
and distributed monthly on an equitable basis to the accounts properly 
chargeable.
    Depreciation expense on vehicles and other work equipment, furniture 
and office equipment, and other such plant used in the construction of 
utility plant, is a proper component of construction cost. To avoid a 
duplicate advance of funds, however, the amount of depreciation on such 
items that has previously been financed from loan

[[Page 833]]

funds shall be deducted from Inventories of Work Orders submitted to 
RUS. This amount shall be specifically identified, and shown either 
monthly or annually as a single item in column 9 on the RUS Form 219, 
Inventory of Work Orders.

        133   Plant Abandonments and Disallowances of Plant Costs

    In December 1986, the Financial Accounting Standards Board issued 
Statement of Financial Accounting Standards No. 90, Regulated 
Enterprises--Accounting for Abandonments (Statement No. 90) and 
Disallowances of Plant Costs. This section provides an overview of the 
requirements outlined in Statement No. 90 together with the specific 
accounts that shall be used to record a plant abandonment or a 
disallowance of plant costs.

                           Plant Abandonments

    When an abandonment becomes probable, the cost of the abandoned 
asset shall be removed from Construction Work-in-Progress or Plant-in-
Service, as applicable. Before making this transfer, however, a 
determination must be made as to whether recovery of the allowed cost is 
likely to be provided with a full return on the investment during the 
period from the time the abandonment becomes probable, to the time when 
recovery is completed, or with a partial or no return on the investment. 
This determination shall be made based upon the facts and circumstances 
of the specific abandonment, and past practices and current policies of 
regulatory jurisdiction.
    If a full return on the investment is likely to be provided, any 
disallowance of all or **part** of the cost of abandoned plant that is both 
probable and reasonably estimated shall be recognized as a loss in the 
current year with the carrying basis of the asset reduced by an equal 
amount. The remaining cost of abandoned plant shall be recorded as a 
separate new asset.
    If partial or no return on the investment is likely to be provided, 
any disallowance of abandoned plant costs that is both probable and 
reasonably estimated shall be recognized as a loss. The present value of 
the future revenues expected to be provided to recover the allowable 
cost of the abandoned plant and return on the investment, if any, shall 
be reported as a separate new asset. The discount rate used to compute 
the present value shall be the borrower's incremental borrowing rate, 
which is the rate that the borrower would have to pay to borrow an 
equivalent amount for a period equal to the expected recovery period. In 
determining the value of expected future revenues, the borrower shall 
consider the probable time period before the recovery is expected to 
begin and the probable time period over which recovery is expected to be 
provided.
    The amount of the new asset shall be adjusted from time to time, as 
necessary, if new information indicates that the estimates used to 
record the new asset have changed. The carrying value of the new asset, 
however, shall not be adjusted for changes in the incremental borrowing 
rate. The amount of any adjustments shall be recorded as a gain or loss.
    During the period between the date on which a new asset is 
recognized and the date on which recovery begins, the carrying amount 
shall be increased by accruing a carrying charge. The rate used to 
accrue the carrying charge shall be:

    1. If a full return on the investment is likely, a rate equal to the 
allowed overall cost of capital in the jurisdiction in which recovery is 
expected to be provided shall be used.
    2. If partial or no return is likely, the asset shall be amortized 
in a manner that will produce a constant return on the unamortized 
investment in the new asset equal to the rate at which the expected 
revenues were discounted.

    Due to the nonprofit environment in which electric cooperatives 
operate, full recovery of interest expense on plant related long-term 
debt equates to full recovery of the rate of return for an investor-
owned utility. Therefore, if a cooperative is permitted full recovery of 
the interest expense incurred on the long-term debt borrowed to finance 
construction of an abandoned plant, no discounting of the asset is 
required nor is accrual of the carrying charge permitted.
    If, at the time the provisions of Statement No. 90 are first 
applied, the

[[Page 834]]

borrower elects to restate the financial statements, the financial 
statements for all periods presented shall be restated and the financial 
statements shall disclose the nature of the restatement and its effect 
on margins before extraordinary items, net margins, and patronage 
capital at the beginning of the earliest period presented. If the 
borrower elects not to restate the financial statements, the effect of 
applying Statement No. 90 shall be reported as a change in accounting 
principle and the financial statements shall disclose the nature of the 
change and the effect of applying Statement No. 90 on margins before 
extraordinary items and net margins.
    The specific accounts that shall be used to record transactions 
involving plant abandonments are as follows:

    1. In the year of the abandonment, the unrecoverable portion of the 
cost of abandoned plant included in construction work-in-progress shall 
be recognized as a loss by a charge to Account 426.5, Other Deductions, 
and a credit to Account 107, Construction Work-in-Progress.
    2. The balance of the cost remaining in the construction work-in-
progress account shall be credited to Account 107 and charged to Account 
182.2, Unrecovered Plant and Regulatory Study Costs.
    3. The difference between the charge to Account 182.2 and the 
present value of expected future revenues for recovery of the new asset, 
shall be recorded as a credit to Account 182.2 and a debit to Account 
426.5. The credit to Account 182.2 shall be segregated from the amount 
charged to Account 182.2 by the use of a separate subaccount. Statement 
No. 90 does not require this segregation; however, it is necessary under 
the USoA to provide for the appropriate segregation of operating and 
nonoperating income.
    4. During the waiting period for recovery of the new asset to begin, 
carrying charges shall be accrued by a debit toAccount 182.2 with a 
concurrent credit to Account 421, Miscellaneous Nonoperating Income. 
Debits to Account 182.2 shall be treated as reductions to the credit 
subaccount of Account 182.2.
    5. The borrower shall amortize the amount debited to Account 182.2 
by charges to operating income, consistent with the way the amortized 
amounts are recovered through rates. These charges to income shall be 
recorded in Account 407, Amortization of Property Losses, Unrecovered 
Plant and Regulatory Study Costs.
    6. As the recoverable amount recorded in Account 182.2 is recovered 
through rates, the borrower shall accrue income by charges to Account 
182.2 and credits to Account 421, Miscellaneous Nonoperating Income. 
Accruals shall be computed by applying the same rate used to derive the 
present value of the asset established in Account 182.2, to the 
unamortized balance in that account. Accrued amounts charged to Account 
182.2 shall be treated as reductions to the credit subaccount 
withinAccount 182.2.
    Prior to implementing the accounting prescribed above, the borrower 
shall submit the details of each plant abandonment to RUS for approval.

           Disallowances of Costs of Recently Completed Plant

    When it becomes probable that a portion of the cost of recently 
completed plant will be disallowed for rate making purposes and a 
reasonable estimate of the amount of the disallowance can be made, the 
estimated amount of the probable disallowance shall be deducted from the 
reported cost of the plant and recognized as a loss. If a portion of the 
costs is explicitly, but indirectly disallowed, the equivalent amount of 
the cost shall be deducted from the reported cost of the plant and 
recognized as a loss. The specific accounts that shall be used to record 
transactions involving the disallowance of plant costs are as follows:

    1. Estimated disallowed plant costs which the borrower records as a 
credit to Account 101, Electric Plant-in-Service, shall be charged to 
Account 426.5, Other Deductions.
    2. If the loss qualifies as an extraordinary item under the criteria 
set forth in General Instruction No. 7 of the USoA, the borrower shall 
record the loss in Account 435, Extraordinary Deductions. To be 
considered extraordinary, an item shall be more than five

[[Page 835]]

percent of income computed before extraordinary items. If a borrower 
believes that a loss of less than five percent should be treated as an 
extraordinary item; the borrower shall, with commission approval, record 
the loss in Account 435 and report the loss as an extraordinary item. If 
the borrower is not subject to state commission jurisdiction, RUS 
approval is required.

                   134   Utility Plant Phase-in Plans

    In August 1987, the Financial Accounting Standards Board issued 
Statement of Financial Accounting Standards No. 92, Regulated 
Enterprises--Accounting for Phase-in Plans (Statement No. 92). This 
section provides an overview of the requirements outlined in Statement 
No. 92.
    The term phase-in plan is used to refer to any method of recognition 
of allowable costs in rates that meets all of the following criteria:

    1. The method was adopted by the regulator in connection with a 
major, newly completed plant of the regulated enterprise or one of its 
suppliers or a major plant scheduled for completion in the near future.
    2. The method defers the rates intended to recover allowable costs 
beyond the period in which those allowable costs would be charged to 
expense under generally accepted accounting principles applicable to 
enterprises in general.
    3. The method defers the rates intended to recover allowable costs 
beyond the period in which those rates would have been ordered under the 
rate-making methods routinely used prior to 1982 by that regulator for 
similar allowable costs of that regulated enterprise.

    If a phase-in plan is ordered by a regulator in connection with a 
plant on which no substantial physical construction had been performed 
before January 1, 1988, none of the allowable costs that are deferred 
for future recovery by the regulator under the plan for rate-making 
purposes, shall be capitalized for general-purpose financial reporting 
purposes (financial reporting).
    If a phase-in plan is ordered by a regulator in connection with a 
plant completed before January 1, 1988, or a plant on which substantial 
physical construction had been performed before January 1, 1988, the 
criteria specified below shall be applied to that plan. If the phase-in 
plan meets all of those criteria, all allowable costs that are deferred 
for future recovery by the regulator under the plan shall be capitalized 
for financial reporting purposes as a separate asset (a deferred 
charge). If any one of those criteria is not met, none of the allowable 
costs that are deferred for future recovery by the regulator under the 
plan shall be capitalized for financial reporting. The criteria for 
determining whether capitalization is appropriate are:

    1. The allowable costs in question are deferred pursuant to a formal 
plan that has been agreed to by the regulator;
    2. The plan specifies the timing of recovery of all allowable costs 
that will be deferred under the plan;
    3. All allowable costs deferred under the plan are scheduled for 
recovery within 10 years of the date when the deferral began; and
    4. The percentage increase in rates scheduled under the plan for 
each future year is no greater than the percentage increase in rates 
scheduled under the plan for each immediately preceding year. That is, 
the scheduled percentage increase in year two is no greater than the 
percentage increase granted in year one, the scheduled percentage 
increase in year three is no greater than the percentage increase in 
year two, etc.

    By definition, a phase-in plan approved prior to 1982 that contains 
provisions contrary to those detailed above is not subject to the 
provisions of Statement No. 92. This exemption, however, only relates to 
a specific utility and a specific regulator. For example, a utility 
cannot use a phase-in plan approved by its regulator for a different 
utility as justification for its phase-in plan exceeding the 10-year 
limit imposed by Statement No. 92.
    A phase-in plan is a method of rate making intended to moderate a 
sudden increase in rates while providing the regulated enterprise with 
recovery of its investment and a return on that investment during the 
recovery period. A disallowance is a rate-making action that prevents 
the regulated enterprise

[[Page 836]]

from recovering either some amount of its investment or some amount of 
return on its investment. Statement No. 90 specifies the accounting for 
disallowances of plant costs (see item 133 of this regulation). If a 
method of rate making that meets the criteria for a phase-in plan 
includes an indirect disallowance of plant costs, that disallowance 
shall be accounted for in accordance with Statement No. 90. Cumulative 
amounts capitalized under phase-in plans shall be reported as a separate 
asset in the balance sheet. The net amount capitalized in each period or 
the net amount of previously capitalized allowable costs recovered 
during each period shall be reported as a separate item of other income 
or expense in the income statement. Allowable costs capitalized shall 
not be reported as reductions of other expenses.
    The terms of any phase-in plan in effect during the year or ordered 
for future years shall be disclosed in the financial statements. 
Statement No. 92 does not permit capitalization for financial reporting 
of allowable costs deferred for future recovery by the regulator 
pursuant to a phase-in plan that does not meet the criteria or a phase-
in plan related to plant on which substantial physical construction was 
not completed before January 1, 1988. Nevertheless, the financial 
statements shall include disclosures of the net amount deferred at the 
balance sheet date for rate-making purposes, and the net change in 
deferrals for rate-making purposes during the year for those plans.
    If the provisions of Statement No. 92 are applied retroactively, the 
financial statements of all periods presented shall be restated. In 
addition, the restated financial statements shall, in the year that 
Statement No. 92 is first applied, disclose the nature of any 
restatement and its effect on margins before extraordinary items, net 
margins, and on patronage capital at the beginning of the earliest 
period presented. If the financial statements for prior years are not 
restated, the effects of applying Statement No. 92 to existing phase-in 
plans shall be reported as a change in accounting principle and the 
financial statements shall disclose the effect of adopting Statement No. 
92 on margins before extraordinary items and net margins.
    The application of Statement No. 92 to an existing phase-in plan 
shall be delayed if both of the following conditions are met:

    1. The enterprise has filed a rate application to have the plan 
amended to meet the criteria of Statement No. 92 or intends to do so as 
soon as practicable; and
    2. It is reasonably possible that the regulator will change the 
terms of the phase-in plan so that it will meet the criteria of 
Statement No. 92.

    If the above conditions are met, the provisions of Statement No. 92 
shall be applied to the existing phase-in plan on the earlier of the 
date when one of the conditions ceases to be met or the date when the 
final rate order is received, amending or refusing to amend the phase-in 
plan. However, if the enterprise delays filing its application for the 
amendment or the regulator does not process the application in the 
normal period of time, the application of Statement No. 92 shall not be 
further delayed.
    In applying the criteria of Statement No. 92 to a plan that was in 
existence prior to the first fiscal year beginning after December 15, 
1987, and that was revised to meet that criteria, the 10-year criterion 
and the requirement concerning the percentage increase shall be measured 
from the date of the amendment rather than from the date of the first 
scheduled deferrals under the original plan. All phase-in plans must 
receive RUS approval prior to implementation.

   135   Accounting for Removal or Relocation of Electric Facilities 
                   Resulting from the Action of Others

    Under arrangements with another party, a borrower agrees, or is 
obliged, to remove, relocate, rearrange, or otherwise make changes in 
utility property, other than for the purpose of rendering utility 
service to the other party, for which the utility is reimbursed for all 
or a portion of the costs incurred.

[[Page 837]]

                            Plant Accounting

    The relocation of the line shall be accounted for as follows:

    1. If all of the assemblies in the line are retired or completely 
removed and later reinstalled or if the line is constructed in a new 
location before the old line is removed, construction and retirement 
work orders shall be prepared except for the costs relating to special 
equipment items (transformers, oil circuit reclosers, etc.) which shall 
be charged to operations expense.
    2. If a line is moved in its entirety to a new location except for 
isolated retirement units (such as at the end of the line) or poles not 
suitable for resetting, the cost of moving the portion of line that is 
moved intact shall be charged to maintenance expense while the cost 
related to the change in isolated retirement units or the replacement of 
poles not suitable for resetting shall be accounted for through use of 
construction and retirement work orders.
    3. If a line is moved intact without any change in assemblies, the 
cost shall be charged to maintenance expense.

                              Reimbursement

    If the borrower receives reimbursement for the costs related to the 
relocation of the line, the reimbursement shall be accounted for by 
crediting operation and maintenance expenses to the extent of actual 
expenses occasioned by the plant changes and crediting the remainder to 
the accumulated provision for depreciation, unless contractual terms 
definitely characterize residual or specific amounts as applicable to 
the cost of replacement. In the latter event, appropriate credits shall 
be entered in the plant accounts.
    Reimbursement received from a telephone company for adding a pole or 
replacing a present pole with a taller pole under joint use contracts 
falls within this latter category. In this instance, appropriate credits 
are charged against the plant accounts.

                                Financing

    The total reimbursement, less any portion for operations and 
maintenance costs, shall be entered in the ``Contributions in Aid of 
Construction'' section at the bottom of the Construction Work Order. 
When the Inventory of Work Orders (RUS Form 219) is prepared, enter only 
enough of the contribution in column 9 to reduce to zero the amount in 
column 10, ``Loan Funds Subject to Advance by RUS.'' This entry is made 
although none of the reimbursement received is recorded in the 
accounting records as a contribution in aid of construction.

                           136   Storm Damage

    As a result of recent hurricane, flood, and ice storm damage, the 
Rural Utilities Service (RUS) has received several inquiries concerning 
the proper accounting for storm damage costs and the associated funds 
received from the Federal Emergency Management Administration (FEMA).
    Storm damage costs should be accounted for under the work order 
procedure. Units of property destroyed or otherwise removed from service 
must be reflected on retirement work orders and units of property 
installed must be shown on construction work orders. To ensure that the 
accounting for construction and retirement costs is as accurate as 
possible, an effort should be made to accurately accumulate material, 
labor, and overhead costs. Even when extreme care has been exercised, 
however, it may still be necessary to use estimates to develop the 
appropriate cost figures.
    When a storm occurs, a utility typically incurs a large retirement 
loss, all or a **part** of which should be charged to the accumulated 
provision for depreciation. Storm damage costs over and above 
construction and retirement costs represent maintenance expense. 
Maintenance costs include the costs of resagging lines, straightening 
poles, and replacing minor items of property. When extensive damage has 
occurred, the need to restore the property to an operating condition 
without delay usually results in excessive costs being incurred. 
Standard property unit costs may be used as a guide in determining the 
amount to be capitalized. It should be noted, however, that when 
standard property unit costs are used, all excess costs are charged to 
maintenance expense.

[[Page 838]]

    Because of the storm's destruction, property is retired prematurely 
and as a result, extraordinary retirement losses occur. When such 
extraordinary losses occur, they should be recorded in the year in which 
the losses are incurred. If the recording of such losses will materially 
distort the income statement, such losses may be charged to Account 435, 
Extraordinary Deductions. These costs may be deferred and amortized to 
future periods only if the provisions of Statement of Financial 
Accounting Standards No. 71, Accounting for the Effects of Certain Types 
of Regulation (Statement No. 71), are applied. Under the provisions of 
Statement No. 71, a utility may defer certain costs, provided such costs 
are included in the utility's rate base and recovered through future 
rates. If an RUS borrower elects to apply the provisions of Statement 
No. 71, RUS approval is required. To obtain RUS approval, a borrower 
must submit:
    a. A detailed description of the plan including the nature of the 
expense item, the amount of the deferral, the specific time period for 
rate recovery, and justifying support for the time period selected;
    b. The accounting journal entries being used by the cooperative to 
record the expense deferral and amortization of the deferred costs;
    c. A copy of the state Commission order authorizing recovery of the 
deferred costs through future rates, or in the absence of commission 
jurisdiction, a resolution from the cooperative's board of directors 
authorizing such recovery; and
    d. A statement from the borrower's certified public accountant (CPA) 
or CPA firm indicating that the deferral and amortization of these costs 
is in accordance with generally accepted accounting principles.
    To assist in the restoration of the damaged facilities, the Federal 
government often provides assistance through FEMA. Under current FEMA 
procedures, FEMA provides funds for the restoration of facilities based 
upon the cost estimates submitted by the entity requesting assistance. 
If the FEMA grant is for less than 100 percent of the cost estimates, 
FEMA does not specify which costs are to be reimbursed. When the funds 
are received, therefore, they should be accounted for by crediting 
construction, retirement, maintenance expense, and administrative 
expense in direct proportion to the total costs incurred. For example, 
if total storm damage costs are $1,000,000 with $450,000 incurred for 
maintenance, $300,000 for retirement, $200,000 for construction, and 
$50,000 for administrative costs, the FEMA reimbursement should be 
accounted for by applying 45 percent of the funds received as a credit 
to maintenance expense, 30 percent as a credit to retirement costs, 20 
percent as a credit to construction, and 5 percent as a credit to 
administrative and general costs.

