Sec.  32.2000   Instructions for telecommunications plant accounts.

   (a) Purpose of telecommunications plant accounts. (1) The telecommunications
   plant accounts (2001 to 2007 inclusive) are designed to show the investment
   in the company's tangible and intangible telecommunications plant which
   ordinarily has a service life of more than one year, including such plant
   whether  used by the company or others in providing telecommunications
   service.

   (2) The telecommunications plant accounts shall not include the cost or
   other  value  of  telecommunications plant contributed to the company.
   Contributions in the form of money or its equivalent toward the construction
   of telecommunications plant shall be credited to the accounts charged with
   the cost of such construction. Amounts of non-recurring reimbursements based
   on  the cost of plant or equipment furnished in rendering service to a
   customer shall be credited to the accounts charged with the cost of the
   plant or equipment. Amounts received for construction which are ultimately
   to be repaid wholly or in part, shall be credited to Account 4300, Other
   long-term liabilities and deferred credits; when final determination has
   been made as to the amount to be returned, any unrefunded amounts shall be
   credited to the accounts charged with the cost of such construction. Amounts
   received for the construction of plant, the ownership of which rests with or
   will revert to others, shall be credited to the accounts charged with the
   cost of such construction. (Note also Account 7100, Other operating income
   and expense.)

   (3) When telecommunications plant ordinarily having a service life of more
   than one year is installed for temporary use in providing telecommunications
   service, it shall be accounted for in the same manner as plant having a
   service life of more than one year. This includes temporary installations of
   plant (such as poles, wire and cable) installed to maintain service during
   the progress of highway reconstruction or during interruptions due to storms
   or other casualties, equipment used for the training of operators, equipment
   used to provide intercepting positions in central offices to handle traffic
   for  a  short  period  following  extensive system changes and similar
   installations of property used to provide telecommunications service.

   (4) The cost of the individual items of equipment, classifiable to Accounts
   2112, Motor vehicles; 2113, Aircraft; 2114, Tools and other work equipment;
   2122, Furniture; 2123, Office equipment; 2124, General purpose computers,
   costing $2,000 or less or having a life of less than one year shall be
   charged to the applicable expense accounts, except for personal computers
   falling within Account 2124. Personal computers classifiable to Account
   2124, with a total cost for all components of $500 or less, shall be charged
   to the applicable Plant Specific Operations Expense accounts. The cost of
   tools and test equipment located in the central office, classifiable to
   central office asset accounts 2210–2232 costing $2,000 or less or having a
   life of less than one year shall be charged to the applicable Plant Specific
   Operations Expense accounts. If the aggregate investment in the items is
   relatively  large  at  the  time of acquisition, such amounts shall be
   maintained in an applicable material and supplies account until items are
   used.

   (b) Telecommunications plant acquired. (1) Property, plant and equipment
   acquired from an entity, whether or not affiliated with the accounting
   company, shall be accounted for at original cost, except that property,
   plant and equipment acquired from a nonaffiliated entity shall be accounted
   for at acquisition cost if the purchase price is less than $100,000 for
   Class A companies or $25,000 for Class B companies.

   (2) The accounting for property, plant and equipment to be recorded at
   original cost shall be as follows:

   (i) The amount of money paid (or current money value of any consideration
   other than money exchanged) for the property (together with preliminary
   expenses incurred in connection the acquisition) shall be charged to Account
   1438, Deferred maintenance, retirements, and other deferred charges.

   (ii) The original cost, estimated if not known, of telecommunications plant,
   governmental franchises and other similar rights acquired shall be charged
   to the applicable telecommunications plant accounts, Telecommunications
   Plant Under Construction, and Property Held For Future Telecommunications
   Use, as appropriate, and credited to Account 1439. When the actual original
   cost cannot be determined and estimates are used, the company shall be
   prepared to furnish the Commission with the particulars of such estimates.

