80 FR 39021 - Accounting and Reporting of Business Combinations, Security Investments, Comprehensive Income, Derivative Instruments, and Hedging Activities

DEPARTMENT OF TRANSPORTATION
Surface Transportation Board

Federal Register Volume 80, Issue 130 (July 8, 2015)

Page Range		39021-39045
FR Document		2015-15402

The Surface Transportation Board proposes to revise its regulations to update the accounting and reporting requirements under its Uniform System of Accounts (USOA) for Class I Railroads to be more consistent with current generally accepted accounting principles (GAAP) and revise the schedules and instructions for the Annual Report for Class I Railroads (R-1 or Form R-1) to better meet regulatory requirements and industry needs. The intent of the proposed revisions is to promote sound and uniform accounting and financial reporting for the types of transactions and events described herein.

Federal Register, Volume 80 Issue 130 (Wednesday, July 8, 2015)

[Federal Register Volume 80, Number 130 (Wednesday, July 8, 2015)]
[Proposed Rules]
[Pages 39021-39045]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2015-15402]

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DEPARTMENT OF TRANSPORTATION

Surface Transportation Board

49 CFR Part 1201

[Docket No. EP 720]

Accounting and Reporting of Business Combinations, Security
Investments, Comprehensive Income, Derivative Instruments, and Hedging
Activities

AGENCY: Surface Transportation Board, DOT.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Surface Transportation Board proposes to revise its
regulations to update the accounting and reporting requirements under
its Uniform System of Accounts (USOA) for Class I Railroads to be more
consistent with current generally accepted accounting principles (GAAP)
and revise the schedules and instructions for the Annual Report for
Class I Railroads (R-1 or Form R-1) to better meet regulatory
requirements and industry needs. The intent of the proposed revisions
is to promote sound and uniform accounting and financial reporting for
the types of transactions and events described herein.

DATES: Comments on this proposed rulemaking are due on or before August
7, 2015; reply comments are due by September 8, 2015.

ADDRESSES: Any filings submitted in this proceeding must be submitted
either via the Board's e-filing format or in the traditional paper
format. Any person using e-filing should attach a document and
otherwise comply with the instructions found at the E-FILING link on
the Board's Web site at www.stb.dot.gov. Any person submitting a filing
in the traditional paper format should send an original and 10 copies
and also an electronic version to: Surface Transportation Board, Attn:
Docket No. EP 720, 395 E Street SW., Washington, DC 20423-0001.

FOR FURTHER INFORMATION CONTACT: Pedro Ramirez at (202) 245-0333.
Assistance for the hearing impaired is available through the Federal
Information Relay Services (FIRS) at 1-800-877-8339.

SUPPLEMENTARY INFORMATION:

Introduction

In this notice of proposed rulemaking (NPR), the Surface
Transportation Board (Board) proposes to amend its USOA and Form R-
1.\1\ The Board proposes to add new general instructions and accounts
to recognize changes in the fair value of certain security investments,
items of other comprehensive income, derivative instruments, and
hedging activities. Additionally, the Board proposes to revise the USOA
to reflect current accounting practices for business combinations by
removing existing instructions for the pooling-of-interest method of
accounting. The Board also seeks to revise Form R-1 to include the new
accounts and the new reporting schedule proposed by this rulemaking.
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\1\ The Board has broad economic regulatory oversight of
railroads, addressing such matters as rates, service, construction,
acquisition and abandonment of rail lines, carrier mergers, and
interchange of traffic among carriers (49 U.S.C. 10101-11908). The
Board monitors the financial condition of railroads as part of its
oversight of the rail industry. The Board prescribes a uniform
accounting system for railroads to use for regulatory purposes. 49
U.S.C. 11141-43, 11161-64; 49 CFR parts 1200 and 1201. In addition,
the Board requires Class I railroads to submit quarterly and annual
reports containing financial and operating statistics, including
employment and traffic data (49 U.S.C. 11145; 49 CFR parts 1241
through 1246 and 1248).
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The Board also solicits comments on the proposed elimination of
certain schedules currently contained in Form R-1 that are not used for
any regulatory or other purposes by the Board. As there may be other
governmental agencies or interested parties that rely on the
information in some of these schedules, we are requesting comments
concerning their elimination.
The purpose of the proposed revisions is to provide sound and
uniform accounting and financial reporting for certain types of
transactions and events. The Board believes that such requirements are
needed because these types of transactions and events are neither
specifically nor correctly addressed in the existing USOA. The new
instructions, accounts, and reporting schedule would result in
improved, consistent, and complete accounting and reporting.

Background

A. General

The Interstate Commerce Act, as amended by the ICC Termination Act
of 1995 (ICCTA), Public Law 104-88, 109 Stat. 803, authorizes the
Board, in 49 U.S.C. 11142, to prescribe a uniform accounting system for
rail carriers subject to our jurisdiction and, in 49 U.S.C. 11161, to
maintain cost accounting rules for rail carriers. Sections 11142 and
11161 both require the Board to conform its accounting rules to GAAP
``[t]o the maximum extent practicable.''
In keeping with this requirement, we propose updates to the USOA to
provide for: (1) Fair value presentation of certain security
investments, derivative instruments and hedging activities; (2)
presentation of comprehensive income and components of other
comprehensive income; and (3) accounting for business combinations. The
proposed revisions are based on the generally accepted accounting
principles promulgated by the FASB in the following Accounting
Standards Codifications (ASC): ASC 320 Investments--Debt and Equity
Securities; ASC 220 Comprehensive Income; ASC 815 Derivatives and
Hedging; and ASC 805 Business Combinations.\1\
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\1\ These accounting pronouncements are available at https://asc.fasb.org.

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[[Page 39022]]

The Board considers the requirements in ASC 320, 220, 815, and 805
to be an improvement in financial accounting and reporting practices.
The Board also considers it important that its accounting requirements
are consistent with the industry's general purpose financial reporting
requirements. Therefore, the Board proposes to implement the principles
and concepts set forth in ASC 320, 220, 815, and 805 for railroad
accounting and reporting purposes effective upon issuance of a final
rule in this proceeding. The Board believes that the proposed
accounting and reporting changes would provide consistent accounting
and reporting of changes in the fair value of security investments,
derivative instruments, and hedging activities. The proposed changes
would also minimize the accounting and reporting burden on railroads
under the Board's jurisdiction, assist the Board in its overall
monitoring effort, and improve transparency.
To provide context for the Board's proposed changes, the key
aspects of the relevant FASB pronouncements are discussed in sections B
through E of this Background.

B. Investments in Debt and Equity Securities (ASC 320)

ASC 320 establishes standards of financial accounting and reporting
for investments in equity securities that have readily determinable
fair values and for all investments in debt securities. Fair value of
an equity security is readily determinable if sales prices and bid-and-
asked quotations are currently available on a securities exchange
registered with the U.S. Securities and Exchange Commission, or
publicly reported in the over-the-counter market.
ASC 320 requires entities to classify all debt securities and
selected equity securities into one of three categories: (1) Trading
securities; (2) available-for-sale securities; or (3) held-to-maturity
securities. Classification of the securities is based primarily on
management's intent for holding a particular investment.
Trading securities. Trading securities are debt and equity
securities that are bought and held principally for the purpose of
selling them in the near term, usually less than one year. These
securities are held for short periods of time with the objective of
generating profits from short-term differences in price.
Available-for-sale securities. Available-for-sale securities are
investments in debt and equity securities that have readily
determinable fair values not classified as trading securities or held-
to-maturity securities.
Held-to-maturity securities. Held-to-maturity securities are debt
securities that the entity has the positive intent and ability to hold
to maturity. For debt securities held to maturity, amortized cost is a
more relevant measure than fair value because that cost will be
realized, absent default. Therefore, changes in the fair value of
securities held to maturity are not recognized during the period the
entity holds the security investment. ASC 320 states that a debt
security that is available to be sold in response to changes in market
interest rates, changes in the security's prepayment risk, the
enterprise's need for liquidity, changes in foreign exchange risks, or
other similar factors should not be included in the held-to-maturity
category because the possibility of a sale indicates that the
enterprise does not have a positive intent and ability to hold the
security to maturity. However, under certain circumstances, a company
may change its intent concerning securities originally classified as
held-to-maturity, resulting in the securities' sale or reclassification
without calling into question the company's intent to hold other
securities to maturity.

C. Comprehensive Income (ASC 220)

The purpose of comprehensive income is to measure all changes in an
entity's equity that result from recognized transactions and other
economic events of a period other than those transactions resulting
from investment by owners and distributions to owners. When paired with
disclosure notes and other information in the financial statements, the
reporting of comprehensive income is intended to help investors,
creditors, and others assess an entity's activities and future cash
flows.
Under GAAP, comprehensive income is comprised of traditional net
income and all components of other comprehensive income. ``Other
comprehensive income'' includes revenues, expenses, gains and losses
that are included in comprehensive income but not in net income. This
includes foreign currency translation adjustments, unrealized holding
gains and losses on available-for-sale securities, changes in pension
or other post-retirement benefits, and changes in the fair value of
derivative financial instruments classified as cash-flow hedges.
GAAP requires financial statements to present comprehensive income
in two parts: (1) Net income and its components (such as income from
continuing operations, discontinued operations, and extraordinary
items); and (2) Other Comprehensive Income and its components.
Reclassifications of items from accumulated Other Comprehensive
Income to net income must be measured and presented by income statement
line item in both the statement where net income is presented and the
statement where Other Comprehensive Income is presented. This
accounting standard applies only to entities with items of Other
Comprehensive Income. Entities without Other Comprehensive Income items
are exempt from providing a statement of comprehensive income and
instead should report only net income in the statement displaying the
results of operations.

D. Derivatives and Hedging (ASC 815)

A derivative instrument is a security whose price is dependent upon
or derived from one or more underlying assets. Derivative instruments
represent rights or obligations that meet the definition of an asset or
liability and should be reported in financial statements. For
accounting purposes, a derivative instrument is a financial instrument
or other contract that has all of the following characteristics:
1. The instrument has one or more underlyings. An underlying is a
specified interest rate, security price, commodity price, foreign
exchange rate, index of prices or rates, or other variable. An
underlying may be a price or rate of an asset or liability but is not
the asset or liability itself.
2. The instrument must have one or more notional amounts or payment
provisions. A notional amount represents a quantity such as a number of
currency units, shares, bushels, pounds, or other units specified in a
derivative instrument. Those terms determine the amount of a contract's
settlement or settlements, and, in some cases, determine whether or not
a settlement is required.
3. The instrument requires either no initial net investment or an
initial net investment that is smaller than would be required for other
types of contracts that would be expected to have a similar response to
changes in market factors.
4. The instrument requires or permits net settlement, and can
readily be settled net by a means outside the contract, or provides for
delivery of an asset that puts the recipient in a position not
substantially different from net settlement.
Certain types of contracts are exempted from the requirements of
ASC 815 to avoid burdening certain industries and markets. For example,
normal purchases and normal sales

[[Page 39023]]

contracts that provide for the purchase or sale of goods that will be
delivered in quantities expected to be used or sold by the reporting
entity over a reasonable period of time and in the normal course of
business are not considered derivative instruments. This exception is
commonly referred to as the normal purchases and normal sales scope
exception. The exception would include typical purchases and sales of
inventory items, certain insurance contracts, and employee compensation
agreements. Derivative instruments that do not qualify for the normal
purchases and normal sales scope exception or other exceptions provided
for under the statement are reflected in the financial statements.
Consequently, most futures, forwards, swaps, and option contracts meet
the definition of a derivative instrument and changes in their fair
value would be reflected in the financial statements.
Accounting for a Derivative Instrument. Accounting for changes in
the fair value of a derivative instrument depends upon its intended use
and designation. Essentially, for certain derivative instruments not
designated as hedging instruments, gain or loss is recognized as
earnings in the period of change. The change in the value of the
derivative instrument is reflected on the balance sheet as an asset or
liability with a corresponding amount recognized in earnings. This
accounting effectively provides users of the financial statements with
information concerning the value of the derivative instrument as if it
had been settled in the market place.
Hedge Accounting. A hedge is an instrument's position intended to
offset potential losses or gains that may be incurred by a companion
investment. Entities hedge to manage risk to prices or interest rates
(among other things). Provided certain criteria are met, a derivative
may be specifically designated as a fair-value or cash-flow hedge.
Under the rules for hedge accounting, the changes in the fair value of
the derivative instrument are measured at fair value with adjustments
made to the carrying amount of the items being hedged (as in a fair-
value hedge) or to Other Comprehensive Income (as in a cash-flow hedge)
to the extent the hedge is effective.
1. Fair-Value Hedge. In a fair-value hedge, a derivative instrument
is designated as a hedge against exposure to changes in the fair value
of a recognized asset, liability, or a firm commitment.\2\ The change
in value of the derivative instrument is recognized in earnings in the
period of the change together with the offsetting gain or loss on the
hedged item attributable to the risk. To the extent that a hedge is
perfectly effective, it will produce the same offsetting amounts in
earnings so that net income is not impacted by the hedge. However,
amounts would be reflected in earnings to the extent that the hedge is
not effective in offsetting the change in value of the item being
hedged. Additionally, fair-value accounting results in an adjustment of
the carrying amount of the hedged asset or liability. In the case of a
fair-value hedge of a firm commitment, a new asset or liability is
created. As a result of the hedge relationship, the new asset or
liability ultimately becomes part of the carrying amount of the item
being hedged.
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\2\ A firm commitment is an agreement with an unrelated party,
binding on both parties, that is usually legally enforceable and
that specifies all significant terms and includes a disincentive for
nonperformance.
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2. Cash-Flow Hedge. A cash-flow hedge uses a derivative instrument
to protect against the risk caused by variable prices or costs, which
may cause future cash flows to be uncertain. This type of instrument
protects against an anticipated or forecasted transaction that probably
will occur in the future but the amount of which has not been fixed.
In a cash-flow hedge, the effective portion of the derivative
instrument's gain or loss is initially reported as a component of Other
Comprehensive Income (outside net income). The ineffective portion of
the gain or loss is reported in earnings immediately. Amounts in
accumulated Other Comprehensive Income are reclassified into earnings
in the same period during which the hedged forecasted item affects
earnings.
Documentation of Hedge Relationship. Entities must keep extensive
documentation of the hedge relationship. An entity that elects to apply
the special hedge accounting principles is required to document, at the
inception of the hedge, the risk management objective and strategy for
undertaking the hedge, including the hedge instrument, the related
transaction, the nature of the risk being hedged, and how effectiveness
will be determined.
A company's documentation of its overall risk management philosophy
is essential in addressing the role that derivative instruments and
hedging activities play in achieving the company's risk management
objectives. Concurrent designation and documentation of a hedge is
critical because an entity could retroactively identify a transaction
as a hedge or change a method of measuring effectiveness to achieve a
desired outcome. At the inception of the hedge, formal documentation is
required that identifies the hedging instrument, and specifically the
hedged item or transaction, along with the nature of the risk being
hedged. Entities are required to formally document how effectiveness
will be assessed at the adoption of the hedge and on an ongoing basis.