                       Accounting Journal Entries
Dr. 108.8X, Retirement Work in Progress--      $1,015.17
 Storm Damage...........................
    Cr. 107.4, Construction Work in       ..............       $1,015.17
     Progress--Storm Damage.............
To transfer the removal costs recorded in Column 11 of Retirement Work
 Order #4401X to Account 108.8X.........................................
Dr. 107.4, Construction Work in                $4,141.55
 Progress--Storm Damage.................
    Cr. 108.8X, Retirement Work in        ..............       $4,141.55
     Progress--Storm Damage.............
To remove material salvaged in the ____________________ rebuild from
 Account 107.4. The original entry debited Account 154, Plant Materials
 and Operating Supplies, and credited Account 107.4. (See Column 12 of
 Retirement Work Order #4401X.).........................................
Dr. 108.8X, Retirement Work in Progress--    $312,230.41
 Storm Damage...........................
    Cr. 364, Poles Towers and Fixtures..  ..............     $133,377.55
    Cr. 365, Overhead Conductors and      ..............       59,683.08
     Devices............................
    Cr. 368, Lines Transformers.........  ..............       19,704.60
    Cr. 369, Services...................  ..............       97,651.23
    Cr. 373, Street Lighting and Signal   ..............        1,813.95
     Systems............................
To remove the original cost of property destroyed and retired from the
 classified plant accounts. This retirement is recorded, in detail, on
 Retirement Work Order #4401X. It is understood that this retirement
 covers all distribution property retired or destroyed in the
 ____________________ area exclusive of substations and special
 equipment items (meters, meter sockets, current and potential
 transformers, transformers, voltage regulators, oil circuit reclosers
 (OCR), and sectionalizers).............................................

[[Page 839]]


Dr. 108.6, Accumulated Provision for         $309,104.03
 Depreciation of Distribution Plant.....
    Cr. 108.8X, Retirement Work in        ..............     $309,104.03
     Progress--Storm Damage.............
To record the net loss due to the retirement of distribution lines in
 the ____________________ area. (See Retirement Work Order #4401X.).....
Dr. 364, Poles, Towers and Fixtures.....      $99,075.40
Dr. 365, Overhead Conductors and Devices      104,142.22
Dr. 368, Line Transformers..............       25,036.07
Dr. 369, Services.......................       28,865.08
Dr. 373, Street Lighting and Signal             2,101.60
 Systems................................
    Cr. 107.4, Construction Work in       ..............     $259,220.37
     Progress--Storm Damage.............
To record, in the proper classified plant accounts, Construction Work
 Order #4401 covering the ____________________ rebuild..................
This entry includes:
    Material Issued.....................     $150,336.49
    Less: Materials Returned............       15,631.39
                                         -------------------------------
    Net Material Used...................      134,705.10
    Labor and overhead estimated by           124,515.27
     using standard record unit costs...
                                         -------------------------------
      Total.............................      259,220.37
                                         ===============================
Dr. 108.8X, Retirement Work in Progress--       2,384.00
 Storm Damage...........................
    Cr. 107.4, Construction Work in       ..............       $2,384.00
     Progress--Storm Damage.............
To transfer the removal costs associated with the retirement of old
 transmission lines ($1,966) and substations ($418) to Account 107.4.
 This cost is shown in Column 11 of Retirement Work Order #4400X).......
Dr. 107.4, Construction Work in                $1,939.74
 Progress--Storm Damage.................
    Cr. 108.8X, Retirement Work in        ..............       $1,939.74
     Progress--Storm Damage.............
To remove material salvaged from transmission lines ($1,545.74) and
 substations ($394.00) from Account 107.4. The original entry debited
 Account 154 and credited Account 107.4. (See Column 12 of Retirement
 Work Order #4400X.)....................................................
Dr. 108.8X, Retirement Work in Progress--    $162,172.06
 Storm Damage...........................
    Cr. 355, Poles and Fixtures.........  ..............      $47,738.45
    Cr. 356, Overhead Conductors &        ..............       80,304.11
     Devices............................
    Cr. 362, Station Equipment..........  ..............       34,129.50
To remove the original cost of transmission lines and substations
 destroyed and retired from the classified plant accounts. (See
 Retirement Work Order #4400X.) (New substations were built and
 separately accounted for on Work Order #4406.).........................
Dr. 108.5, Accumulated Provision for         $128,462.82
 Depreciation of Transmission Plant.....
Dr. 108.6, Accumulated Provision for           34,153.50
 Depreciation of Distribution Plant.....
    Cr. 108.8X, Retirement Work in        ..............     $162,616.32
     Progress--Storm Damage.............
To record the net loss due to the retirement of transmission lines
 ($128,462.82) and substations ($34,153.50). (See Retirement Work Order
 #4400X):...............................................................



------------------------------------------------------------------------
                                                           Transmission
                                            Substations        plant
------------------------------------------------------------------------
Original Cost...........................      $34,129.50     $128,042.56
Add: Cost of Removal....................          418.00        1,966.00
                                         -------------------------------
                                               34,547.50      130,008.56
Less: Material Salvaged.................          394.00        1,545.74
                                         -------------------------------
      Total.............................       34,153.50      128,462.82
                                         ===============================
------------------------------------------------------------------------


Dr. 355, Poles and Fixtures.............     $161,784.05
Dr. 356, Overhead Conductors and Devices      124,704.77
    Cr. 107.4, Construction Work in       ..............     $286,488.82
     Progress--Storm Damage.............
To record, in the proper classified plant accounts, the costs of a 69 kV
 transmission line (____________________) as detailed in Work Order
 #4400. This work order includes construction costs as follows:.........

[[Page 840]]


Material Used (Net).....................     $171,665.62
    Labor and overhead estimated by           114,823.20
     using standard record unit costs...
                                         -------------------------------
      Total.............................      286,488.82
                                         ===============================
Dr. 107.4, Construction Work in                  $329.40
 Progress--Storm Damage.................
    Cr. 108.8X, Retirement Work in        ..............         $329.40
     Progress--Storm Damage.............
To correct the journal entry for cash received from the sale of scrapped
 meters and transformers. The original entry credited Account 107.4 at
 the time of receipt....................................................
    Transformers........................         $318.00
    Meters..............................           11.40
                                         -------------------------------
    Net Materials Used..................          329.40
                                         ===============================
Dr. 108.8X, Retirement Work in Progress-- ..............     $137,671.22
 Storm Damage...........................
    Cr. 365, Overhead Conductors and      ..............       $4,557.00
     Devices............................
    Cr. 368, Line Transformers..........  ..............      112,815.22
    Cr. 370, Meters.....................  ..............       20,299.00
To remove the cost of meters, transformers, and OCRs lost or destroyed
 from the primary plant accounts. (See Retirement Work Order #4402X.)...
    737 Transformers....................     $112,815.22
    31 OCRs.............................        4,557.00
    1,532 Meters........................       20,299.00
                                         -------------------------------
      Total.............................      137,671.22
                                         ===============================
Dr. 108.6, Accumulated Provision for         $137,341.82
 Depreciation of Distribution Plant.....
    Cr. 108.8X, Retirement Work in        ..............     $137,341.82
     Progress...........................
To record the net loss due to the retirement of meters, transformers,
 and OCRs. (See Retirement Work Order #4402X.)..........................
    Original Cost.......................     $137,671.22
    Salvaged Realized...................          329.40
                                         -------------------------------
      Total.............................      137,341.82
                                         ===============================
Dr. 186, Miscellaneous Deferred Debits..       $1,319.85
    Cr. 107.4, Construction Work in       ..............       $1,319.85
     Progress--Storm Damage.............
To record the engineering costs associated with future construction work
 in the ____________________ area.......................................
Dr. 593, Maintenance of Overhead Lines..         $607.24
Dr. 595, Maintenance of Line                   19,365.86
 Transformers...........................
Dr. 597, Maintenance of Meters..........        6,595.56
    Cr. 107.4, Construction Work in       ..............      $26,568.66
     Progress--Storm Damage.............
To charge the costs of repairing damaged meters, transformers, voltage
 regulators, and OCRs to the appropriate expense accounts. Repair costs
 were originally charged to Account 107.4...............................



----------------------------------------------------------------------------------------------------------------
                                                                        593             595             597
----------------------------------------------------------------------------------------------------------------
Meters..........................................................  ..............  ..............       $6,595.56
Transformers....................................................  ..............      $18,869.95  ..............
Voltage Regulators..............................................  ..............          495.91  ..............
Oil Circuit Reclosers...........................................         $607.24  ..............  ..............
                                                                 -----------------------------------------------
      Total.....................................................          607.24       19,365.86        6,595.56
                                                                 ===============================================
----------------------------------------------------------------------------------------------------------------


Dr. 920, Administrative and General           $32,000.00
 Salaries...............................
Dr. 921, Office Supplies and Expenses...        4,421.69
    Cr. 107.4, Construction Work in       ..............      $36,421.69
     Progress--Storm Damage.............
To charge the administrative costs incurred to obtain the FEMA grant to
 the appropriate expense accounts. Administrative costs were originally
 charged to Account 107.4...............................................
    Salaries............................      $32,000.00
    Office Supplies.....................        4,421.69
                                         -------------------------------
      Total.............................      $36,421.69
                                         ===============================

[[Page 841]]


Dr. 571, Maintenance of Overhead Lines..       $3,675.60
Dr. 593, Maintenance of Overhead Lines..       33,080.40
    Cr. 107.4, Construction Work in       ..............      $36,756.00
     Progress Storm Damage..............
To allocate expenses remaining in Account 107.4 to distribution and
 transmission maintenance expense. It was estimated that only 10 percent
 is applicable to transmission..........................................
Dr. 426.5, Other Deductions.............     $275,000.00
Dr. 435, Extraordinary Deductions
Dr. 182.1, Extraordinary Property Losses
    Cr. 108.5, Accumulated Provision for  ..............      $35,000.00
     Depreciation of Transmission Plant.
    Cr. 108.6, Accumulated Provision for  ..............      240,000.00
     Depreciation of Distribution Plant.
To restore the accumulated provisions for depreciation to their
 appropriate levels based upon a study of plant currently in service....



    Note: Account 426.5, Other Deductions, should be used to record the 
retirement loss as a current period expense. Account 435, Extraordinary 
Deductions, may be used when the loss will materially distort the income 
statement. Account 182.1, Extraordinary Property Losses, should be used 
when such costs are being deferred under the provisions of Statement No. 
71. Costs recorded in this account should be amortized to Account 407, 
Amortization of Property Losses, as the costs are recovered through 
rates.

Dr. 131.1, Cash--General................   $1,000,000.00
    Cr. 253, Other Deferred Credits.....  ..............   $1,000,000.00
To record the receipt of funds from the Federal Emergency Management
 Administration (FEMA)..................................................
Dr. 253, Other Deferred Credits.........   $1,000,000.00
    Cr. 108.5, Accumulated Provision for  ..............      $74,205.00
     Depreciation of Transmission Plant.
    Cr. 108.6, Accumulated Provision for  ..............      191,575.00
     Depreciation of Distribution Plant.
    Cr. 186, Miscellaneous Deferred       ..............          872.00
     Debits.............................
    Cr. 355, Poles and Fixtures.........  ..............      129,056.00
    Cr. 356, Overhead Conductors and      ..............       99,408.00
     Devices............................
    Cr. 364, Poles, Towers and Fixtures.  ..............       78,916.00
    Cr. 365, Overhead Conductors and      ..............       82,840.00
     Devices............................
    Cr. 368, Line Transformers..........  ..............       20,056.00
    Cr. 369, Services...................  ..............       23,108.00
    Cr. 373, Street Lighting and Signal   ..............        1,744.00
     Systems............................
    Cr. 426.5, Other Deductions.........  ..............      219,220.00
    Cr. 571, Maintenance of Overhead      ..............        2,900.00
     Lines..............................
    Cr. 593, Maintenance of Overhead      ..............       26,600.00
     Lines..............................
    Cr. 595, Maintenance of Line          ..............       15,300.00
     Transformers.......................
    Cr. 597, Maintenance of Meters......  ..............        5,200.00
    Cr. 920, Administrative and General   ..............       25,491.00
     Salaries...........................
    Cr. 921, Office Supplies and          ..............        3,509.00
     Expenses...........................
To allocate FEMA funds to the proper accounts...........



                            Summary of Costs
Maintenance:
    Account 571, Maintenance of Overhead Lines..........       $3,675.60
    Account 593, Maintenance of Overhead Lines..........       33,687.24
    Account 595, Maintenance of Line Transformers.......       19,365.86
    Account 597, Maintenance of Meters..................        6,595.56
                                                         ---------------
      Total Maintenance Costs...........................       63,324.26
                                                         ===============
Retirement Loss:
    Account 108.5, Accumulated Provision for                   93,462.82
     Depreciation of Transmission Plant.................
    Account 108.6, Accumulated Provision for                  240,599.35
     Depreciation of Distribution Plant.................
    Account 426.5, Other Deductions.....................      275,000.00
                                                         ---------------
      Total Retirement Loss.............................      609,062.17
                                                         ===============
Construction:
    Account 186, Miscellaneous Deferred Debits..........        1,319.85
    Account 355, Poles and Fixtures.....................      161,784.05
    Account 356, Overhead Conductors and Devices........      124,704.77

[[Page 842]]


    Account 364, Poles, Towers and Fixtures.............       99,075.40
    Account 365, Overhead Conductor and Devices.........      104,142.22
    Account 368, Line Transformers......................       25,036.07
    Account 369, Services...............................       28,865.08
    Account 373, Street Lighting and Signal Systems.....        2,101.60
                                                         ---------------
      Total Construction Cost...........................      547,029.04
                                                         ===============
Administrative:
    Account 920, Administrative and General Salaries....      $32,000.00
    Account 921, Office Supplies and Expenses...........        4,421.69
                                                         ---------------
      Total Administrative Cost.........................       36,421.69
                                                         ===============
    Maintenance.........................................       63,324.26
    Retirement Loss.....................................      609,062.17
    Construction........................................      547,029.04
    Administrative......................................       36,421.69
                                                         ---------------
      Total Costs.......................................    1,255,837.16
                                                         ===============
                       Distribution of FEMA Funds
Maintenance: 63,324.26<divide>1,255,837.16=.0504=5.0%
Retirement: 609,062.17<divide>1,255,837.16=.4850=48.5%
Construction: 547,029.04<divide>1,255,837.16=.4356 = 43.6%
Administrative: 36,421.69<divide>1,255,837.16=.0290=2.9%
Maintenance: $1,000,000.00 x 5.0%=......................      $50,000.00
Retirement: $1,000,000.00 x 48.5%=......................      485,000.00
Construction: $1,000,000.00 x 43.6%=....................      436,000.00
Administrative: $1,000,000.00 x 2.9%=...................       29,000.00
                                                         ---------------
      Total.............................................    1,000,000.00
                                                         ===============
                 Distribution of FEMA Funds--Maintenance
Account 571: 3,675.60<divide>63,324.26=.0580=5.8%
Account 593: 33,687.24<divide>63,324.26=.5320=53.2%
Account 595: 19,365.86<divide>63,324.26=.3058=30.6%
Account 597: 6,595.56<divide>63,324.26=.1041=10.4%
Account 571: $50,000.00 x 5.8%=.........................       $2,900.00
Account 593: $50,000.00 x 53.2%=........................       26,600.00
Account 595: $50,000.00 x 30.6%=........................       15,300.00
Account 597: $50,000.00 x 10.4%=........................        5,200.00
                                                         ---------------
      Total.............................................       50,000.00
                                                         ===============
               Distribution of FEMA Funds--Retirement Loss
Account 108.5: 93,462.82<divide>609,062.17=.1535=15.3%
Account 108.6: 240,599.35<divide>609,062.17=.3950=39.5%
Account 426.5: 275,000.00<divide>609,062.17=.4515=45.2%
Account 108.5: $485,000.00 x 15.3%=.....................      $74,205.00
Account 108.6: $485,000.00 x 39.5%=.....................      191,575.00
Account 426.5: $485,000.00 x 45.2%=.....................      219,220.00
                                                         ---------------
      Total.............................................      485,000.00
                                                         ===============
                Distribution of FEMA Funds--Construction
Account 186: 1,319.85<divide>547,029.04=.0024=.2%
Account 355: 161,784.05<divide>547,029.04=.2958=29.6%
Account 356: 124,704.77<divide>547,029.04=.2280=22.8%
Account 364: 99,075.40<divide>547,029.04=.1811=18.1%
Account 365: 104,142.22<divide>547,029.04=.1904=19.0%
Account 368: 25,036.07<divide>547,029.04=.0457=4.6%
Account 369: 28,865.08<divide>547,029.04=.0528=5.3%
Account 373: 2,101.67<divide>547,029.04=.0038=.4%
Account 186: $436,000.00 x .2%=.........................         $872.00
Account 355: $436,000.00 x 29.6%=.......................      129,056.00
Account 356: $436,000.00 x 22.8%=.......................       99,408.00
Account 364: $436,000.00 x 18.1%=.......................       78,916.00

[[Page 843]]


Account 365: $436,000.00 x 19.0%=.......................       82,840.00
Account 368: $436,000.00 x 4.6%=........................       20,056.00
Account 369: $436,000.00 x 5.3%=........................       23,108.00
Account 373: $436,000.00 x .4%=.........................        1,744.00
                                                         ---------------
      Total.............................................      436,000.00
                                                         ===============
               Distribution of FEMA Funds--Administrative
Account 920: 32,000.00<divide>36,421.69=.8786=87.9%
Account 921: 4,421.69<divide>36,421.69=.1213=12.1%
Account 920: $29,000.00 x 87.9%=........................      $25,491.00
Account 921: $29,000.00 x 12.1%=........................        3,509.00
                                                         ---------------
      Total.............................................       29,000.00
                                                         ===============


                   137 Impairment of Long-Lived Assets

    Statement of Financial Accounting Standards No. 121, Accounting for 
the Impairment of Long-Lived Assets and for Long-Lived Assets to be 
Disposed of (Statement No. 121), requires reporting entities to review 
all long-lived assets and certain identifiable intangibles that are to 
be held, used, or disposed of by that entity for impairment whenever 
events and changes in circumstances indicate that the carrying amount of 
the asset may not be recoverable. If the sum of the expected future cash 
flows (undiscounted and without interest charges) is less than the 
carrying value of the asset, the entity must recognize an impairment 
loss. The impairment loss is measured as the amount by which the 
carrying amount of the asset exceeds the fair value of the asset. The 
impairment loss is reported as a component of income from continuing 
operations before income taxes for entities presenting an income 
statement and in the statement of activities of not-for-profit 
organizations. Statement No. 121 does not apply to assets included in 
the scope of Statement of Financial Accounting Standards No. 90, 
Regulated Enterprises--Accounting for Abandonments and Disallowances of 
Plant Costs.

