[Federal Register Volume 59, Number 177 (Wednesday, September 14, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-22609]
[[Page Unknown]]
[Federal Register: September 14, 1994]
VOL. 59, NO. 177
Wednesday, September 14, 1994
DEPARTMENT OF AGRICULTURE
Rural Electrification Administration
7 CFR Part 1770
Accounting Requirements for REA Telephone Borrowers
AGENCY: Rural Electrification Administration, USDA.
ACTION: Proposed rule.
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SUMMARY: The Rural Electrification Administration (REA) proposes to
amend its regulations on accounting policies and procedures for REA
telephone borrowers as set forth in REA's regulations concerning
Accounting System Requirements for REA Telephone Borrowers. This
proposed rule would establish an accounting interpretation for
postretirement benefits that addresses both the requirements of the
Financial Accounting Standards Board and the Federal Communications
Commission. It would also set forth accounting interpretations that
establish uniform accounting procedures for Rural Telephone Bank (RTB)
stock, cushion of credit investments, Rural Economic Development loans
and grants, and satellite or cable television service investments.
DATES: Written comments must be received by REA by November 14, 1994.
ADDRESSES: Submit written comments to Ms. Roberta E. Detwiler, Chief,
Technical Accounting and Auditing Staff, Borrower Accounting Division,
Rural Electrification Administration, room 2222 South Building, U.S.
Department of Agriculture, Washington, DC 20250, telephone number (202)
720-5227. REA requires a signed original and three copies of all
comments (7 CFR Part 1700). All comments received will be made
available for inspection at room 2234 South Building during regular
business hours (7 CFR 1.27 (b)).
FOR FURTHER INFORMATION CONTACT: Ms. Roberta E. Detwiler, Chief,
Technical Accounting and Auditing Staff, Borrower Accounting Division,
Rural Electrification Administration, room 2222, South Building, U.S.
Department of Agriculture, Washington, DC 20250, telephone number (202)
720-5227.
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This proposed rule has been determined to be not significant for
the purposes of Executive Order 12866 and therefore has not been
reviewed by OMB.
Regulatory Flexibility Act Certification
The Administrator of REA has determined that the Regulatory
Flexibility Act (5 U.S.C. 601 et seq.) does not apply to this proposed
rule.
Information Collection and Recordkeeping Requirements
In compliance with the Office of Management and Budget (OMB)
regulations (5 CFR Part 1320) which implements the Paperwork Reduction
Act of 1980 (Pub. L. 96-511) and section 3504 of that Act, the
information collection and recordkeeping requirements have been
approved by the Office of Management and Budget (OMB) under control
number 0572-0003. Comments regarding these requirements may be sent to
the United States Department of Agriculture, Clearance Office, OIRM,
Room 404-W, Washington, DC 20250 or to the Office of Management and
Budget, Office of Information and Regulatory Affairs, Room 10102,
Washington, DC 20503.
National Environment Policy Act Certification
The Administrator, REA, has determined that this proposed rule will
not significantly affect the quality of the human environment as
defined by the National Environmental Policy Act of 1969 (42 U.S.C.
4321 et seq.). Therefore, this action does not require an environmental
impact statement or assessment.
Catalog of Federal Domestic Assistance
The program described by this proposed rule is listed in the
Catalog of Federal Domestic Assistance Program under numbers 10.851--
Rural Telephone Loans and Loan Guarantees and 10.852--Rural Telephone
Bank loans. This catalog is available on a subscription basis from the
Superintendent of Documents, the United States Government Printing
Office, Washington, DC 20402.
Executive Order 12372
This proposed rule is excluded from the scope of Executive Order
12372, Intergovernmental Consultation. A Notice of Final Rule entitled
Department Programs and Activities Excluded from Executive Order 12372
(50 FR 47034) exempts REA and Rural Telephone Bank (RTB) loans and loan
guarantees, and RTB loans, to governmental and nongovernmental entities
from coverage under this order.