E. Business Combinations (ASC 805)

A business combination is a transaction or other event in which one
or more businesses obtain control of another business. It also includes
transactions involving mergers of equals and certain acquisitions by a
not-for-profit entity. ASC 805--Business Combinations requires that a
business combination be accounted for by applying the acquisition
method.
The acquisition method requires the acquiring entity to recognize
and measure, as of the acquisition date, the identifiable assets
acquired, liabilities assumed, and any noncontrolling interest in the
acquired entity. The acquiring entity must also recognize and measure
goodwill (the excess of purchase price over net assets, related to the
acquisition) or a gain resulting from a bargain purchase.

Discussion

A. General. The Board's existing USOA does not specifically address
the proper accounting and reporting for changes in the fair value of
certain security investments, derivative instruments, and hedging
activities. Additionally, the existing USOA does not contain specific
accounts to record amounts related to items of Other Comprehensive
Income or provide a format to display comprehensive income in the Form
R-1. The USOA's accounting for business combinations must also be
revised to reflect the acquisition accounting method, as required in
ASC 805.
Without specific instructions and accounts for recording and
reporting certain transactions and events, inconsistent and incomplete
accounting would result. For example, if the effects of certain
derivative instruments and hedging activities are not properly reported
to the Board in the Form R-1, it would be difficult for the Board and
others to determine the impact of derivatives on regulated carriers'
financial statements and Results of

[[Page 39024]]

Operations Statements.\3\ The addition of new accounts and related
general instructions is intended to improve the visibility,
completeness, and consistency of accounting and reporting of changes in
the fair value of certain investment securities, items of Other
Comprehensive Income, derivatives instruments, and hedging activities.
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\3\ Results of Operations Statements, also referred to as a
Profit and Loss Statement, Statement of Operations, or Statement of
Income, appear in the Form R-1 and reflect the profitability (i.e.
revenues, expenses, gains, and losses) of a company during the year
specified in the heading of the R-1 annual report. The statements do
not show cash receipts or cash disbursements.
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Also, the addition of the proposed new accounts and related
reporting requirements to the Form R-1 would reduce regulatory
uncertainty as to the proper accounting and reporting for these items
and minimize regulatory burden by reducing the potential differences in
the manner in which these amounts are reported to shareholders and to
the Board. Finally, the reporting of derivative instruments and hedging
activities by regulated carriers would assist the Board in its overall
monitoring effort as well as its ability to assess railroad industry
growth and financial stability. Further, such reporting would assist
the Board in identifying industry changes that may affect national
transportation policy.
B. Proposed Accounting for Trading and Available-for-Sale Type
Securities. Under the Board's USOA, all types of securities are
recorded at cost, and subsequent changes in the fair value of security
investments are not recognized in the financial statements.
The Board is of the view that fair-value measurement of trading and
available-for-sale type securities presents relevant and useful
information to existing and potential investors, creditors, regulators,
and others in making credit and other decisions. Fair-value
measurements would also provide useful information to the Board
concerning the status of certain amounts set aside to fund future
obligations.
Therefore, the Board proposes to add language to its investment
account requirements for rail carriers to permit the recognition of
changes in the fair value of trading and available-for-sale types of
securities due to unrealized holding gains and losses. The security
investment asset accounts for railroads are: Account 702, Temporary
Cash Investments; Account 721, Investments and Advances: Affiliated
Companies; Account 722, Other Investments and Advances; Account 715,
Sinking Funds; Account 716, Capital Funds; and Account 717, Other
Funds.
C. Proposed Accounting for Other Comprehensive Income. The existing
USOA does not contain specific accounts to record amounts related to
items of Other Comprehensive Income or provide a format to display
comprehensive income in the Form R-1. Therefore, entities currently
record items of Other Comprehensive Income in Account 606. However, as
part of the proposed rule, the USOA would be revised to provide
accounting for such items. Thus, the use of Account 606 in the USOA to
record items of Other Comprehensive Income would no longer be
appropriate. Instead, these items would be accounted for elsewhere in
the USOA.
A new equity account (Account 799, Accumulated Other Comprehensive
Income) is also proposed to include the accumulated balance for items
of Other Comprehensive Income. The account would require that railroads
maintain supporting records for each category of Other Comprehensive
Income and report such information in their Form R-1. Detailed records
would be maintained so that the current period activity, year-to-date
activity, and reclassification adjustments related to items of Other
Comprehensive Income could be readily identified. Maintaining detailed
records for items included in accumulated Other Comprehensive Income is
necessary to ensure that a railroad can readily identify amounts when
an item is included in net income in subsequent periods.
As proposed, a new equity sub-account entitled Account 799.1, Other
Comprehensive Income, would be established to include amounts for items
of Other Comprehensive Income for the reporting year. The purpose of
this account is to record the activity for items of Other Comprehensive
Income during a fiscal year. At year end, the amounts recorded in sub-
account 799.1 would be transferred to the new equity Account 799.
Consequently, Account 799.1, as proposed, would always have a zero
beginning and year-end balance. Therefore, the Board proposes not to
include this account as part of the balance sheet schedules.
To increase the prominence of items that are recorded in Other
Comprehensive Income and also to improve comparability and transparency
in financial statements, the Board has developed a two-statement
approach. This two-statement approach includes Schedule 210, Results of
Operations, and Schedule 210A, Consolidated Statement of Other
Comprehensive Income. Schedule 210 would show the components of net
income and total net income. Schedule 210A, which would immediately
follow Schedule 210, would reflect the components of Other
Comprehensive Income, a total for Other Comprehensive Income, and a
total for Comprehensive Income. Schedule 210A would begin with net
income.
The proposed instructions for the Other Comprehensive Income
accounts for all railroads would require that supporting records be
maintained by each category of Other Comprehensive Income. This level
of detail would be required to ensure that the railroad is able to
identify the amounts associated with an item when it is entered into
the determination of net income, and the railroad effectively moves the
recognition of the item from Other Comprehensive Income to net income.
Finally, items recognized in Other Comprehensive Income that are
later recognized in net income require a reclassification adjustment in
order to avoid double counting an item in both net income and Other
Comprehensive Income. The proposed instructions for Accounts 799 and
799.1 would require the railroad to make reclassification adjustments
directly to these accounts, as appropriate. This proposed accounting
treatment for reclassification adjustments would minimize the need for
creating a new account to capture amounts solely related to
reclassification adjustments. Items reclassified from Other
Comprehensive Income to net income would no longer be presented in
footnotes to the financial statements. Further, the adjustments must be
shown on the face of the financial statements where the components of
net income and Other Comprehensive Income are presented; corresponding
adjustments must appear in both net income and Other Comprehensive
Income.
D. Proposed Accounting for Derivatives and Hedging Activities. The
Board proposes to revise the USOA to provide accounting for derivative
instruments and hedging activities. The Board's existing USOA does not
contain specific accounts to record changes in the fair value of
derivative instruments used in hedging and non-hedging activities. The
addition of new accounts and instructions would provide improved
visibility and completeness of accounting and reporting of derivative
instruments and hedging activities.
Proposed General Instructions for Fair-Value and Cash-Flow Hedges.
The Board proposes to add a new general instruction that would require
railroads to record changes in the fair value of the derivative
instrument (the effective portion of the gain or loss) designated as a
cash-flow hedge to Other

[[Page 39025]]

Comprehensive Income. The ineffective portion of the cash-flow hedge
would be charged to the same income or expense account that would have
been used if the hedged item had been disposed of, or otherwise
settled.
The proposed instructions would also require railroads to record
changes in the fair value of a derivative instrument designated as a
fair-value hedge in this account with a concurrent charge to a sub
account of the asset or liability that carries the item being hedged.
The ineffective portion of the fair-value hedge would be charged to the
same income or expense account that would have been used if the hedged
item had been disposed of, or otherwise settled.
Proposed Accounting for Derivative Assets and Liabilities. The
Board proposes to establish new asset and liability accounts that would
include amounts related to the changes in the fair value of derivative
instruments not designated as cash-flow or fair-value hedges. The
proposed accounts are Account 713.5, Derivative Instrument Assets and
Account 763.5, Derivative Instrument Liabilities. Railroads would
charge Account 551, Miscellaneous Income Charges, with the
corresponding amount of the change in the fair value of the derivative
instruments.
Proposed Accounting for Fair-Value and Cash-Flow Hedges. As
proposed, railroads would be required to establish a new asset and
liability account that would include amounts related to the changes in
the fair value of derivative instruments designated as a cash-flow or
fair-value hedge. The new asset account is Account 713.6, Derivative
Instrument Assets-Hedges and the new liability account would be Account
763.6, Derivative Instrument Liabilities--Hedges.
E. Proposed Changes to and Elimination of Certain Schedules to the
Form R-1. The proposed accounting changes, if adopted, would require
changes to existing Schedule 200, Comparative Statement of Financial
Position, and Schedule 210, Results of Operations.\4\ The Board also
would add a new Schedule 210A, entitled ``Consolidated Statement of
Comprehensive Income,'' with instructions on the proper footnote
disclosures for the Form R-1 in order to provide consistent accounting
and reporting of items of Other Comprehensive Income. This proposed
schedule is modeled after an income-statement approach which provides
the most transparency for the components of Other Comprehensive Income
and is more consistent with the overall framework of the FASB Concepts
Statement. The proposed income-statement format would also avoid
duplication of data already reported on other schedules. This new
schedule would show the components of Other Comprehensive Income and
would require the following to be contained in a footnote to the
schedule:
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\4\ The proposed revised schedules appear in Appendix A.
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(1) Reporting of categories of Other Comprehensive Income on a net-
of-tax basis, where appropriate, along with the reporting of related
tax effects allocated to each component;
(2) Reporting of accumulated Other Comprehensive Income balances at
year end by category;
(3) Reporting of fair-value hedge balances at year end by category.
The Board concludes that the proposed reporting requirements would
not be a significant reporting burden to the railroad industry since
the information is already being captured by the railroads' accounting
systems for internal and external reporting.
F. Proposed Accounting for Business Combinations. FASB established
ASC 805 Business Combinations requiring the acquisition method of
accounting for all business combinations. This methodology is now
standard practice in the accounting industry, and the Board agrees that
the acquisition method better reflects the investment made in an
acquired entity and has affirmed the use of this treatment in Western
Coal Traffic League--Petition for Declaratory Order, FD 35506, slip op
at 6-17 (STB served July 25, 2013). We propose to update the USOA to
reflect this accounting treatment. We also seek comment on the
application of Instruction 2-15, paragraph (d) with respect to the
utilization of the pooling of interest method for transactions
involving the acquisition and merger of property of subsidiaries in
Instructions for Property Accounts.
G. Elimination of Certain Schedules in Annual Report Form R-1. The
Board and its predecessor, the ICC, have collected financial and
accounting data from regulated railroads since the 1880's. Information
from the carriers' annual reports is used in the Board's oversight and
regulatory missions. Reduction of unnecessary reporting requirements
has been a long-standing goal of the Board and ICC. In a policy
statement issued in 1979, the ICC specified that only information
needed to carry out its functions should be collected.\5\ Since then,
reporting requirements have been eliminated for non-Class I carriers
and the dollar threshold for inclusion as a Class I carrier has been
raised to $250 million, indexed for inflation. Thus, significant
reductions in the financial and accounting reporting burden for
railroads have already been accomplished.
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\5\ See Policy Statement on Fin. & Statistical Reporting, 44 FR
27537 (1979).
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However, we have examined the current Form R-1 filed by the Class I
railroads and have determined that 15 of the 47 schedules are no longer
used by the STB to perform our regulatory and oversight functions.
Therefore, we are proposing to eliminate these 15 schedules from the
Form R-1, as listed below:

230 Capital Stock
339 Accrued Liability--Leased Property
340 Depreciation Base and Rates--Improvements to Road and Equipment
Leased from Others
350 Depreciation Base and Rates--Road and Equipment Leased to Others
351 Accumulated Depreciation--Road and Equipment Leased to Others
416 Supporting Schedule--Road
418 Supporting Schedule--Capital Leases
460 Items in Selected Income and Retained Earnings Accounts for the
Year
702 Miles of Road at Close of Year--By States and Territories (Single
Track)
721 Ties Laid in Replacement
722 Ties Laid in Additional Tracks and in New Lines and Extensions
723 Rails Laid in Replacement
724 Rails Laid in Additional Tracks and in New Lines and Extensions
725 Weight of Rail
726 Summary of Track Replacements

Periodic Review

To ensure that the Board's accounting and reporting requirements
reflect, to the extent practicable, current GAAP principles, the Board
will conduct a periodic review of its accounting standards not less
than every five years. This periodic review will be initiated through
the rulemaking process, thereby affording interested parties an
opportunity for notice and comment.

