Sec.  32.2   Basis of the accounts.

   (a) The financial accounts of a company are used to record, in monetary
   terms, the basic transactions which occur. Certain natural groupings of
   these transactions are called (in different contexts) transaction cycles,
   business processes, functions or activities. The concept, however, is the
   same in each case; i.e., the natural groupings represent what happens within
   the company on a consistent and continuing basis. This repetitive nature of
   the  natural groupings, over long periods of time, lends an element of
   stability to the financial account structure.

   (b) Within the telecommunications industry companies, certain recurring
   functions (natural groupings) do take place in the course of providing
   products and services to customers. These accounts reflect, to the extent
   feasible, those functions. For example, the primary bases of the accounts
   containing the investment in telecommunications plant are the functions
   performed by the assets. In addition, because of the anticipated effects of
   future innovations, the telecommunications plant accounts are intended to
   permit technological distinctions. Similarly, the primary bases of plant
   operations, customer operations and corporate operations expense accounts
   are the functions performed by individuals. The revenue accounts, on the
   other  hand,  reflect  a market perspective of natural groupings based
   primarily upon the products and services purchased by customers.

   (c)  In the course of developing the bases for this account structure,
   several other alternatives were explored. It was, for example, determined
   that,  because  of  the variety and continual changing of various cost
   allocation  mechanisms, the financial accounts of a company should not
   reflect an a priori allocation of revenues, investments or expenses to
   products or services, jurisdictions or organizational structures. (Note also
    Sec. 32.14 (c) and (d) of subpart B.) It was also determined that costs (in the
   case of assets) should not be recorded based solely upon physical attributes
   such as location, description or size.

   (d) Care has been taken in this account structure to avoid confusing a
   function with an organizational responsibility, particularly as it relates
   to the expense accounts. Whereas in the past, specific organizations may
   have  performed  specific  functions,  the future environment with its
   increasing mechanization and other changes will result in entirely new or
   restructured  organizations.  Thus,  any  relationships  drawn between
   organizations and accounts would become increasingly meaningless with the
   passage of time.

   (e)  These  accounts,  then,  are intended to reflect a functional and
   technological  view of the telecommunications industry. This view will
   provide a stable and consistent foundation for the recording of financial
   data.

   (f) The financial data contained in the accounts, together with the detailed
   information contained in the underlying financial and other subsidiary
   records required by this Commission, will provide the information necessary
   to  support  separations,  cost  of  service  and management reporting
   requirements. The basic account structure has been designed to remain stable
   as reporting requirements change.