Executive Order 12778
This proposed rule has been reviewed under Executive Order 12778,
Civil Justice Reform. This proposed rule:
(1) Will not preempt any state or local laws, regulations, or
policies, unless they present an irreconcilable conflict with this
rule;
(2) will not have any retroactive effect; and
(3) will not require administrative proceeding before parties may
file suit challenging the provisions of this proposed rule.
Background
In order to facilitate the effective and economical operation of a
business enterprise, adequate and reliable financial records must be
maintained. Accounting records must provide a clear, accurate picture
of current economic conditions from which management can make informed
decisions in charting the company's future. The rate regulated
environment in which a telecommunications carrier operates causes an
even greater need for financial information that is accurate, complete,
and comparable with that generated by other carriers. For this reason,
the Federal Communications Commission (FCC) prescribes a Uniform System
of Accounts (USoA) for the telecommunications industry.
REA, as a Federal lender and mortgagee, and in furthering the
objectives of the Rural Electrification Act (RE Act) (7 U.S.C. 901 et
seq.) has a legitimate programmatic interest and a substantial
financial interest in requiring adequate records to be maintained. In
order to provide REA with financial information that can be analyzed
and compared with the operations of other borrowers in the REA program,
all REA borrowers must maintain financial records that utilize uniform
accounts and uniform accounting policies and procedures. The standard
REA security instrument, therefore, requires borrowers to maintain
their books, records, and accounts in accordance with methods and
principles of accounting prescribed by REA in the REA USoA for its
telephone borrowers.
To ensure that borrowers consistently account for and apply the
provisions of recent pronouncements of the Financial Accounting
Standards Board and the Federal Communications Commission (FCC), the
REA USoA must be revised and updated as changes in generally accepted
accounting principles and the FCC USoA occur. REA is, therefore,
proposing to establish a new accounting interpretation that addresses
the accounting requirements set forth in Statement of Financial
Accounting Standards No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions (Statement No. 106). Statement No. 106
requires reporting entities to accrue the expected cost of
postretirement benefits during the years the employee provides service
to the entity. Copies of Statements of Financial Accounting Standards
may be obtained from the Order Department of the Financial Accounting
Standards Board, 401 Merritt 7, P.O. Box 5116, Norwalk, Connecticut
06856-5116.
REA is also proposing to establish an accounting interpretation for
RTB bank stock that sets forth the journal entries necessary to record
the required purchase of Class B RTB stock, patronage refunds in the
form of additional shares of Class B RTB stock, purchases of Class C
stock, and dividends received on Class C stock. The interpretation also
addresses the proper accounting for the conversion of Class B stock to
Class C stock after all RTB loans have been repaid.
REA is also proposing to set forth an accounting interpretation
that establishes the accounting policies and procedures for the Rural
Economic Development loan and grant programs recently established by
REA and for investments in satellite and cable television services.
List of Subjects in 7 CFR Part 1770
Accounting, Loan programs--communications, Reporting and
recordkeeping requirements, Rural areas, Telephone, Uniform System of
Accounts.
For the reasons set forth in the preamble, REA proposes to amend 7
CFR chapter XVII as follows:
PART 1770--ACCOUNTING REQUIREMENTS FOR REA TELEPHONE BORROWERS
1. The authority for part 1770 continues to read as follows:
Authority: 7 U.S.C. 901 et seq.
2. Subpart C is added to read as follows:
Subpart C--Accounting Interpretations
Sec.
1770.26 General.
1770.27 Definitions.
1770.28-1770.45 [Reserved]
Appendix to Subpart C--Accounting Methods and Procedures Required of
all Borrowers
Subpart C--Accounting Interpretations
Sec. 1770.26 General.