Paperwork Reduction Act

Pursuant to the Paperwork Reduction Act (PRA), 44 U.S.C. 3501-3549,
and Office of Management and Budget (OMB) regulations at 5 CFR
1320.8(d)(3), the Board seeks comments regarding: (1) Whether the
revisions to the collection of information proposed here are necessary
for the proper performance of the functions of the Board, including
whether the collection

[[Page 39026]]

has practical utility; (2) the accuracy of the Board's burden
assessment; (3) ways to enhance the quality, utility, and clarity of
the information collected; and (4) ways to minimize the burdens of the
collections of information on the respondents, including the use of
automated collection techniques or other forms of information
technology, when appropriate. Additional information related to these
questions can be found in Appendix B below. The proposed information-
collection revisions described in this decision are being submitted to
OMB for review as required under the PRA, 5 U.S.C. 3507(d) and OMB
regulations at 5 CFR 1320.11. Comments received by the Board regarding
the information collection will also be forwarded to OMB for its review
when the final rule is published.

Regulatory Flexibility Act Statement

The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612,
generally requires a description and analysis of new rules that would
have a significant economic impact on a substantial number of small
entities. In drafting a rule, an agency is required to: (1) Assess the
effect that its regulation will have on small entities; (2) analyze
effective alternatives that may minimize a regulation's impact; and (3)
make the analysis available for public comment. Sections 601-604. In
its notice of proposed rulemaking, the agency must either include an
initial regulatory flexibility analysis, section 603(a), or certify
that the proposed rule would not have a ``significant impact on a
substantial number of small entities,'' section 605(b).
Because the goal of the RFA is to reduce the cost to small entities
of complying with federal regulations, the RFA requires an agency to
perform a regulatory flexibility analysis of small entity impacts only
when a rule directly regulates those entities. In other words, the
impact must be a direct impact on small entities ``whose conduct is
circumscribed or mandated'' by the proposed rule. White Eagle Coop.
Ass'n v. Conner, 553 F.3d 467, 478, 480 (7th Cir. 2009).
This proposal will not have a significant economic impact upon a
substantial number of small entities within the meaning of the RFA. The
proposed rule would affect only entities that are required to file Form
R-1 reports; these reports are only required to be submitted by Class I
carriers. 49 CFR 1241.1. Class I carriers are large railroads;
accordingly, there will be no impact on small railroads (small
entities).

Authority. 49 U.S.C. 11142 and 11164.

List of Subjects in 49 CFR Part 1201

Railroads, Uniform System of Accounts.

Decided: June 18, 2015.

By the Board, Acting Chairman Miller and Vice Chairman Begeman.
Brendetta S. Jones,
Clearance Clerk.

For the reasons set forth in the preamble, the Surface
Transportation Board proposes to amend part 1201 of title 49, chapter
X, of the Code of Federal Regulations as follows:

PART 1201--RAILROAD COMPANIES

0
1. The authority citation for part 1201 continues to read as follows:

Authority: 49 U.S.C. 11142 and 11164.

Subpart A--Uniform System of Accounts

0
2. Amend Regulations Prescribed by revising paragraph (ii), item 16(c),
to read as follows:

List of Instructions and Accounts

REGULATIONS PRESCRIBED

* * * * *
(ii) * * *
16. * * *
(c) Cost, as applied to a marketable equity security, refers to the
original cost as adjusted for unrealized holding gains and losses.
* * * * *
3. Amend General Instructions by adding Instructions 1-19 and 1-20
to read as follows:

GENERAL INSTRUCTIONS

* * * * *
1-19 Accounting for Other Comprehensive Income. (a) Railroads will
record items of Other Comprehensive Income in account 799.1, Other
comprehensive income. Amounts included in this account will be
maintained by each category of Other Comprehensive Income. Examples of
categories of Other Comprehensive Income include foreign currency
items, minimum pension liability adjustments, unrealized gains and
losses on available-for-sale type securities and cash-flow hedge
amounts.
(b) Supporting records will be maintained for account 799 so that
the company can readily identify the cumulative amount of Other
Comprehensive Income for each item included in this account.
(c) When an item of Other Comprehensive Income enters into the
determination of earnings in the current or subsequent periods, a
reclassification adjustment will be recorded in accounts 799 to avoid
double counting of when an item included in net income was also
included in Other Comprehensive Income in the same or prior period.
1-20 Accounting for derivative instruments and hedging activities.
(a) A carrier will recognize derivative instruments as either assets or
liabilities in the financial statements and measure those instruments
at fair value. A derivative instrument is a financial instrument or
other contract with all three of the following characteristics:
(1) The derivative instrument has one or more underlyings and a
notional amount or payment provision. Those terms determine the amount
of the settlement or settlements, and, in some cases, whether or not a
settlement is required.
(2) The derivative instrument requires no initial net investment or
an initial net investment that is smaller than would be required for
other types of contracts that would be expected to have similar
responses to changes in market factors.
(3) The derivative instrument's terms require or permit net
settlement; the derivative instrument can readily be settled net by a
means outside the contract; or the derivative instrument's terms
provide for delivery of an asset that puts the recipient in a position
not substantially different from net settlement.
(b) The accounting for the changes in the fair value of derivative
instruments depends upon their intended use and designation. Changes in
the fair value of derivative instruments not designated as fair value
or cash flow hedges will be recorded in account 713.5, Derivative
instrument assets, or account 763.5, Derivative instrument liabilities,
as appropriate, with the gains or losses charged to earnings in account
551, Miscellaneous income charges.
(c) A derivative instrument may be specifically designated as a
fair-value or cash-flow hedge. A hedge may be used to manage risk to
price, interest rates, or foreign currency transactions. An entity will
maintain documentation of the hedge relationship at the inception of
the hedge that details the risk management objective and strategy for
undertaking the hedge, the nature of the risk being hedged, and how
hedge effectiveness will be determined.
(d) If the carrier designates the derivative instrument as a fair-
value hedge against exposure to changes in the fair value of a
recognized asset, liability, or a firm commitment, it will record the
change in fair value of the derivative instrument designated as a

[[Page 39027]]

fair-value hedge to account 713.6, Derivative instruments assets--
hedges, or account 763.6, Derivative instrument liabilities--hedges, as
appropriate, with a corresponding adjustment to the sub-account of the
item being hedged. The ineffective portion of the hedge transaction
will be reflected in the same income or expense account that would have
been used if the hedged item had been disposed of or settled. In the
case of a fair-value hedge of a firm commitment, a new asset or
liability is created. As a result of the hedge relationship, the new
asset or liability will become part of the carrying amount of the item
being hedged.
(e) If the carrier designates the derivative instrument as a cash-
flow hedge against exposure to variable cash flows of a probable
forecasted transaction it will record changes in the fair value of the
derivative instrument in account 713.6, Derivative instrument assets--
hedges, or account 763.6, Derivative instrument liabilities--hedges, as
appropriate, with a corresponding amount in account 799.1, Other
comprehensive income, for the effective portion of the hedge. The
ineffective portion of the hedge transaction will be reflected in the
same income or expense account that would have been used if the hedged
item had been disposed of or settled. Amounts recorded in Other
Comprehensive Income will be reclassified into earnings in the same
period or periods that the hedged forecasted item affects earnings.
0
4. Amend Instructions For Property Accounts by:
0
a. Revising paragraph (a) in Instruction 2-15;
0
b. Removing paragraph (b) in Instruction 2-15;
0
c. Redesignating paragraph (c) as paragraph (b) in Instruction 2-15;
0
d. Revising the newly designated paragraph (b) in Instruction 2-15; and
0
e. Redesignating paragraph (d) as paragraph (c) in Instruction 2-15.
The revisions read as follows:

INSTRUCTIONS FOR PROPERTY ACCOUNTS

* * * * *
2-15 * * * (a) When a railway or portion thereof constituting an
operating unit or system is acquired in a business combination, that
business combination shall be recorded in the accounts in the manner
stated hereunder.
(b) Purchase:
(1) The amount includible in account 731, Road and equipment
property, shall be the cost at the date of acquisition to the purchaser
of the transportation property acquired. The cost assigned the
property, as well as other assets acquired, shall be the amount of the
cost consideration given. Where property and other assets are acquired
for other than cash, including liabilities assumed and shares of stock
issued, cost shall be determined by either the fair value of the
consideration given or the fair value of the assets acquired, whichever
is more clearly evident. In addition to any liabilities assumed,
provision shall be made for such estimated liabilities as may be
necessary.
(2) When the costs of individual units or classes of transportation
property are not specified in the agreement, the cost assigned such
property shall be apportioned among the appropriate primary accounts
using the percentage relationship between the fair values for each
class of property acquired and the total of such values.
* * * * *
0
5. Amend Instructions For Income And Balance Sheet Accounts by revising
Instruction 5-2, paragraph (a), items (2), (3), and (4) to read as
follows:

INSTRUCTIONS FOR INCOME AND BALANCE SHEET ACCOUNTS

* * * * *
5-2 * * *
(a) * * *
(2) Account 702, Temporary cash investments, account 721,
Investments and advances; affiliated companies, and account 722, Other
investments and advances, shall be maintained in such a manner as to
reflect the marketable equity portion (see definition 26) and other
securities or investments.
(3) For the purpose of determining net ledger value, the marketable
equity securities in account 702 shall be considered the current
portfolio and the marketable equity securities in accounts 721 and 722
(combined) shall be considered the noncurrent portfolio.
(4) Carriers will categorize their security investments as held-to-
maturity, trading, or available-for-sale. Unrealized holding gains and
losses on trading type investment securities will be recorded in
account 551, Miscellaneous income charges. Unrealized holding gains and
losses on available-for-sale type investment securities will be
recorded in account 799.1, Other comprehensive income.
* * * * *
0
6. Amend Income Accounts--Ordinary Items by adding a sentence at the
end of the list of inclusions for account 551 ``Miscellaneous income
charges,'' paragraph (a) to read as follows:

INCOME ACCOUNTS

Ordinary Items

* * * * *

551 Miscellaneous income charges.

(a) * * *
Unrealized holding gains and losses on trading type investment
securities.
* * * * *
0
7. Amend General Balance Sheet Accounts Explanations--Assets, Current
Assets by:
0
a. Adding a sentence to the end of the first paragraph in account 702
``Temporary cash investment'';
0
b. Adding accounts 713.5 ``Derivative instrument assets'' and 713.6
``Derivative instrument assets-hedges.''
The additions read as follows:

GENERAL BALANCE SHEET ACCOUNTS EXPLANATIONS

Assets

Current Assets
* * * * *

702 Temporary cash investments.

* * * This account shall also include unrealized holding gains and
losses on trading and available-for-sale types of security investments.
* * * * *

713.5 Derivative instrument assets.

This account shall include the amounts paid for derivative
instruments, and the change in the fair value of all derivative
instrument assets not designated as cash-flow or fair-value hedges.
Account 551, Miscellaneous income charges, will be charged with the
corresponding amount of the change in the fair value of the derivative
instrument.

713.6 Derivative instrument assets-hedges.

(a) This account shall include the amounts paid for derivative
instruments, and the change in the fair value of derivative instrument
assets designated by the utility as cash-flow or fair-value hedges.
(b) When a carrier designates a derivative instrument asset as a
cash-flow hedge, it will record the change in the fair value of the
derivative instrument in this account with a concurrent charge to
account 799.1, Other comprehensive income, with the effective portion
of the derivative's gain or loss. The ineffective portion of the cash-
flow hedge will be charged to the same income or expense account that
would have been used if the hedged item had been disposed of or
otherwise settled.

[[Page 39028]]

(c) When a carrier designates a derivative instrument as a fair-
value hedge, it will record the change in the fair value of the
derivative instrument in this account with a concurrent charge to a
sub-account of the asset or liability that carries the item being
hedged. The ineffective portion of the fair-value hedge will be charged
to the same income or expense account that would have been used if the
hedged item had been disposed of or otherwise settled.
* * * * *
0
8. Amend General Balance Sheet Accounts Explanations--Assets, Special
Funds by:
0
a. In account 715 ``Sinking funds,'' adding two sentences to the end of
paragraph (b);
0
b. In account 716 ``Capital funds,'' adding a sentence to the end of
paragraph (a); and
0
c. In account 717 ``Other funds,'' adding Note E.
The additions read as follows:

GENERAL BALANCE SHEET ACCOUNTS EXPLANATIONS

Assets

Special Funds

715 Sinking funds.

* * * * *
(b) * * * This account shall also include unrealized holding gains
and losses on trading and available-for-sale types of security
investments. The cash value of life insurance policies on the lives of
employees and officers to the extent that the carrier is the
beneficiary of such policies shall also be included in this account.
* * * * *

716 Capital funds.

(a) * * * This account shall also include unrealized holding gains
and losses on trading and available-for-sale types of security
investments.
* * * * *

717 Other funds.

* * * * *
Note E: This account shall also include unrealized holding gains
and losses on trading and available-for-sale types of security
investments.
0
9. Amend General Balance Sheet Accounts Explanations--Assets,
Investments by:
0
a. In account 722 ``Other investments and advances,'' adding two
sentences to the end of paragraph (a); and
0
b. Removing account 724 ``Allowance for net unrealized loss on
noncurrent marketable equity securities--Cr.''
The addition reads as follows:

GENERAL BALANCE SHEET ACCOUNTS EXPLANATIONS

Assets

Investments

* * * * *

722 Other investments and advances.

(a) * * * This account shall also include unrealized holding gains
and losses on trading and available-for-sale types of security
investments. Include also the offsetting entry to the recording of
amortization of discount or premium on interest bearing investments.
* * * * *
0
10. Amend General Balance Sheet Accounts Explanations--Liabilities and
Shareholders' Equity, Current Liabilities by adding accounts 763.5
``Derivative instrument liabilities'' and 763.6 ``Derivative instrument
liabilities-hedges'',to read as follows:

GENERAL BALANCE SHEET ACCOUNTS EXPLANATIONS

Liabilities and Shareholders' Equity

Current Liabilities
* * * * *

763.5 Derivative instrument liabilities.

This account shall include the change in the fair value of all
derivative instrument liabilities not designated as cash-flow or fair-
value hedges. Account 551, Miscellaneous income charges, will be
charged with the corresponding amount of the change in the fair value
of the derivative instrument.