                        Assets To Be Held or Used

    Entities are required to review long-lived assets and certain 
identifiable intangibles whenever events or changes in circumstances 
indicate that the carrying value of the asset may not be recoverable. 
For example:
    1. A significant decrease in the market value of an asset;
    2. A significant change in the extent or manner in which an asset is 
used;
    3. A significant physical change in an asset;
    4. A significant adverse change in legal factors or in the business 
climate that could affect the value of an asset;
    5. An adverse action or assessment by a regulator;
    6. An accumulation of costs significantly in excess of the amount 
originally expected to acquire or construct an asset; and
    7. A current period operating or cash flow loss combined with a 
history of operating or cash flow losses or a projection or forecast 
that demonstrates continued losses associated with an asset used for the 
purpose of producing revenue.
    The impairment of the asset is measured by estimating the future 
cash flows expected to result from the use of the asset and its 
disposition. Assets are grouped at the lowest level for which there are 
identifiable cash flows that are largely independent of the cash flows 
of other groups of assets. Future cash flows are those cash inflows that 
are expected to be generated by the asset less the cash outflows 
expected to be necessary to maintain those inflows. If the future cash 
flows (undiscounted and without interest charges) are less than the 
carrying value of the asset, an impairment loss must be recognized. If 
the expected future cash flows are greater than the carrying value of 
the asset, no impairment loss exists.
    The impairment loss is the amount by which the carrying amount 
(acquisition cost less accumulated depreciation) of the asset exceeds 
the fair value of the asset. The fair value of the asset

[[Page 844]]

is the amount for which the asset could be bought or sold in an arms-
length transaction between willing parties. A quoted market price is the 
best evidence of fair value. If this information is not available, the 
fair value should be based upon the best information available. 
Consideration should be given to the price of similar assets and 
valuation techniques such as the present value of the expected future 
cash flows discounted at a rate representative of the risk involved, 
option-pricing models, matrix pricing, option-adjusted spread models, 
and fundamental analysis. All available information should be considered 
when using the above pricing techniques.
    If an impairment is recognized, the carrying value of the asset is 
reduced to the lower of its fair value or its carrying value and, if 
depreciable, depreciated over the remaining useful life. Previously 
recognized impairment losses cannot be restored. If the asset was 
acquired in a business combination and there is goodwill resulting from 
the transaction, the goodwill is included in the asset grouping and 
reduced or eliminated before any adjustment is made to the carrying 
value of the asset.
    The following financial statement disclosures are required in the 
period in which the impairment is recognized:
    1. A description of the impaired assets and the facts and 
circumstances surrounding the impairment;
    2. The amount of the impairment and how fair value was determined;
    3. The caption in the income statement or the statement of 
activities in which the impairment loss is aggregated if that loss has 
not been presented as a separate caption or reported parenthetically on 
the face of the statement; and
    4. If applicable, the business segment(s) affected.

                          Assets To Be Disposed

    Statement No. 121 also applies to all long-lived assets and certain 
identifiable intangibles for which management, having the authority to 
approve the action, has committed to a plan of disposal except those 
assets covered by APB No. 30, Reporting the Results of Operations--
Reporting the Effects of Disposal of a Segment of a Business, and 
Extraordinary, Unusual and Infrequently Occurring Events and 
Transactions. An asset to be disposed of is carried at the lower of its 
carrying amount (acquisition cost less accumulated depreciation) or its 
fair value less cost to sell.
    The fair value of the asset to be disposed of is computed in the 
same manner as that for an asset to be held or used by the entity. 
Selling costs include the incremental direct cost to transact the sale--
broker commissions, legal fees, title transfer, and other closing costs 
that must be incurred before legal title can be transferred. Costs such 
as insurance, security service, and utilities are generally excluded 
unless these costs are **part** of a contractual agreement that obligates 
the entity to incur such costs in the future. If the asset's fair value 
is based upon current market price or the current selling price for a 
similar asset, the fair value is considered a current amount and is not 
discounted. If, however, the fair value is based upon discounted 
expected future cash flows and if the sale is to occur beyond one year, 
the cost to sell must also be discounted. Assets covered by this 
statement are not depreciated (amortized) while being held for disposal.
    Subsequent revisions in estimates of fair value less cost to sell 
are reported as adjustments to the carrying amount of the asset to be 
disposed of as long as the carrying amount of the asset does not exceed 
the original carrying amount.
    The following financial statement disclosures are required in the 
period in which the impairment is recognized:
    1. A description of the assets to be disposed of including the facts 
and circumstances leading to the expected disposal, the expected 
disposal date, and the carrying amount of those assets;
    2. If applicable, the business segment(s) in which the assets to be 
disposed of are held;
    3. The amount, if any, of the impairment loss resulting from the 
adoption of this statement;
    4. The gain or loss, if any, resulting from subsequent revisions in 
the estimates of fair value less cost to sell;

[[Page 845]]

    5. The caption in the income statement or statement of activities in 
which the gains or losses are aggregated if those gains or losses have 
not been presented as a separate caption or reported parenthetically on 
the face of the statement; and
    6. The results of operations for assets to be disposed of to the 
extent that those results are included in the entity's results of 
operations for the period and can be identified.

                         Accounting Requirements

    All borrowers must adopt the accounting prescribed by Statement No. 
121.

                    Effective Date and Implementation

    Statement No. 121 is effective for financial statements for fiscal 
years beginning after December 15, 1995. Impairment losses resulting 
from the application of this statement to assets that are held or used 
by the entity must be reported in the period in which the recognition 
criteria are first applied and met. Impairment losses attributable to 
assets to be disposed of must be reported as the cumulative effect of a 
change in accounting principle as prescribed in Accounting Principles 
Board Opinion No. 20, Accounting Changes.

             Accounting Journal Entries--Implementation Date

    If a borrower has impaired assets that are held or used at the 
implementation date, the following entry should be recorded:

Dr. 426.5, Other Deductions
Cr. 300 Series of Accounts, Plant Accounts
To record the adoption of Statement No. 121 for the impairment of assets 
    that are held or used.

    If a borrower has impaired assets to be disposed of at the 
implementation date, the following entry should be recorded:

Dr. 435.1, Cumulative Effect on Prior Years of a Change in Accounting 
    Principle
Cr. 300 Series--Plant Accounts
To record the adoption of Statement No. 121 for assets that are to be 
    disposed.

      Accounting Journal Entries--Subsequent to Implementation Date

    If an asset that is either held, used or to be disposed of becomes 
impaired, the following entry should be recorded:

Dr. 426.5, Other Deductions
Cr. 300 Series--Plant Accounts
To record the impairment of a plant asset.

    If a borrower makes a subsequent revision in the estimate of the 
fair value less the cost to sell of an asset to be disposed of, the 
following entry should be recorded:

Dr. 300 Series--Plant Accounts
Cr. 421, Miscellaneous Nonoperating Income
To revise the fair value of an asset to be disposed.

              138  Automatic Meter Reading Systems--Turtles

    Automatic meter reading systems were developed from technology 
called power line carrier communication systems. One such system, 
developed by Hunt Technologies, Inc., is called by its brand name, the 
Turtle system. In addition to its function as an automated reading 
device, the Turtle can provide outage detection, power failure counts, 
and other potential applications. The current Turtle system does not 
have the capability for applications such as collection of load survey 
or interval data. A Turtle system consists of:
    1. A meter reader mounted (retrofitted) inside the meter;
    2. A receiver located in each substation; and
    3. Monitoring and programming equipment (software and personal 
computer) usually located in the headquarters building.
    The system transmits continuous information one way from the meter 
to a receiver located in the substation. The receiver constantly 
monitors every Turtle meter served by the substation. The substation 
receiver can be sized to monitor up to 3,000 Turtle meter readers at the 
same time. The data is then

[[Page 846]]

transmitted to the headquarters monitoring equipment via telephone line 
or an equivalent communication system.
    The technical literature and other information provided by the 
manufacturer indicates that this system can only be used for remote 
meter reading, outage detection, power failure counts, and phase 
identification. At this time, there is no indication that the system 
supports other functions such as home security. Therefore, the 
accounting prescribed for the Turtle meter reading devices and support 
equipment relates only to electric utility operations.

                         Accounting Requirements

    The function of the equipment is the primary factor in determining 
the account in which the equipment shall be recorded. The components of 
the Turtle automatic meter reading system shall be recorded in Account 
370, Meters. The cost of the meter reader encoding device and 
retrofitting the meter with the meter reader unit shall be capitalized 
to the cost of the existing meter. Any associated operating expenses 
shall be charged to Account 586, Meter Expenses, with maintenance 
expenses charged to Account 597, Maintenance of Meters.
    Separate continuing property records shall be established for the 
meters, either fitted or retrofitted with the device; the receiver; the 
personal computer; and the system software. The meters, receivers, and 
personal computer shall be depreciated over the manufacturer's estimated 
useful service life. The system software shall be depreciated over the 
estimated useful service life of the program not to exceed 5 years.

                     139  Global Positioning Systems

    The Global Positioning System (GPS) is a worldwide radio-navigation 
system formed from a network of 24 satellites and their ground stations. 
Utilities are using this advanced technology geographic data collection 
system to update and modernize their system maps. GPS uses a system of 
satellites orbiting the earth to establish plant locations with pinpoint 
accuracy. By triangulating from three satellites and using radio signals 
to measure distances and locate items, system-wide maps can be created 
of the utility's service area. A field inventory is then taken of the 
utility's plant and plotted onto the map. The GPS consists of base 
station equipment, remote station equipment, the GPS program, and 
mapping conversion software.
    All equipment associated with GPS is dedicated to the mapping 
effort. The base station is installed at a fixed location and ties 
satellite measurements into a solid local reference. The remote station 
is a portable receiver that is taken into the field to determine 
locations and is moved from site to site. The GPS program is the 
application software that operates the station equipment and is used by 
layout technicians to gather information of existing and new facilities 
in the field. The conversion software is used for converting the GPS and 
inventory information gathered in the field into a form usable by the 
mapping program.

                         Accounting Requirements

    The function and location of the equipment are the primary factors 
in determining the account in which the equipment shall be recorded. The 
components of the GPS shall be accounted for as follows:
    1. Remote and Base Station Equipment. The cost of the equipment, 
both remote and fixed, shall be capitalized in a subaccount of Account 
391, Office Furniture and Equipment.
    2. GPS Program and Conversion Software for Mapping. The cost of GPS 
program and conversion software shall be capitalized in a subaccount of 
Account 391, Office Furniture and Equipment.
    3. GPS/GIS Field Inventory of System. The cost of performing a GPS/
GIS survey and field inventory of the existing system, by either a 
consultant or the utility's own forces, shall be charged to Account 588, 
Miscellaneous Distribution Expenses.

            140  Radio-Based Automatic Meter Reading Systems

    Radio-based automatic meter reading technology allows meters 
equipped with a low-power radio device called an ERT (Encoder, Receiver, 
Transmitter) to be read from a remote location. The ERT device can 
either be retrofitted to

[[Page 847]]

an existing meter or purchased installed in a new meter. The ERT device 
``encodes'' energy consumption and transmits this information to a radio 
transceiver equipped handheld computer. The data collected and stored in 
the handheld computer is then uploaded to a billing computer using 
specialized software for that purpose.

                         Accounting Requirements

    The function of the equipment is the primary factor in determining 
the account in which the equipment shall be recorded. The components of 
the radio-based automatic meter reading system shall be recorded in 
Account 370, Meters. The cost of the meter reader encoding device and 
retrofitting the meter with the meter reader unit shall be capitalized 
to the cost of the existing meter. Any associated operating expenses 
shall be charged to Account 586, Meter Expenses, with maintenance 
expenses charged to Account 597, Maintenance of Meters.
    Separate continuing property records shall be established for the 
meters, either fitted or retrofitted with the device; the handheld 
computer; and the upload software. The meters and handheld computer 
shall be depreciated over the manufacturer's estimated useful service 
life. The upload software shall be depreciated over the estimated useful 
service life of the program not to exceed 5 years.

                      201   Supplemental Financing

    Many borrowers secure additional financing from sources other than 
RUS. CFC was established to provide a source of supplemental financing. 
Although the accounting provided in this section refers to CFC, it is 
applicable to other sources of supplemental financing as well.

    1. Membership Fees
    When a membership fee is paid to CFC, the payment shall be recorded 
as a debit to Account 123.23, Other Investments in Associated 
Organizations.
    2. Subscriptions
    The subscription agreement to purchase Capital Term Certificates 
(CTCs) is a binding obligation to pay an initial subscription in equal 
annual payments over the first three years and an additional annual 
subscription payable in the fourth through fifteenth years.
    The annual subscriptions to CFC for the fourth through fifteenth 
years is 2.0 percent of total operating revenues after deducting the 
cost of power. Using the best data available, each borrower shall 
estimate the amount of CTCs that are required to be purchased. Estimates 
are not expected to be precise and adjustments shall be made when future 
projections indicate a change is needed. When the agreement to purchase 
CTCs is made, an entry shall be recorded debiting Account 123.21, 
Subscriptions to Capital Term Certificates--Supplemental Financing, and 
crediting Account 224.11, Other Long-Term Debit--Subscriptions. When the 
CTCs are actually purchased, the following entries shall be recorded:
Dr. 224.11, Other Long-Term Debt--Subscriptions
    Cr. 131.1, Cash--General
Dr. 123.22, Investments in Capital Term Certificates--Supplemental 
Financing
    Cr. 123.21, Subscriptions to Capital Term Certificates--Supplemental 
Financing

    3. Interest Receipts
    Interest accrues monthly to the holder of CTCs at a rate in 
accordance with the terms of the CFC Invitation to Subscribe. The 
accrual of interest and the receipt of interest proceeds shall be 
recorded as follows:

Dr. 171, Interest and Dividends Receivable
    Cr. 419, Interest and Dividend Income
To record the monthly accrual of interest.
Dr. 131.1, Cash--General
    Cr. 171, Interest and Dividends Receivable
To record the receipt of interest proceeds from the investment in CTCs.
    Note: Any amounts received in excess of the previous accruals shall 
be credited to Account 419.
    Interest penalties may be charged by CFC for late payments on any 
subscription from the date that the payment was due to the date that the 
payment was actually received. Such charges shall be expensed to Account 
431, Other Interest Expense.
    4. Notes

[[Page 848]]

    If a note is due more than one year after the date of the note, the 
appropriate subaccount of Account 224, Other Long-Term Debt, shall be 
credited. If the note is due less than one year from the date of the 
note, Account 231, Notes Payable, shall be credited.
    When a loan from CFC has been consummated and a note is executed, 
Account 224.13, Supplemental Financing Notes Executed--Debit, shall be 
debited; and Account 224.12, Other Long-Term Debt--Supplemental 
Financing, credited. When a loan from another source has been 
consummated, Account 224.15, Notes Executed--Other--Debit, shall be 
debited; and Account 224.14, Other Long-Term Debt--Miscellaneous, 
credited.
    5. Loan Proceeds
    Cash proceeds from unsecured short-term loans shall be deposited 
into the General Fund Account. Cash proceeds from all secured loans 
shall be deposited into the Construction Fund Trustee Account.
    From two to seven percent, depending upon the class of borrower and 
its debt-equity ratio, of each CFC loan is applied to the purchase of 
Capital Term Certificates. At the time of a borrower's first requisition 
under the CFC loan, the following entry shall be recorded:

Dr. 131.2, Cash--Construction Fund--Trustee
Dr. 123.22, Investments in Capital Term Certificates--Supplemental 
Financing
    Cr. 224.13, Supplemental Financing Notes Executed--Debit
To record the requisition of funds from CFC.

    6. Capital Credits
    As a result of borrowing from CFC or other lenders organized on a 
cooperative basis, a borrower may receive capital credit allocations. 
These allocations are usually based upon the borrower's participation in 
the lending program with participation measured by the amount of 
interest expense and conversion costs incurred.
    To account for patronage capital allocations from cooperative 
lenders, the following journal entries shall be recorded:

Dr. 123.1, Patronage Capital from Associated Cooperatives
    Cr. 424, Other Capital Credits and Patronage Capital Allocations
To record the allocation of capital credits from a cooperative lender.
    Note: If any portion of the interest expense was capitalized as a 
component of construction cost, a similar portion of the capital credit 
allocation shall be credited to construction rather than to Account 424. 
The portion credited to construction shall be determined by applying the 
percentage of interest expense charged to construction for that 
particular lender to the interest expense incurred for that lender.
Dr. 131.1, Cash--General
    Cr. 123.1, Patronage Capital from Associated Cooperatives
To record the cash receipt of patronage capital credits from cooperative 
lenders.

                   301   Forfeited Customers' Deposits

    Customers may be required to make deposits to guarantee payment of 
amounts billed for electric service. When a customer discontinues 
service, the customer's deposit shall first be applied to unpaid energy 
bills, with the balance remitted by check to the customer. If the check 
is returned, it shall be voided and the original entry that was made 
when the check was issued shall be reversed.
    Unclaimed balances of customer deposits shall remain in Account 235, 
Customer Deposits, until the legal liability of the cooperative to make 
such a refund has elapsed. When there is no further legal liability to 
refund the deposit and if it does not escheat to the state, it shall be 
transferred to Account 144, Accumulated Provision for Uncollectible 
Customer Accounts--Credit, retaining full information of all 
particulars.

                      401   Computer Software Costs

    Computer software consists of programs and routines (sets of 
computer instructions) which direct the operation of the computer. 
Software may refer to generalized routines useful in computer operations 
or to programs for specific applications such as payroll.
    The distinction between generalized software and application 
software is important. Generalized software provides operating support 
for individual

[[Page 849]]

applications. This would include programs for such tasks as making 
printouts of machine-readable records, sorting records, organizing and 
maintaining files, translating programs written in a symbolic language 
into machine-language instructions, and scheduling jobs through the 
computer. These programs are generally furnished by the manufacturer.
    Application software consists of a set of instructions for 
performing a particular data processing task. Application programs are 
generally written by the user installation, but are frequently obtained 
as prewritten packages from software vendors. Application software 
includes programs such as payroll, billing, general ledger, as well as 
engineering or managerial applications.
    Costs incurred with the purchase or development of computer software 
shall be accounted for as follows:
    1. Capitalize in a subaccount of Account 391, Office Furniture and 
Equipment, all costs for generalized software. Depreciate the cost over 
the service life (or remaining life) of the main hardware (i.e., 
containing central processor). If the purchase invoice does not break 
out or assign a cost to the ``generalized software,'' it is appropriate 
to include the full amount in hardware costs. Capitalize in a separate 
subaccount of Account 391, all costs for applications software 
determined to have a service life of over one year. Depreciate the cost 
over the estimated useful service life of the program. This depreciation 
period shall not exceed five (5) years. RUS realizes, however, that 
there may be circumstances that justify a useful life longer than 5 
years. When this is the case and it is management's intent to utilize 
these programs over an extended period, written justification shall be 
submitted to RUS for approval.
    2. Expense in Account 921, Office Supplies and Expenses, in the 
period incurred, all costs associated with the maintenance, updating, 
and conversion of files or revision of all software, and all costs for 
software with a useful life of less than 1 year. Also expense in Account 
921, the unamortized cost of all software determined, during the year, 
to be no longer used by or useful to the cooperative. Such costs that 
are clearly applicable to any category of operating expenses other than 
the administrative and general category, however, shall be included in 
the appropriate account in such category. In accordance with the USoA, 
no portion of such costs shall be capitalized to construction or 
retirement activities.
    In determining the total cost of purchased or internally developed 
software, the following items shall be included:
    a. Costs incurred for feasibility studies if they result in the 
purchase or development of software;
    b. All costs related to the actual purchase or development of the 
software. These costs must be specifically identifiable with the 
software and properly supported by time cards, invoices, or other 
documents; and
    c. All costs incurred in ``testing and debugging'' the software.
    Computer software costs are properly chargeable to Account 107, 
Construction Work in Progress, provided that the following criteria are 
met:
    1. The computer program is specifically dedicated to performing a 
construction related activity, and
    2. The cost of the software is itemized separate and apart from 
other hardware and software costs.
    The cost of software programs meeting the above requirements and 
having an estimated useful service life in excess of 1 year shall be 
recorded in Account 186, Miscellaneous Deferred Debits, and amortized to 
Account 107, Construction Work in Progress, over the estimated service 
life of the program not to exceed 5 years.
    All costs related to training personnel in the use of software shall 
be expensed as incurred.
    The accounting in this section is not intended to apply to 
immaterial amounts. When it is deemed that the costs of the 
recordkeeping necessary to amortize these costs outweigh the benefits to 
the members, software costs shall be expensed in the year incurred.
    For computer costs relating to load control equipment, refer to Item 
118 of this section.

