[Federal Register Volume 59, Number 39 (Monday, February 28, 1994)]
[Unknown Section]
[Page ]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-4408]
[Federal Register: February 28, 1994]
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FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 32
[CC Docket No. 89-360, FCC 94-28]
Statement of Financial Accounting Standards No. 96, Accounting
for Income Taxes
AGENCY: Federal Communications Commission.
ACTION: Final rule.
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SUMMARY: The Commission has adopted a Report and Order to incorporate
the liability method of accounting for income taxes into the Uniform
System of Accounts for Telecommunications Companies. This action brings
the method of accounting for income taxes in line with the generally
accepted method of accounting for income taxes prescribed for the
American business community.
EFFECTIVE DATE: August 29, 1994.
FOR FURTHER INFORMATION CONTACT:
Thaddeus Machcinski, Common Carrier Bureau, Accounting and Audits
Division, 202-634-1861.
SUPPLEMENTARY INFORMATION: This is a synopsis of the Commission's
Report and Order in CC Docket No. 89-360, adopted January 31, 1994 and
released February 8, 1994. The complete text of this Report and Order
is available for inspection and copying during normal business hours in
the FCC Dockets Branch (room 230), 1919 M Street NW., Washington, DC,
and may also be purchased from the Commission's copy contractor,
International Transcription Service, Inc., at (202) 857-3800, 2100 M
Street NW., suite 140, Washington, DC 20037.
Synopsis of Report and Order
1. This Report and Order amends part 32 to incorporate the new
accounting procedures for income taxes prescribed in Statement of
Financial Accounting Standards No. 109 (SFAS-109) and it also
establishes new accounts to properly implement those procedures.
2. This Report and Order adds three new accounts to the Uniform
System of Accounts to incorporate the requirements of SFAS-109 into
part 32. The new accounts are Account 1437, Deferred Tax Regulatory
Asset; Account 4341, Net Deferred Tax Liability Adjustments; and
Account 4361, Deferred Tax Regulatory Liability. These new accounts
will reflect the adjustments to existing carrier deferred tax balances
that are necessary as a result of adopting SFAS-109.
3. The type of SFAS-109 adjustments that will be shown in the above
accounts relate to changes in tax rates, recording tax liabilities for
items that were previously accounted for under the flow through method,
and recording taxes on items that were formerly considered permanent
differences by the accounting profession.
4. The Report and Order will be effective six months after it is
published in the Federal Register. However, the Report and Order
permits carriers to adopt SFAS-109 for federal accounting purposes on
January 1, 1993 if the carriers so desire.
5. Finally, the new accounts that are established in the Report and
Order will be excluded from interstate rate base and revenue
requirement determinations. This insures that the adoption of SFAS-109
for federal accounting purposes will not increase or decrease the
interstate revenue requirement.
Rule Changes
6. Accordingly, it is ordered that, Pursuant to sections 1, 4(i),
201-205, 218, 220, and 403 of the Communications Act of 1934, as
amended, 47 U.S.C. 151, 154(i)201-205, 218, 220, 403, part 32 is
amended as set forth below.
7. It is further ordered that, Pursuant to section 220(g) of the
Communications Act of 1934, as amended, 47 U.S.C. Sec. 220(g) and
Sec. 1.427(c) of the Commission's Rules, 47 CFR 1.427(c), the
amendments to part 32 of the Commission's Rules, 47 CFR 32.1 et seq.,
as set forth below, shall be effective August 29, 1994.
8. It is further ordered that, Pursuant to section 4(i) of the
Communications Act of 1934, as amended, 47 U.S.C. 154(i), Sec. 32.16 of
the Commission's rules 47 CFR 32.16 is waived to the extent that it
requires the filing of a revenue requirement study in regard to SFAS-
109.
9. It is further ordered that, Carriers may implement SFAS-109 for
federal regulatory purposes prior to the effective date of the new
rules.
10. It is further ordered that, The Secretary shall provide a copy
of this Report and Order to each state utility commission.