(a) The standard provisions of the security instruments utilized by
the Rural Electrification Administration (REA) and the Rural Telephone
Bank (RTB) for all telephone borrowers require borrowers to at all
times keep and safely preserve proper books, records, and accounts in
which full and true entries will be made of all of the dealings,
business, and affairs of the borrower in accordance with the methods
and principles of accounting prescribed by the state regulatory body
having jurisdiction over the borrower and by the Federal Communications
Commission in its Uniform System of Accounts for telecommunications
companies, as those methods and principles of accounting are
supplemented from time to time by REA.
(b) This subpart implements those standard provisions of the REA
and RTB security instruments by prescribing accounting principles,
methodologies, and procedures applicable to all telephone borrowers for
particular situations.
Sec. 1770.27 Definitions.
As used in this part:
Borrower is an REA telephone borrower.
Cushion of Credit Account is a 5 percent interest bearing account
established by REA in which all voluntary payments or overpayments on
Rural Electric and Telephone Revolving Funds after October 1, 1987, are
deposited.
FCC is the Federal Communications Commission
Part 32 is 47 CFR Part 32, Uniform System of Accounts, issued by
the Federal Communications Commission.
RAO is the Responsible Accounting Officer of the Federal
Communications Commission.
REA is the Rural Electrification Administration, an agency of the
United States Department of Agriculture, or its successor.
RE Act is the Rural Electrification Act of 1936, as amended.
RETRF is the Rural Electric and Telephone Revolving Fund.
RTB is the Rural Telephone Bank.
Secs. 1770.28-1770.45 [Reserved]
Appendix to Subpart C--Accounting Methods and Procedures Required of
All Borrowers
All Borrowers shall maintain and keep their books of accounts
and all other books and records which support the entries in such
books of accounts in accordance with the accounting principles
prescribed in this appendix.
Numerical Index
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No. Title
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101.... Postretirement Benefits.
102.... Rural Telephone Bank (RTB) Stock.
103.... Cushion of Credit Investments.
104.... Rural Economic Development Loan and Grant Program.
105.... Satellite and Cable Television Services.
106.... Consolidated Financial Statements.
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Subject matter index No.
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C
Cable Television Services.................................... 105
Consolidated Financial Statements............................ 106
Cushion of Credit Investments................................ 103
E
Economic Development Loan and Grant Program.................. 104
F
Financial Statements--Consolidated........................... 106
I
Investments--Cushion of Credit............................... 103
P
Postretirement Benefits...................................... 101
R
Rural Economic Development Loan and Grant Program............ 104
Rural Telephone Bank Stock................................... 102
S
Satellite Television Services................................ 105
Stock--Rural Telephone Bank.................................. 102
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101 Postretirement Benefits
Statement of Financial Accounting Standards No. 106, Employers'
Accounting for Postretirement Benefits Other Than Pensions
(Statement No. 106), requires reporting entities to accrue the
expected cost of postretirement benefits during the years the
employee provides service to the entity. For purposes of applying
the provisions of Statement No. 106, members of the board of
directors are considered to be employees of the cooperative. Prior
to the issuance of Statement No. 106, most reporting entities
accounted for postretirement benefit costs on a ``pay-as-you-go''
basis; that is, costs were recognized when paid, not when the
employee provided service to the entity in exchange for the
benefits.
As defined in Statement No. 106, a postretirement benefit plan
is a deferred compensation arrangement in which an employer promises
to exchange future benefits for an employee's current services.
Postretirement benefit plans may be funded or unfunded.
Postretirement benefits include, but are not limited to, health
care, life insurance, tuition assistance, daycare, legal services,
and housing subsidies provided outside of a pension plan.
Statement No. 106 applies to both written plans and to plans
whose existence is implied from a practice of paying postretirement
benefits. An employer's practice of providing postretirement
benefits to selected employees under individual contracts with
specific terms determined on a employee-by-employee basis does not,
however, constitute a postretirement benefit plan under the
provisions of this statement.
Postretirement benefit plans generally fall into three
categories: single-employer defined benefit plans, multiemployer
plans, and multiple-employer plans.