763.6 Derivative instrument liabilities-hedges.

(a) This account shall include the change in the fair value of
derivative instrument liabilities designated by the carrier as cash-
flow or fair-value hedges.
(b) A carrier will record the change in the fair value of a
derivative instrument liability related to a cash-flow hedge in this
account, with a concurrent charge to account 799.1, Other comprehensive
income, with the effective portion of the derivative instrument's gain
or loss. The ineffective portion of the cash-flow hedge will be charged
to the same income or expense account that would have been used if the
hedged item had been disposed of or otherwise settled.
(c) A carrier will record the change in the fair value of a
derivative instrument liability related to a fair-value hedge in this
account, with a concurrent charge to a sub-account of the asset or
liability that carries the item being hedged. The ineffective portion
of the fair-value hedge will be charged to the same income or expense
account that would have been used if the hedged item had been disposed
of or otherwise settled.
* * * * *
0
11. Amend General Balance Sheet Accounts Explanations--Liabilities and
Shareholders' Equity, Shareholders' Equity by:
0
a. Removing account 798.1 ``Net unrealized loss on noncurrent
marketable securities''; and
0
b. Adding account 799 ``Accumulated Other Comprehensive Income.''
The addition reads as follows:

GENERAL BALANCE SHEET ACCOUNTS EXPLANATIONS

Liabilities and Shareholders' Equity

Shareholders' Equity
* * * * *

799 Accumulated Other Comprehensive Income.

(a) This account shall include revenues, expenses, gains, and
losses that are properly includable in Other Comprehensive Income
during the period. Examples of items of Other Comprehensive Income
include foreign currency items, minimum pension liability adjustments,
unrealized gains and losses on certain investments in debt and equity
securities, and cash-flow hedges. Records supporting the entries to
this account shall be maintained so that the carrier can furnish the
amount of Other Comprehensive Income for each item included in this
account.
(b) This account shall also be debited or credited, as appropriate,
with amounts of accumulated Other Comprehensive Income that have been
included in the determination of net income during the period and in
accumulated Other Comprehensive Income in prior periods. Separate
records for each category of items will be maintained to identify the
amount of the reclassification adjustments from accumulated Other
Comprehensive Income to earnings made during the period.
0
12. Revise the Form of General Balance Sheet Statement, Assets to read
as follows:
Form of General Balance Sheet Statement
The classified form of general balance sheet statement is designed
to show the financial condition of the accounting company at any
specified date.

[[Page 39029]]

Assets
------------------------------------------------------------------------

-------------------------------------------------------------------------
Current assets:
701. Cash.
702. Temporary cash investments.
703. Special deposits.
704. Loans and notes receivable.
705. Accounts receivable; Interline and other balances.
706. Accounts receivable; Customers.
707. Accounts receivable; Other.
708. Interest and dividends receivable.
708.5. Receivables from affiliated companies.
709. Accrued accounts receivable.
709.5. Allowance for uncollectible accounts.
Net receivables.
710. Working funds.
711. Prepayments.
712. Material and supplies.
713. Other current assets.
713.5 Derivative instrument assets
713.6 Derivative instrument assets--hedges
714. Deferred income tax debits.
Total current assets.
Special funds:
715. Sinking funds.
716. Capital funds.
717. Other funds.
Total special funds.
Investments:
721. Investments and advances; affiliated companies.
Undistributed earnings from certain investments in account 751.
721.5. Adjustments; investments and advances--affiliated companies.
Net--investments and advances--affiliated companies.
722. Other investments and advances.
723. Adjustments; Other investments and advances.
Net--other investments and advances.
Total investments.
Tangible property:
731. Road and equipment property.
735. Accumulated depreciation; Road and equipment property.
736. Accumulated amortization; Road and equipment property--Defense
projects.

Net road and equipment property.
732. Improvements on leased property.
733. Accumulated depreciation; Improvements on leased property.
734. Accumulated amortization; Improvements on leased property--
Defense projects.
Net improvements on leased property.
Total carrier property.
737. Property used in other than carrier operations.
738. Accumulated depreciation; Property used in other than carrier
operations.
Net--property used in other than carrier operations.
Total tangible property.
Intangible property:
739. Organization expenses.
Other assets and deferred debits:
741. Other assets.
743. Other deferred debits.
744. Accumulated deferred income tax debits.
Total other assets and deferred debits.
Total assets.
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
751. Loans and notes payable.

[[Page 39030]]

752. Accounts payable; Interline and other balances.
753. Audited accounts and wages payable.
754. Accounts payable; Other.
755. Interest payable.
756. Dividends payable.
757. Payables to affiliated companies.
759. Accrued accounts payable.
760. Federal income taxes accrued.
761. State and other income taxes accrued.
761.5. Other taxes accrued.
762. Deferred income tax credits.
763. Other current liabilities.
763.5 Derivative instrument liabilities
763.6 Derivative instrument liabilities-hedges
764. Equipment obligations and other long-term debt due within one
year.
Total current liabilities.
Long-term debt due after one year: \1\
765. Funded debt unmatured.
766. Equipment obligations.
766.5. Capitalized lease obligations.
767. Receivers' and trustees' securities.
768. Debt in default.
769. Accounts payable; Affiliated companies.
770.1 Unamortized debt discount.
770.2 Unamortized premium on debt.
Total long-term debt due after one year.
Other long-term liabilities:
771. Accrued liability; Pension and welfare.
772. Accrued liability; Leased property.
774. Accrued liability; Casualty and other claims.
775. Other accrued liabilities.
781. Interest in default.
782. Other liabilities.
Total other long-term liabilities.
Deferred credits:
783. Deferred revenues--transfers from government authorities.
784. Other deferred credits.
786. Accumulated deferred income tax credits.
Total deferred credits.
Shareholders' equity:
Capital stock:
791. Capital stock.
792. Liability for conversion of capital stock.
793. Discount on capital stock.
Total capital stock.
Additional capital:
794. Premiums and assessments on capital stock.
795. Other capital.
Total additional capital.
Retained earnings:
797. Retained earnings; Appropriated.
798. Retained earnings; Unappropriated.
Total retained earnings.
798.5 Treasury stock.
799. Accumulated Other Comprehensive Income
Total shareholders' equity.
Total liabilities and shareholders' equity.
------------------------------------------------------------------------
\1\To be divided as to ``Total issued'' and ``Held by or for company.''

0
13. Amend Conversion Tables by revising General Balance Sheet Accounts
conversion table to read as follows:

CONVERSION TABLES

* * * * *

[[Page 39031]]

General Balance Sheet Accounts Conversion Table
----------------------------------------------------------------------------------------------------------------
System of accounts eff. prior to Month XX, 2015 System of accounts eff. Month, XX, 2015
----------------------------------------------------------------------------------------------------------------
Account title No. No. Account title
----------------------------------------------------------------------------------------------------------------
Cash....................................... 701 701 Cash.
Temporary cash investments................. 702 702 Temporary cash investments.
Special deposits........................... 703 703 Special deposits.
Loans and notes receivable................. 704 704 Loans and notes receivable.
.............. 708.5 Receivables from affiliated
companies.
.............. 709.5 Allowance for uncollectible
accounts.
Traffic, car service and other balances--dr 705 705 Accounts receivable; interline and
other balances.
.............. 709.5 Allowances for uncollectible
accounts.
.............. 752 Accounts payable; interline and
other balances.
Net balance receivable from agents and 706 706 Accounts receivable; customers.
conductors.
Miscellaneous accounts receivable.......... 707 707 Accounts receivable; other.
.............. 708.5 Receivables from affiliated
companies.
.............. 709.5 Allowance for uncollectible
accounts.
Interest and dividends receivable.......... 708 708 Interest and dividends receivable.
.............. 708.5 Receivables from affiliated
companies.
.............. 709.5 Allowance for uncollectible
accounts.
Accrued accounts receivable................ 709 709 Accrued accounts receivable.
Working fund advances...................... 710 710 Working funds.
Prepayments................................ 711 711 Prepayments.
Material and supplies...................... 712 712 Material and supplies.
Other current assets....................... 713 713 Other current assets.
.............. 713.5 Derivative instrument assets
.............. 713.6 Derivative instrument assets--
hedges
Deferred income tax charges................ 714 714 Deferred income tax debits.
Sinking funds.............................. 715 715 Sinking funds.
Capital and other reserve funds............ 716 716 Capital funds.
Insurance and other funds.................. 717 717 Other funds.
Investment in affiliated companies......... 721 721 Investments and advances;
affiliated companies.
Other investments.......................... 722 722 Other investments and advances.
Reserve for adjustment of investment in 723 721.5 Adjustments; investments and
securities--cr. advances--affiliated companies.
.............. 723 Adjustments; other investments and
advances.
Road and equipment property................ 731 731 Road and equipment property.
Organization expenses...................... 71 739 Organization expenses.
Improvements on leased property............ 732 732 Improvements on leased property.
Accrued depreciation; improvements on 733 733 Accumulated depreciation;
leased property. improvements on leased property.
Accrued depreciation; road and equipment... 735 735 Accumulated depreciation; road and
equipment property.
Amortization of defense projects; road and 736 736 Accumulated amortization; road and
equipment. equipment property--defense
projects.
.............. 734 Accumulated amortization;
improvements on leased property--
defense projects.
Miscellaneous physical property............ 737 737 Property used in other than carrier
operations.
Accrued depreciation; miscellaneous 738 738 Accumulated depreciation; property
physical property. used in other than carrier
operations.
Other assets............................... 741 741 Other assets.
Unamortized discount on long-term debt..... 770.1 770.1 Unamortized debt discount.
Other deferred charges..................... 743 743 Other deferred debits.
Accumulated deferred income tax charges.... 744 744 Accumulated deferred income tax
debits.
----------------------------------------------------------------------------------------------------------------
Liabilities
----------------------------------------------------------------------------------------------------------------
Loans and notes payable.................... 751 751 Loans and notes payable.
.............. 757 Payables to affiliated companies.
Traffic, car service and other balances--cr 752 752 Accounts payable; interline and
other balances.
.............. 705 Accounts receivable; interline and
other balances.
.............. 709.5 Allowance for uncollectible
accounts.
Audited accounts and wages payable......... 753 753 Audited accounts and wages payable.
Miscellaneous accounts payable............. 754 754 Accounts payable; other.
.............. 757 Payables to affiliated companies.
Interest matured unpaid.................... 755 755 Interest payable.
.............. 757 Payables to affiliated companies.
Dividends matured unpaid................... 756 756 Dividends payable.
.............. 757 Payables to affiliated companies.
Unmatured interest accrued................. 757 755 Interest payable.
.............. 757 Payables to affiliated companies.
Unmatured dividends declared............... 758 756 Dividends payable.
.............. 757 Payables to affiliated companies.
Accrued accounts payable................... 759 759 Accrued accounts payable.

[[Page 39032]]

Federal income taxes accrued............... 760 760 Federal income taxes accrued.
Other taxes accrued........................ 761 711 Prepayments.
.............. 761 State and other income taxes
accrued.
.............. 761.5 Other taxes accrued.
Deferred income tax credits................ 762 762 Deferred income tax credits.
Other current liabilities.................. 763 763 Other current liabilities.
.............. 763.5 Derivative instrument liabilities
.............. 763.6 Derivative instrument liabilities--
hedges
Equipment obligations and other debt due 764 764 Equipment obligations and other
within one year. long-term debt due within 1 year.
Funded debt unmatured...................... 765 765 Funded debt unmatured.
Equipment obligations...................... 766 766 Equipment obligations.
Capitalized lease obligations.............. 766.5 766.5 Capitalized lease obligations.
Receivers' and trustees' securities........ 767 767 Receivers' and trustees'
securities.
Debt in default............................ 768 768 Debt in default.
Amounts payable to affiliated companies.... 769 769 Accounts payable; affiliated
companies.
Pension and welfare reserves............... 771 771 Accrued liability; pension and
welfare.
Casualty and other reserves................ 774 774 Accrued liability; casualty and
other claims.
.............. 775 Other accrued liabilities.
Interest in default........................ 781 781 Interest in default.
Other liabilities.......................... 782 782 Other liabilities.
Deferred revenues--transfers from 783 783 Deferred revenues--transfers from
government authorities. government authorities
Unamortized premium on long-term debt...... 790.2 770.2 Unamortized premium on debt.
Other deferred credits..................... 784 784 Other deferred credits.
Accrued liability; leased property......... 785 772 Accrued liability; leased property.
Accumulated deferred income tax credits.... 786 786 Accumulated deferred income tax
credits.
----------------------------------------------------------------------------------------------------------------
Shareholders' Equity
----------------------------------------------------------------------------------------------------------------
Capital stock issued....................... 791 791 Capital stock.
Stock liability for conversion............. 792 792 Liability for conversion of capital
stock.
Discount on capital stock.................. 793 793 Discount on capital stock.
Premiums and assessment on capital stock... 794 794 Premiums and assessments on capital
stock.
Paid-in surplus............................ 795 795 Other capital.
Other capital surplus...................... 796 795 Do.
Retained income; appropriated.............. 797 797 Retained earnings; appropriated.
Retained income; unappropriated............ 798 798 Retained earnings; unappropriated.
Treasury stock............................. 798.5 798.5 Treasury stock.
.............. 799 Accumulated Other Comprehensive
Income.
----------------------------------------------------------------------------------------------------------------

Note: The following appendices will not appear in the Code of
Federal Regulations.