List of Subjects in 47 CFR Part 32
Communications common carriers, Reporting and recordkeeping
requirements, Telephone, Uniform System of Accounts.
Federal Communications Commission.
William F. Caton,
Acting Secretary.
Part 32 of title 47 of the CFR is amended as follows:
PART 32--UNIFORM SYSTEM OF ACCOUNTS FOR TELECOMMUNICATIONS
COMPANIES
1. The authority citation for part 32 continues to read as follows:
Authority: Secs. 4(i), 4(j) and 220 as amended; 47 U.S.C.
154(i), 154(j), and 220 unless otherwise noted.
2. Section 32.22 (a), (c), (d), and (f) is revised to read as
follows:
Sec. 32.22 Comprehensive interperiod tax allocation.
(a) Companies shall apply interperiod tax allocation (tax
normalization) to all book/tax temporary differences which would be
considered material for published financial report purposes.
Furthermore, companies shall also apply interperiod tax allocation if
any item or group of similar items when aggregated would yield debit or
credit entries which exceed or would exceed 5 percent of the gross
deferred income tax expense debits or credits during any calendar year
over the life of the temporary difference. The tax effects of book/tax
temporary differences shall be normalized and the deferrals shall be
included in the following accounts:
4100, Net Current Deferred Operating Income Taxes;
4110, Net Current Deferred Nonoperating Income Taxes;
4340, Net Noncurrent Deferred Operating Income Taxes;
4350, Net Noncurrent Deferred Nonoperating Income Taxes.
In lieu of the accounting prescribed herein, any company shall
treat the increase or reduction in current income taxes payable
resulting from the use of flow through accounting in prior years as an
increase or reduction in current tax expense.
* * * * *
(c) Subsidiary records shall be used to reduce the deferred tax
assets contained in the accounts specified in paragraph (a) of this
section when it is likely that some portion or all of the deferred tax
asset will not be realized. The amount recorded in the subsidiary
record should be sufficient to reduce the deferred tax asset to the
amount that is likely to be realized.
(d) The records supporting the activity in the deferred income tax
accounts shall be maintained in sufficient detail to identify the
nature of the specific temporary differences giving rise to both the
debits and credits to the individual accounts.
* * * * *
(f) The tax differentials to be normalized as specified in this
section shall also encompass the additional effect of state and local
income tax changes on Federal income taxes produced by the provision
for deferred state and local income taxes for book/tax temporary
differences related to such income taxes.
* * * * *
3. Section 32.103 is amended by adding account 32.1437 to the list
of accounts to read as follows:
Sec. 32.103 Balance sheet accounts for other than regulated-fixed
assets to be maintained.
Balance Sheet Accounts
------------------------------------------------------------------------
Class A Class B
Account title account account
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*****
Deferred Tax Regulatory Asset....................... 1437 1437
*****
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* * * * *
4. Section 32.1437 is added to read as follows:
Sec. 32.1437 Deferred tax regulatory asset.
(a) This account shall include amounts of probable future revenue
for the recovery of future increases in taxes payable. As reversals
occur, amounts recorded in this account shall be reduced with a credit
entry and a debit entry to Account 4341, Net Deferred Tax Liability
Adjustments.
(b) This account shall also be adjusted for the impact of
prospective tax rate changes on the deferred tax liability for those
temporary differences underlying its existing balance. If the
cumulative effect of such adjustments reduce the account to a net
credit balance, such balance shall be reclassified to Account 4361.
5. Section 32.4000 is amended by adding accounts 32.4341 and
32.4361 to the list of accounts to read as follows:
Sec. 32.4000 Instructions for balance sheet accounts--liabilities and
stockholders' equity.
Liabilities and Stockholders' Equity Accounts to be Maintained by
Class A and Class B telephone companies:
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Class A Class B
Account title account account
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*****
Net Deferred Tax Liability Adjustments.............. 4341 4341
* * * * *
Deferred Tax Regulatory Liability................... 4361 4361
* * * * *
------------------------------------------------------------------------
* * * * *
6. Section 32.4100(d) is revised to read as follows:
Sec. 32.4100 Net current deferred operating income taxes.
