Opinion ID: 6258030
Heading Depth: 1
Heading Rank: 2

Heading: Amortization of Franchise Paving

Text: These costs represent money expended by predecessor companies at a cost of $15,000,000 to pave and repave streets in order to install and maintain tracks. They were recapitalized by PTC in the amount of $7,500,000 in 1940 under a reorganization plan. When the retirement program was conceived in the mid-1950’s, the PTC continued its annual 2% “amortization” of this item and reflected the impact of the retirement program by “amortizing,” through a separate account an additional sum of $300,000 per year for the two years in question. Iii a 1953 rate proceeding the Pa. PUC ruled that franchise paving costs should be excluded as a rate base asset. Thereafter, since these “intangible assets,” as PTC terms them, no longer contributed to the income of PTC, they were no longer amortizable because at that time it was reasonably foreseeable that the loss had occurred and, since no benefits inured to the future, the entire loss should have been recognized then. PTC cites authority for the principle that merely because an asset is not included in the company’s valuation for rate-making purposes does not necessitate its write-off from the company’s books. This may be true, but PTC still does not show that this “intangible asset” continued to benefit the PTC in any manner after 1953. Consequently, since the “asset” was stripped of its only corporate benefit by having been removed from the rate base in 1953 it ceased to be an asset of the corporation at that time. Thus, we are in accord with the lower court’s result that the PTC’s amortization of franchise paving in 1957 and 1958 was not in accordance with “sound accounting practice.”