Appendix A

BILLING CODE 4915-01-P

[[Page 39033]]

[GRAPHIC] [TIFF OMITTED] TP08JY15.000

[GRAPHIC] [TIFF OMITTED] TP08JY15.001

[[Page 39034]]

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Appendix B

Information Collection

Title: Class I Railroad Annual Report
OMB Control Number: 2140-0009.
Form Number: R1.
Type of Review: Revision of a currently approved collection.
Respondents: Class I railroads.
Number of Respondents: 7.
Estimated Time per Response: The railroads currently spend no
more than 800 hours preparing this report, including time spent
reviewing instructions; searching existing data sources; gathering
and maintaining the data needed; completing and reviewing the
collection of information; and converting the data from the
carrier's individual accounting system to the Board's Uniform System
of Accounts (USOA), which ensures that the information will be
presented in a consistent format across all reporting railroads, see
49 U.S.C. 11141-43, 11161-64, 49 CFR parts 1200 and 1201. The
proposed modifications would not increase the hourly burden.
Frequency of Response: Annual.
Total Annual Hour Burden: No more than 5,600 hours.
Total Annual ``Non-Hour Burden'' Cost: Respondents are currently
required to submit a signed hard copy of this report. We estimate a
total annual cost for all respondents of $28. The proposed
modifications would not increase the cost burden.
Needs and Uses: Annual reports are required to be filed by Class
I railroads under 49 U.S.C. 11145. The reports show operating
expenses and operating statistics of the carriers. Operating
expenses include costs for right-of-way and structures, equipment,
train and yard operations, and general and administrative expenses.
Operating statistics include such items as car-miles, revenue-ton-
miles, and gross ton-miles. The reports are used by the Board, other
Federal agencies, and industry groups to monitor and assess railroad
industry growth, financial stability, traffic, and operations, and
to identify industry changes that may affect national transportation
policy. Information from this report is also entered into the
Board's Uniform Rail Costing System (URCS), which is a cost
measurement methodology. URCS, which was developed by the Board
pursuant to 49 U.S.C. 11161, is used as a tool in rail rate
proceedings, in accordance with 49 U.S.C. 10707(d), to calculate the
variable costs associated with providing a particular service. The
Board also uses this information to more effectively carry out other
of its regulatory responsibilities, including: acting on railroad
requests for authority to engage in Board-regulated financial
transactions such as mergers, acquisitions of control, and
consolidations, see 49 U.S.C. 11323-11324; analyzing the information
that the Board obtains through the annual railroad industry waybill
sample, see 49 CFR part 1244; measuring off-branch costs in railroad
abandonment proceedings, in accordance with 49 CFR 1152.32(n);
developing the ``rail cost adjustment factors,'' in accordance with
49 U.S.C. 10708; and conducting investigations and rulemakings.
Information from certain schedules contained in these reports is
compiled and published on the Board's Web site, http://www.stb.dot.gov. Information in these reports is not available from
any other source.

[FR Doc. 2015-15402 Filed 7-7-15; 8:45 am]
BILLING CODE 4915-01-C

Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules 39021

(e.g., CBI). To inspect the hard copy to update the accounting and reporting business combinations by removing
materials, please schedule an requirements under its Uniform System existing instructions for the pooling-of-
appointment during normal business of Accounts (USOA) for Class I interest method of accounting. The
hours with the contact listed in the FOR Railroads to be more consistent with Board also seeks to revise Form R–1 to
FURTHER INFORMATION CONTACT section. current generally accepted accounting include the new accounts and the new
FOR FURTHER INFORMATION CONTACT: principles (GAAP) and revise the reporting schedule proposed by this
James Shears, EPA Region IX, (213) schedules and instructions for the rulemaking.
244–1810, shears.james@epa.gov. Annual Report for Class I Railroads (R– The Board also solicits comments on
SUPPLEMENTARY INFORMATION: This 1 or Form R–1) to better meet regulatory the proposed elimination of certain
proposal addresses revisions to the requirements and industry needs. The schedules currently contained in Form
FRAQMD portion of the California SIP. intent of the proposed revisions is to R–1 that are not used for any regulatory
In the rules and regulations section of promote sound and uniform accounting or other purposes by the Board. As there
the Federal Register, we are approving and financial reporting for the types of may be other governmental agencies or
the three RACT SIP revisions in a direct transactions and events described interested parties that rely on the
final action without prior proposal herein. information in some of these schedules,
because we believe these SIP revisions DATES: Comments on this proposed we are requesting comments concerning
are not controversial. This proposal also rulemaking are due on or before August their elimination.
addresses the following local rule: 7, 2015; reply comments are due by The purpose of the proposed revisions
FRAQMD Rule 3.8, Gasoline Dispensing September 8, 2015. is to provide sound and uniform
Facilities. In the Rules and Regulations ADDRESSES: Any filings submitted in accounting and financial reporting for
section of this Federal Register, we are this proceeding must be submitted certain types of transactions and events.
approving this local rule in a direct final either via the Board’s e-filing format or The Board believes that such
action without prior proposal because in the traditional paper format. Any requirements are needed because these
we believe this SIP revision is not person using e-filing should attach a types of transactions and events are
controversial. Please note that if we document and otherwise comply with neither specifically nor correctly
receive adverse comment on a specific the instructions found at the E-FILING addressed in the existing USOA. The
provision of these SIP revisions or the link on the Board’s Web site at new instructions, accounts, and
rule, we will publish a timely www.stb.dot.gov. Any person submitting reporting schedule would result in
withdrawal of the direct final rule and a filing in the traditional paper format improved, consistent, and complete
address the comments in a subsequent should send an original and 10 copies accounting and reporting.
action. If that provision may be severed and also an electronic version to: Background
from the remainder of the SIP revisions Surface Transportation Board, Attn:
or the rule, we may adopt as final those Docket No. EP 720, 395 E Street SW., A. General
provisions of the SIP revisions or the Washington, DC 20423–0001. The Interstate Commerce Act, as
rule that are not the subject of an FOR FURTHER INFORMATION CONTACT: amended by the ICC Termination Act of
adverse comment. Pedro Ramirez at (202) 245–0333. 1995 (ICCTA), Public Law 104–88, 109
We do not plan to open a second Assistance for the hearing impaired is Stat. 803, authorizes the Board, in 49
comment period, so anyone interested available through the Federal U.S.C. 11142, to prescribe a uniform
in commenting should do so at this Information Relay Services (FIRS) at 1– accounting system for rail carriers
time. If we do not receive adverse 800–877–8339. subject to our jurisdiction and, in 49
comments, no further activity is SUPPLEMENTARY INFORMATION: U.S.C. 11161, to maintain cost
planned. For further information, please accounting rules for rail carriers.
see the direct final action. Introduction
Sections 11142 and 11161 both require
Dated: April 30, 2015. In this notice of proposed rulemaking the Board to conform its accounting
Jared Blumenfeld,
(NPR), the Surface Transportation Board rules to GAAP ‘‘[t]o the maximum
(Board) proposes to amend its USOA extent practicable.’’
Regional Administrator, Region IX.
and Form R–1.1 The Board proposes to In keeping with this requirement, we
[FR Doc. 2015–16629 Filed 7–7–15; 8:45 am]
add new general instructions and propose updates to the USOA to provide
BILLING CODE 6560–50–P accounts to recognize changes in the fair for: (1) Fair value presentation of certain
value of certain security investments, security investments, derivative
items of other comprehensive income, instruments and hedging activities; (2)
DEPARTMENT OF TRANSPORTATION derivative instruments, and hedging presentation of comprehensive income
activities. Additionally, the Board and components of other
Surface Transportation Board proposes to revise the USOA to reflect comprehensive income; and (3)
current accounting practices for accounting for business combinations.
49 CFR Part 1201
1 The Board has broad economic regulatory
The proposed revisions are based on the
[Docket No. EP 720] generally accepted accounting
oversight of railroads, addressing such matters as
rates, service, construction, acquisition and principles promulgated by the FASB in
Accounting and Reporting of Business
abandonment of rail lines, carrier mergers, and the following Accounting Standards
Combinations, Security Investments, interchange of traffic among carriers (49 U.S.C. Codifications (ASC): ASC 320
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Comprehensive Income, Derivative 10101–11908). The Board monitors the financial
Investments—Debt and Equity
Instruments, and Hedging Activities condition of railroads as part of its oversight of the
rail industry. The Board prescribes a uniform Securities; ASC 220 Comprehensive
AGENCY: Surface Transportation Board, accounting system for railroads to use for regulatory Income; ASC 815 Derivatives and
DOT. purposes. 49 U.S.C. 11141–43, 11161–64; 49 CFR Hedging; and ASC 805 Business
parts 1200 and 1201. In addition, the Board requires
ACTION: Notice of proposed rulemaking. Class I railroads to submit quarterly and annual
Combinations.1
reports containing financial and operating statistics,
SUMMARY: The Surface Transportation including employment and traffic data (49 U.S.C. 1 These accounting pronouncements are available

Board proposes to revise its regulations 11145; 49 CFR parts 1241 through 1246 and 1248). at https://asc.fasb.org.

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39022 Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules

The Board considers the requirements as trading securities or held-to-maturity operations, and extraordinary items);
in ASC 320, 220, 815, and 805 to be an securities. and (2) Other Comprehensive Income
improvement in financial accounting Held-to-maturity securities. Held-to- and its components.
and reporting practices. The Board also maturity securities are debt securities Reclassifications of items from
considers it important that its that the entity has the positive intent accumulated Other Comprehensive
accounting requirements are consistent and ability to hold to maturity. For debt Income to net income must be measured
with the industry’s general purpose securities held to maturity, amortized and presented by income statement line
financial reporting requirements. cost is a more relevant measure than fair item in both the statement where net
Therefore, the Board proposes to value because that cost will be realized, income is presented and the statement
implement the principles and concepts absent default. Therefore, changes in the where Other Comprehensive Income is
set forth in ASC 320, 220, 815, and 805 fair value of securities held to maturity presented. This accounting standard
for railroad accounting and reporting are not recognized during the period the applies only to entities with items of
purposes effective upon issuance of a entity holds the security investment. Other Comprehensive Income. Entities
final rule in this proceeding. The Board ASC 320 states that a debt security that without Other Comprehensive Income
believes that the proposed accounting is available to be sold in response to items are exempt from providing a
and reporting changes would provide changes in market interest rates, statement of comprehensive income and
consistent accounting and reporting of changes in the security’s prepayment instead should report only net income
changes in the fair value of security risk, the enterprise’s need for liquidity, in the statement displaying the results
investments, derivative instruments, changes in foreign exchange risks, or of operations.
and hedging activities. The proposed other similar factors should not be
D. Derivatives and Hedging (ASC 815)
changes would also minimize the included in the held-to-maturity
accounting and reporting burden on category because the possibility of a sale A derivative instrument is a security
railroads under the Board’s jurisdiction, indicates that the enterprise does not whose price is dependent upon or
assist the Board in its overall monitoring have a positive intent and ability to hold derived from one or more underlying
effort, and improve transparency. the security to maturity. However, assets. Derivative instruments represent
To provide context for the Board’s under certain circumstances, a company rights or obligations that meet the
proposed changes, the key aspects of the may change its intent concerning definition of an asset or liability and
relevant FASB pronouncements are securities originally classified as held- should be reported in financial
discussed in sections B through E of this to-maturity, resulting in the securities’ statements. For accounting purposes, a
Background. sale or reclassification without calling derivative instrument is a financial
into question the company’s intent to instrument or other contract that has all
B. Investments in Debt and Equity
hold other securities to maturity. of the following characteristics:
Securities (ASC 320) 1. The instrument has one or more
ASC 320 establishes standards of C. Comprehensive Income (ASC 220) underlyings. An underlying is a
financial accounting and reporting for The purpose of comprehensive specified interest rate, security price,
investments in equity securities that income is to measure all changes in an commodity price, foreign exchange rate,
have readily determinable fair values entity’s equity that result from index of prices or rates, or other
and for all investments in debt recognized transactions and other variable. An underlying may be a price
securities. Fair value of an equity economic events of a period other than or rate of an asset or liability but is not
security is readily determinable if sales those transactions resulting from the asset or liability itself.
prices and bid-and-asked quotations are investment by owners and distributions 2. The instrument must have one or
currently available on a securities to owners. When paired with disclosure more notional amounts or payment
exchange registered with the U.S. notes and other information in the provisions. A notional amount
Securities and Exchange Commission, financial statements, the reporting of represents a quantity such as a number
or publicly reported in the over-the- comprehensive income is intended to of currency units, shares, bushels,
counter market. help investors, creditors, and others pounds, or other units specified in a
ASC 320 requires entities to classify assess an entity’s activities and future derivative instrument. Those terms
all debt securities and selected equity cash flows. determine the amount of a contract’s
securities into one of three categories: Under GAAP, comprehensive income settlement or settlements, and, in some
(1) Trading securities; (2) available-for- is comprised of traditional net income cases, determine whether or not a
sale securities; or (3) held-to-maturity and all components of other settlement is required.
securities. Classification of the comprehensive income. ‘‘Other 3. The instrument requires either no
securities is based primarily on comprehensive income’’ includes initial net investment or an initial net
management’s intent for holding a revenues, expenses, gains and losses investment that is smaller than would
particular investment. that are included in comprehensive be required for other types of contracts
Trading securities. Trading securities income but not in net income. This that would be expected to have a similar
are debt and equity securities that are includes foreign currency translation response to changes in market factors.
bought and held principally for the adjustments, unrealized holding gains 4. The instrument requires or permits
purpose of selling them in the near and losses on available-for-sale net settlement, and can readily be
term, usually less than one year. These securities, changes in pension or other settled net by a means outside the
securities are held for short periods of post-retirement benefits, and changes in contract, or provides for delivery of an
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time with the objective of generating the fair value of derivative financial asset that puts the recipient in a
profits from short-term differences in instruments classified as cash-flow position not substantially different from
price. hedges. net settlement.
Available-for-sale securities. GAAP requires financial statements to Certain types of contracts are
Available-for-sale securities are present comprehensive income in two exempted from the requirements of ASC
investments in debt and equity parts: (1) Net income and its 815 to avoid burdening certain
securities that have readily components (such as income from industries and markets. For example,
determinable fair values not classified continuing operations, discontinued normal purchases and normal sales