[[Page 850]]

                          402   Legal Expenses

    Utilities may incur legal expenses which pertain to construction 
activities, loan activities, or general services. The proper accounting 
treatment for legal expenses is as follows:

    1. Legal fees incurred in connection with a construction project, 
including the court costs directly related thereto, which can be 
identified and supported as such, shall be capitalized in Account 107, 
Construction Work-in-Progress, as a cost of construction.
    2. Legal fees specifically identified and properly supported as 
resulting from activities designed to obtain long-term debt, shall be 
deferred in Account 181, Unamortized Debt Expense.
    3. Legal fees for all other services and fees which cannot be 
properly identified will require expensing to either Account 417.1, 
Expenses of Nonutility Operations, or Account 923, Outside Services 
Employed, as appropriate.

    To properly support the capitalization or deferral of legal fees, 
the attorney shall provide an itemization of services performed and the 
corresponding costs. Only those costs specifically identified by the 
attorney as being related to construction or loan activities shall be 
capitalized or deferred as described above.

                              403   Leases

    Lease transactions shall be accounted for as either a capital lease 
or an operating lease depending upon whether or not the lease meets the 
criteria for classification as a capital lease. The definitions for 
capital and operating leases and the criteria used to determine which 
method shall be used are as follows:

                               Definitions

    1. Capital Lease: A lease that transfers substantially all of the 
benefits and risks inherent in the ownership of the property to the 
lessee, who accounts for the lease as an acquisition of an asset and the 
incurrence of a liability.
    2. Operating Lease: An operating lease is a simple rental agreement 
which does not meet the criteria for a capital lease. Under the terms of 
an operating lease, the lessee records the rental payments due over the 
term of the lease as rent expense.

                                Criteria

    A lease agreement shall be classified as a capital lease if one or 
more of the following criteria is met:

    1. Ownership of the property is transferred to the lessee by the end 
of the lease term;
    2. The lease contains a bargain purchase option;
    3. The lease term is equal to 75 percent or more of the estimated 
useful life of the leased property; or
    4. The present value of the lease payments at the inception of the 
lease equals or exceeds 90 percent of the fair market value of the 
leased property.

    A lease agreement qualifying as a capital lease shall be recorded in 
either Account 101.1, Property Under Capital Leases;Account 120.6, 
Nuclear Fuel Under Capital Leases; or Account 121, Nonutility Property, 
as appropriate, at the present value (at the beginning of the lease 
term) of the minimum lease payments. If, however, this amount exceeds 
the fair value of the leased property at the inception of the lease, the 
asset shall be recorded at its fair market value. An offsetting credit 
shall be recorded in Account 227, Obligations Under Capital Leases--
Noncurrent, with the current portion recorded in Account 243, 
Obligations Under Capital Leases--Current. Assets recorded in Account 
101.1 shall be classified separately according to the detailed accounts 
(301-399) provided for electric plant in service.
    Monthly payments made under the lease obligation shall be charged to 
rent expense, fuel expense, or construction work-in-progress as they 
become payable. Similarly, the leased asset and the associated 
obligation shall be reduced by the current amount due.
    The following journal entries shall be used by the lessee to record 
capital lease transactions:

Dr. 101.1, Property Under Capital Leases
    Cr. 243, Obligations Under Capital Leases--Current
    Cr. 227, Obligations Under Capital Leases--Noncurrent

[[Page 851]]

To record the capital lease agreement.
Dr. 550, Rents
    Cr. 232, Accounts Payable
Dr. 243, Obligations Under Capital Leases--Current
    Cr. 101.1, Property Under Capital Leases
To record the monthly rental payment due.
Dr. 232, Accounts Payable
    Cr. 131.1, Cash--General
To record the monthly lease payment.
    Operating leases which are simple rental agreements do not require 
the recording of an asset or a liability. The entries that are required 
to record an operating lease by the lessee are as follows:

Dr. 550, Rents
    Cr. 232, Accounts Payable
To record the monthly rental payment due.
Dr. 232, Accounts Payable
    Cr. 131.1, Cash--General
To record the monthly lease payment.

    For purposes of illustration, the journal entries presented in this 
interpretation debit Account 550, Rents. However, Account 507, Rents 
(steam power generation); Account 525, Rents (nuclear power generation); 
Account 540, Rents (hydraulic power generation); Account 550, Rents 
(other power production); Account 567, Rents (transmission expense); 
Account 589, Rents (distribution expense); and Account 931, Rents 
(general and administrative), should be charged, as appropriate, 
depending upon the function of the equipment being leased.

                 404   Consolidated Financial Statements

    In October 1987, the Financial Accounting Standards Board issued 
Statement of Financial Accounting Standards No. 94, Consolidation of All 
Majority-Owned Subsidiaries (Statement No. 94). For purposes of 
reporting to RUS, Statement No. 94 shall be applied as follows:
    1. An RUS borrower that is a subsidiary of another entity shall 
prepare and submit to RUS separate financial statements even though this 
financial information is presented in the parent's consolidated 
statements.
    2. In those cases in which an RUS borrower has a majority-ownership 
in a subsidiary, the borrower must prepare consolidated financial 
statements in accordance with the requirements of Statement No. 94. 
These consolidated statements must also include supplementary schedules 
presenting a Balance Sheet and Income Statement for each majority-owned 
subsidiary included in the consolidated statements.
    Although Statement No. 94 requires the consolidation of majority-
owned subsidiaries, RUS Forms 7 and 12 must be prepared on an 
unconsolidated basis.

                   501   Patronage Capital Assignments

    Accounting for patronage capital and margins may vary depending upon 
the individual cooperative's bylaws. The comments contained in this 
section relate to the application of the standard bylaw provisions.
    The entries required, at year's end, to record patronage capital 
transactions where there is no major merchandising program are as 
follows:

Dr. 219.1, Operating Margins
Dr. 219.2, Nonoperating margins
    Cr. 201.2, Patronage Capital Assignable
To record the amount of patronage capital assignable.
Dr. 201.2, Patronage Capital Assignable
    Cr. 201.1, Patronage Capital Credits
To record the allocation of patronage capital to the patrons' accounts.

    The procedure for determining the amount of patronage capital 
assignable to the individual patron on a total dollar basis is as 
follows:

    1. Determine the total amount to be assigned for the year (Account 
201.2).
    2. Determine patronage from electric service, the total of 
consumers' billings (Accounts 440-447).
    3. Determine the percentage factor to be used in calculating 
patronage capital to be credited to each consumer account. Divide ``1'' 
by ``2''.
    4. Determine the amount of capital to be credited to each consumer. 
Multiply the individual consumer's billings for the year by the 
percentage factor obtained in ``3'' above.

    The procedure for determining the amount of patronage capital 
assignable to the individual patron on a dollar

[[Page 852]]

basis, less the cost of power, is as follows:

    1. Determine the total amount to be assigned for the year.
    2. Determine the total amount of revenue received from each 
classification of customers.
    3. Determine the total cost of power for each classification of 
customers. (For example, use cost per kWh sold).
    4. For each classification of customers subtract the amount obtained 
in ``3'' from the amount obtained in ``2,'' to obtain the total amount 
received, less cost of power, by classification of customers.
    5. Add the amounts obtained in ``4'' to obtain the total amount of 
revenue, less cost of power.
    6. Divide the total amount received, less cost of power for each 
classification of customers (amounts obtained in ``4''), by the total 
amount received, less cost of power for all customers (amount obtained 
in ``5'') to obtain the prorata percentage for each classification of 
customers.
    7. Multiply the total amount to be allocated (amount obtained in 
``1'') by the prorata percentage for each classification of customers 
(obtained in ``6'') to obtain the amount to be assigned each 
classification of customers.
    8. Divide the amount to be assigned each classification of customers 
(amount obtained in ``7'') by the total amount received from the 
classification of customers (amount obtain in ``2'') to obtain the 
percentage factor for each classification of customers.
    9. Determine the total amount received from each individual 
customer.
    10. Multiply the total amount received from each individual customer 
(amount obtained in ``9'') by the percentage factor for his 
classification (amount obtained in ``8'') to obtain the amount of 
capital to be assigned each individual customer.

    After calculating the patronage capital to be credited to each 
customer, there is usually a small balance remaining. This small balance 
shall remain in Account 201.2, Patronage Capital Assignable, and shall 
be added to the amount to be assigned in the following year.
    Proper records shall be maintained to support all capital credit 
transactions. As a minimum, these records shall show, for each patron, 
the amount of capital credited for each year as well as the amount and 
date retired for each year.
    The process of transferring capital credits from the Patronage 
Capital Assignable accounts to the Patrons' Capital Credits Assigned 
accounts or to the Patrons' Capital Credits accounts and the making of 
entries to individual patron's records constitutes an assignment of 
capital credits. This holds true for recordkeeping purposes as well as 
from a legal point of view. This assignment shall be followed by formal 
notification to patrons within a reasonable period of time.
    In the event that a distribution cooperative incurs a net loss, that 
loss shall not be allocated to its members (patrons). The loss shall be 
accumulated and offset by future nonoperating margins.

                   502   Patronage Capital Retirements

    As the board of directors has the responsibility for determining 
whether the financial condition of the cooperative will permit 
retirement of capital credits and whether the proposed retirement 
complies with mortgage and bylaw provisions, the authorization for the 
retirement shall be set forth in the board minutes. The entries to 
record the general retirement of capital credits shall be as follows:

Dr. 201.1, Patronage Capital Credits
    Cr. 238.1, Patronage Capital Payable
To record the board of directors' authorization to make payments of 
capital credits.
Dr. 238.1, Patronage Capital Payable
    Cr. 131.1, Cash--General.
To record actual cash payments of capital credits.
    Note: To provide better control over the payment of patronage 
capital credits, a special checking account should be established in an 
amount equal to the authorized general retirement. Special prenumbered 
checks shall be used for each general retirement of patronage capital.
    To strengthen internal control and to facilitate the settlement of 
estates, the board should adopt a policy specifying

[[Page 853]]

exactly how payments of capital credits shall be made to the estates of 
deceased patrons. Payments made to estates shall be recorded as follows:

Dr. 201.1, Patronage Capital Credits
    Cr. 131.1, Cash--General
To record the payment of capital credits when an estate is settled by 
refunding 100 cents on the dollar.
Dr. 201.1, Patronage Capital Credits
    Cr. 131.1, Cash--General
    Cr. 217, Retired Capital Credits--Gain
To record the payment of capital credits when an estate is settled for 
less than the full amount of capital credited to the deceased customer's 
account.
Dr. 217, Retired Capital Credits--Gain
    Cr. 201.2, Patronage Capital Assignable
To record the reallocation to current patrons of the amount of the 
discount, if provided for in the bylaws.

    If a capital credit check is returned due to an inability to locate 
the patron, it shall be held pending a recheck of available records to 
ascertain the correct address of the patron. If it is determined that 
the patron cannot be located, the check shall be cancelled and the 
amount of the check debited to Account 131.1, Cash--General, and 
credited to Account 217, Retired Capital Credits--Gain. If the state, 
however, has unclaimed property laws to which the amount is subject, the 
amount shall be credited to Account 253, Other Deferred Credits, until 
final disposition has been made. A notation shall be made in the records 
of the former patron to facilitate payment if his or her whereabouts is 
subsequently determined.
    If the records show that a number of former patrons have moved and 
left no forwarding address, it is not necessary to prepare a capital 
credit retirement check for these patrons when a general retirement of 
capital credits is made. When setting funds aside to make a general 
retirement, however, appropriate amounts shall be included to cover 
payments due these patrons. The cooperative shall then make a reasonable 
effort to locate these patrons through publication of their names in the 
newsletter or local newspaper. If the patrons are not located, the 
amounts set aside and the credits to their accounts shall be handled in 
a manner similar to those for whom payment checks are returned.
    Under the standard bylaw provisions recommended by RUS, it is not 
proper to use capital credits that were assigned to former patrons to 
liquidate their delinquent bills. When the standard bylaws are in effect 
and collection efforts have failed, the balance of an uncollectible 
bill, after application of customers deposits and membership fees, shall 
be charged against the accumulated provision for uncollectible accounts. 
If the patron has capital credits assigned to him or her, these remain 
untouched except for a notation to indicate the amount of the unpaid 
bill. When a general retirement of capital credits is made at some 
future date, amounts which would otherwise be due the patron may be 
applied to satisfy the unpaid bill with the balance refunded to him or 
her.

                503   Operating and Nonoperating Margins

    Occasionally questions arise concerning the accounting for the 
balances in Accounts 218, Capital Gains and Losses; 219.3, Other 
Margins; 219.4, Other Margins and Equities-Prior Periods; 434, 
Extraordinary Income; and 435, Extraordinary Deductions. The balance in 
these accounts shall be accounted for as follows:

    1. The balance in Account 219.4, Other Margins and Equities--Prior 
Periods, shall be transferred, at year's end, to Account 219.1 or 219.2, 
as appropriate. Accounts 219.1 and 219.2 are then closed to Account 
201.2, Patronage Capital Assignable, unless otherwise provided for in 
the bylaws.
    2. The balances in Account 434, Extraordinary Income, and Account 
435, Extraordinary Deductions, shall be cleared to Account 219.2 at 
year's end.
    3. The balances in Account 219.3, Other Margins, and Account 218, 
Capital Gains and Losses, shall remain in these accounts unless they are 
allocated to patrons or used to absorb future losses as provided for in 
the bylaws of the cooperative.

    When a cooperative is engaged in a major merchandising activity, all 
costs

[[Page 854]]

properly chargeable to the merchandising activity shall be allocated as 
such to offset the associated revenue. Nonoperating margins generated 
from this source shall be prorated annually on a patronage basis and 
credited to those patrons accounts from whom such amounts were obtained. 
Merchandising activities of this nature may require a bylaw provision 
allowing for the allocation of margins generated by a major 
merchandising activity separate from other operating or nonoperating 
margins.
    If, at the time of the adoption of the bylaw provisions for the 
allocation of nonoperating margins, there are prior years' losses 
resulting in debit balances in Accounts 218, Capital Gains and Losses; 
219.1, Operating Margins; 219.2, Nonoperating Margins; or 219.3, Other 
Margins; the credit balances in Accounts 218, 219.2, or 219.3 resulting 
from prior years' operations shall be transferred, to the extent 
necessary, to offset such deficits. If the board determines that amounts 
shall be allocated to prior years' patrons, the credit balances 
remaining in these accounts shall be transferred to Account 201.2, 
Patronage Capital Assignable.
    If there are current year's losses resulting in debit balances in 
either Account 219.1 or 219.2, credit balances in Accounts 219.2, 219.3, 
and 218 shall be transferred, to the extent necessary, to offset such 
deficits. Remaining credit balances allocable to patrons shall be 
transferred to Account 1.2.

              504   Patronage Capital from G&T Cooperatives

    When a cooperative receives capital credits from a G&T cooperative, 
the transaction shall be recorded by a debit to Account 123.1, Patronage 
Capital from Associated Cooperatives, and a credit to Account 423, 
Generation and Transmission Cooperative Capital Credits. This entry 
shall be made priorto the closing of the cooperative's books even 
though, in most cases, the notice of the G&T allocation is not received 
until after the close of the year to which it relates. If precise 
information cannot be obtained from the G&T within a reasonable time, 
capital credits shall be recorded on an estimated basis. The difference 
between the estimated amount and the actual shall be recognized in the 
following year unless the difference is material.
    A distribution cooperative shall not recognize its proportionate 
share of losses incurred by the G&T. G&T losses shall be accumulated and 
offset as provided for in the bylaws. Unlike distribution cooperatives, 
a G&T has the option to offset accumulated losses with future operating 
and/or nonoperating margins.

     505   Patronage Capital Furnished by Other Cooperative Service 
                              Organizations

    Utilities may obtain long-term and short-term loans, telephone or 
data processing services, or may purchase oil, gasoline, materials, 
insurance, and various items from cooperative or mutual enterprises. 
These enterprises often make patronage refunds or provide evidence that 
an amount equal to such a refund has been credited to the utility as an 
investment of capital. The refund may be in the form of cash in the year 
following the purchase or it may be deducted from the next invoice. The 
notice of patronage credited to the borrower's account may indicate that 
such capital may be retired at some future date upon certain conditions 
having been met. The following provides the accounting journal entries 
for these types of transactions:

    1. Insurance policy refunds from mutual companies, in cash or as 
credits against subsequent purchases, shall be credited to the 
appropriate expense account. If sufficient information is not available 
to credit the refunds to the appropriate expense accounts, they shall be 
credited to Account 165, Prepayments, and reduce premiums for the 
current year.
    2. Patronage capital allocations from cooperatives, other than 
mutual insurance companies, shall be credited, in the year that the 
allocation notice is received, to Account 424, Other Capital Credits and 
Patronage Allocations, or to construction work-in-progress, as 
appropriate. The allocation of patronage capital credits between Account 
424 and construction work-in-progress shall be made on an equitable 
basis. For example, patronage capital allocations received from a 
cooperative

[[Page 855]]

money lender are allocated between Account 424 and construction work-in-
progress based upon the ratio of interest charged to construction for 
that particular lender to total interest expense incurred for that 
lender. Patronage capital allocations received from a material supplier 
are allocated based upon the ratio of materials charged to construction 
to total materials purchased.
    3. The face amount of patronage capital certificates received by the 
cooperative from the purchase of goods or services from cooperative 
money lenders (CFC), oil dealers, material suppliers, pole treating 
plants, communications services, and others shall be charged to either 
Account 123.1, Patronage Capital from Associated Cooperatives, or 
Account 124, Other Investments, as appropriate. Account 123.1 shall 
include investments in only those cooperatives, or enterprises, that are 
directly related to the electric utility industry and controlled by the 
electric cooperatives. These include statewide cooperatives, power 
cooperatives, and NRECA. Other investments in oil cooperatives and 
insurance companies shall be charged to Account 124.

                     506   Forfeited Membership Fees

    The bylaws of each cooperative prescribe certain rules and 
regulations concerning membership in the cooperative. Among these are 
provisions for forfeiture of membership fees. Some bylaws provide for 
application of membership fees against any unpaid accounts at the time 
of termination of service. Any remaining balance may be refunded to the 
member. Balances that cannot be refunded to the member due to an 
inability to locate the member or due to bylaw restriction, shall be 
credited to Account 208, Donated Capital, provided they do not escheat 
to the state. If disposition of the fees cannot be determined 
immediately, the amount involved shall be transferred to Account 253, 
Other Deferred Credits, until the determination is made.