A single-employer plan is a postretirement benefit plan that is
maintained by one employer. The term may also be applied to a plan
that is maintained by related parties such as a parent and its
subsidiaries. A multiemployer plan is a postretirement benefit plan
in which two or more unrelated employers contribute, usually
pursuant to one or more collective-bargaining agreements. One
characteristic of a multiemployer plan is that the assets
contributed by one participating employer may be used to provide
benefits to employees of other participating employers since assets
contributed by an employer are not segregated in a separate account
or restricted to provide benefits only to employees of that
employer.
A multiple-employer plan is a postretirement benefit plan that
is maintained by more than one employer but is not a multiemployer
plan. A multiple-employer plan is generally not collectively
bargained and is intended to allow participating employers to pool
their plan assets for investment purposes and reduce the cost of
plan administration. A multiple-employer plan maintains separate
accounts for each employer so that contributions provide benefits
only for employees of the contributing employer.
The accounting requirements set forth in this interpretation
focus on single- and multiple-employer plans. The accounting
requirements set forth in Statement No. 106 for multiemployer plans
or defined contribution plans shall be adopted for borrowers
electing those types of plans.
Under the provisions of Statement No. 106, there are two
components of the postretirement benefit cost: the current period
cost and the transition obligation. The transition obligation is a
one-time accrual of the costs resulting from services already
provided. Statement No. 106 allows the transition obligation to be
deferred and amortized on a straight-line basis over the average
remaining service period of the active employees. If the average
remaining service period of the active employees is less than 20
years, a 20-year amortization period may be used.
Accounting Requirements
All Borrowers shall adopt the accrual accounting provisions and
reporting requirements as set forth in Statement No. 106. The
transition obligation and accrual of the current period cost must be
based upon an actuarial study. This study must be updated to allow
the Borrower to comply with the measurement date requirements of
Statement No. 106; however, the study must, at a minimum, be updated
every five years. REA will not allow Borrowers to account for
postretirement benefits on a ``pay-as-you-go'' basis.
Under the provisions of Statement No. 106, an entity may
recognize the transition obligation, in its entirety, when Statement
No. 106 is first adopted or the entity may elect to delay the
recognition of the transition obligation. On December 26, 1991,
however, the Federal Communications Commission (FCC) issued 6 FCC
Rcd 7560, which requires telecommunications carriers to recognize
the transition obligation on a delayed basis. REA reviewed this
issuance and has determined that Borrowers must comply with this
ruling and recognize the transition obligation on a delayed basis.
The deferral and amortization of the transition obligation on a
delayed basis is considered to be an off balance sheet item. As a
result, an accounting entry is not required at the time of adoption
of Statement No. 106. Instead, the transition obligation is
recognized as a component of postretirement benefit cost as it is
amortized. The amount of the unamortized transition obligation must
be disclosed in the notes to the financial statements.
In accordance with the provisions of Responsible Accounting
Officer (RAO) Letter 20, released by the FCC on April 24, 1992,
Account 4310, Other Long-Term Liabilities, shall be used to record
the liability accrued for postretirement benefits. Borrowers shall
credit this account for the net periodic cost of postretirement
benefits for the current year and shall debit this account for any
fund payments made during the current year.
Net periodic postretirement benefit cost includes current period
service cost, interest cost, return on plan assets, amortization of
prior service cost, gains and losses, and amortization of the
transition obligation. If fund payments create a debit balance in
the postretirement benefits portion of Account 4310, the debit
balance applicable to postretirement benefits shall be reported in
Account 1410, Other Noncurrent Assets. Account 1410 shall also be
used to record any prepaid postretirement benefit cost.
The benefits portion of the expense matrix shall be used to
record the current year's net periodic cost of postretirement
benefits in the appropriate Part 32 expense accounts.