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contracts that provide for the purchase the derivative instrument is recognized because an entity could retroactively
or sale of goods that will be delivered in earnings in the period of the change identify a transaction as a hedge or
in quantities expected to be used or sold together with the offsetting gain or loss change a method of measuring
by the reporting entity over a reasonable on the hedged item attributable to the effectiveness to achieve a desired
period of time and in the normal course risk. To the extent that a hedge is outcome. At the inception of the hedge,
of business are not considered perfectly effective, it will produce the formal documentation is required that
derivative instruments. This exception same offsetting amounts in earnings so identifies the hedging instrument, and
is commonly referred to as the normal that net income is not impacted by the specifically the hedged item or
purchases and normal sales scope hedge. However, amounts would be transaction, along with the nature of the
exception. The exception would include reflected in earnings to the extent that risk being hedged. Entities are required
typical purchases and sales of inventory the hedge is not effective in offsetting to formally document how effectiveness
items, certain insurance contracts, and the change in value of the item being will be assessed at the adoption of the
employee compensation agreements. hedged. Additionally, fair-value hedge and on an ongoing basis.
Derivative instruments that do not accounting results in an adjustment of
qualify for the normal purchases and the carrying amount of the hedged asset E. Business Combinations (ASC 805)
normal sales scope exception or other or liability. In the case of a fair-value
exceptions provided for under the hedge of a firm commitment, a new A business combination is a
statement are reflected in the financial asset or liability is created. As a result transaction or other event in which one
statements. Consequently, most futures, of the hedge relationship, the new asset or more businesses obtain control of
forwards, swaps, and option contracts or liability ultimately becomes part of another business. It also includes
meet the definition of a derivative the carrying amount of the item being transactions involving mergers of equals
instrument and changes in their fair hedged. and certain acquisitions by a not-for-
value would be reflected in the financial 2. Cash-Flow Hedge. A cash-flow profit entity. ASC 805—Business
statements. hedge uses a derivative instrument to Combinations requires that a business
Accounting for a Derivative protect against the risk caused by combination be accounted for by
Instrument. Accounting for changes in variable prices or costs, which may applying the acquisition method.
the fair value of a derivative instrument cause future cash flows to be uncertain. The acquisition method requires the
depends upon its intended use and This type of instrument protects against acquiring entity to recognize and
designation. Essentially, for certain an anticipated or forecasted transaction measure, as of the acquisition date, the
derivative instruments not designated as that probably will occur in the future identifiable assets acquired, liabilities
hedging instruments, gain or loss is but the amount of which has not been assumed, and any noncontrolling
recognized as earnings in the period of fixed. interest in the acquired entity. The
change. The change in the value of the In a cash-flow hedge, the effective acquiring entity must also recognize and
derivative instrument is reflected on the portion of the derivative instrument’s measure goodwill (the excess of
balance sheet as an asset or liability gain or loss is initially reported as a purchase price over net assets, related to
with a corresponding amount component of Other Comprehensive the acquisition) or a gain resulting from
recognized in earnings. This accounting Income (outside net income). The a bargain purchase.
effectively provides users of the ineffective portion of the gain or loss is
financial statements with information reported in earnings immediately. Discussion
concerning the value of the derivative Amounts in accumulated Other
instrument as if it had been settled in Comprehensive Income are reclassified A. General. The Board’s existing
the market place. into earnings in the same period during USOA does not specifically address the
Hedge Accounting. A hedge is an which the hedged forecasted item proper accounting and reporting for
instrument’s position intended to offset affects earnings. changes in the fair value of certain
potential losses or gains that may be Documentation of Hedge security investments, derivative
incurred by a companion investment. Relationship. Entities must keep instruments, and hedging activities.
Entities hedge to manage risk to prices extensive documentation of the hedge Additionally, the existing USOA does
or interest rates (among other things). relationship. An entity that elects to not contain specific accounts to record
Provided certain criteria are met, a apply the special hedge accounting amounts related to items of Other
derivative may be specifically principles is required to document, at Comprehensive Income or provide a
designated as a fair-value or cash-flow the inception of the hedge, the risk format to display comprehensive
hedge. Under the rules for hedge management objective and strategy for income in the Form R–1. The USOA’s
accounting, the changes in the fair value undertaking the hedge, including the accounting for business combinations
of the derivative instrument are hedge instrument, the related must also be revised to reflect the
measured at fair value with adjustments transaction, the nature of the risk being acquisition accounting method, as
made to the carrying amount of the hedged, and how effectiveness will be required in ASC 805.
items being hedged (as in a fair-value determined. Without specific instructions and
hedge) or to Other Comprehensive A company’s documentation of its accounts for recording and reporting
Income (as in a cash-flow hedge) to the overall risk management philosophy is certain transactions and events,
extent the hedge is effective. essential in addressing the role that inconsistent and incomplete accounting
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1. Fair-Value Hedge. In a fair-value derivative instruments and hedging would result. For example, if the effects
hedge, a derivative instrument is activities play in achieving the of certain derivative instruments and
designated as a hedge against exposure company’s risk management objectives. hedging activities are not properly
to changes in the fair value of a Concurrent designation and reported to the Board in the Form R–1,
recognized asset, liability, or a firm documentation of a hedge is critical it would be difficult for the Board and
commitment.2 The change in value of
others to determine the impact of
usually legally enforceable and that specifies all
2A firm commitment is an agreement with an significant terms and includes a disincentive for
derivatives on regulated carriers’
unrelated party, binding on both parties, that is nonperformance. financial statements and Results of

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39024 Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules

Operations Statements.3 The addition of C. Proposed Accounting for Other 210A, which would immediately follow
new accounts and related general Comprehensive Income. The existing Schedule 210, would reflect the
instructions is intended to improve the USOA does not contain specific components of Other Comprehensive
visibility, completeness, and accounts to record amounts related to Income, a total for Other Comprehensive
consistency of accounting and reporting items of Other Comprehensive Income Income, and a total for Comprehensive
of changes in the fair value of certain or provide a format to display Income. Schedule 210A would begin
investment securities, items of Other comprehensive income in the Form R– with net income.
Comprehensive Income, derivatives 1. Therefore, entities currently record The proposed instructions for the
instruments, and hedging activities. items of Other Comprehensive Income Other Comprehensive Income accounts
Also, the addition of the proposed in Account 606. However, as part of the for all railroads would require that
new accounts and related reporting proposed rule, the USOA would be supporting records be maintained by
requirements to the Form R–1 would revised to provide accounting for such each category of Other Comprehensive
reduce regulatory uncertainty as to the items. Thus, the use of Account 606 in Income. This level of detail would be
proper accounting and reporting for the USOA to record items of Other required to ensure that the railroad is
these items and minimize regulatory Comprehensive Income would no longer able to identify the amounts associated
burden by reducing the potential be appropriate. Instead, these items with an item when it is entered into the
differences in the manner in which would be accounted for elsewhere in the determination of net income, and the
these amounts are reported to USOA. railroad effectively moves the
shareholders and to the Board. Finally, A new equity account (Account 799, recognition of the item from Other
the reporting of derivative instruments Accumulated Other Comprehensive Comprehensive Income to net income.
and hedging activities by regulated Income) is also proposed to include the Finally, items recognized in Other
carriers would assist the Board in its accumulated balance for items of Other Comprehensive Income that are later
overall monitoring effort as well as its Comprehensive Income. The account recognized in net income require a
ability to assess railroad industry would require that railroads maintain reclassification adjustment in order to
growth and financial stability. Further, supporting records for each category of avoid double counting an item in both
such reporting would assist the Board in Other Comprehensive Income and net income and Other Comprehensive
identifying industry changes that may report such information in their Form Income. The proposed instructions for
affect national transportation policy. R–1. Detailed records would be Accounts 799 and 799.1 would require
B. Proposed Accounting for Trading maintained so that the current period the railroad to make reclassification
and Available-for-Sale Type Securities. activity, year-to-date activity, and adjustments directly to these accounts,
Under the Board’s USOA, all types of reclassification adjustments related to as appropriate. This proposed
securities are recorded at cost, and items of Other Comprehensive Income accounting treatment for reclassification
subsequent changes in the fair value of could be readily identified. Maintaining adjustments would minimize the need
security investments are not recognized detailed records for items included in for creating a new account to capture
in the financial statements. accumulated Other Comprehensive amounts solely related to
The Board is of the view that fair- Income is necessary to ensure that a reclassification adjustments. Items
value measurement of trading and railroad can readily identify amounts reclassified from Other Comprehensive
available-for-sale type securities when an item is included in net income Income to net income would no longer
presents relevant and useful information in subsequent periods. be presented in footnotes to the
to existing and potential investors, As proposed, a new equity sub- financial statements. Further, the
creditors, regulators, and others in account entitled Account 799.1, Other adjustments must be shown on the face
making credit and other decisions. Fair- Comprehensive Income, would be of the financial statements where the
value measurements would also provide established to include amounts for items components of net income and Other
useful information to the Board of Other Comprehensive Income for the Comprehensive Income are presented;
concerning the status of certain amounts reporting year. The purpose of this corresponding adjustments must appear
set aside to fund future obligations. account is to record the activity for in both net income and Other
Therefore, the Board proposes to add items of Other Comprehensive Income Comprehensive Income.
language to its investment account during a fiscal year. At year end, the D. Proposed Accounting for
requirements for rail carriers to permit amounts recorded in sub-account 799.1 Derivatives and Hedging Activities. The
the recognition of changes in the fair would be transferred to the new equity Board proposes to revise the USOA to
value of trading and available-for-sale Account 799. Consequently, Account provide accounting for derivative
types of securities due to unrealized 799.1, as proposed, would always have instruments and hedging activities. The
holding gains and losses. The security a zero beginning and year-end balance. Board’s existing USOA does not contain
investment asset accounts for railroads Therefore, the Board proposes not to specific accounts to record changes in
are: Account 702, Temporary Cash include this account as part of the the fair value of derivative instruments
Investments; Account 721, Investments balance sheet schedules. used in hedging and non-hedging
and Advances: Affiliated Companies; To increase the prominence of items activities. The addition of new accounts
Account 722, Other Investments and that are recorded in Other and instructions would provide
Advances; Account 715, Sinking Funds; Comprehensive Income and also to improved visibility and completeness of
improve comparability and accounting and reporting of derivative
Account 716, Capital Funds; and
transparency in financial statements, the instruments and hedging activities.
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Account 717, Other Funds.
Board has developed a two-statement Proposed General Instructions for
3 Results of Operations Statements, also referred approach. This two-statement approach Fair-Value and Cash-Flow Hedges. The
to as a Profit and Loss Statement, Statement of includes Schedule 210, Results of Board proposes to add a new general
Operations, or Statement of Income, appear in the Operations, and Schedule 210A, instruction that would require railroads
Form R–1 and reflect the profitability (i.e. revenues, Consolidated Statement of Other to record changes in the fair value of the
expenses, gains, and losses) of a company during
the year specified in the heading of the R–1 annual
Comprehensive Income. Schedule 210 derivative instrument (the effective
report. The statements do not show cash receipts or would show the components of net portion of the gain or loss) designated as
cash disbursements. income and total net income. Schedule a cash-flow hedge to Other