   (iii) Accumulated Depreciation and amortization balances related to plant
   acquired shall be credited to Account 3100, Accumulated depreciation, or
   Account 3200, Accumulated depreciation—held for future telecommunications
   use,  or Account 3410, Accumulated amortization—capitalized leases and
   debited to Account 1438. Accumulated amortization balances related to plant
   acquired which ultimately is recorded in Accounts 2005, Telecommunications
   plant adjustment, Account 2682, Leasehold improvements, or Account 2690,
   Intangibles  shall be credited to these asset accounts, and debited to
   Account 1438.

   (iv) Any amount remaining in Account 1438, applicable to the plant acquired,
   shall, upon completion of the entries provided in paragraphs (b)(2)(i)
   through (b)(2)(iii) of this section, be debited or credited, as applicable,
   to Account 2007, Goodwill, or to Account 2005, Telecommunications plant
   adjustment, as appropriate.

   (3) A memorandum record shall be kept showing the amount of contributions in
   aid of construction applicable to the property acquired as shown by the
   accounts of the previous owner.

   (c)  Cost  of construction. (1) Telecommunications plant represents an
   economic resource which will be used to provide future services, the cost of
   which will be allocated in a rational and systematic manner to the future
   periods in which it provides benefits. In accounting for construction costs,
   the utility shall charge to the telecommunications plant accounts, where
   applicable, all direct and indirect costs.

   (2) Direct and indirect costs shall include, but not be limited to:

   (i) “Labor” includes the wages and expenses of employees directly engaged in
   or in direct charge of construction work. It includes expenses directly
   related to an employee's wages, such as worker's compensation insurance,
   payroll taxes, benefits and other similar items of expense.

   (ii)  “Engineering”  includes the portion of the wages and expenses of
   engineers, draftsmen, inspectors, and their direct supervision applicable to
   construction work. It includes expenses directly related to an employee's
   wages, such as worker's compensation insurance, payroll taxes, benefits and
   other similar items of expense.

   (iii) “Material and supplies” includes the purchase price of material used
   at the point of free delivery plus the costs of inspection, loading and
   transportation,  and  an equitable portion of provisioning expense. In
   determining the cost of material used, proper allowance shall be made for
   unused material, for material recovered from temporary structures used in
   performing the work involved, and for discounts allowed and realized in the
   purchase of material. This item does not include construction material that
   is stolen or rendered unusable due to vandalism. Such material should be
   charged to the applicable plant specific operations expense accounts.

   (iv) “Transportation” includes the cost of transporting employees, material
   and  supplies, tools and other work equipment to and from the physical
   construction location. It includes amounts paid therefor to other companies
   or individuals and the cost of using the company's own motor vehicles or
   other transportation equipment.

   (v) “Contract work” includes amounts paid for work performed under contract
   or other agreement by other companies, firms or individuals; engineering and
   supervision  applicable  to  such  work; cost incident to the award of
   contracts; and the inspection of such work. The cost of construction work
   performed by affiliated companies and other details relating thereto shall
   be available from the work in progress and supporting records.

   (vi) “Protection” includes the cost of protecting the company's property
   from fire or other casualties and the cost of preventing damages to others
   or the property of others.

   (vii) “Privileges, Permits, and Rights of way” includes such costs incurred
   in obtaining these privileges, permits, or rights of way in connection with
   construction work, such as for use of private property, streets or highways.
   The cost of such privileges and permits shall be included in the cost of the
   work for which the privileges or permits are obtained, except for costs
   includable in Account 2111, Land, and Account 2690, Intangibles.

   (viii) “Taxes” includes taxes properly includable in construction costs
   before the facilities are completed for service, which taxes are assessed
   separately from taxes on operating property or under conditions that permit
   separate identification of the amount chargeable to construction.

   (ix)  “Special  machine  service” includes the cost of labor expended,
   materials  and  supplies  consumed  and other expenses incurred in the
   maintenance, operation and use of special and other labor saving machines
   (other than transportation equipment (such as trenching equipment, cable
   plows and pole setting trucks. Also included are expenditures for rental,
   maintenance  and  operation  of  such machines owned by others. When a
   construction  job  requires the purchase of special machines, the cost
   thereof, less the appraised or salvage value at the time of release from the
   job, shall be included in the cost of construction.

