20.802 Shop expenses. (a) To this account shall be charged items of expense at shops and other places at which mechanical work is done, not assignable direct to specific accounts.

(b) For the purpose of securing an equitable assignment of shop expenses to the cost of the output of the shops, a separate clearing account shall be maintained for each shop plant. (Note § 20.01-2 (dd).)

(c) The shop expenses for each shop plant shall be apportioned each month among the various accounts to which are chargeable the directly assignable expenses of the plant. The apportionment of shop expenses to each account shall be based upon the ratio of the shop expenses to the total assigned labor of the shop plant. The carrier is permitted to make the monthly apportionments of shop expenses on the basis of percentage rates, provided these rates are currently adjusted, and provided further that the balance in this account for each shop plant shall be fully apportioned and distributed at the close of each calendar year. (d) The expenses assignable to this account are as follows:

(1) General shop employees: The pay of general foremen in small shops, who exercise direct supervision over all departments unassisted by department foremen; the pay of department foremen, assistant department foremen, other supervising or directing employees, and their clerks; pay of chauffeurs and oilers; pay of sweepers, cleaners, and other unskilled laborers employed in general work in and about shops and shop grounds; pay of watchmen, gatekeepers, and policemen at shops and other places at which mechanical work is done; pay of employees while attending fires or fire drills; pay of employees while making, repairing, or having charge of small shop tools; and the pay of employees while regularly engaged in making shop delivery of material from warehouses.

(2) Power: The pay of stationary engineers, firemen, electricians, fuel handlers, and other employees engaged in production of power; cost of fuel used in steam and other power plants in producing power for shops and for other places at which mechanical work is done; cost of oil, grease, waste, and other material used in the operation of such power plants; cost of carbon brushes, fuses, lamps, picks, pokers, scuttles, shovels, and other small tools and supplies, and cost of water and power purchased.

(3) Heating: The cost of fuel and other supplies used for heating shops and other places at which mechanical work is done, shop offices, watchmen's, gatekeepers', and inspectors' boxes; and the pay of firemen, fuel handlers, and other employees engaged in operating heating

boilers.

(4) Lighting: The cost of electric current, gas, oil, torches, lamp burners, lamp chimneys, lamps not permanently attached to buildings, incandescent lamps and flood lights, and other material used in lighting shops and shop offices and other places at which mechanical work is done, and cost of material used and labor expended in operating electric-light plants and repairing electric light and other lamps at shops.

(5) Shop supplies: Fuel for forge and other shop work; supplies and small tools used by mechanics and other employees engaged in

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construction or repair work; test-room and laboratory supplies used in connection with shop work; lubricating material for shop machinery and tools; water used at shops and shop offices and other places at which mechanical work is done; and other supplies used generally in shop work.

(6) Incidental expenses: Watchmen's uniforms, clocks, and call boxes; traveling expenses connected with the operation of shops not directly chargeable to other accounts; removal of snow and ice from shop yards when removed by shop employees; cost of ice for shops; and other undistributed shop expenses.

(7) The balance in this account shall be included in account 28, "Other deferred debits."*†

20.803 Material store expenses. (a) To this account shall be charged expenses directly incurred in connection with purchasing, handling, and storing materials in and distributing it from the carrier's warehouses, including the pay of employees in the store departments and their traveling, office, and other expenses. The pay and expenses of men employed in inspecting a single class of material shall be added as store expenses to the cost of that particular material.

(b) The total amount of warehouse expenses charged to this account shall be so distributed among the accounts to which material has been charged that the amounts thus distributed will be, for each account, in proportion to the value of the material consumed chargeable thereto. To avoid monthly fluctuations in the ratio of store expenses to the value of material purchased or issued, carriers may make a monthly apportionment on the basis of fair percentage rates, provided the store-expense account be adjusted and closed out at the end of each calendar year.

(c) The monthly balance in this account shall be included in account No. 28, "Other deferred debits." *+

20.804 Machine tools and machinery; maintenance. (a) This account shall include the cost of repairs of machine tools and machinery.