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39026 Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules

has practical utility; (2) the accuracy of Authority. 49 U.S.C. 11142 and 11164. or subsequent periods, a reclassification
the Board’s burden assessment; (3) ways List of Subjects in 49 CFR Part 1201 adjustment will be recorded in accounts
to enhance the quality, utility, and 799 to avoid double counting of when
clarity of the information collected; and Railroads, Uniform System of an item included in net income was also
(4) ways to minimize the burdens of the Accounts. included in Other Comprehensive
collections of information on the Decided: June 18, 2015. Income in the same or prior period.
respondents, including the use of By the Board, Acting Chairman Miller and 1–20 Accounting for derivative
automated collection techniques or Vice Chairman Begeman. instruments and hedging activities. (a) A
other forms of information technology, Brendetta S. Jones, carrier will recognize derivative
when appropriate. Additional Clearance Clerk.
instruments as either assets or liabilities
information related to these questions in the financial statements and measure
can be found in Appendix B below. The For the reasons set forth in the those instruments at fair value. A
proposed information-collection preamble, the Surface Transportation derivative instrument is a financial
revisions described in this decision are Board proposes to amend part 1201 of instrument or other contract with all
being submitted to OMB for review as title 49, chapter X, of the Code of three of the following characteristics:
required under the PRA, 5 U.S.C. Federal Regulations as follows: (1) The derivative instrument has one
3507(d) and OMB regulations at 5 CFR or more underlyings and a notional
1320.11. Comments received by the PART 1201—RAILROAD COMPANIES amount or payment provision. Those
Board regarding the information terms determine the amount of the
■ 1. The authority citation for part 1201 settlement or settlements, and, in some
collection will also be forwarded to continues to read as follows:
OMB for its review when the final rule cases, whether or not a settlement is
is published. Authority: 49 U.S.C. 11142 and 11164. required.
(2) The derivative instrument requires
Regulatory Flexibility Act Statement Subpart A—Uniform System of no initial net investment or an initial
The Regulatory Flexibility Act of 1980 Accounts net investment that is smaller than
(RFA), 5 U.S.C. 601–612, generally ■ 2. Amend Regulations Prescribed by would be required for other types of
requires a description and analysis of revising paragraph (ii), item 16(c), to contracts that would be expected to
new rules that would have a significant read as follows: have similar responses to changes in
economic impact on a substantial market factors.
number of small entities. In drafting a List of Instructions and Accounts (3) The derivative instrument’s terms
rule, an agency is required to: (1) Assess REGULATIONS PRESCRIBED require or permit net settlement; the
the effect that its regulation will have on derivative instrument can readily be
small entities; (2) analyze effective * * * * * settled net by a means outside the
alternatives that may minimize a (ii) * * * contract; or the derivative instrument’s
regulation’s impact; and (3) make the 16. * * * terms provide for delivery of an asset
analysis available for public comment. (c) Cost, as applied to a marketable that puts the recipient in a position not
Sections 601–604. In its notice of equity security, refers to the original substantially different from net
proposed rulemaking, the agency must cost as adjusted for unrealized holding settlement.
either include an initial regulatory gains and losses. (b) The accounting for the changes in
flexibility analysis, section 603(a), or * * * * * the fair value of derivative instruments
certify that the proposed rule would not 3. Amend General Instructions by depends upon their intended use and
have a ‘‘significant impact on a adding Instructions 1–19 and 1–20 to designation. Changes in the fair value of
substantial number of small entities,’’ read as follows: derivative instruments not designated as
section 605(b). fair value or cash flow hedges will be
GENERAL INSTRUCTIONS
Because the goal of the RFA is to recorded in account 713.5, Derivative
reduce the cost to small entities of * * * * * instrument assets, or account 763.5,
complying with federal regulations, the 1–19 Accounting for Other Derivative instrument liabilities, as
RFA requires an agency to perform a Comprehensive Income. (a) Railroads appropriate, with the gains or losses
regulatory flexibility analysis of small will record items of Other charged to earnings in account 551,
entity impacts only when a rule directly Comprehensive Income in account Miscellaneous income charges.
regulates those entities. In other words, 799.1, Other comprehensive income. (c) A derivative instrument may be
the impact must be a direct impact on Amounts included in this account will specifically designated as a fair-value or
small entities ‘‘whose conduct is be maintained by each category of Other cash-flow hedge. A hedge may be used
circumscribed or mandated’’ by the Comprehensive Income. Examples of to manage risk to price, interest rates, or
proposed rule. White Eagle Coop. Ass’n categories of Other Comprehensive foreign currency transactions. An entity
v. Conner, 553 F.3d 467, 478, 480 (7th Income include foreign currency items, will maintain documentation of the
Cir. 2009). minimum pension liability adjustments, hedge relationship at the inception of
This proposal will not have a unrealized gains and losses on the hedge that details the risk
significant economic impact upon a available-for-sale type securities and management objective and strategy for
substantial number of small entities cash-flow hedge amounts. undertaking the hedge, the nature of the
within the meaning of the RFA. The (b) Supporting records will be risk being hedged, and how hedge
srobinson on DSK5SPTVN1PROD with PROPOSALS

proposed rule would affect only entities maintained for account 799 so that the effectiveness will be determined.
that are required to file Form R–1 company can readily identify the (d) If the carrier designates the
reports; these reports are only required cumulative amount of Other derivative instrument as a fair-value
to be submitted by Class I carriers. 49 Comprehensive Income for each item hedge against exposure to changes in
CFR 1241.1. Class I carriers are large included in this account. the fair value of a recognized asset,
railroads; accordingly, there will be no (c) When an item of Other liability, or a firm commitment, it will
impact on small railroads (small Comprehensive Income enters into the record the change in fair value of the
entities). determination of earnings in the current derivative instrument designated as a

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Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules 39027

fair-value hedge to account 713.6, other assets acquired, shall be the INCOME ACCOUNTS
Derivative instruments assets—hedges, amount of the cost consideration given. Ordinary Items
or account 763.6, Derivative instrument Where property and other assets are
liabilities—hedges, as appropriate, with acquired for other than cash, including * * * * *
a corresponding adjustment to the sub- liabilities assumed and shares of stock 551 Miscellaneous income charges.
account of the item being hedged. The issued, cost shall be determined by
ineffective portion of the hedge either the fair value of the consideration (a) * * *
transaction will be reflected in the same given or the fair value of the assets Unrealized holding gains and losses
income or expense account that would acquired, whichever is more clearly on trading type investment securities.
have been used if the hedged item had evident. In addition to any liabilities * * * * *
been disposed of or settled. In the case assumed, provision shall be made for ■ 7. Amend General Balance Sheet
of a fair-value hedge of a firm such estimated liabilities as may be Accounts Explanations—Assets, Current
commitment, a new asset or liability is necessary. Assets by:
created. As a result of the hedge ■ a. Adding a sentence to the end of the
(2) When the costs of individual units
relationship, the new asset or liability or classes of transportation property are first paragraph in account 702
will become part of the carrying amount not specified in the agreement, the cost ‘‘Temporary cash investment’’;
of the item being hedged. ■ b. Adding accounts 713.5 ‘‘Derivative
assigned such property shall be
(e) If the carrier designates the apportioned among the appropriate instrument assets’’ and 713.6
derivative instrument as a cash-flow primary accounts using the percentage ‘‘Derivative instrument assets–hedges.’’
hedge against exposure to variable cash relationship between the fair values for The additions read as follows:
flows of a probable forecasted each class of property acquired and the GENERAL BALANCE SHEET
transaction it will record changes in the total of such values. ACCOUNTS EXPLANATIONS
fair value of the derivative instrument in
* * * * * Assets
account 713.6, Derivative instrument
assets—hedges, or account 763.6, ■ 5. Amend Instructions For Income
And Balance Sheet Accounts by revising Current Assets
Derivative instrument liabilities—
hedges, as appropriate, with a Instruction 5–2, paragraph (a), items (2), * * * * *
corresponding amount in account 799.1, (3), and (4) to read as follows:
702 Temporary cash investments.
Other comprehensive income, for the INSTRUCTIONS FOR INCOME AND * * * This account shall also include
effective portion of the hedge. The BALANCE SHEET ACCOUNTS unrealized holding gains and losses on
ineffective portion of the hedge
* * * * * trading and available-for-sale types of
transaction will be reflected in the same
5–2 * * * security investments.
income or expense account that would
have been used if the hedged item had (a) * * * * * * * *
been disposed of or settled. Amounts (2) Account 702, Temporary cash 713.5 Derivative instrument assets.
recorded in Other Comprehensive investments, account 721, Investments
Income will be reclassified into earnings This account shall include the
and advances; affiliated companies, and amounts paid for derivative
in the same period or periods that the account 722, Other investments and
hedged forecasted item affects earnings. instruments, and the change in the fair
advances, shall be maintained in such a value of all derivative instrument assets
■ 4. Amend Instructions For Property
manner as to reflect the marketable not designated as cash-flow or fair-value
Accounts by: equity portion (see definition 26) and
■ a. Revising paragraph (a) in hedges. Account 551, Miscellaneous
other securities or investments. income charges, will be charged with
Instruction 2–15;
■ b. Removing paragraph (b) in (3) For the purpose of determining net the corresponding amount of the change
Instruction 2–15; ledger value, the marketable equity in the fair value of the derivative
■ c. Redesignating paragraph (c) as securities in account 702 shall be instrument.
paragraph (b) in Instruction 2–15; considered the current portfolio and the
713.6 Derivative instrument assets–
■ d. Revising the newly designated marketable equity securities in accounts hedges.
paragraph (b) in Instruction 2–15; and 721 and 722 (combined) shall be
■ e. Redesignating paragraph (d) as considered the noncurrent portfolio. (a) This account shall include the
paragraph (c) in Instruction 2–15. amounts paid for derivative
(4) Carriers will categorize their instruments, and the change in the fair
The revisions read as follows: security investments as held-to- value of derivative instrument assets
INSTRUCTIONS FOR PROPERTY maturity, trading, or available-for-sale. designated by the utility as cash-flow or
ACCOUNTS Unrealized holding gains and losses on fair-value hedges.
trading type investment securities will (b) When a carrier designates a
* * * * * be recorded in account 551,
2–15 * * * (a) When a railway or derivative instrument asset as a cash-
Miscellaneous income charges. flow hedge, it will record the change in
portion thereof constituting an operating Unrealized holding gains and losses on
unit or system is acquired in a business the fair value of the derivative
available-for-sale type investment instrument in this account with a
combination, that business combination securities will be recorded in account
shall be recorded in the accounts in the concurrent charge to account 799.1,
srobinson on DSK5SPTVN1PROD with PROPOSALS

799.1, Other comprehensive income. Other comprehensive income, with the
manner stated hereunder.
(b) Purchase: * * * * * effective portion of the derivative’s gain
(1) The amount includible in account ■ 6. Amend Income Accounts— or loss. The ineffective portion of the
731, Road and equipment property, Ordinary Items by adding a sentence at cash-flow hedge will be charged to the
shall be the cost at the date of the end of the list of inclusions for same income or expense account that
acquisition to the purchaser of the account 551 ‘‘Miscellaneous income would have been used if the hedged
transportation property acquired. The charges,’’ paragraph (a) to read as item had been disposed of or otherwise
cost assigned the property, as well as follows: settled.

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39028 Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules

(c) When a carrier designates a The addition reads as follows: ineffective portion of the fair-value
derivative instrument as a fair-value hedge will be charged to the same
GENERAL BALANCE SHEET
hedge, it will record the change in the income or expense account that would
ACCOUNTS EXPLANATIONS
fair value of the derivative instrument in have been used if the hedged item had
this account with a concurrent charge to Assets been disposed of or otherwise settled.
a sub-account of the asset or liability Investments * * * * *
that carries the item being hedged. The ■ 11. Amend General Balance Sheet
ineffective portion of the fair-value * * * * *
Accounts Explanations—Liabilities and
hedge will be charged to the same 722 Other investments and advances. Shareholders’ Equity, Shareholders’
income or expense account that would Equity by:
(a) * * * This account shall also
have been used if the hedged item had ■ a. Removing account 798.1 ‘‘Net
include unrealized holding gains and
been disposed of or otherwise settled. unrealized loss on noncurrent
losses on trading and available-for-sale
* * * * * types of security investments. Include marketable securities’’; and
■ 8. Amend General Balance Sheet also the offsetting entry to the recording ■ b. Adding account 799 ‘‘Accumulated
Accounts Explanations—Assets, Special of amortization of discount or premium Other Comprehensive Income.’’
Funds by: on interest bearing investments. The addition reads as follows:
■ a. In account 715 ‘‘Sinking funds,’’
adding two sentences to the end of * * * * * GENERAL BALANCE SHEET
■ 10. Amend General Balance Sheet ACCOUNTS EXPLANATIONS
paragraph (b);
■ b. In account 716 ‘‘Capital funds,’’
Accounts Explanations—Liabilities and
Shareholders’ Equity, Current Liabilities Liabilities and Shareholders’ Equity
adding a sentence to the end of
paragraph (a); and by adding accounts 763.5 ‘‘Derivative Shareholders’ Equity
■ c. In account 717 ‘‘Other funds,’’ instrument liabilities’’ and 763.6
* * * * *
adding Note E. ‘‘Derivative instrument liabilities–
The additions read as follows: hedges’’,to read as follows: 799 Accumulated Other Comprehensive
Income.
GENERAL BALANCE SHEET GENERAL BALANCE SHEET
ACCOUNTS EXPLANATIONS (a) This account shall include
ACCOUNTS EXPLANATIONS revenues, expenses, gains, and losses
Assets Liabilities and Shareholders’ Equity that are properly includable in Other
Current Liabilities Comprehensive Income during the
Special Funds
period. Examples of items of Other
* * * * * Comprehensive Income include foreign
715 Sinking funds.
* * * * * 763.5 Derivative instrument liabilities. currency items, minimum pension
(b) * * * This account shall also This account shall include the change liability adjustments, unrealized gains
include unrealized holding gains and in the fair value of all derivative and losses on certain investments in
losses on trading and available-for-sale instrument liabilities not designated as debt and equity securities, and cash-
types of security investments. The cash cash-flow or fair-value hedges. Account flow hedges. Records supporting the
value of life insurance policies on the 551, Miscellaneous income charges, will entries to this account shall be
lives of employees and officers to the be charged with the corresponding maintained so that the carrier can
extent that the carrier is the beneficiary amount of the change in the fair value furnish the amount of Other
of such policies shall also be included of the derivative instrument. Comprehensive Income for each item
in this account. included in this account.
* * * * *
763.6 Derivative instrument liabilities– (b) This account shall also be debited
hedges. or credited, as appropriate, with
716 Capital funds. (a) This account shall include the amounts of accumulated Other
(a) * * * This account shall also change in the fair value of derivative Comprehensive Income that have been
include unrealized holding gains and instrument liabilities designated by the included in the determination of net
losses on trading and available-for-sale carrier as cash-flow or fair-value hedges. income during the period and in
types of security investments. (b) A carrier will record the change in accumulated Other Comprehensive
* * * * * the fair value of a derivative instrument Income in prior periods. Separate
liability related to a cash-flow hedge in records for each category of items will
717 Other funds. this account, with a concurrent charge be maintained to identify the amount of
* * * * * to account 799.1, Other comprehensive the reclassification adjustments from
NOTE E:This account shall also income, with the effective portion of the accumulated Other Comprehensive
include unrealized holding gains and derivative instrument’s gain or loss. The Income to earnings made during the
losses on trading and available-for-sale ineffective portion of the cash-flow period.
types of security investments. hedge will be charged to the same ■ 12. Revise the Form of General
■ 9. Amend General Balance Sheet income or expense account that would Balance Sheet Statement, Assets to read
Accounts Explanations—Assets, have been used if the hedged item had as follows:
Investments by: been disposed of or otherwise settled.
Form of General Balance Sheet
srobinson on DSK5SPTVN1PROD with PROPOSALS

■ a. In account 722 ‘‘Other investments (c) A carrier will record the change in
the fair value of a derivative instrument Statement
and advances,’’ adding two sentences to
the end of paragraph (a); and liability related to a fair-value hedge in The classified form of general balance
■ b. Removing account 724 ‘‘Allowance this account, with a concurrent charge sheet statement is designed to show the
for net unrealized loss on noncurrent to a sub-account of the asset or liability financial condition of the accounting
marketable equity securities—Cr.’’ that carries the item being hedged. The company at any specified date.