   (x) Allowance for funds used during construction (“AFUDC”) provides for the
   cost of financing the construction of telecommunications plant. AFUDC shall
   be charged to Account 2003, Telecommunications plant under construction, and
   credited to Account 7300, Nonoperating income and expense. The rate for
   calculating  AFUDC  shall be determined as follows: If financing plans
   associate a specific new borrowing with an asset, the rate on that borrowing
   may be used for the asset; if no specific new borrowing is associated with
   an asset or if the average accumulated expenditures for the asset exceed the
   amounts of specific new borrowing associated with it, the capitalization
   rate to be applied to such excess shall be the weighted average of the rates
   applicable to other borrowings of the enterprise. The amount of interest
   cost capitalized in an accounting period shall not exceed the total amount
   of interest cost incurred by the company in that period.

   (xi) “Insurance” includes premiums paid specifically for protection against
   loss and damage in connection with the construction of telecommunications
   plant due to fire or other casualty, injury to or death of employees or
   others, damages to property of others, defalcations of employees and agents
   and the non-performance of contractual obligations of others.

   (xii) “Construction services” include the cost of telephone, electricity,
   power, construction quarters, office space and equipment directly related to
   the construction project.

   (xiii) “Indirect construction costs” shall include indirect costs such as
   general engineering, supervision and support. Such costs, in addition to
   direct supervision, shall include indirect plant operations and engineering
   supervision up to, but not including, supervision by executive officers
   whose  pay  and  expenses  are chargeable to Account 6720, General and
   administrative. The records supporting the entries for indirect construction
   costs  shall be kept so as to show the nature of the expenditures, the
   individual jobs and accounts charged, and the bases of the distribution. The
   amounts charged to each plant account for indirect costs shall be readily
   determinable. The instructions contained herein shall not be interpreted as
   permitting the addition to plant of amounts to cover indirect costs based on
   arbitrary allocations.

   (xiv) The cost of construction shall not include any amounts classifiable as
   Corporate Operations Expense.

   (d) Telecommunications plant retired. (1) Telecommunications plant accounts
   shall at all times disclose the original cost of all property in service.
   When any item of property subject to plant retirement accounting is worn
   out, lost, sold, destroyed, abandoned, surrendered upon lapse of title,
   becomes permanently unserviceable, is withdrawn or for any other reason is
   retired from service, the plant accounts applicable to that item shall be
   credited with the original cost of the plant retired whether replaced or not
   (except  as  provided  for minor items in paragraph (d)(2)(ii) of this
   section). Normally, these retirement credits with respect to such plant as
   entire buildings, entire central offices, all plant abandoned and any large
   sections of plant withdrawn from service, shall be entered in the accounts
   for the month in which use of the property ceased. For any other plant
   withdrawn from service, the retirement credits shall be entered no later
   than the next succeeding month. Literal compliance with the provision for
   timing of entries with respect to property amounting to less than $50,000
   retired under any one project is not required if an unreasonable amount of
   recordkeeping and estimating of quantities, original costs and salvage is
   necessary. The retirement entry shall refer to the continuing property
   record, or records supplemental thereto, from which the cost was obtained
   (note also paragraph (d)(3) of this section). Every company shall establish
   procedures which will ensure compliance with these requirements.

   (2) To avoid undue refinement, depreciable telecommunications plant shall be
   accounted for as follows:

   (i)  Retirement  units: This group includes major items of property, a
   representative list of which shall be prescribed by this Commission. In lieu
   of the retirement units prescribed with respect to a particular account, a
   company may, after obtaining specific approval by this Commission, establish
   and maintain its own list of retirement units for a portion or all of the
   plant in any such account. For items included on the retirement units list,
   the original cost of any such items retired shall be credited to the plant
   account and charged to Account 3100 Accumulated Depreciation, whether or not
   replaced.  The original cost of retirement units installed in place of
   property retired shall be charged to the applicable telecommunications plant
   account.