(b) This account shall be cleared by adding to the cost of the work performed through the use of such property, such amounts as will distribute such expenses equitably.*+

NOTE A: The cost of labor expended and material consumed in the operation of machine tools and machinery shall be charged direct to the work in connection with which such property is operated.

NOTE B: The depreciation charges for machine tools and machinery shall be included in accounts Nos. 613, 663, 763, "Depreciation." Charges to other than the operating-expense accounts to cover depreciation on such property shall be credited to accounts Nos. 503, 553, "Rent revenues."

PART 21-PIPE LINE COMPANIES: DEPRECIATION

CHARGES

Section 21.0 Order of the Commission. It appearing that in compliance with paragraph (5) of section 20 of the Interstate Commerce Act, as amended by the Transportation Act, 1920, the Commission entered upon an investigation into and concerning depreciation charges of common carriers subject to the act; and that a full investi

*For statutory citation, see note to § 20.00-1.

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gation of the matters and things involved, in so far as they concern carriers by pipe lines, has been had, and that the Commission, on the date hereof, has made and filed a report containing its findings of fact and conclusions thereon, which said report is hereby referred to and made a part hereof (205 I.C.C. 33) :

It is ordered that (a) All pipe-line companies subject to the Interstate Commerce Act shall, effective January 1, 1936, institute depreciation accounting, as hereinafter prescribed, with respect to the following classes of common-carrier property, found in the accompanying report to be classes of property for which depreciation charges may properly be included under operating expenses:

Rights of way.
Line pipe.

Line pipe fittings.

Pipe line construction.
Buildings.

Boilers.

Engines and pumps.

Machine tools and machinery.

Other station equipment.
Oil tanks.

Delivery facilities.

Telegraph and telephone lines.
Office furniture and equipment.
Highway equipment.
Other property.

Provided, That in case a pipe-line company can show that the service life of its property or a substantial portion thereof is dependent upon a particular source of traffic, upon exhaustion of which the operation of the property for common-carrier purposes must in all probability be abandoned, and that the time of such exhaustion can be predicted with a reasonable degree of accuracy, then the entire property of such pipe-line company or the portion thereof which is so affected may be classed as depreciable, in which case, however, depreciation of this character shall be provided for through a special amortization account, instructions as to which will hereafter be given. (b) In the application of this order the terms "service life," "service value," "net salvage value," "straight-line method," "ledger value,' "component rates," and "currently accruing depreciation" shall be construed in accordance with the definitions and explanations given therefor in the accompanying report.

(c) Depreciation accounting, as referred to in this order shall mean (1) The charging to operating expenses and the crediting to a depreciation reserve during the service life of the property, as hereinafter provided, of amounts which will approximate the loss in service value not restored by current maintenance and incurred in connection with the consumption or prospective retirement of property in the course of service from causes against which the carrier is not protected by insurance, which are known to be in current operation, and whose effect can be forecast with a reasonable approach to accuracy.

(2) The crediting of the ledger value of property at time of retirement to the appropriate primary pipe-line investment accounts and the charging of the service value of such property when retired to the depreciation reserve.

(d) The annual charges to operating expenses for currently accruing depreciation shall be computed, as hereinafter provided, at such percentage rate of the ledger value of the property in question that the service value may be distributed under the straight-line method

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in equal annual charges to operating expenses during the estimated service life of the property.