Effective Date and Implementation
For plans outside the United States and for defined benefit
plans of employers that (a) are nonpublic enterprises and (b)
sponsor defined benefit postretirement plans with no more than 500
plan participants in the aggregate, Statement No. 106 is effective
for fiscal years beginning after December 15, 1994.
For all other plans, Statement No. 106 is effective for fiscal
years beginning after December 15, 1992.
102 Rural Telephone Bank Stock
Capital stock issued by the Rural Telephone Bank consists of
Class A, Class B, and Class C stock. Class A stock is issued only to
the Administrator of REA on behalf of the United States in exchange
for capital furnished to RTB.
Class B stock is issued only to recipients of loans under
Section 408 of the RE Act. Borrowers receiving loan funds pursuant
to Section 408a (1) or (2) of the RE Act are required to invest 5
percent of the amount of loan funds approved in Class B stock. No
dividends are payable on Class B stock. All holders of Class B stock
are entitled to patronage refunds in the form of Class B stock under
the terms and conditions specified in the bylaws of the RTB.
Class C stock is available for purchase by Borrowers,
corporations, and public bodies eligible to borrow under Section 408
of the RE Act, or by organizations controlled by such Borrowers,
corporations and public bodies. The payment of dividends is in
accordance with the bylaws of the RTB.
Accounting Requirements
The purchase of RTB stock that is required by the RE Act shall
be debited to Account 1402.1, Investments in Nonaffiliated
Companies-Class B RTB Stock. Patronage refunds in the form of
additional shares of RTB Class B Stock shall be debited to Account
1402.1 and credited to Account 1402.11, Investments in Nonaffiliated
Companies--Class B RTB Stock--Cr.
Purchases of Class C RTB stock shall be debited toAccount
1402.2, Investments in Nonaffiliated Companies--Class C RTB Stock.
Cash dividends received on Class C RTB stock shall be credited to
Account 7310, Dividend Income.
Once a Borrower has repaid all of its Rural Telephone Bank
loans, it may request that its RTB Class B stock be converted to RTB
Class C stock. When the conversion is made, Account 1402.2 shall be
debited for the value of the Class C stock. Accounts 1402.1 and
1402.11, shall be debited or credited, as appropriate, for the value
of the Class B stock. The gain realized on the conversion
(accumulated RTB stock dividends) shall be credited to Account 7310,
Dividend Income.
103 Cushion of Credit Investments
The REA Cushion of Credit account is an investment account
bearing an interest rate of 5 percent. All voluntary payments or
overpayments on Rural Electric and Telephone Revolving Fund (RETRF)
loans made after October 1, 1987, are deposited into this account in
the appropriate Borrower's name.
Accounting Requirements
The following journal entries shall be used by REA Borrowers to
record the transactions associated with cushion of credit payment:
Dr. 4210.18, REA Notes--Advance Payments, Dr.
Cr. 1130.1/1120.11, Cash--General Fund
To record the cushion of credit payment.
Dr. 4210.18, REA Notes--Advance Payments, Dr.
Cr. 7320/7300.2, Interest Income
To record interest earned on cushion of credit deposits.
Dr. 4210.12, REA Notes
Cr. 4210.18, REA Notes--Advance Payments, Dr.
To apply cushion of credit payments (and interest) to the REA note.
104 Rural Economic Development Loan and Grant Program
On December 21, 1987, Section 313, Cushion of Credit Payments
Program, was added to the Rural Electrification Act. Section 313
establishes a Rural Economic Development Subaccount and authorizes
the Administrator of the REA to provide zero interest loans or
grants to RE Act borrowers for the purpose of promoting rural
economic development and job creation projects.
Subpart B, Rural Economic Development Loan and Grant Program, 7
CFR Part 1703, sets forth the policies and procedures relating to
the zero interest loan program and for approving and administering
grants.
Accounting Requirements
The accounting journal entries required to record the
transactions associated with a Rural Economic Development Grant are
as follows:
Dr. 1130.4/1120.14, Cash--General Fund--Economic Development Grant
Funds
Cr. 7360/7300.6, Other Nonoperating Income
To record the receipt of economic development grant funds.