   (ii) Minor items: This group includes any part or element of plant which is
   not designated as a retirement unit. The original cost of a minor item of
   property when included in the specific or average cost for a retirement unit
   or units requires no separate credit to the telecommunications plant account
   when such a minor item is retired. The cost of replacement shall be charged
   to the account applicable for the cost of repairs of the property. However,
   if the replacement effects a substantial betterment (the primary aim of
   which is to make the property affected more useful, of greater durability,
   of greater capacity or more economical in operation), the excess cost of
   such a replacement, over the estimated cost at the then current prices of
   replacement without betterment of the minor items being retired, shall be
   charged to the applicable telecommunications plant account.

   (3) The cost of property to be retired shall be the amount at which property
   is included in the telecommunications plant accounts. However, when it is
   impracticable to determine the cost of each item due to the relatively large
   number  or small cost of such items, the average cost of all the items
   covered  by an appropriate subdivision of the account shall be used in
   determining the cost to be assigned to such items when retired. The method
   used in determining average cost must give due regard to the quantity,
   vintage, size and kind of items, the area in which they were installed and
   their classification in other respects. Average cost may be applied in
   retirement of such items as poles, wire, cable, cable terminals, conduit and
   booths. Any company may use average cost of property installed in a year or
   band  of years as approved by the Commission. It should be understood,
   however, that the use of average costs shall not relieve the company of the
   requirement for maintaining its continuing property records to show, where
   practicable, dates of installation and removal for purposes of mortality
   studies.  (See   Sec. 32.2000(f)  of  this  subpart, Standard Practices for
   Establishing and Maintaining Continuing Property Records.)

   (4) The accounting for the retirement of property, plant and equipment shall
   be as provided above except that amounts in Account 2111, Land, and amounts
   for works of art recorded in Account 2122, Furniture, shall be treated at
   disposition as a gain or loss and shall be credited or debited to Account
   7100, Other operating income and expense, as applicable. If land or artwork
   is retained by the company and held for sale, the cost shall be charged to
   Account 2006, Nonoperating plant.

   (5)  When  the  telecommunications plant is sold together with traffic
   associated therewith, the original cost of the property shall be credited to
   the applicable plant accounts and the estimated amounts carried with respect
   thereto in the accumulated depreciation and amortization accounts shall be
   charged to such accumulated accounts. The difference, if any, between the
   net amount of such debit and credit items and the consideration received
   (less commissions and other expenses of making the sale) for the property
   shall be included in Account 7300, Nonoperating income and expense. The
   accounting for depreciable telecommunications plant sold without the traffic
   associated therewith shall be in accordance with the accounting provided in
    Sec. 32.3100(c).

   (e) Basic property records. (1) The basic property records are that portion
   of  the total property accounting system which preserves the following
   detailed information:

   (i) The identity, vintage, location and original cost of units of property;

   (ii) Original and ongoing transactional data (plant account activity) in
   terms of such units; and

   (iii) Any other specific financial and cost accounting information not
   properly warranting separate disclosure as an account or subaccount but
   which is needed to support regulatory, cost, tax, management and other
   specific accounting information needs and requirements.

   (2) The basic property records must be: (i) Subject to internal accounting
   controls,  (ii)  auditable,  (iii) equal in the aggregate to the total
   investment reflected in the financial property control accounts as well as
   the  total  of  the  cost  allocations supporting the determination of
   cost-of-service  at  any particular point in time, and (iv) maintained
   throughout the life of the property.

   (3) The basic property records shall consist of (i) continuing property
   records and (ii) records supplemental thereto which together reveal clearly,
   by accounting area, the detailed and systematically summarized information
   necessary to meet fully the requirements of paragraphs (e)(1) and (e)(2) of
   this section.

   (4) Companies shall establish and maintain basic property records for each
   class of property recorded in the several plant accounts which comprise the
   balance sheet Account 2001, Telecommunications Plant In Service, Account
   2002, Property Held for Future Telecommunications Use, and Account 2006,
   Nonoperating Plant.