(e) All depreciation charges to operating expenses and concurrent credits to the depreciation reserve shall be made monthly in conformity with the group plan of accounting for depreciation, as explained in the accompanying report and as hereinafter provided, and in determining such monthly charges and credits the annual percentage rates shall be applied to the total ledger value (see paragraph (j)), as of the first of each month, of the respective primary accounts covering the classes of property hereinbefore specified and the result divided by 12; but that for corporate ledger and balance-sheet purposes the depreciation reserve shall be regarded and treated as a single composite reserve. Provided, That for purposes of analysis each carrier shall maintain subsidiary records in which the reserve is broken down into component parts corresponding to such primary accounts as include property hereinbefore found to be depreciable, showing in these records also in complete detail by such primary accounts the current credits and debits to the reserve; and that such detailed information shall be reported annually to the Commission. (f) In determining the monthly depreciation charges to operating expenses and the corresponding credits to the depreciation reserve a composite annual percentage rate shall be used for each of the primary accounts in the classification of investment in pipe lines covering the classes of property hereinbefore specified; and the composite rates so used shall be those which are from time to time prescribed by the Commission. Provided, That where the composite rate as prescribed has been developed by the application of component rates to the various subclasses of property within a primary account and a segregation of the property to which they are applicable is maintained or is available, such component rates, unless otherwise ordered by the Commission, may be used in computing the current depreciation charges as long as the property to which they apply is in service and the estimated service lives, and salvage values upon which they are based remain the same-without a supplemental order, regardless of the fact that the amount of the various classes of property has so changed as to make possible the computation of a slightly different composite rate.

(g) For the assistance of the Commission in prescribing the composite annual percentage rates to be effective beginning January 1, 1936, each operating pipe-line company subject to the Act shall, not later than September 1, 1936, file with the Commission estimates of said percentage rates applicable to ledger values of the respective primary accounts covering the classes of property hereinbefore specified, owned and/or used by such company; such composite percentage rates shall be based upon estimated service values and service lives developed by a study of the company's history and experience and such engineering and other information as may be available with respect to future prospects, and shall produce a charge to operating expenses for the primary account, where more than one class of property is covered by the account, equal to the sum of the amounts that would otherwise be chargeable for each of the various classes; and

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such estimates shall be accompanied by a sworn statement showing the bases therefor and the methods employed in their computation.24

(h) Upon the retirement of a unit of depreciable property, whether or not the cause of the retirement is a recognized factor in depreciation, as explained in the accompanying report, the service value shall be charged in its entirety to the depreciation reserve. Provided, That if the cause of retirement is not a recognized factor in depreciation, but is a cause against which the carrier is insured, the depreciation reserve shall be credited with the full amount of insurance recovered; And provided further, That if the retirement charge will result in undue depletion of the depreciation reserve the carrier, after application to the Commission, may charge to an appropriate account in operating expenses or profit and loss such portion of the service value as the Commission may approve.

(i) In determining the amounts to be respectively credited to the primary pipe-line investment accounts and charged to the material and supplies account and to the depreciation reserve in the case of the retirement of a unit of property, amounts for specific units shall be used so far as practicable; but where this is impracticable because of the relatively large number and small size of the units, average amounts shall be used.

(j) As of January 1, 1936, each operating pipe-line company shall establish and thereafter shall maintain records covering the cost of all carrier property owned and/or used for which depreciation accounting is herein prescribed; the manner in which such records shall be kept and the method of determining the amounts to be included therein as of January 1, 1936, and for subsequent property changes, shall be in accordance with finding (9) (205 İ.C.C. 33, 46) of the accompanying report; and the ledger value of carrier property used for depreciation purposes thereafter shall be the costs entering into the records so provided subject to the provisions of finding (10).

(k) With respect to common-carrier property used but not owned operating pipe-line companies shall include in operating expenses charges for depreciation upon the same basis as for owned property and shall maintain the same records of service lives, salvage values, etc., as are required for owned property. Provided, That this shall not apply to units of property the depreciation of which is assumed by the lessor and the rent for which is included in operating expenses nor, with the approval of the Commission, to other units of property with respect to which it is shown that there are special circumstances and conditions justifying such exception.

(1) As of the effective date of this order each operating pipe-line company shall make an estimate, in accordance with the principles set forth for the determination of currently accruing depreciation, of the amount of accrued depreciation in the depreciable property as of

"Upon the submission by the companies of the data specified above temporary orders will be issued, specifying the composite annual percentage rates to be used, such orders to be subject to modification from time to time thereafter in accordance with the procedure indicated in finding (8) (205, I.C.C. 33, 45) of the accompanying report, or as may otherwise be deemed necessary or desirable by the Commission.

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