                         601  Employee Benefits

    The costs of employees' fringe benefits (hospitalization, 
retirement, holiday, sick and vacation pay, etc.) shall be accumulated 
in an appropriate clearing account and allocated monthly on the basis of 
payroll. Vacation costs shall be accrued monthly by appropriate credits 
to an accrual account. These monthly accruals shall be allocated on the 
basis of direct payroll costs to construction, retirement, and the 
applicable operations, maintenance, and administrative expense accounts.
    Sick leave costs are not normally accrued unless the employee is 
entitled to be paid for accumulated sick leave at the termination of 
employment. Salary payments and the associated employee pensions and 
benefits and social security and other payroll taxes for an employee who 
is actually sick shall be charged to the same account or accounts to 
which his or her salary is normally charged.

                        602  Compensated Absences

    Statement of Financial Accounting Standards No. 43, Accounting for 
Compensated Absences (Statement No. 43), requires employers to accrue a 
liability as an employee earns the right to be paid for future absences. 
Four criteria were established for this accrual:
    1. The employer's obligation for payment for future absences is 
attributable to employees' services already performed.
    2. The obligation relates to employee rights which vest or 
accumulate. Vested rights are considered those for which the employer is 
obligated to make payment even if the employee terminates. Rights which 
accumulate are those earned but unused rights to compensated absences 
which may be carried forward to one or more periods, subsequent to the 
period in which they are earned.
    3. Payment of the compensation is probable.
    4. The amount can be reasonably estimated.
    A company's liability shall be estimated based upon payments it 
expects to make as a result of employees' work already performed. If a 
reasonable estimate cannot be made, the company shall disclose that fact 
in the financial statements.

[[Page 856]]

    Statement No. 43 does not apply to severance or termination pay, 
postretirement benefits, deferred compensation, stock or stock options, 
group insurance, or other long-term fringe benefits.
    The entries required to account for the accrual of compensated 
absences are as follows:

Dr. 435.1, Cumulative Effect on Prior Years of a Change in Accounting 
    Principle
Cr. 242.3, Accrued Employees' Vacation and Holidays
To record the liability for benefits earned in prior years.

Dr. 107, Construction Work in Progress
Dr. 108.8, Retirement Work in Progress
Dr. Various Operations, Maintenance, and Administrative Expense Accounts
Cr. 242.3, Accrued Employees Vacation and Holidays
To record the liability for benefits earned in the current period.

              603  Employee Retirement and Group Insurance

    Some borrowers have group insurance or retirement plans or both for 
their employees. As a general rule the cost of these programs is borne 
partially by the cooperative and partially by its employees. The 
cooperative may pay the full cost in advance and recover the employee's 
share through payroll deductions. The accounting for these transactions 
is as follows:
    1. The cooperative's advanced payment of premiums on insurance and 
retirement agreements shall be charged to Account 165, Prepayments, for 
the employers portion, and Account 143, Other Accounts Receivable, for 
the employee's portion.
    2. The cost of the employer's portion of a retirement and group 
insurance program shall be charged to construction and retirement 
activities and the applicable operations, maintenance, and 
administrative expense accounts based upon a specific identification 
with employees' labor costs charged therein or, in the absence of 
specific employee identification, based upon direct labor dollars or 
direct labor hours depending upon which allocation technique provides 
the most equitable distribution of costs.

                       604  Deferred Compensation

    Many utilities participate in the NRECA Deferred Compensation 
Program. Based upon the provisions of the program, the following 
accounting entries shall be made:

Dr. 186.XX, Miscellaneous Deferred Debits--Deferred Compensation
Cr. 228.3, Accumulated Provision for Pensions and Benefits
To increase the deferred compensation provision by the amount of the 
    annual deposit to NRECA's Deferred Compensation Fund.

Dr. 128, Other Special Funds--Deferred Compensation
Cr. 131.1, Cash--General
To record the annual deposit to NRECA's Deferred Compensation Fund.

Dr. Construction Work in Progress, Retirement Work in Progress, or the 
    Various Operations, Maintenance, and Administrative Expense 
    Accounts, as appropriate.
Cr. 186.XX, Miscellaneous Deferred Debits--Deferred Compensation
To record monthly accrual of deferred compensation.

    Note: If an employee joins the deferred compensation program during 
the year, use entry #1 to record the additional deposit to the NRECA 
Deferred Compensation Fund and increase the monthly accrual in entry #2 
to reflect this deposit.

    NRECA provides borrowers that participate in the deferred 
compensation program with an annual account statement disclosing the 
activity for each Homestead Fund investment including the number of 
shares owned, interest income, dividend income, capital gains/losses, 
and the value of the shares owned at statement date. Funds may be 
invested in the Short-term Bond Fund, the Value Fund, the Short-term 
Government Securities Fund, and the Daily Income Fund. Depending upon 
the Homestead Fund selected, invested funds may earn interest and 
dividend income and may experience unrealized holding gains or losses. 
Based upon the information provided on the annual

[[Page 857]]

statement, the following journal entries shall be recorded to recognize 
the increase or decrease in the fund assets:

Dr. 128, Other Special Funds--Deferred Compensation
Cr. 419, Interest and Dividend Income
Cr. 421, Miscellaneous Nonoperating Income
To record an increase in the fund value as of December 31, 19xx, 
    resulting from interest and dividend income and from unrecognized 
    holding gains on trading securities.

Dr. Various Operations, Maintenance, and Administrative Expense Accounts
Cr. 228.3, Accumulated Provision for Pensions and Benefits
To record an increase in the liability to the employee resulting from an 
    increase in the investment account.

Dr. 426.5, Other Deductions
Cr. 128, Other Special Funds--Deferred Compensation
To record a decrease in fund value as of December 31, 19xx, resulting 
    from unrecognized holding losses on trading securities.

Dr. 228.3, Accumulated Provision for Pensions and Benefits
Cr. Various Operations, Maintenance, and Administrative Expense Accounts
To record a decrease in the liability to the employee resulting from a 
    decrease in the investment account.

    Payments made to participating employees because of retirement or 
separation for other reasons shall be recorded using the following 
entries:

Dr. 131.1, Cash--General
Cr. 128, Other Special Funds--Deferred Compensation
To record the receipt of funds from NRECA.

and

Dr. 228.3, Accumulated Provision for Pensions and Benefits
Cr. 131.1, Cash--General
To record payment to employee for deferred compensation.

    If the borrower has elected to bear the market risk of the funds 
which guarantee that the amount of money an employee receives will not 
be less than the amount of salary deferred, the following entry shall be 
recorded if total payment(s) from NRECA are less than the amount of 
salary deferred:

Dr. Various Operations, Maintenance, and Administrative Expense Accounts
Cr. 131.1, Cash--General
To record payment to employee for deferred compensation. Payment was 
    made because amount returned did not equal salary deferred.

    Appropriate disclosure of the terms of the program shall be made in 
the notes to the financial statements.

       605   Life Insurance Premium on Life of a Borrower Employee

    Some borrowers insure the life of the manager and/or key employees 
with the borrower being named as the beneficiary. Such arrangements 
shall be accounted for as follows:

    1. Charge Account 426.2, Life Insurance, for the net amount of the 
premium paid each year on the insurance policy.
    2. At the anniversary date of the policy each year, charge Account 
124, Other Investments, and credit Account 426.2, Life Insurance, with 
the amount of the annual increase in the cash surrender value of the 
policy; provided such increase is less than the net premium paid for 
that year. If the annual increase in the surrender value exceeds the net 
premium paid for the same year, only that portion of the surrender value 
increase equal to the net premium paid shall be credited to Account 
426.2. The remainder is to be credited to Account 419, Interest and 
Dividend Income.
    3. Upon retirement of the insured employee and surrender of the 
insurance policy, charge Account 131.1, Cash--General, and credit 
Account 124, Other Investments, for the amount received from the 
insurance company. If it is decided to grant to the retiring insured 
employee all, or any portion, of the cash received upon surrender of the 
policy, Account 926, Employee Pensions and Benefits, shall be charged 
and Account 131.1 credited for the amount paid to the retiring employee.
    4. If the insured employee dies within his term of service, charge 
Account 131.1, Cash--General, for the face

[[Page 858]]

amount of the policy paid by the insurance company. Credit Account 124, 
Other Investments, for the cash surrender value previously charged 
thereto, and credit the remainder to Account 421, Miscellaneous 
Nonoperating Income.

                           606  Pension Costs

    With the issuance of Statement of Financial Accounting Standards No. 
87, Employers' Accounting for Pensions (Statement No. 87), there have 
been significant changes in the accounting and reporting requirements 
relating to pension costs. This section will highlight the accounting 
and reporting requirements for the major types of pension plans. It 
should be noted, however, that the definitions and accounting procedures 
outlined in this section relate to financial accounting and they may 
differ from those used for tax accounting.

                      Defined Benefit Pension Plans

    A defined benefit pension plan is a plan that defines an amount of 
pension benefit to be provided, usually as a function of one or more 
factors such as age, years of service, or compensation. In a defined 
benefit plan, the employer promises to provide, in addition to current 
wages, retirement income payments in future years after the employee 
retires or terminates service. Generally, the amount of benefit to be 
paid depends upon a number of future events that are incorporated into 
the plan's benefit formula, after including how long the employee and 
any survivors live, how many years of service the employee renders, and 
the employee's compensation in the years immediately before retirement 
or termination.
    Under a defined benefit plan, the determination of pension costs, 
assets, liabilities, and the disclosures in the financial statements 
require many calculations and assumptions to be made. This section 
provides a general overview of the accounting and reporting requirements 
associated with a defined benefit pension plan. Consult Statement No. 87 
for guidance in making the necessary calculations and assumption.
    The accounting and reporting requirements related to a defined 
benefit pension plan are as follows:
    1. The following components shall be included in the periodic 
recognition of net pension cost by an employer sponsoring a defined 
benefit pension plan:
    a. The service cost component recognized in a period shall be 
determined as the actuarial present value of benefits attributed by the 
pension plan formula to employee service during that period. The 
measurement of the service cost component requires use of an attribution 
method and assumptions.
    b. The interest cost component recognized in a period shall be 
determined as the increase in the projected benefit obligation due to 
the passage of time. Measuring the projected benefit obligation as a 
present value requires accrual of an interest cost at rates equal to the 
assumed discount rates.
    c. For a funded plan, the actual return on plan assets, if any, 
shall be determined based upon the fair value of plan assets at the 
beginning and the end of the period, adjusted for contributions and 
benefit payments.
    d. Plan amendments (including initiation of a plan) often include 
provisions that grant increased benefits based upon services rendered in 
prior period. Because plan amendments are granted with the expectation 
that the employer will realize economic benefits in future period, 
Statement No. 87 does not require the cost of providing such retroactive 
benefits (prior service cost) to be included in net periodic pension 
cost entirely in the year of the amendment but provides for recognition 
during the future service periods of those employees active at the date 
of the amendment who are expected to receive benefits under the plan.
    The cost of retroactive benefits (including benefits that are 
granted to retirees) is the increase in the projected benefit obligation 
at the date of the amendment. Except as noted below, prior service cost 
shall be amortized by assigning an equal amount to each future period of 
service of each employee active at the date of the amendments who is 
expected to receive benefits under the plan. If all or almost all of the 
plan's participants are inactive,

[[Page 859]]

the cost of retroactive plan amendments affecting benefits of inactive 
participants shall be amortized based upon the remaining life expectancy 
of those participants rather than the remaining service period.
    To reduce the complexity and detail of the computations required, 
consistent use of an alternative amortization approach that more rapidly 
reduces the unrecognized cost of retroactive amendments is acceptable. 
For example, a straight-line amortization of the cost over the average 
remaining service period of employees expected to receive benefits under 
the plan is acceptable. The alternative method used shall be disclosed.
    In some situations, a history of regular plan amendments and other 
evidence may indicate that the period during which the employee expects 
to realize economic benefits from an amendment granting retroactive 
benefits is shorter than the entire remaining service period of the 
active employees. Identification of such situations requires an 
assessment of the individual circumstances and the substance of the 
particular plan situation. In those circumstances, the amortization of 
prior service cost shall be accelerated to reflect the more rapid 
expiration of the employer's economic benefits and to recognize the cost 
in the periods benefited.
    A plan amendment can reduce rather than increase the projected 
benefit obligation. Such a reduction shall be used to reduce an existing 
unrecognized prior service cost, and the excess, if any, shall be 
amortized on the same basis as the cost of benefit increases.
    e. Gains and losses are changes in the amount of either the 
projected benefit obligation or plan assets resulting from experience 
different from that assumed and changes in assumptions. Gains and losses 
include amounts that have been realized. Because gains and losses may 
reflect refinements in estimates as well as real changes in economic 
values, and because some gains in one period may be offset by losses in 
another or vice versa, the recognition of gains and losses as components 
of net pension cost of the period in which they arise is not required.
    The expected return on plan assets shall be determined based upon 
the expected long-term rate of return on plan assets and the market-
related value of plan assets. The market-related value of plan assets 
shall be either fair value or a calculated value that recognizes changes 
in fair value in a systematic and rational manner over not more than 5 
years. Different ways of calculating market-related value may be used 
for different classes of assets but the manner of determining market-
related value shall be applied consistently from year to year for each 
asset class.
    Asset gains and losses are the differences between the actual return 
on assets during a period and the expected return on assets for that 
period. Assets gains and losses include both changes reflected in the 
market-related value of assets and changes not yet reflected in the 
market-related value (that is, the difference between the fair value of 
assets and the market-related value). Asset gains and losses not yet 
reflected in market-related values are not required to be amortized.
    As a minimum, amortization of an unrecognized gain or loss 
(excluding asset gains and losses not yet reflected in market-related 
value) shall be included as a component of net pension cost for a year 
if, as of the beginning of the year, that unrecognized net gain or loss 
exceeds 10 percent of the greater of the projected benefit obligation or 
the market-related value of plan assets. If amortization is required, 
the minimum amortization shall be that excess divided by the average 
remaining service period of active employees expected to receive 
benefits under the plan. If all or almost all of a plan's participants 
are inactive, the average remaining life expectancy of the inactive 
participants shall be used instead of average remaining service life.
    Any systematic method of amortization of gains and losses may be 
used in lieu of the minimum specified in the previous paragraph provided 
that the minimum is used in any period in which the minimum is greater 
(i.e., reduces the net balance by more), the method is applied 
consistently, the method is applied similarly to both

[[Page 860]]

gains and losses, and the method is disclosed.
    The gain or loss component of net periodic pension cost shall 
consist of the difference between the actual return on plan assets and 
the expected return on plan assets and amortization of the unrecognized 
net gain or loss from previous periods.
    2. A liability (unfunded accrued pension cost) shall be recognized 
if the net periodic pension cost recognized pursuant to Statement No. 87 
exceeds amounts the employer has contributed to the plan. An asset 
(prepaid pension cost) shall be recognized if the net periodic pension 
cost is less than the amounts the employer has contributed to the plan.
    If the accumulated benefit obligation exceeds the fair value of plan 
assets, the employer shall recognize a liability (including unfunded 
accrued pension cost) that is at least equal to the unfunded accumulated 
benefit obligation. Recognition of an additional minimum liability is 
required if an unfunded accumulated benefit obligation exists and an 
asset has been recognized as a prepaid pension cost, the liability 
already recognized as unfunded accrued pension cost is less than the 
unfunded accumulated benefit obligation, or no accrued or prepaid 
pension cost has been recognized.
    If an additional minimum liability is recognized, an equal amount 
shall be recognized as an intangible asset, provided that the asset does 
not exceed the amount of unrecognized prior service cost. If an 
additional liability required to be recognized exceeds unrecognized 
prior service cost, the excess (which represents a net loss not yet 
recognized as a net periodic pension cost) shall be reported as a 
separate component (reduction) of equity.
    When a new determination of the amount of additional liability is 
made to prepare a balance sheet, the related intangible asset and 
separate component of equity shall be eliminated or adjusted, as 
necessary.
    3. An employer sponsoring a defined benefit pension plan shall 
disclose the following information:
    a. A description of the plan including employee groups covered, type 
of benefit formula, funding policy, types of assets held and significant 
nonbenefit liabilities, if any, and the nature and effect of significant 
matters affecting comparability of information for all period presented.
    b. The amount of net periodic pension cost for the period showing 
separately the service cost component, the interest cost component, the 
actual return on assets for the period, and the net total of other 
components.
    c. A schedule reconciling the funded status of the plan with amounts 
reported in the employer's balance sheet, showing separately, the fair 
value of plan assets, the projected benefit obligation identifying the 
accumulated benefit obligation and the vested benefit obligation, the 
amount of unrecognized prior service cost, the amount of unrecognized 
net gain or loss including asset gains and losses not yet reflected in 
market-related value), the amount of any remaining unrecognized net 
obligation or net asset existing at the date of initial application of 
Statement No. 87, the amount of any additional liability recognized, and 
the amount of net pension asset or liability recognized in the balance 
sheet (which is the net result of combining the previous six items).
    d. The weighted-average assumed discount rate and rate of 
compensation increase (if applicable) used to measure the projected 
benefit obligation and the weighted-average expected long-term rate of 
return on plan assets.
    e. If applicable, the amount and type of securities of the employer 
and related parties included in plan assets, and the approximate amount 
of annual benefits of employees and retirees covered by annuity 
contracts issued by the employer and related parties. Also, if 
applicable, the alternative amortization periods used.
    f. An employer that sponsors two or more separate defined benefit 
pension plans shall determine net periodic pension cost, liabilities, 
and assets by separately applying the provisions of Statement No. 87 to 
each plan. In particular, unless an employer clearly has a right to use 
the assets of one plan to pay benefits of another, a liability required 
to be recognized for one plan shall not be reduced or eliminated because 
another plan has assets in excess

[[Page 861]]

of its accumulated benefit obligation or because the employer has 
prepaid pension cost related to another plan.
    The required disclosures may be aggregated for all of an employer's 
single-employer defined benefit plans, or plans may be disaggregated 
into groups so as to provide the most useful information. Plans with 
assets in excess of the accumulated benefit obligation, however, shall 
not be aggregated with plans that have accumulated benefit obligations 
that exceed plan assets.

                            Annuity Contracts

    An annuity contract is a contract in which an insurance company 
unconditionally undertakes a legal obligation to provide specified 
benefits to specific individuals in return for a fixed consideration or 
premium. An annuity contract is irrevocable and involves the transfer of 
significant risk from the employer to the insurance company. Some 
annuity contracts (participating annuity contracts) provide that the 
purchaser (either the plan or the employer) may participate in the 
experience of the insurance company. Under these contracts, the 
insurance company ordinarily pays dividends to the purchaser. If the 
substance of a participating contract is such that the employer remains 
subject to all or most of the risks and rewards associated with the 
benefit obligation covered and the assets transferred to the insurance 
company, that contract is not an annuity contract for purposes of 
Statement No. 87.
    To the extent that benefits currently earned are covered by annuity 
contracts, the cost of these benefits shall be the cost of purchasing 
the contracts, except as noted below. That is, if all benefits 
attributed by the plan's benefits formula to service in the current 
period are covered by nonparticipating annuity contracts, the cost of 
the contracts determines the service cost component of net pension cost 
for that period.
    Benefits provided by the pension benefit formula beyond benefits 
provided by annuity contracts (for example, benefits related to future 
compensation levels) shall be accounted for according to the provisions 
applicable to plans not involving insurance contracts.
    Benefits covered by annuity contracts shall be excluded from the 
projected benefit obligation and the accumulated benefit obligation. 
Except as noted below, annuity contracts shall be excluded from plan 
assets.
    Some annuity contracts provide that the purchaser (either the plan 
or the employer) may participate in the experience of the insurance 
company. Under these contracts, the insurance company ordinarily pays 
dividends to the purchaser, the effect of which is to reduce the cost of 
the plan. The purchase price of a participating annuity contract 
ordinarily is higher than the price of an equivalent contract without 
participation rights. The cost of the participation right shall be 
recognized, at the date of purchase, as an asset. In subsequent periods, 
the participation right shall be measured at its fair value if the 
contract is such that the fair value is reasonably estimable. Otherwise, 
the participation right shall be measured at its amortized cost (not in 
excess of its net realizable value), and the cost shall be amortized 
systematically over the expected dividend period under the contract.