* * * * *
(d) The classification of deferred income taxes as current or
noncurrent shall follow the classification of the asset or liability
that gave rise to the deferred income tax. If there is no related asset
or liability, classification shall be based on the expected turnaround
of the temporary differences.
* * * * *
7. Section 32.4110(g) is revised to read as follows:
Sec. 32.4110 Net current deferred nonoperating income taxes.
* * * * *
(g) The classification of deferred income taxes as current or
noncurrent shall follow the classification of the asset or liability
that gave rise to deferred income tax. If there is no related asset or
liability, classification shall be based on the expected turnaround of
the temporary differences.
* * * * *
8. Section 32.4340 (a) and (d) are revised to read as follows:
Sec. 32.4340 Net noncurrent deferred operating income taxes.
(a) This account shall include the balance of income tax expense
related to noncurrent items from regulated operations which have been
deferred to later periods as a result of comprehensive interperiod tax
allocation related to temporary differences that arise from regulated
operations.
* * * * *
(d) The classification of deferred income taxes as current or
noncurrent shall follow the classification of the asset or liability
that gave rise to the deferred income tax. If there is no related asset
or liability, classification shall be based on the expected turnaround
of the temporary difference.
* * * * *
9. Section 32.4341 is added to read as follows:
Sec. 32.4341 Net deferred tax liability adjustments.
(a) This account shall include the portion of deferred income tax
charges and credits pertaining to Accounts 32.1437, Deferred Tax
Regulatory Asset, and 32.4361, Deferred Tax Regulatory Liability.
(b) This account shall be used to record adjustments to the
accumulated deferred tax liabilities recorded in Accounts 4100 and 4340
for:
(1) Tax effects of temporary differences accounted for under the
flow-through method or treated as permanent differences.
(2) Reclassification attributable to changes in tax rates (Federal,
state and local). As tax rates increase or decrease, the offsetting
debit or credit will be recorded in Account 1437 and/or 4361 as
required by paragraph (a) of this section.
(3) The tax effects of carryforward net operating losses and
carryforward investment tax credits expected to reduce future taxes
payable that are reported in published financial statements.
(4) Reversals of the tax effects of carryforward net operating
losses and carryforward investment tax credits previously recorded in
this account at the time they become recognized as reductions in
current taxable income and current taxes payable on tax returns.
(c) This account shall be exempt from the vintage year detail
record requirements of Sec. 32.22(e)(2).
10. Section 32.4350 (a) and (g) are revised to read as follows:
Sec. 32.4350 Net noncurrent deferred nonoperating income taxes.
(a) This account shall include the balance of income tax expense
(Federal, state, and local) that has been deferred to later periods as
a result of comprehensive interperiod allocation related to
nonoperating differences.
* * * *
(g) The classificaiton of deferred income taxes as current or
noncurrent shall follow the classification of the asset or liability
that gave rise to the deferred income tax. If there is no related asset
or liability, classification shall be based on the expected turnaround
of the temporary difference.
* * * * *
11. Section 32.4361 is added to read as follows:
Sec. 32.4361 Deferred tax regulatory liability.
(a) This account shall include amounts of probable future revenue
reductions attributable to future decreases in taxes payable. As
reductions occur, amounts recorded in this amount shall be reduced with
a debit entry and a credit entry to Account 4341, Net Deferred Tax
Liability Adjustments.
(b) This account shall also be adjusted for the impact of
prospective tax rate changes on the deferred tax liability for those
temporary differences underlying its existing balance. If the
cumulative effect on such adjustments reduces the account to a net
debit balance, such balance shall be reclassified to Account 1437.
[FR Doc. 94-4408 Filed 2-25-94; 8:45 am]
BILLING CODE 6712-01-M