   (5) The company shall notify the Commission of a plan for the basic property
   record as follows:

   (i) Not later than June 30 of the year following that in which it becomes
   subject  to  this  system of accounts, the company shall file with the
   Commission two (2) copies of a complete plan of the method to be used in the
   compilation  of  a basic property record with respect to each class of
   property.  The  plan shall include a list of proposed accounting areas
   accompanied by description of the boundaries of each area as defined in
   accordance with the requirements of  Sec. 32.2000(f)(1) (i) and (ii) of this
   subpart.  The  plan shall also include a list of property record units
   proposed for use under each regulated plant account. These property record
   units shall be selected such that the requirements of  Sec. 32.2000(f)(2) (i),
   (ii) and (iii) of this subpart can be satisfied.

   (ii)  The company shall submit to the Commission one copy of any major
   proposed changes in its basic property record plan at least 30 days before
   the effective date of the proposed changes.

   (6) The company shall prepare and maintain the basic property record as
   follows:

   (i) Not later than June 30 of the year following that in which the company
   becomes subject to this system of accounts, begin the preparation of a basic
   property record.

   (ii) Complete within two years of the prescribed beginning date, basic
   property records for all property as of the end of the preceding calendar
   year.

   (iii) Promptly process in the basic property records all property changes
   affecting periods subsequent to initial establishment of the basic property
   record.

   (7) The basic property record components (see paragraph (c) of this section)
   shall be arranged in conformity with the regulated plant accounts prescribed
   in this section of accounts as follows:

   (i)  The continuing property records shall be compiled on the basis of
   original cost (or other book cost consistent with this system of accounts).
   The  continuing  property records shall be maintained as prescribed in
    Sec. 32.2000(f)(2)(iii)  of  this  subpart in such manner as will meet the
   following basic objectives:

   (A)  Provide for the verification of property record units by physical
   examination.

   (B) Provide for accurate accounting for retirements.

   (C) Provide data for use in connection with depreciation studies.

   (ii) The records supplemental to the continuing property records shall
   disclose   such  service  designations,  usage  measurement  criteria,
   apportionment factors, or other data as may be prescribed by the Commission
   in this part or other parts of its Rules and Regulations. Such data are
   subject to the same general controls and standards for auditability and
   support as are all other elements of the basic property records.

   (f) Standard practices for establishing and maintaining continuing property
   records —(1) Accounting area. (i) The continuing property record, as related
   to  each primary plant account, shall be established and maintained by
   subaccounts for each accounting area. An accounting area is the smallest
   territory of the company for which accounting records of investment are
   maintained for all plant accounts within the area. Areas already established
   for administrative, accounting, valuation, or other purposes may be adopted
   for  this purpose when appropriate. In no case shall the boundaries of
   accounting areas cross either State lines or boundaries prescribed by the
   Commission.

   (ii) In determining the limit of each area, consideration shall be given to
   the quantities of property, construction conditions, operating districts,
   county and township lines, taxing district boundaries, city limits, and
   other political or geographical limits, in order that the area adopted may
   have maximum adaptability, within the confines of practicability, for both
   the  company's  purpose  and  those  of  Federal, State, and municipal
   authorities.

   (2) Property record units. (i) In each of the established accounting areas,
   the “property record units” which are to be maintained in the continuing
   property record shall be set forth separately, classified by size and type
   with the amount of original cost (or other appropriate book cost) associated
   with such units. When a list of property record units has been accepted by
   the Commission, they shall become the units referred to in this statement of
   standard practices. Such units shall apply to only the regulated portion of
   this system of accounts.

   (ii) When it is found necessary to revise this list because of the addition
   of units used in providing new types of service, or new units resulting from
   improvements in technology, or because of the grouping or elimination of
   units which no longer merit separate recognition as property record units,
   one  copy  of  such changes shall be submitted to the Commission. Upon
   appropriate showing by the company, the Commission may specifically exempt
   the company from these filing requirements.

