******************************************************** NOTICE ******************************************************** This document was converted from WordPerfect to ASCII Text format. Content from the original version of the document such as headers, footers, footnotes, endnotes, graphics, and page numbers will not show up in this text version. All text attributes such as bold, italic, underlining, etc. from the original document will not show up in this text version. Features of the original document layout such as columns, tables, line and letter spacing, pagination, and margins will not be preserved in the text version. If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** FEDERAL COMMUNICATIONS COMMISSION WASHINGTON, D.C. 20554 April 13, 1988 In reply refer to: RAO Letter 13 Responsible Accounting Officers: Part 32, Uniform System of Accounts for Telecommunications Companies Accounting for Certain Loadings to Cost of Removal Recent submissions for depreciation rate represcriptions have brought to our attention a question on accounting for cost of removal under Part 32, Uniform System of Accounts for Telecommunications Companies. The represcription requests include an adjustment to the rates because of certain changes with respect to the elements included as cost of removal and charged against accumulated depreciation (the depreciation reserve). Part 31, Uniform System of Accounts for Class A and Class B Telephone Companies--which was replaced by Part 32--did not provide for loading relief and pensions, and social security taxes onto the cost of removal charged against Account 171, Depreciation Reserve. Carriers seeking represcription, however, indicate that under Part 32 they are now charging these elements against Account 3100, Accumulated Depreciation, as part of the cost of removal. It is their interpretation that this is required by the new accounting rules in Part 32. Under Part 31, relief and pensions expenses were recorded in a separate account, Account 672, Relief and Pensions. Likewise, social security taxes were recorded in Account 307, Other Operating Taxes. Under Part 32, however, there are no separate accounts for these items. Instead, the expense matrix required in Section 32.5999 provides a category called "benefits." It is clear that this category shall include "payroll related benefits," and among the items listed to be payroll related benefits are pensions and social security taxes. The intent is that relief and pensions, social security taxes, and other such payroll related expenses are to be recorded in the various expense accounts. With respect to the relief, pensions, social security taxes, and other payroll related benefits associated with cost of removal, it was intended that, in the same manner that these elements are considered cost of construction as required under Section 32.2000(c)(2)(i), they are considered to be includable in the definition of cost of removal. The clearance of salary dollars without the associated benefits would distort the relationship of benefits to salary in those accounts that retain, or have charged to them, the benefits that are properly associated with the salary charged to Account 3100 for the cost of removal. Therefore, when salaries and wages are charged to Account 3100 for the cost of removal, the associated relief and pensions, social security taxes, and other benefits are to be charged to Account 3100, as well. This letter is issued under Section 0.291 of the Commission's rules. Applications for review under Section 1.115 of the Commission's rules must be filed within 30 days from the date indicated above. (See Section 1.4(b)(4) of the Commission's rules.) If you have any questions, contact the Chief of the Accounting Systems Branch at (202) 418-0810. Sincerely, Kenneth P. Moran, Chief, Accounting and Audits Division Common Carrier Bureau