                Other Contracts with Insurance Companies

    Insurance contracts that are, in substance, equivalent to the 
purchase of annuities shall be accounted for as such. Other contracts 
with insurance companies shall be accounted for as investments and 
measured at fair value. For some contracts, the best available evidence 
of fair value may be contract value. If a contract has a determinable 
cash surrender value or conversion value, that is presumed to be its 
fair value.

                       Defined Contribution Plans

    A defined contribution pension plan is a plan that provides pension 
benefits in return for services rendered, provides an individual account 
for each participant, and has terms that specify how contributions to 
the individual's accounts are to be determined rather than the amount of 
pension benefits the individual is to receive. Under a defined 
contribution plan, the pension

[[Page 862]]

benefits a participant will receive depend only upon the amount 
contributed to the participant's account, the returns earned on 
investments of those contributions, and forfeitures of other 
participants' benefits that may be allocated to the participant's 
account.
    To the extent that a plan's defined contributions to an individual's 
account are to be made for periods in which that individual renders 
services, the net pension cost for a period shall be the contribution 
called for in that period. If a plan calls for contributions for periods 
after an individual retires or terminates, the estimated cost shall be 
accrued during the employee's service period.
    An employer that sponsors one or more defined contribution plans 
shall disclose the following separately from its defined benefit plan 
disclosures:
    1. A description of the plan(s) including employee groups covered, 
the basis for determining contributions, and the nature and effect of 
significant matters affecting comparability of information for all 
periods presented.
    2. The amount of cost recognized during the period.
    A pension plan having characteristics of both a defined benefit plan 
and a defined contribution plan requires careful analysis. If the 
substance of the plan is to provide a defined benefit, as may be the 
case with some ``target benefit'' plans, the accounting and disclosure 
requirements shall be determined in accordance with the provisions 
applicable to a defined benefit plan.

                           Multiemployer Plans

    A multiemployer plan is a pension plan to which two or more 
unrelated employers contribute, usually pursuant to one or more 
collective-bargaining agreements. A characteristic of multiemployer 
plans is that assets contributed by one participating employer may be 
used to provide benefits to employees of other participating employers 
since assets contributed by an employer are not segregated in a separate 
account or restricted to provide benefits only to employees of that 
employer.
    An employer participating in a multiemployer plan shall recognize as 
net pension cost, the required contribution for the period and shall 
recognize as a liability, any contributions due and unpaid. The required 
contribution includes both current costs and prior service costs. If an 
employer elects to fund prior service cost in full at the inception of 
the plan, the total payment becomes the employer's required 
contribution, and accordingly, its pension cost for the period.
    The following provisions are applicable to RUS borrowers 
participating in a multiemployer pension plan:
    1. An electric utility participating in a multiemployer plan may 
defer current period pension expenses if the provisions of Statement of 
Financial Accounting Standards No. 71 (Statement No. 71), Accounting for 
the Effects of Certain Types of Regulation, are applied.
    Under the provisions of Statement No. 71, pension costs may be 
deferred provided such costs are recovered through future rates.
    2. An electric utility instituting an amendment to the NRECA 
Retirement and Security plan enters into a contractual agreement to pay 
the costs incurred (prior service pension costs) for the amendment. In 
such cases, the agreement is noncancelable and payable regardless of 
continued participation in the plan.
    Since the utility is unconditionally committed to making these 
payments and such payments are not contingent upon the utility's 
continued participation in the plan, the recognition of that liability 
is appropriate. The costs associated with this liability shall be 
expensed, in their entirety, when the liability is recognized.
    The accounting journal entries required to record the transactions 
associated with a multiemployer pension plan are as follows:

                    Sample 1--Current Pension Expense

    The journal entry required to record the normal costs associated 
with the NRECA Retirement and Security Program is as follows:

Dr. Various Operations, Maintenance, and Administrative Expense Accounts
Dr. 107, Construction Work-in-Progress
Dr. 108.8, Retirement Work-in-Progress
Cr. 131.1, Cash--General

[[Page 863]]

To record the payment of pension costs to NRECA.

    Note: This entry shall not be recorded during the moratorium.

                 Sample 2--Prior Service Pension Expense

    The journal entries required to record the prior service costs 
associated with the NRECA Retirement and Security Program are as 
follows:
    1. If the RUS borrower elects to pay the prior service pension costs 
in full, and there is no deferral of costs under the provision of 
Statement No. 71, the following entry shall be recorded:

Dr. Various Operations, Maintenance, and Administrative Expense Accounts
Dr. 107, Construction Work-in-Progress
Dr. 108.8, Retirement Work-in-Progress
Cr. 131.1, Cash--General
To record the payment of prior service pension costs to NRECA.

    2. If the RUS borrower elects to finance prior service pension costs 
over a period of years and there is no deferral of costs under the 
provisions of Statement No. 71, the following entries shall be recorded:

Dr. Various Operations, Maintenance, and Administrative Expense Accounts
Dr. 107, Construction Work-in-Progress
Dr. 108.8, Retirement Work-in-Progress
Cr. 224, Other Long-Term Debt
To record the liability to NRECA for prior service pension costs.

Dr. 224, Other Long-Term Debt
Dr. 427, Interest on Long-Term Debt
Cr. 131.1, Cash--General
To record the annual payment to NRECA for prior service pension costs.

    3. If the RUS borrower elects to finance prior service pension costs 
over a period of years and such costs are being deferred and amortized 
in accordance with the provisions of Statement No. 71, the following 
entries shall be recorded:

Dr. 182.3, Other Regulatory Assets
Cr. 224, Other Long-Term Debt
To record the liability to NRECA for prior service pension costs.

Dr. Various Operations, Maintenance, and Administrative Expense Accounts
Dr. 107, Construction Work-in-Progress
Dr. 108.8, Retirement Work-in-Progress
Cr. 182.3, Other Regulatory Assets
To record the amortization of deferred prior service pension costs.

Dr. 224, Other Long-Term Debt
Dr. 427, Interest on Long-Term Debt
Cr. 131.1, Cash--General
To record the annual payment to NRECA for prior service pension costs.

    4. If the RUS borrower elects to pay the prior service pension costs 
in full and such costs are being deferred and amortized in accordance 
with the provisions of Statement No. 71, the following entries shall be 
recorded:

Dr. 182.3, Other Regulatory Assets
Cr. 131.1, Cash--General
To record the payment to NRECA for prior service pension costs.

Dr. Various Operations, Maintenance, and Administrative Expense Accounts
Dr. 107, Construction Work-in-Progress
Dr. 108.8, Retirement Work-in-Progress
Cr. 182.3, Other Regulatory Assets
To record the amortization of deferred prior service pension costs.

    It should be noted that although the above entries relate 
specifically to the NRECA Retirement and Security Program, they are 
applicable to all multiemployer pension plans.
    An employer that participates in one or more multiemployer plans 
shall disclose the following separately from disclosures for a single-
employer plan:
    1. A description of the multiemployer plan(s) including the employee 
groups covered, the type of benefits provided (defined benefit or 
defined contribution), and the nature and effect of significant matters 
affecting comparability of information for all periods presented.
    2. The amount of cost recognized during the period.

                         Multiple-Employer Plans

    A multiple-employer plan is, in substance, aggregations of single-
employer plans combined to pool their assets for investment purposes to 
reduce the cost of plan administration. Under a multiple-employer plan, 
assets are segregated and specifically identified to an employer. In 
addition, such plans

[[Page 864]]

may have features that allow participating employers to have different 
benefit formulas. Such plans shall be considered single-employer plans 
for financial accounting purposes and each employer's accounting shall 
be based upon its respective interest in the plan.

                         607   Unproductive Time

    Lost time relating to construction, operations and maintenance shall 
be allocated on the basis of direct payroll costs to the appropriate 
construction, operations or maintenance accounts in the month incurred. 
Lost time is defined as time on duty during which productive work is not 
performed due to inclement weather conditions, material shortages, 
machine repairs, or other reasons.
    If lost time attributable to construction has a material effect on 
the construction accounts in any one month, these costs shall be 
deferred and distributed over a reasonable period of time by means of a 
predetermined percentage based upon direct labor.

            608  Training Costs, Attendance at Meetings, Etc.

    Utilities engage in many types of training programs. Seminars are 
conducted for directors, managers, office managers, attorneys, 
engineers, and others. Bookkeepers and office managers attend 
accountants' meetings. Safety engineers attend safety schools and 
subsequently conduct regular safety meetings at the cooperative. Costs 
incurred for the various types of training activities shall be accounted 
for as follows:
    1. Managers' and directors' expenses to attend the NRECA national 
and state conventions shall be charged to Account 930.2, Miscellaneous 
General Expenses.
    2. Management or engineering seminar fees, salary time attending 
such seminars including the associated pensions and benefits expense and 
payroll taxes, and the related per diem and expenses shall be charged to 
the functional expense accounts. Salaries paid to employees shall also 
be charged to the appropriate functional expense account. Fees and 
expenses for directors' attendance shall be charged to Account 930.2, 
Miscellaneous General Expenses.
    3. When the office manager, bookkeeper, or work order clerk attends 
a state or regional accounting meeting, their salary time and the 
associated employee pensions and benefits and social security and other 
payroll taxes shall be charged to the account to which the employees' 
time is ordinarily charged.
    4. Employees' salary time employee and the associated pensions and 
benefits and social security and other payroll taxes spent attending 
regular safety meetings conducted by the cooperative shall be charged to 
the account to which the employees' time is ordinarily charged.
    5. A safety engineer's salary time and the associated employee 
pensions and benefits and social security and other payroll taxes spent 
attending a statewide safety school shall be charged to Account 925, 
Injuries and Damages.
    6. The salary time and the associated employee pensions and benefits 
and social security and other payroll taxes spent by a manager or line 
foreman conducting weekly safely meetings shall be charged to the 
appropriate functional expense accounts including Account 590, 
Maintenance, Supervision and Engineering, and Account 920, 
Administrative and General Services.

                    609   Maintenance and Operations

    ``Operations'' is the general term used to describe activities 
involved in the delivery of electric service, by means of a distribution 
system, to the end user. It pertains to the use of the utility's 
electric plant facilities and does not include activities intended to 
prevent or remedy an impending or actual breakdown of those facilities. 
These activities are classified as maintenance.
    ``Maintenance'' is the general term used to describe the activities 
involved in the upkeep and repair, but not the enlargement or 
improvement, of property owned or leased and operated by the company. It 
does not include the replacement of retirement units.

                        610   Financial Forecast

    Costs incurred and salaries paid to perform a 10-year financial 
forecast

[[Page 865]]

shall be charged to Account 920, Administrative and General Salaries. 
Related office supplies and expenses shall be charged to Account 921, 
Office Supplies and Expenses. When a forecast is performed by an outside 
consultant, the cost shall be charged to Account 923, Outside Services 
Employed.

                        611   Advertising Expense

    The cost of advertising and the cost of informing the public about 
the electric cooperative's activities shall be charged to Account 930.2, 
Miscellaneous General Expenses.
    Most of a cooperative's advertising is instructional in nature and 
relates the cooperative's history and current activities. This type of 
advertising activity should not be confused with that directed towards 
the enactment of a specific law or laws directed toward obtaining a 
specific decision from a regulatory body. Political advertising of the 
type defined above shall be charged to Account 426.4, Expenditures for 
Certain Civic, Political, and Related Activities.

                     612   Special Power Cost Study

    A special power cost study is defined as a study to determine 
whether sufficient power will be available in the future. If additional 
power or power sources are needed, the study determines whether 
generation or purchase will supply the lesser cost. The study also 
indicates when additional power will be needed. As costs are incurred, 
they shall be charged to a subaccount of Account 186, Miscellaneous 
Deferred Debits. Upon completion of the study, the costs shall be 
charged to Account 557, Other Expenses, or amortized to Account 557 over 
a period of time not to exceed 5 years.

                           613   Mapping Costs

    The purpose of posting completed work orders to system maps is to 
improve the operation of the system. These costs shall, therefore, be 
charged to Account 588, Miscellaneous Distribution Expenses. However, 
the cost of system mapping in the planning stage of construction is an 
acceptable overhead cost of the resulting construction.

                      614   Member Relations Costs

    Many electric cooperatives hire employees whose duties concern a 
mixture of power use and member relations activities. The salaries for 
these employees shall be charged to Account 930.2, Miscellaneous General 
Expenses, except as provided below:

    1. Account 912, Demonstrating and Selling Expenses, shall be charged 
with all labor, material, advertising, and other expenses incurred in 
promotional, demonstrating, and selling activities; the objective of 
which is to promote or retain the use of utility services by present or 
prospective customers.
    2. Account 930.1, General Advertising Expenses, shall be charged 
with labor, material, and other expenses incurred in advertising and 
related activities, the cost of which by their content and purpose, are 
not provided for elsewhere.
    3. Account 416, Costs and Expenses of Merchandising, Jobbing, and 
Contract Work, shall be charged with all costs specifically related to 
merchandising activities when the utility is engaged in a major 
merchandising program.
    4. Account 426.4, Expenditures for Certain Civic, Political, and 
Related Activities, shall be charged with 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 repeal or modification of existing 
referenda, legislation or ordinances); or approval, modification, or 
revocation of franchises; or for the purpose of influencing the 
decisions of public officials. Account 426.4 shall not include 
expenditures which are directly related to appearances before regulatory 
or other governmental bodies in connection with the borrower's existing 
or proposed operations.

                          615   Statewide Fees

    Additional fees collected by a statewide association from its 
members for construction of a statewide building shall be charged to 
Account 930.2, Miscellaneous General Expenses. Any

[[Page 866]]

amounts that are to be repaid by the state association shall be charged 
to Account 143, Other Accounts Receivable, or Account 123.23, Other 
Investments in Associated Organizations, depending upon the terms of the 
repayment.

         616   Power Supply/Distribution Cooperative Borrowings

    When a power supply cooperative borrows money from a distribution 
cooperative as the result of a long-term loan agreement, the money shall 
be recorded on the books of the power supply cooperative as general 
funds unless restricted to a specific purpose. If restricted, the funds 
shall be recorded in Account 128, Other Special Funds. The resulting 
liability shall be recorded in Account 224, Other Long-Term Debt.
    The transaction shall be charged to Account 123.23, Other 
Investments in Associated Organizations, on the books of the 
distribution cooperative.

  617   Rate Discount Allowed by the Power Cooperative to Distribution 
            Cooperatives Owning Connecting Transmission Lines

    A distribution cooperative purchases power from a power cooperative. 
The distribution cooperative owns and operates the transmission line 
between the power cooperative's facilities and the distribution 
facilities. Because of this, power is sold at the standard rate at which 
the power cooperative sells to other distribution cooperatives who do 
not own their transmission lines, less a discount. The discount or 
reduction in rate is based upon the distribution cooperative's expense 
in operating and maintaining its transmission facilities. The contract 
between the power cooperative and the distribution cooperative must 
specifically state that the member shall receive a reduced rate or 
discount from the seller's rate to other member cooperatives.
    Under this type of arrangement, the distribution cooperative shall 
record the cost of purchased power by charging the net amount to Account 
555, Purchased Power.

               618  Theft Losses not Covered by Insurance

    Utilities may suffer losses as a result of thefts of cash, materials 
and supplies, equipment, or electric plant-in-service that is not 
covered by insurance. The charges for nominal uninsured losses shall be 
recorded in the following accounts:
    1. Cash--Account 924, Property Insurance, shall be charged.
    2. Plant materials and operating supplies--Account 163, Stores 
Expense Undistributed, shall be charged.
    3. Equipment--Account 163, Stores Expense Undistributed, shall be 
charged for stores equipment; and Account 184, Transportation Expense--
Clearing, for transportation and garage equipment. The appropriate 
miscellaneous operations or administrative expense account (Account 506, 
524, 539, 549, 566, 588, 905, 910, 916, or 930.2, as appropriate) shall 
be charged for all other equipment.
    4. Electric Plant-in-Service--A retirement work order shall be 
prepared for electric plant constituting a unit of property. The loss 
due to retirement shall be charged to Account 108.6, Accumulated 
Provision for Depreciation of Distribution Plant. If the plant does not 
constitute a retirement unit, the loss shall be charged to the 
appropriate maintenance expense account.

                           619   Self Billing

    To maintain the books of accounts on an accrual basis, bills for 
customers who self bill and have not sent in a reading or remittance, 
shall be estimated. A journal entry shall be made to record the 
estimated revenue and kWh sold by debiting accounts receivable and 
crediting the appropriate revenue accounts. The estimated bill shall be 
posted to the customer's account and identified by an appropriate symbol 
indicating that it is an estimate. Reconciliation with the general 
ledger control is made in the usual manner.

                         620   Purchase Rebates

    Some vendors from which electric cooperatives purchase plant 
materials and supplies and merchandise for resale are making purchase 
rebates based upon the quantity or dollar volume of

[[Page 867]]

purchases. These ``quantity discounts'' may be in the form of cash or 
credit memoranda, in the form of prepaid package travel arrangements, or 
a combination of such methods. The rebate shall be accounted for as a 
reduction in the cost of the material or appliances upon which it was 
based.
    In some instances, the rebate may be for material or appliances that 
are no longer in stock or cannot be identified. If the rebate is based 
upon the purchase of plant materials and operating supplies that are 
normally charged to Account 154, Plant Materials and Operating Supplies, 
a credit shall be made to Account 163, Stores Expense Undistributed. If 
the rebate is based upon appliances and equipment held for merchandising 
or contract work, the credit shall be spread over the items in Account 
155, Merchandise. To avoid materially distorting the cost of the 
remaining appliances, if a portion of the items upon which the rebate 
was based are no longer in stock, a portion of the credit shall be 
prorated to Account 416, Cost and Expenses of Merchandising, Jobbing, 
and Contract Work, on the basis of the number of items sold to the 
quantity remaining in stock.
    If the rebate is in the form of a travel package or travel 
arrangements, the value of the rebate shall be estimated and recorded as 
a reduction of the cost of the material or appliances upon which it was 
based in a manner similar to that of the cash rebates discussed above. 
The beneficiary of the travel or travel allowance shall be designated by 
or in accordance with policy established by the board of directors. The 
contra charge to the reduction in cost shall be to an appropriate 
account depending upon the relationship of the recipient to the 
cooperative. For employees, this shall be Account 926, Employee Pensions 
and Benefits; for directors or patrons, Account 930.2, Miscellaneous 
General Expenses.