   (iii) The continuing property record shall reveal the description, location,
   date of placement, the essential details of construction, and the original
   cost (note also  Sec. 32.2000(f)(3) of this subpart) of the property record
   units.  The continuing property record and other underlying records of
   construction costs shall be so maintained that, upon retirement of one or
   more  retirement  units or of minor items without replacement when not
   included in the costs of retirement units, the actual cost or a reasonably
   accurate estimate of the cost of the plant retired can be determined.

   (3) Methods of determining original cost of property record units. The
   original cost of the property record units shall be determined by analyses
   of the construction costs incurred as shown by completion reports and other
   data,  accumulated  in  the  respective  construction  work  orders or
   authorizations. Costs shall be allocated to and associated with the property
   record units to facilitate accounting for retirements. The original cost of
   property  record  units  shall be determined by unit identification or
   averaging as described in paragraphs (f)(3) (i) and (ii) of this section.

   (i) Unit identification. Cost shall be identified and maintained by specific
   location for property record units contained within certain regulated plant
   accounts  or account groupings such as Land, Buildings, Central Office
   Assets, Motor Vehicles, garage work equipment included in Account 2114,
   Tools and other work equipment, and Furniture. In addition, units involved
   in any unusual or special type of construction shall be recorded by their
   specific location costs (note also  Sec. 32.2000(f)(3)(ii)(B)).

   (ii) Averaging. (A) Average costs may be developed for plant consisting of a
   large number of similar units such as terminal equipment, poles, wire,
   cable, cable terminals, conduit, furniture, and work equipment. Units of
   similar size and type within each specified accounting area and regulated
   plant account may be grouped. Each such average cost shall be set forth in
   the continuing property record of the units with which it is associated.

   (B) The averaging of costs permitted under the provisions of the foregoing
   paragraph is restricted to plant installed in a particular vintage or band
   of years incurred within an accounting area. This paragraph does not permit
   the inclusion of the cost of units involved in any unusual or special type
   of construction. The units involved in such unusual or special type of
   construction shall be recorded at cost by location.

   (4) Estimates. In cases where the actual original cost of property cannot be
   ascertained,  such  as pricing an inventory for the initial entry of a
   continuing property record or the pricing of an acquisition for which a
   continuing property record has not been maintained, the original cost may be
   estimated.  Any  estimated  original cost shall be consistent with the
   accounting practices in effect at the time the property was constructed.

   (5) Identification of property record units. There shall be shown in the
   continuing property record or in record supplements thereof, a complete
   description of the property records units in such detail as to identify such
   units. The description shall include the identification of the work order
   under which constructed, the year of installation (unless not determinable
   per  Sec. 32.2000(f)(4) of this subpart, specific location of the property within
   each accounting area in such manner that it can be readily spot-checked for
   proof of physical existence, the accounting company's number or designation,
   and any other description used in connection with the determination of the
   original cost. Descriptions of units of similar size and type shall follow
   prescribed groupings.

   (6) Reinstalled units. When units to which average costs are not applied,
   i.e.,  specific  and  fixed location units, are removed or retired and
   subsequently reinstalled, the date when the unit was first charged to the
   appropriate plant account shall, when required for adequate service life
   studies and reasonably accurate retirement accounting, be shown in addition
   to the date of reinstallation.

   (7) Age and service life of property. The continuing property record shall
   disclose the age of existing property and the supporting records shall
   disclose  the  service  life of property retired. Exceptions from this
   requirement  for  any  property  record unit shall be submitted to the
   Commission for approval.

   (8) Reference to sources of information. There shall be shown by appropriate
   reference the source of all entries. All drawings, computations, and other
   detailed records which support quantities and costs or estimated costs shall
   be retained as a part of or in support of the continuing property record.

   (9) Jointly owned property. (i) With respect to jointly owned property,
   there  shall  be  shown  in  the continuing property record or records
   supplemental thereto:

   (A) The identity of all joint owners.

   (B) The percentage owned by the accounting company.

   (ii)  When regulated plant is constructed under arrangements for joint
   ownership, the amount received by the constructing company from the other
   joint owner or owners shall be credited as a reduction of the gross cost of
   the plant in place.