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Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules 39029

ASSETS
Current assets:
701. Cash.
702. Temporary cash investments.
703. Special deposits.
704. Loans and notes receivable.
705. Accounts receivable; Interline and other bal-
ances.
706. Accounts receivable; Customers.
707. Accounts receivable; Other.
708. Interest and dividends receivable.
708.5. Receivables from affiliated companies.
709. Accrued accounts receivable.
709.5. Allowance for uncollectible accounts.
Net receivables.
710. Working funds.
711. Prepayments.
712. Material and supplies.
713. Other current assets.
713.5 Derivative instrument assets
713.6 Derivative instrument assets—hedges
714. Deferred income tax debits.
Total current assets.
Special funds:
715. Sinking funds.
716. Capital funds.
717. Other funds.
Total special funds.
Investments:
721. Investments and advances; affiliated compa-
nies.
Undistributed earnings from certain investments in
account 751.
721.5. Adjustments; investments and advances—
affiliated companies.
Net—investments and advances—affiliated compa-
nies.
722. Other investments and advances.
723. Adjustments; Other investments and ad-
vances.
Net—other investments and advances.
Total investments.
Tangible property:
731. Road and equipment property.
735. Accumulated depreciation; Road and equip-
ment property.
736. Accumulated amortization; Road and equip-
ment property—Defense projects.

Net road and equipment property.
732. Improvements on leased property.
733. Accumulated depreciation; Improvements
on leased property.
734. Accumulated amortization; Improvements
on leased property—Defense projects.
Net improvements on leased property.
Total carrier property.
737. Property used in other than carrier oper-
ations.
738. Accumulated depreciation; Property used in
other than carrier operations.
Net—property used in other than carrier oper-
ations.
Total tangible property.
Intangible property:
739. Organization expenses.
srobinson on DSK5SPTVN1PROD with PROPOSALS

Other assets and deferred debits:
741. Other assets.
743. Other deferred debits.
744. Accumulated deferred income tax debits.
Total other assets and deferred debits.
Total assets.
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
751. Loans and notes payable.

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$39030 Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules ASSETS—Continued 752. Accounts payable; Interline and other bal- ances. 753. Audited accounts and wages payable. 754. Accounts payable; Other. 755. Interest payable. 756. Dividends payable. 757. Payables to affiliated companies. 759. Accrued accounts payable. 760. Federal income taxes accrued. 761. State and other income taxes accrued. 761.5. Other taxes accrued. 762. Deferred income tax credits. 763. Other current liabilities. 763.5 Derivative instrument liabilities 763.6 Derivative instrument liabilities-hedges 764. Equipment obligations and other long-term debt due within one year. Total current liabilities. Long-term debt due after one year: 1 765. Funded debt unmatured. 766. Equipment obligations. 766.5. Capitalized lease obligations. 767. Receivers’ and trustees’ securities. 768. Debt in default. 769. Accounts payable; Affiliated companies. 770.1 Unamortized debt discount. 770.2 Unamortized premium on debt. Total long-term debt due after one year. Other long-term liabilities: 771. Accrued liability; Pension and welfare. 772. Accrued liability; Leased property. 774. Accrued liability; Casualty and other claims. 775. Other accrued liabilities. 781. Interest in default. 782. Other liabilities. Total other long-term liabilities. Deferred credits: 783. Deferred revenues—transfers from govern- ment authorities. 784. Other deferred credits. 786. Accumulated deferred income tax credits. Total deferred credits. Shareholders’ equity: Capital stock: 791. Capital stock. 792. Liability for conversion of capital stock. 793. Discount on capital stock. Total capital stock. Additional capital: 794. Premiums and assessments on capital stock. 795. Other capital. Total additional capital. Retained earnings: 797. Retained earnings; Appropriated. 798. Retained earnings; Unappropriated. Total retained earnings. 798.5 Treasury stock. 799. Accumulated Other Comprehensive Income Total shareholders’ equity. Total liabilities and shareholders’ equity. 1To be divided as to ‘‘Total issued’’ and ‘‘Held by or for company.’’ srobinson on DSK5SPTVN1PROD with PROPOSALS ■ 13. Amend Conversion Tables by Accounts conversion table to read as CONVERSION TABLES revising General Balance Sheet follows: * * * * * VerDate Sep<11>2014 15:15 Jul 07, 2015 Jkt 235001 PO 00000 Frm 00041 Fmt 4702 Sfmt 4702 E:\FR\FM\08JYP1.SGM 08JYP1$

Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules 39031

GENERAL BALANCE SHEET ACCOUNTS CONVERSION TABLE
System of accounts eff. prior to Month XX, 2015 System of accounts eff. Month, XX, 2015

Account title No. No. Account title

Cash ............................................................................. 701 701 Cash.
Temporary cash investments ....................................... 702 702 Temporary cash investments.
Special deposits ........................................................... 703 703 Special deposits.
Loans and notes receivable ......................................... 704 704 Loans and notes receivable.
708.5 Receivables from affiliated companies.
709.5 Allowance for uncollectible accounts.
Traffic, car service and other balances—dr ................. 705 705 Accounts receivable; interline and other balances.
709.5 Allowances for uncollectible accounts.
752 Accounts payable; interline and other balances.
Net balance receivable from agents and conductors .. 706 706 Accounts receivable; customers.
Miscellaneous accounts receivable .............................. 707 707 Accounts receivable; other.
708.5 Receivables from affiliated companies.
709.5 Allowance for uncollectible accounts.
Interest and dividends receivable ................................. 708 708 Interest and dividends receivable.
708.5 Receivables from affiliated companies.
709.5 Allowance for uncollectible accounts.
Accrued accounts receivable ....................................... 709 709 Accrued accounts receivable.
Working fund advances ................................................ 710 710 Working funds.
Prepayments ................................................................. 711 711 Prepayments.
Material and supplies ................................................... 712 712 Material and supplies.
Other current assets ..................................................... 713 713 Other current assets.
713.5 Derivative instrument assets
713.6 Derivative instrument assets—hedges
Deferred income tax charges ....................................... 714 714 Deferred income tax debits.
Sinking funds ................................................................ 715 715 Sinking funds.
Capital and other reserve funds ................................... 716 716 Capital funds.
Insurance and other funds ........................................... 717 717 Other funds.
Investment in affiliated companies ............................... 721 721 Investments and advances; affiliated companies.
Other investments ........................................................ 722 722 Other investments and advances.
Reserve for adjustment of investment in securities—cr 723 721.5 Adjustments; investments and advances—affiliated
companies.
723 Adjustments; other investments and advances.
Road and equipment property ...................................... 731 731 Road and equipment property.
Organization expenses ................................................. 71 739 Organization expenses.
Improvements on leased property ................................ 732 732 Improvements on leased property.
Accrued depreciation; improvements on leased prop- 733 733 Accumulated depreciation; improvements on leased
erty. property.
Accrued depreciation; road and equipment ................. 735 735 Accumulated depreciation; road and equipment prop-
erty.
Amortization of defense projects; road and equipment 736 736 Accumulated amortization; road and equipment prop-
erty—defense projects.
734 Accumulated amortization; improvements on leased
property—defense projects.
Miscellaneous physical property .................................. 737 737 Property used in other than carrier operations.
Accrued depreciation; miscellaneous physical prop- 738 738 Accumulated depreciation; property used in other
erty. than carrier operations.
Other assets ................................................................. 741 741 Other assets.
Unamortized discount on long-term debt ..................... 770.1 770.1 Unamortized debt discount.
Other deferred charges ................................................ 743 743 Other deferred debits.
Accumulated deferred income tax charges .................. 744 744 Accumulated deferred income tax debits.

Liabilities

Loans and notes payable ............................................. 751 751 Loans and notes payable.
757 Payables to affiliated companies.
Traffic, car service and other balances—cr ................. 752 752 Accounts payable; interline and other balances.
705 Accounts receivable; interline and other balances.
709.5 Allowance for uncollectible accounts.
Audited accounts and wages payable ......................... 753 753 Audited accounts and wages payable.
Miscellaneous accounts payable .................................. 754 754 Accounts payable; other.
757 Payables to affiliated companies.
srobinson on DSK5SPTVN1PROD with PROPOSALS

Interest matured unpaid ............................................... 755 755 Interest payable.
757 Payables to affiliated companies.
Dividends matured unpaid ............................................ 756 756 Dividends payable.
757 Payables to affiliated companies.
Unmatured interest accrued ......................................... 757 755 Interest payable.
757 Payables to affiliated companies.
Unmatured dividends declared ..................................... 758 756 Dividends payable.
757 Payables to affiliated companies.
Accrued accounts payable ........................................... 759 759 Accrued accounts payable.

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$39032 Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules GENERAL BALANCE SHEET ACCOUNTS CONVERSION TABLE—Continued System of accounts eff. prior to Month XX, 2015 System of accounts eff. Month, XX, 2015 Account title No. No. Account title Federal income taxes accrued ..................................... 760 760 Federal income taxes accrued. Other taxes accrued ..................................................... 761 711 Prepayments. 761 State and other income taxes accrued. 761.5 Other taxes accrued. Deferred income tax credits ......................................... 762 762 Deferred income tax credits. Other current liabilities .................................................. 763 763 Other current liabilities. 763.5 Derivative instrument liabilities 763.6 Derivative instrument liabilities—hedges Equipment obligations and other debt due within one 764 764 Equipment obligations and other long-term debt due year. within 1 year. Funded debt unmatured ............................................... 765 765 Funded debt unmatured. Equipment obligations .................................................. 766 766 Equipment obligations. Capitalized lease obligations ........................................ 766.5 766.5 Capitalized lease obligations. Receivers’ and trustees’ securities ............................... 767 767 Receivers’ and trustees’ securities. Debt in default .............................................................. 768 768 Debt in default. Amounts payable to affiliated companies .................... 769 769 Accounts payable; affiliated companies. Pension and welfare reserves ...................................... 771 771 Accrued liability; pension and welfare. Casualty and other reserves ........................................ 774 774 Accrued liability; casualty and other claims. 775 Other accrued liabilities. Interest in default .......................................................... 781 781 Interest in default. Other liabilities .............................................................. 782 782 Other liabilities. Deferred revenues—transfers from government au- 783 783 Deferred revenues—transfers from government au- thorities. thorities Unamortized premium on long-term debt .................... 790.2 770.2 Unamortized premium on debt. Other deferred credits .................................................. 784 784 Other deferred credits. Accrued liability; leased property ................................. 785 772 Accrued liability; leased property. Accumulated deferred income tax credits .................... 786 786 Accumulated deferred income tax credits. Shareholders’ Equity Capital stock issued ..................................................... 791 791 Capital stock. Stock liability for conversion ......................................... 792 792 Liability for conversion of capital stock. Discount on capital stock ............................................. 793 793 Discount on capital stock. Premiums and assessment on capital stock ................ 794 794 Premiums and assessments on capital stock. Paid-in surplus .............................................................. 795 795 Other capital. Other capital surplus .................................................... 796 795 Do. Retained income; appropriated .................................... 797 797 Retained earnings; appropriated. Retained income; unappropriated ................................ 798 798 Retained earnings; unappropriated. Treasury stock .............................................................. 798.5 798.5 Treasury stock. 799 Accumulated Other Comprehensive Income. Note: The following appendices will not Appendix A appear in the Code of Federal Regulations. BILLING CODE 4915–01–P srobinson on DSK5SPTVN1PROD with PROPOSALS VerDate Sep<11>2014 19:43 Jul 07, 2015 Jkt 235001 PO 00000 Frm 00043 Fmt 4702 Sfmt 4702 E:\FR\FM\08JYP1.SGM 08JYP1$

Document Created: 2018-02-23 09:12:24
Document Modified: 2018-02-23 09:12:24

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Proposed Rules
Action		Notice of proposed rulemaking.
Dates		Comments on this proposed rulemaking are due on or before August 7, 2015; reply comments are due by September 8, 2015.
Contact		Pedro Ramirez at (202) 245-0333. Assistance for the hearing impaired is available through the Federal Information Relay Services (FIRS) at 1-800-877-8339.
FR Citation		80 FR 39021
CFR Associated		Railroads and Uniform System of Accounts

80 FR 39021 - Accounting and Reporting of Business Combinations, Security Investments, Comprehensive Income, Derivative Instruments, and Hedging Activities

DEPARTMENT OF TRANSPORTATIONSurface Transportation Board

Federal Register Volume 80, Issue 130 (July 8, 2015)

DEPARTMENT OF TRANSPORTATION
Surface Transportation Board