                          621   Integrity Fund

    The CFC Integrity Fund was established to assist borrowers in their 
attempts to stop takeover bids by investor-owned utilities. A borrower 
makes a contribution to the Integrity Fund in the form of cash or 
patronage capital refunds. CFC retains the contribution for a 5-year 
period during which time the borrower earns interest on the balance in 
its account. Each year, the borrower receives a statement indicating 
(both for the total fund and the individual borrower's share) the amount 
contributed, interest earned, disbursements made, and the ending 
balance. The disbursements from the fund are allocated to each 
contributing borrower's account based upon their individual account 
balances. At the end of the 5-year period, the balance in the account, 
if any, is refunded to the contributing borrower.
    Since the contributing borrower will receive a refund only if its 
funds are not totally disbursed, the contribution shall be charged to 
expense in Account 426.1, Donations. If any **part** of the contribution is 
returned at the end of the 5-year period, the refund shall be credited 
to Account 421, Miscellaneous Nonoperating Income.

                      622   In-Substance Defeasance

    An in-substance defeasance has been defined as the process whereby a 
debtor irrevocably places cash or other assets in a trust to be used 
solely for the purpose of satisfying scheduled payments of both 
principal and interest related to a specific debt obligation. Under the 
structural arrangements of an in-substance defeasance, the probability 
that the debtor will be required to make additional future debt payments 
is remote. In these specific circumstances, debt has been determined to 
be extinguished even though the debtor has not been legally released 
from his obligations under the debt instrument.
    The trust established in a defeasance transaction is restricted as 
to the nature of the assets held. The trust must be funded with monetary 
assets that are essentially risk free as to the amount, timing, and 
collection of interest and principal. For debt denominated in United 
States dollars, ``risk free'' assets are limited to:

    1. Direct obligations of the United States government;
    2. Obligations guaranteed by the United States government; and
    3. Securities that are backed by United States government 
obligations as collateral under an arrangement by

[[Page 868]]

which the interest and principal payments on the collateral, flow 
immediately through to the holder of the security.

    The monetary assets of the trust must provide cash flows sufficient 
to coincide with the scheduled interest and principal payments on the 
defeased debt. If the trust is expected to pay the costs associated with 
the defeasance, such as trustee fees, these costs must be considered in 
determining the amount of funds required by the trust.
    The principles of in-substance defeasance apply only to debt with 
specific maturities and fixed payment schedules and, as such, do not 
apply to debt with variable terms in which advance determination of debt 
service requirements is not possible.
    Generally accepted accounting principles (GAAP) address the 
extinguishment of debt in Accounting Principles Board Opinion No. 26, 
and Statement of Financial Accounting Standard No. 76, Extinguishment of 
Debt. In accordance with these two statements, debt which has been 
defeased remains recorded in the regulated books of account as do the 
assets placed in the irrevocable trust. They are not, however, 
recognized as an asset and liability for financial reporting purposes. 
The transaction, including the total amount of debt outstanding and the 
total amount of debt that is considered extinguished at the end of the 
period, must be disclosed in the footnotes to the financial statements 
as long as the debt remains outstanding.
    Debt is frequently extinguished before its scheduled maturity. Debt 
may be extinguished by the use of the borrower's general funds, or by 
the reacquisition of another debt issue at a different interest rate or 
varying terms. As these assets are expected to be revenue producing 
during those years, both the assets and the revenue they generate may be 
utilized to meet maturing debt payments. Therefore, in most instances, 
the dollar value of the assets initially placed in the trust do not 
equal the dollar value of the outstanding principal balance. The 
difference represents an ``economic '' gain or loss to the borrower.
    To provide consistency in reporting among all RUS borrowers, any 
gain or loss that is recognized for financial statement purposes should 
be reported in accordance with the provisions of General Instruction No. 
17 of this **part**. Therefore, the gain or loss should be amortized (for 
reporting purposes) in equal monthly amounts over the remaining life of 
the original debt issue or the remaining life of the new issue. The gain 
or loss may be reported in the current period only in those instances in 
which it is immaterial to the financial statements.
    The RUS Form 7, Financial and Statistical Report, and the RUS Form 
12, Operating Report--Financial, must, however, reflect the actual 
amounts recorded in the books and records of the borrower.

              623   Satellite or Cable Television Services

    Many electric borrowers have become involved in either providing 
satellite or cable television services or obtaining satellite or cable 
television services for their own use. This section outlines the 
accounting to be followed when recording transactions involving 
satellite or cable television services.
    1. Separate Subsidiary

    If a borrower provides satellite or cable television services 
through a separate subsidiary, the investment in the subsidiary shall be 
recorded in Account 123.11, Investment in Subsidiary Companies. The net 
income or loss of the subsidiary shall be debited or credited to Account 
123.11, as appropriate, with an offsetting entry to Account 418.1, 
Equity in Earnings of Subsidiary Companies.

    2. Segment of Current Operations

    If a borrower provides satellite or cable television services as 
**part** of its normal operations, the investment in satellite or cable 
television equipment shall be recorded in Account 121, Nonutility 
Property. All income associated with these services shall be recorded in 
Account 417, Revenues from Nonutility Operations, and the associated 
expenses shall be charged to Account 417.1, Expenses of Nonutility 
Operations.

    3. Sale and Installation of Satellite or Cable Television Equipment


[[Page 869]]


    If a borrower sells or installs satellite or cable television 
equipment, the equipment purchased for resale shall be recorded in 
Account 156, Other Materials and Supplies, until sold. The revenues 
generated from such sales or installations shall be recorded in Account 
415, Revenues from Merchandising, Jobbing, and Contract Work, and the 
associated expenses shall be charged to Account 416, Costs and Expenses 
of Merchandising, Jobbing, and Contract Work.

    4. Equipment Purchased for Own Use

    If a borrower purchases satellite or cable television equipment for 
its own use, the investment in the equipment shall be recorded in 
Account 397, Communication Equipment.

                      624   Pollution Control Bonds

    The construction and installation of pollution control facilities 
are often financed by issuing tax exempt municipal securities. The funds 
generated from the sale of these securities are deposited into an 
account that is controlled by a designated trustee. The funds under the 
control of the trustee are usually invested, earning interest, until 
they are needed.
    Interest expense accrued on the pollution control bonds during the 
construction period shall be capitalized in Account 107, Construction 
Work-in-Progress. After construction is complete, all subsequent 
accruals of interest expense shall be charged to Account 427, Interest 
on Long-Term Debt.
    Interest income earned during the construction period shall be 
recorded as a debit to Account 171, Interest and Dividends Receivable, 
and a credit to Account 107, Construction Work-in-Progress. Upon 
notification of receipt of the interest in the trustee account, Account 
221.XX, Long-Term Debt--Pollution Control Bonds, shall be debited and 
Account 171, Interest and Dividends Receivable shall be credited. Upon 
completion of construction, Account 419, Interest and Dividend Income, 
shall be credited for the amount of interest income earned during the 
period.
    The entries required to account for the transactions associated with 
the issuance of pollution control bonds are as follows:

Dr. 221.XX, Long-Term Debt--Pollution Control Bonds--Trustee
    Cr. Account 221.X1, Long-Term Debt--Pollution Control Bonds
To record the sale of pollution control bonds.
Dr. 107, Construction Work-in-Progress
    Cr. 232, Accounts Payable
To record costs incurred in construction of pollution control 
facilities.
Dr. 131.1, Cash--General Funds
    Cr. 221.XX, Long-Term Debt--Pollution Control Bonds--Trustee
To record the transfer of funds from the trustee.
Dr. 107, Construction Work-in-Progress
    Cr. 221.XX, Long-Term Debt--Pollution Control Bonds--Trustee
To record interest expense on pollution control bonds.
Dr. 171, Interest and Dividends Receivable
    Cr. 107, Construction Work-in-Progress
To record earnings from investments made by the trustee.
Dr. 221.XX, Long-Term Debt--Pollution Control Bonds--Trustee
    Cr. 171, Interest and Dividends Receivable
To record receipt of interest income by the trustee account.
Dr. XXX, Various Plant Accounts
    Cr. 107, Construction Work-in-Progress
To close completed construction to the primary plant accounts.

                        625   Prepayment of Debt

    Many RUS borrowers have decided to redeem (prepay) their issues of 
long-term debt. As a result of this redemption, the borrower may incur a 
gain (discount) or a loss (penalty) on the early extinguishment of debt. 
The accounting for this gain or loss is highlighted in this section.
    If debt is redeemed without refunding (paid with general funds), the 
gain or loss incurred shall be recorded in Account 189, Unamortized Loss 
on Reacquired Debt, or Account 257, Unamortized Gain on Reacquired Debt, 
as appropriate. The borrower shall amortize the recorded deferral on a 
monthly basis over the remaining life

[[Page 870]]

of the old debt issue. Amounts so amortized shall be charged to Account 
428.1, Amortization of Loss on Reacquired Debt, or credited to Account 
429.1, Amortization of Gain on Reacquired Debt--Credit, as appropriate.
    If the debt is redeemed with refunding (refinanced), the gain or 
loss incurred shall be recorded in Account 189 or Account 257, as 
appropriate. The borrower may elect to account for the deferrals as 
follows:

    1. Write them off immediately when the amounts are insignificant;
    2. Amortize them by equal monthly amounts over the remaining life of 
the old debt issue; or
    3. Amortize them by equal monthly amounts over the life of the new 
debt issue.

    Once an election has been made, it shall be applied on a consistent 
basis. Regardless of the option selected, the amortization shall be 
charged to either Account 428.1 or 429.1, as appropriate.
    Where a regulatory authority having jurisdiction over the borrower 
specifically disallows the rate principle of amortizing gains or losses 
on the redemption of long-term debt without refunding, and does not 
apply the gain or loss to interest charges in computing the borrower's 
rates, the alternative method may be used to account for gains or losses 
relating to the redemption of long-term debt with or without refunding. 
The alternative method requires that gains or losses be recorded in 
Account 421, Miscellaneous Nonoperating Income, or Account 426.5, Other 
Deductions, as incurred. When the alternative method is used, the 
borrower shall include a footnote to the financial statements stating 
the reason for using this method and its treatment for rate making 
purposes.

         626   Rural Economic Development Loan and Grant Program

    On December 21, 1987, Section 313, Cushion of Credits Payments 
Program, was added to the Rural Electrification Act. Section 313 
establishes a Rural Economic Development Subaccount and authorizes the 
Administrator of the Rural Utilities Service to provide zero interest 
loans or grants to RE Act borrowers for the purpose of promoting rural 
economic development and job creation projects.
    Subpart B, Rural Economic Development Loan and Grant Program, 7 CFR 
**Part** 1703, sets forth the policies and procedures relating to the zero 
interest loan program and for approving and administering grants.
    The accounting journal entries required to record the transactions 
associated with a rural economic development loan are as follows:

Dr. 224.17, RUS Notes Executed--Economic Development--Debit
    Cr. 224.16, Long-Term Debt--RUS Economic Development Notes Executed

    To record the contractual obligation to RUS for the Economic 
Development Notes.

Dr. 131.12, Cash--General--Economic Development Funds
    Cr. 224.17, RUS Notes Executed--Economic Development--Debit

    To record the receipt of the economic development loan funds.

Dr. 123, Investment in Associated Organizations or
Dr. 124, Other Investments
    Cr. 131.12, Cash--General--Economic Development Funds

    To record the disbursement of Economic development loan funds to the 
project.
Dr. 131.1, Cash--General Funds
    Cr. 421, Miscellaneous Nonoperating Income

    To record payment received from the project for loan servicing 
charges.

Dr. 171, Interest and Dividends Receivable
    Cr. 419, Interest and Dividend Income

    To record the interest earned on the investment of rural economic 
development loan funds.

Dr. 426.1, Donations or
Dr. 426.5, Other Deductions
    Cr. 131.1, Cash--General Funds

    To record the payment of interest earned in excess of $500.00 on the 
investment of rural economic development loan funds.
    Note: Interest earned in excess of $500.00 must be used for the 
rural economic development project for which the loan funds were 
received or returned to RUS.

[[Page 871]]

Dr. 131.12, Cash--General--Economic Development Funds
    Cr. 123, Investment in Associated Organizations or
    Cr. 124, Other Investments

    To record receipt of the repayment, by the project, of economic 
development loan funds.

Dr. 224.16, Long-Term Debt--RUS Economic Development Notes Executed
    Cr. 131.12, Cash--General--Economic Development Funds

    To record the repayment, to RUS, of the economic development loan 
funds.
    The accounting journal entries required to record the transactions 
associated with a rural economic development grant are as follows:

Dr. 131.13, Cash--General--Economic Development Grant Funds
    Cr. 224.18, Other Long-Term Debt--Grant Funds;
    Cr. 208, Donated Capital; or
    Cr. 421, Miscellaneous Nonoperating Income

    To record grant funds disbursed by RUS. If the grant agreement 
requires repayment of the funds upon termination of the revolving loan 
program, Account 224.18 should be credited. If the grant agreement 
states that there is absolutely no obligation for repayment upon 
termination of the revolving loan program, the funds should be accounted 
for as a permanent infusion of capital by crediting Account 208. If, 
however, the grant agreement is silent as to the final disposition of 
the grant funds, Account 421 should be credited.

Dr. 123.3, Investment in Associated Organizations--Federal Economic 
Development Loans
    Cr. 131.13, Cash--General--Economic Development Grant Funds

    To record advances of Federal funds to associated organizations for 
authorized rural economic development projects.

Dr. 124.1, Other Investments--Federal Economic Development Loans
    Cr. 131.13, Cash--General--Economic Development Grant Funds

    To record advances of Federal funds to nonassociated organizations 
for authorized rural economic development projects.

Dr. 171, Interest and Dividends Receivable
    Cr. 419, Interest and Dividend Income

    To record the accrual of interest on loans made to associated and 
nonassociated organizations with Federal funds for authorized rural 
economic development projects.

Dr. 131.14, Cash--General--Economic Development Non-Federal Revolving 
Funds
    Cr. 123.3, Investment in Associated Organizations--Federal Economic 
Development Loans or
    Cr. 124.1, Other Investments--Federal Economic Development Loans

    To record repayment of loans made with Federal funds.

Dr. 123.4, Investment in Associated Organizations--Non-Federal Economic 
Development Loans
    Cr. 131.14, Cash--General--Economic Development Non-Federal 
Revolving Funds

    To record advances of non-Federal funds to associated organizations 
for authorized rural economic development projects.

Dr. 124.2, Other Investments--Non-Federal Economic Development Loans
    Cr. 131.14, Cash--General--Economic Development Non-Federal 
Revolving Funds

    To record advances of non-Federal funds to nonassociated 
organizations for authorized rural economic development projects.

Dr. 171, Interest and Dividends Receivable
    Cr. 419, Interest and Dividend Income

    To record the accrual of interest on loans made to associated and 
nonassociated organizations with non-Federal funds for authorized rural 
economic development projects.

Dr. 131.14, Cash--General--Economic Development Non-Federal Revolving 
Funds
    Cr. 123.4, Investment in Associated Organizations--Non-Federal 
Economic Development Loans or
    Cr. 124.2, Other Investments--Non-Federal Economic Development Loans

    To record repayment of loans made with non-Federal funds.

[[Page 872]]

                      627  Postretirement Benefits

    Statement of Financial Accounting Standards No. 106, Employers' 
Accounting for Postretirement Benefits Other than Pensions (Statement 
No. 106), requires reporting entities to accrue the expected cost of 
postretirement benefits during the years the employee provides service 
to the entity. For purposes of applying the provisions of Statement No. 
106, members of the board of directors are considered to be employees of 
the cooperative. Prior to the issuance of Statement No. 106, most 
reporting entities accounted for postretirement benefit costs on a 
``pay-as-you-go'' basis; that is, costs were recognized when paid, not 
when the employee provided service to the entity in exchange for the 
benefits.
    As defined in Statement No. 106, a postretirement benefit plan is a 
deferred compensation arrangement in which an employer promises to 
exchange future benefits for an employee's current services. 
Postretirement benefit plans may be funded or unfunded. Postretirement 
benefits include, but are not limited to, health care, life insurance, 
tuition assistance, day care, legal services, and housing subsidies 
provided outside of a pension plan.
    This statement applies to both written plans and to plans whose 
existence is implied from a practice of paying postretirement benefits. 
An employer's practice of providing postretirement benefits to selected 
employees under individual contracts with specified terms determined on 
an employee-by-employee basis does not, however, constitute a 
postretirement benefit plan under the provisions of this statement.
    Postretirement benefit plans generally fall into three categories: 
single-employer defined benefit plans, multi-employer plans, and 
multiple-employer plans.
    The accounting requirements set forth in this interpretation focus 
on single-and multiple-employer plans. The accounting requirements set 
forth in Statement No. 106 for multiemployer plans or defined 
contribution plans shall be adopted for borrowers electing those types 
of plans.
    Under the provisions of Statement No. 106, there are two components 
of the postretirement benefit cost: the current period cost and the 
transition obligation. The transition obligation is a one-time accrual 
of the costs resulting from services already provided. Statement No. 106 
allows the transition obligation to be deferred and amortized on a 
straight-line basis over the average remaining service period of the 
active employees. If the average remaining service life of the employees 
is less than 20 years, a 20-year amortization period may be used.

                         Accounting Requirements

    All RUS borrowers must adopt the accrual accounting provisions and 
reporting requirements set forth in Statement No. 106. The transition 
obligation and accrual of the current period cost must be based upon an 
actuarial study. This study must be updated to allow the borrower to 
comply with the measurement date requirements of Statement No. 106; 
however, the study must, at a minimum, be updated every five years. RUS 
will not allow electric borrowers to account for postretirement benefits 
on a ``pay-as-you-go'' basis.
    The deferral and amortization of the transition obligation does not 
require RUS approval provided that it complies with the provisions of 
Statement No. 106. If, however, a borrower elects to expense the 
transition obligation in the current period and subsequently defer this 
expense in accordance with Statement of Financial Accounting Standards 
No. 71, Accounting for the Effects of Certain Types of Regulation, the 
deferral must be approved by RUS. In those states in which the 
commission will not allow the recovery of the transition obligation 
through future rates, the transition obligation must be expensed, in its 
entirety, in the year in which Statement No. 106 is adopted. A portion 
of the transition obligation may be charged to construction and 
retirement activities provided such charges are properly supported.

                    Effective Date and Implementation

    For plans outside the United States and for defined benefit plans of 
employers that (a) are nonpublic enterprises and (b) sponsor defined 
benefit postretirement plans with no more than 500

[[Page 873]]

plan participants in the aggregate, Statement No. 106 is effective for 
fiscal years beginning after December 15, 1994. For all other plans, 
Statement No. 106 is effective for fiscal years beginning after December 
15, 1992.
    RUS borrowers must comply with the implementation dates set forth in 
Statement No. 106. At the time of the adoption of Statement No. 106, 
rates must be in place sufficient to recover the current period expense 
and any amortization of the transition obligation. A copy of a board 
resolution or commission order, as appropriate, indicating that the 
transition obligation and current period expense have been included in 
the borrower's rates must be submitted to RUS.

            Accounting Journal Entries--Transition Obligation

    The journal entries required to record the transition obligation are 
as follows:
    1. If the borrower elects to expense the transition obligation in 
the current period and there is no deferral of costs, the following 
entry shall be recorded:

Dr. 435.1, Cumulative Effect on Prior Years of a Change in Accounting 
    Principle

or

Dr. 926, Employee Pensions and Benefits
Dr. 107, Construction Work-in-Progress
Dr. 108.8, Retirement Work-in-Progress
Cr. 228.3, Accumulated Provision for Pensions and Benefits
To record the current period recognition of the transition obligation 
    for postretirement benefits. Note: A portion of the transition 
    obligation may be charged to construction and retirement activities 
    provided such charges are properly supported.