   (iii)  When  a sale of a part interest in regulated plant is made, the
   fractional interest sold shall be treated as a retirement and the amount
   received shall be treated as salvage. The continuing property record or
   records  supplemental  thereto  shall  be so maintained as to identify
   separately retirements of this nature from physical retirements of jointly
   owned plant.

   (iv) If jointly owned regulated property is substantial in relation to the
   total of the same kind of regulated property owned wholly by the company,
   such jointly owned regulated property shall be appropriately segregated in
   the continuing property record.

   (g) Depreciation accounting —(1) Computation of depreciation rates. (i)
   Unless otherwise provided by the Commission, either through prior approval
   or upon prescription by the Commission, depreciation percentage rates shall
   be computed in conformity with a group plan of accounting for depreciation
   and shall be such that the loss in service value of the property, except for
   losses excluded under the definition of depreciation, may be distributed
   under the straight-line method during the service life of the property.

   (ii)  In  the  event  any  composite percentage rate becomes no longer
   applicable,  revised  composite  percentage rates shall be computed in
   accordance with paragraph (g)(1)(i) of this section.

   (iii)  The  company  shall  keep such records of property and property
   retirements as will allow the determination of the service life of property
   which has been retired, or facilitate the determination of service life
   indications by mortality, turnover, or other appropriate methods. Such
   records will also allow the determination of the percentage of salvage value
   and cost of removal for property retired from each class of depreciable
   plant.

   (2) Depreciation charges. (i) A separate annual percentage rate for each
   depreciation category of telecommunications plant shall be used in computing
   depreciation charges.

   (ii) Companies, upon receiving prior approval from this Commission, or, upon
   prescription by this Commission, shall apply such depreciation rate, except
   where provisions of paragraph (g)(2)(iv) of this section apply, as will
   ratably distribute on a straight line basis the difference between the net
   book cost of a class or subclass of plant and its estimated net salvage
   during the known or estimated remaining service life of the plant.

   (iii) Charges for currently accruing depreciation shall be made monthly to
   the appropriate depreciation accounts, and corresponding credits shall be
   made to the appropriate depreciation reserve accounts. Current monthly
   charges shall normally be computed by the application of one-twelfth of the
   annual depreciation rate to the monthly average balance of the associated
   category of plant. The average monthly balance shall be computed using the
   balance as of the first and last days of the current month.

   (iv) In certain circumstances and upon prior approval of this Commission,
   monthly charges may be determined in total or in part through the use of
   other  methods whereby selected plant balances or portions thereof are
   ratably  distributed  over periods prescribed by this Commission. Such
   circumstances  could include but not be limited to factors such as the
   existence of reserve deficiencies or surpluses, types of plant that will be
   completely retired in the near future, and changes in the accounting for
   plant. Where alternative methods have been used in accordance with this
   subparagraph, such amounts shall be applied separately or in combination
   with  rates determined in accordance with paragraph (g)(2)(ii) of this
   section.

   (3) Acquired depreciable plant. When acquired depreciable plant carried in
   Account 1438, Deferred maintenance, retirements and other deferred charges,
   is distributed to the appropriate plant accounts, adjusting entries shall be
   made covering the depreciation charges applicable to such plant for the
   period during which it was carried in Account 1438.

   (4) Plant Retired for Nonrecurring Factors not Recognized in Depreciation
   Rates.

   (i) A retirement will be considered as nonrecurring (extraordinary) only if
   the following criteria are met:

   (A) The impending retirement was not adequately considered in setting past
   depreciation rates.

   (B) The charging of the retirement against the reserve will unduly deplete
   that reserve.

   (C) The retirement is unusual such that similar retirements are not likely
   to recur in the future.

   (5) Upon direction or approval from this Commission, the company shall
   credit Account 3100, Accumulated Depreciation, and charge Account 1438,
   Deferred Maintenance, retirements and other deferred charges, with the
   unprovided-for loss in service value. Such amounts shall be distributed from
   Account 1438 to Account 6561, Depreciation expense—Telecommunications plant
   in service, or Account 6562, Depreciation expense—property held for future
   telecommunications use, over such period as this Commission may direct or
   approve.