    2. If the borrower elects to defer and amortize the transition 
obligation in accordance with the provisions of Statement No. 71, the 
following entry shall be recorded:

Dr. 182.3, Other Regulatory Assets
Cr. 228.3, Accumulated Provision for Pensions and Benefits
To record the deferral of the transition obligation under the provisions 
    of Statement No. 71.

Dr. Various Operations, Maintenance, and Administrative Expense Accounts
Dr. 107, Construction Work-in-Progress
Dr. 108.8, Retirement Work-in-Progress
Cr. 182.3, Other Regulatory Assets
To record the amortization of postretirement benefits expenses as they 
    are recovered through rates in accordance with Statement No. 71.

    3. The deferral and amortization of the transition obligation under 
the provisions of Statement No. 106 is considered to be an off balance 
sheet item. If, therefore, the borrower elects to defer and amortize the 
transition obligation on a straight-line basis over the average 
remaining service period of the active employees or 20 years in 
accordance with Statement No. 106, no entry is required. Instead, the 
transition obligation is recognized as a component of postretirement 
benefit cost as it is amortized. It should be noted, however, that the 
amount of the unamortized transition obligation must be disclosed in the 
notes to the financial statements.

           Accounting Journal Entries--Current Period Expense

    The current period postretirement expense should be recorded by the 
following entry:

Dr. Various Operations, Maintenance, and Administrative Expense Accounts
Dr. 107, Construction Work-in-Progress
Dr. 108.8, Retirement Work-in-Progress
Cr. 228.3, Accumulated Provision for Pensions and Benefits
To record current period postretirement benefit expense.
Dr. 228.3X, Accumulated Provision for Pensions and Benefits--Funded
Cr. 131.1, Cash--General
To record cash payments on a ``pay-as-you-go'' basis for postretirement 
    benefits.

                    Accounting Journal Entry--Funding

    If a borrower elects to voluntarily fund its postretirement benefits 
obligation in an external, irrevocable trust, the following entry shall 
be recorded:

Dr. 228.3X, Accumulated Provision for Pensions and Benefits--Funded

[[Page 874]]

Cr. 131.1, Cash--General
To record the funding of postretirement benefits expense into an 
    external, irrevocable trust.

    If a borrower elects to voluntarily fund its postretirement benefits 
obligation in an investment vehicle other than an external, irrevocable 
trust, the following entry shall be recorded:

Dr. 128, Other Special Funds
Cr. 131.1, Cash--General
To record the funding of postretirement benefits expense into an 
    investment vehicle other than an external, irrevocable trust.

                      628  Postemployment Benefits

    Statement of Financial Accounting Standards No. 112, Employers' 
Accounting for Postemployment Benefits (Statement No. 112) establishes 
the standards of financial accounting and reporting for employers who 
provide benefits to former or inactive employees after employment but 
before retirement. Inactive employees are those who are not currently 
rendering service to the employer but who have not been terminated, 
including employees who are on disability leave, regardless of whether 
they are expected to return to active service. For purposes of applying 
the provisions of Statement No. 112, former members of the board of 
directors are considered to be employees of the cooperative.
    Postemployment benefits include benefits provided to former or 
inactive employees, their beneficiaries, and covered dependents. They 
include, but are not limited to, salary continuation, supplemental 
benefits (including workmen's compensation), health care, job training 
and counseling, and life insurance coverage. Benefits may be provided in 
cash or in kind and may be paid upon cessation of active employment or 
over a specified period of time.
    The cost of providing postemployment benefits is considered to be a 
**part** of the compensation provided to an employee in exchange for current 
service and should, therefore, be accrued as the employee earns the 
right to be paid for future postemployment benefits. Applying the 
criteria set forth in Statement of Financial Accounting Standards No. 
43, Accounting for Compensated Absences, a postemployment benefit 
obligation is accrued when all of the following conditions are met:
    1. The employer's obligation for payment for future absences is 
attributable to employees' services already performed;
    2. The obligation relates to employee rights that vest or 
accumulate. Vested rights are considered those rights for which the 
employer is obligated to make payment even if the employee terminates. 
Rights that accumulate are those earned, but unused rights to 
compensated absences that may be carried forward to one or more periods 
subsequent to the period in which they are earned;
    3. Payment of the compensation is probable; and
    4. The amount can be reasonably estimated.
    If all of these conditions are not met, the employer must account 
for its postemployment benefit obligation in accordance with Statement 
of Financial Accounting Standards No. 5, Accounting for Contingencies 
(Statement No. 5) when it becomes probable that a liability has been 
incurred and the amount of that liability can be reasonably estimated.
    If an obligation for postemployment benefits is not accrued in 
accordance with the provisions of Statement No. 5 or Statement No. 43 
only because the amount cannot be reasonably estimated, the financial 
statements should disclose that fact.

                         Accounting Requirements

    All RUS borrowers must adopt the accrual accounting provisions and 
reporting requirements set forth in Statement No. 112 as of the 
statement's implementation date. A portion of the cumulative effect may 
be charged to construction and retirement activities provided such 
charges are properly supported. If a borrower elects to defer the 
cumulative effect of implementing Statement No. 112 in accordance with 
the provisions of Statement of Financial Accounting Standards No. 71, 
Accounting for the Effects of Certain Types of Regulation, the deferral 
must be approved by RUS.

[[Page 875]]

                    Effective Date and Implementation

    Statement No. 112 is effective for fiscal years beginning after 
December 15, 1993. Previously issued financial statements should not be 
restated.
    RUS borrowers must comply with the implementation date set forth in 
Statement No. 112. At the time of the adoption of Statement No. 112, 
rates must be in place sufficient to recover the current period expense.

                       Accounting Journal Entries

    The journal entries required to account for postemployment benefits 
are as follows:

Dr. 435.1, Cumulative Effect on Prior Years of a Change in Accounting 
    Principle
Dr. 107, Construction Work in Progress
Dr. 108.8, Retirement Work in Progress
Cr. 228.3, Accumulated Provision for Pensions and Benefits
To record the cumulative effect of implementing Statement No. 112.

    Note: A portion of the cumulative effect may be charged to 
construction and retirement activities provided such charges are 
properly supported. Account 435.1 is closed to Account 219.2, 
Nonoperating Margins.

    If the borrower elects to defer and amortize the cumulative effect 
in accordance with the provisions of Statement No. 71, the following 
entry shall be recorded:

Dr. 182.3, Other Regulatory Assets
Cr. 228.3, Accumulated Provision for Pensions and Benefits
To record the deferral of the cumulative effect of implementing 
    Statement No. 112 in accordance with the provisions of Statement No. 
    71.

Dr. Various Operations, Maintenance, and Administrative Expense Accounts
Dr. 107, Construction Work in Progress
Dr. 108.8, Retirement Work in Progress
Cr. 182.3, Other Regulatory Assets
To record the amortization of the cumulative effect of implementing 
    Statement No. 112 as it is recovered through rates in accordance 
    with Statement No. 71.

Dr. Various Operations, Maintenance, and Administrative Expense Accounts
Dr. 107, Construction Work in Progress
Dr. 108.8, Retirement Work in Progress
Cr. 228.3, Accumulated Provision for Pensions and Benefits
To record current period postemployment benefit expense.

    Note: If postemployment benefits are accrued under the criteria set 
forth in Statement No. 43, this journal entry is made on a monthly 
basis. If, however, the accrual is based upon the provisions of 
Statement No. 5, this is a one-time entry unless the liability is 
reevaluated and subsequently adjusted.

             629   Investments in Debt and Equity Securities

    Statement of Financial Accounting Standards No. 115, Accounting for 
Certain Investments in Debt and Equity Securities (Statement No. 115), 
establishes the standards of financial accounting and reporting for 
investments in debt securities and for investments in equity securities 
that have readily determinable fair values. Statement No. 115 does not 
apply to investments in equity securities accounted for under the equity 
method nor to investments in consolidated subsidiaries.
    At the time of acquisition, an entity must classify debt and equity 
securities into one of three categories: held-to-maturity, available-
for-sale, or trading. At the balance sheet date, the appropriateness of 
the classifications must be reassessed.
    Investments in debt securities are classified as held-to-maturity 
and are measured at amortized cost in the balance sheet only if the 
reporting entity has the positive intent and ability to hold these 
securities to maturity. Debt securities are not classified as held-to-
maturity if the entity has the intent to hold the security only for an 
indefinite period; for example, if the security would become available 
for sale in response to changes in market interest rates and related 
changes in the security's prepayment risk, needs for liquidity, changes 
in the availability of and the yield on alternative investments, changes 
in funding sources and terms, and changes in foreign currency risk.
    Investments in debt securities that are not classified as held-to-
maturity and equity securities that have readily determinable fair 
values are classified

[[Page 876]]

as either trading securities or available-for-sale securities and are 
measured at fair value in the balance sheet. Trading securities are 
those securities that are bought and held principally for the purpose of 
selling them in the near future. Trading generally reflects active and 
frequent buying and selling and trading securities are generally used 
with the objective of generating profits on short-term differences in 
prices. Available-for-sale securities are those investments not 
classified as either trading securities or held-to-maturity securities.
    Statement No. 115 requires unrealized holding gains and losses for 
trading securities to be included in earnings in the current period. 
Unrealized holding gains and losses for available-for-sale securities 
are excluded from earnings; however, they are reported as a net amount 
in a separate component of shareholders' equity until realized.
    For individual securities classified as either available-for sale or 
held-to-maturity, an entity must determine whether a decline in the 
security's fair value below the amortized cost is other than temporary. 
If the decline in fair value is determined to be permanent, that is, it 
is probable that the entity will not be able to collect all amounts due 
under the contractual terms of the security, the realized loss is 
accounted for in earnings of the current period. The new cost basis is 
not adjusted upward for subsequent recoveries in the fair value. 
Subsequent increases in the fair value of available-for-sale securities 
are included in the separate component of equity. Subsequent decreases 
are also included in the separate component of equity.
    All trading securities are reported as current assets in the balance 
sheet and individual held-to-maturity and available-for-sale securities 
are classified as either current or noncurrent, as appropriate. Cash 
flows from the purchase, sale, or maturity of available-for-sale 
securities and held-to-maturity securities are classified in the 
statement of cash flows as cash flows from investing activities and 
reported gross for each security classification.

                         Accounting Requirements

    All RUS borrowers must adopt the accounting, reporting, and 
disclosure requirements set forth in Statement No. 115 as of the 
statement's implementation date. Unrealized holding gains or losses for 
trading securities shall be recorded in either Account 421, 
Miscellaneous Nonoperating Income, or Account 426.5, Other Deductions, 
as appropriate. Unrealized holding gains or losses for available-for-
sale securities held by the corporate entity are recognized as a 
component of stockholder's equity in Account 215.1, Unrealized Gains and 
Losses--Debt and Equity Securities. A contra account of the investment 
account shall be debited or credited accordingly. Unrealized gains and 
losses for available-for-sale securities held in a decommissioning fund 
shall increase or decrease, as appropriate, the reported value of the 
fund.

                    Effective Date and Implementation

    Statement No. 115 is effective for fiscal years beginning after 
December 15, 1993. At the beginning of the entity's fiscal year, the 
entity must classify its debt and equity securities on the basis of the 
entity's current intent. This statement may not be applied retroactively 
to prior years' financial statements. For fiscal years beginning prior 
to December 16, 1993, reporting entities are permitted to apply 
Statement No. 115 as of the end of a fiscal year for which annual 
financial statements have not previously been issued.

                    630  Split Dollar Life Insurance

    The National Rural Electric Cooperative Association Split Dollar 
Life Insurance provides life insurance benefits to cooperative 
employees. The benefits provided under this policy consist of two 
components, the face value of the insurance policy and the accumulated 
cash surrender value. While the employee is the owner of the policy, the 
employee must sign a collateral assignment giving the cooperative 
absolute right to the cash surrender value of the policy. Under the 
terms of this collateral assignment, the employee must reimburse the 
cooperative for the premiums paid upon the employee's termination of 
employment or attainment of

[[Page 877]]

the age of 62 if the employee wishes to maintain the insurance coverage. 
If death occurs prior to either of these events, the premiums paid to 
date by the cooperative are deducted from the death benefits payable to 
the policy beneficiary.

                         Accounting Requirements

    Financial Accounting Standards Board Technical Bulletin 85-4, 
Accounting for Purchase of Life Insurance (Bulletin 85-4), states that 
the amount that could be realized under an insurance contract as of the 
date of the financial statements should be reported as an asset. The 
change in the cash surrender or contract value of that asset during the 
period should be reported as an adjustment to the premiums paid in 
determining the expense or income to be recognized for the period. The 
cooperative shall, therefore, record the cash surrender value of the 
policy as an asset because of its absolute right to receive that value 
based upon the employee's collateral assignment. Any receivable that may 
occur as a result of the employee reimbursement for the premiums paid is 
contingent upon the employee electing to maintain the insurance coverage 
after termination of employment or reaching the age of 62 and is not 
recorded as an asset on the cooperative's records.

                       Accounting Journal Entries

    The journal entries required to account for the NRECA Split Dollar 
Life Insurance Program are as follows:

Dr. 124, Other Investments
Cr. Various Operations, Maintenance, and Administrative Expense Accounts
To record an increase in the cash surrender value of the insurance 
    contract.

or

Dr. Various Operations, Maintenance, and Administrative Expense Accounts
Cr. 124, Other Investments
To record a decrease in the cash surrender value of the insurance 
    contract.

Dr. Various Operations, Maintenance, and Administrative Expense Accounts
Dr. 107, Construction Work-in-Progress
Dr. 108.8, Retirement Work-in-Progress
Cr. 131.1, Cash--General
To record the premium cost of the insurance contract.

                   631  Special Early Retirement Plan

    The Special Early Retirement Plan (SERP) being offered through the 
National Rural Electric Cooperative Association (NRECA) constitutes an 
amendment to its Retirement and Security (R&S) program. The SERP is 
often chosen as a vehicle through which the cooperative may reduce the 
size of its workforce or replace more highly paid employees with lower 
paid entry level employees. If an employee covered by an NRECA 
retirement plan chose to retire before his/her normal retirement date, 
that employee would receive an actuarially reduced benefit. However, 
when a cooperative elects to offer a SERP, no such reduction is 
required. The cooperative selects the criteria under which an employee 
will be eligible to participate such as age, years of service, or a 
combination of age and benefit service requirements. As with other 
amendments to the R&S program, NRECA calculates the cost of the plan 
based upon the criteria selected by the cooperative and allows the 
cooperative to pay the cost immediately or on an installment basis.
    Under this plan, the employee receives full retirement benefits in 
the form of either an immediate lump-sum settlement or annuity payments. 
It is not unusual for the cooperative to add an incentive to encourage 
participation such as medical or life insurance, either in whole or in 
**part**, until age 65. The actuarial analysis provided by NRECA includes 
the cost of the SERP and the estimated reduction and/or increase in 
costs associated with Statement of Financial Accounting Standards No. 
106, Employer's Accounting for Postretirement Benefits Other Than 
Pensions (Statement No. 106).

[[Page 878]]

     Statement of Financial Accounting Standards No. 87, Employer's 
               Accounting for Pensions (Statement No. 87)

    In accordance with the provisions of Statement No. 87, the costs 
associated with an amendment to a multiemployer plan are recognized when 
they become due and payable. Since NRECA calculates the amount due and 
payable at the time of the amendment, the entire amount due, whether 
paid immediately or financed through NRECA or any other institution, 
must be recognized as an expense at that time. This cost may, however, 
be deferred in accordance with the provisions of Statement of Financial 
Accounting Standards No. 71, Accounting for the Effects of Certain Types 
of Regulation (Statement No. 71).

                       Accounting Journal Entries

    The journal entry required to record the additional pension costs 
associated with the SERP is as follows:

Dr. Various Operations, Maintenance, and Administrative Expense Accounts
Dr. 107, Construction Work-in-Progress
Dr. 108.8, Retirement Work-in-Progress
Cr. 131.1, Cash--General

or

Cr. 224, Other Long-Term Debt
To record the prior service pension costs incurred as a result of 
    adopting the SERP.

    If the borrower elects to defer and amortize the cost in accordance 
with Statement No. 71, the following entries shall be recorded:

Dr. 182.3, Other Regulatory Assets
Cr. 131.1, Cash--General

or

Cr. 224, Other Long-Term Debt
To record, under the provisions of Statement No. 71, the deferral of the 
    prior service pension costs incurred as a result of adopting the 
    SERP.

Dr. Various Operations, Maintenance, and Administrative Expense Accounts
Dr. 107, Construction Work-in-Progress
Dr. 108.8, Retirement Work-in-Progress
Cr. 182.3, Other Regulatory Assets
To record the amortization of deferred prior service pension costs as 
    they are recovered through rates in accordance with Statement No. 
    71.

                            Statement No. 106

    In the event that net reductions in postretirement benefits result 
from this plan amendment, the reductions are recognized as follows:
    1. The amount of the reduction shall first reduce any existing 
unrecognized prior service cost;
    2. Any remaining reductions shall next reduce any unrecognized 
transition obligation; and
    3. Any remaining reduction shall be recognized in a manner 
consistent with the accounting for prior service postretirement benefit 
costs.
    In accordance with Statement No. 106, prior service postretirement 
benefit costs are recognized in equal amounts in each remaining year of 
service for active plan participants. Because it is an off-balance sheet 
item, only a memorandum entry is required to reduce the amount of 
unrecognized prior service cost.
    At adoption, Statement No. 106 permitted the recognition of the 
transition obligation in one of two ways. The transition obligation was 
recognized over the longer of the average remaining service period of 
current plan participants or 20 years, or it may have been recognized 
immediately. If the delayed recognition option was chosen under 
Statement No. 106, this, too, was an off-balance sheet item that 
requires only a memorandum entry to reduce the amount of unrecognized 
transition obligation. However, if the immediate recognition option was 
chosen, the cooperative either recorded the expense in that year or, 
with RUS approval, deferred the expense under the provisions of 
Statement No. 71. If the expense were recorded, in total, in the year of 
adoption, no unrecognized transition obligation remains to reduce. If, 
however, the transition obligation was deferred in accordance with 
Statement No. 71, the journal entry required to effect the reduction in 
Statement No. 106 expense is as follows:

Dr. 228.3, Accumulated Provision for Pensions and Benefits
Cr. 182.3, Other Regulatory Assets

[[Page 879]]

To record a reduction in the deferred Statement No. 106 transition 
    obligation resulting from the adoption of the SERP.

    Note: The dollar value of this entry must not exceed the deferral 
shown on the balance sheet.

    If, after the two previous reductions have been made, any net credit 
remains, it shall be recognized in a manner consistent with prior 
service costs; that is, as an off balance sheet item that is amortized 
over the remaining service lives (to full eligibility) of the active 
plan participants. The annual amortization reduces amounts normally 
charged to the various operations, maintenance, and administrative 
expense accounts and Account 228.3 as postretirement benefit expenses.

[58 FR 59825, Nov. 10, 1993, as amended at 59 FR 27436, May 27, 1994; 60 
FR 55430, 55435-55438, Nov. 1, 1995; 62 FR 42319-42321, 42323, 42330, 
Aug. 6, 1997]

Secs. 1767.42-1767.45  [Reserved]

        Subpart C--Depreciation Rates and Procedures  [Reserved]

Secs. 1767.46-1767.65  [Reserved]

             Subpart D--Preservation of Records  [Reserved]

Secs. 1767.66-1767.85  [Reserved]
```