   (h)  Amortization  accounting.  (1)  Unless otherwise provided by this
   Commission,  either  through  approval,  or  upon prescription by this
   Commission, amortization shall be computed on the straight-line method,
   i.e., equal annual amounts shall be applied. The cost of each type asset
   shall be amortized on the basis the estimated life of that asset and shall
   not be written off in the accounting period in which the asset is acquired.
   A reasonable estimate of the useful life may be based on the upper or lower
   limits even though a fixed existence is not determinable. However, the
   period of amortization shall not exceed forty years.

   (2) In the event any estimated useful life becomes no longer applicable, a
   revised  estimated  useful life shall be determined in accordance with
   paragraph (h)(1) of this section.

   (3)  Amortization  charges  shall  be  made monthly to the appropriate
   amortization expense accounts and corresponding credits shall be made to
   accounts 2005, 2682, 2690, and 3410, as appropriate. Monthly charges shall
   be computed by the application of one-twelfth to the annual amortization
   amount.

   (4) The company shall keep such records as will allow the determination of
   the useful life of the asset.

   (i) Accounting for software. The original cost of initial operating system
   software  for computers shall be classified to the same account as the
   associated hardware whether acquired separately or in conjunction with the
   associated hardware.

   (j)  Plant  Accounts to be Maintained by Class A and Class B telephone
   companies as indicated:
   Account title Class A
   account Class B
   account
   Regulated plant
   Property, plant and equipment:
   Telecommunications plant in service ^12001 ^12001
   Property held for future telecommunications use 2002 2002
   Telecommunications plant under construction-short term 2003 2003
   Telecommunications plant adjustment 2005 2005
   Nonoperating plant 2006 2006
   Goodwill 2007 2007
   Telecommunications plant in service (TPIS)
   TPIS—General support assets:
   Land and support assets 2110
   Land 2111
   Motor vehicles 2112
   Aircraft 2113
   Tools and other work equipment 2114
   Buildings 2121
   Furniture 2122
   Office equipment 2123
   General purpose computers 2124
   TPIS—Central Office assets:
   Central Office—switching 2210
   Non-digital switching 2211
   Digital electronic switching 2212
   Operator systems 2220 2220
   Central Office—transmission 2230
   Radio systems 2231
   Circuit equipment 2232
   TPIS—Information origination/termination assets:
   Information origination termination 2310
   Station apparatus 2311
   Customer premises wiring 2321
   Large private branch exchanges 2341
   Public telephone terminal equipment 2351
   Other terminal equipment 2362
   TPIS—Cable and wire facilities assets:
   Cable and wire facilities 2410
   Poles 2411
   Aerial cable 2421
   Underground cable 2422
   Buried cable 2423
   Submarine and deep sea cable 2424
   Intrabuilding network cable 2426
   Aerial wire 2431
   Conduit systems 2441
   TPIS—Amortizable assets:
   Amortizable tangible assets 2680
   Capital leases 2681
   Leasehold improvements 2682
   Intangibles 2690 2690

   ^1Balance sheet summary account only.

   [ 51 FR 43499 , Dec. 2, 1986, as amended at  52 FR 7580 , Mar. 12, 1987;  53 FR 30059 , Aug. 10, 1988;  59 FR 46930 , Sept. 13, 1994;  60 FR 12138 , Mar. 6,
   1995;  62 FR 39451 , July 23, 1997;  64 FR 50007 , Sept. 15, 1999;  67 FR 5683 ,
   Feb. 6, 2002;  69 FR 53648 , Sept. 2, 2004]

   Effective Date Note:   At  64 FR 50007 , Sept. 15, 1999,  Sec. 32.2000 was amended
   by removing paragraph (b)(4). This section contains information collection
   requirements and will not become effective until approved by the Office of
   Management and Budget.