Dr. 1401.1, Other Investments in Affiliated Companies--Federal
Economic Development Grant Loans or
Dr. 1402.4, Other Investments in Nonaffiliated Companies--Federal
Economic Development Grant Loans
Cr. 1130.4/1120.14, Cash--General Fund--Economic Development
Grant Funds
To record a Federal revolving loan to an economic development
project.
Dr. 1130.1/1120.11, Cash--General Fund
Cr. 7360/7300.6, Other Nonoperating Income
To record payment of loan servicing fees charged to the economic
development project.
Dr. 1130.5/1120.15, Cash--General Fund--Economic Development Non-
Federal Revolving Funds
Cr. 1401.1, Other Investments in Affiliated Companies--Federal
Economic Development Grant Loans or
Cr. 1402.4, Other Investments in Nonaffiliated Companies--
Federal Economic Development Grant Loans
To record the repayment, by the project, of the Federal revolving
loan.
Dr. 1401.2, Other Investments in Affiliated Companies--Non-Federal
Economic Development Grant Loans or
Dr. 1402.5, Other Investments in Nonaffiliated Companies--Non-
Federal Economic Development Grant Loans
Cr. 1130.5/1120.15, Cash--General Fund--Economic Development
Non-Federal Revolving Funds
To record a Non-Federal revolving loan to an economic development
project.
Dr. 1210, Interest and Dividends Receivable
Cr. 7320/7300.2, Interest Income
To record the interest earned on a Non-Federal revolving loan to an
economic development project.
Dr. 1130.5/1120.15, Cash--General Fund--Economic Development Non-
Federal Revolving Funds
Cr. 1401.2, Other Investments in Affiliated Companies--Non-
Federal Economic Development Grant Loans or
Cr. 1402.5, Other Investments in Nonaffiliated Companies--Non-
Federal Economic Development Grant Loans
To record the repayment, by the project, of the Non-Federal
revolving loan.
The accounting journal entries required to record the
transactions associated with a Rural Economic Development Loan are
as follows:
Dr. 4210.26, Economic Development Notes--Unadvanced, Dr.
Cr. 4210.25, Economic Development Notes
To record the contractual obligation to REA for the Economic
Development Notes.
Dr. 1130.6/1120.16, Cash--General Fund--Economic Development Loan
Funds
Cr. 4210.26, Economic Development Notes--Unadvanced, Dr.
To record the receipt of the economic development loan funds.
Dr. 1401.3, Other Investments in Affiliated Companies--Federal
Economic Development Loans or
Dr. 1402.6, Other Investments in Nonaffiliated Companies--
Federal Economic Development Loans
Cr. 1130.6/1120.16, Cash--General Fund--Economic Development
Loan Funds
To record the disbursement of economic development loan funds to
the project.
Dr. 1130.1/1120.11, Cash--General Fund
Cr. 7360/7300.6, Other Nonoperating Income
To record payment of loan servicing fees charged to the economic
development project.
Dr. 1210, Interest and Dividends Receivable
Cr. 7320/7300.2, Interest Income
To record the interest earned on the investment of rural economic
development loan funds.
Dr. 7370, Special Charges
Cr. 1130.1, Cash--General Fund
To record the payment of interest earned in excess of $500 on the
investment of rural economic development loan funds.
Note: Interest earned in excess of $500 must be used for the
rural economic development project for which the loan funds were
received or returned to REA.
Dr. 1130.6/1120.16, Cash--General Fund--Economic Development Loan
Funds
Cr. 1401.3, Other Investments in Affiliated Companies--Federal
Economic Development Loans or
Cr. 1402.6, Other Investments in Nonaffiliated Companies--
Federal Economic Development Loans
To record repayment, by the project, of the economic development
loan.
Dr. 4210.25, Economic Development Notes
Cr. 1130.6/1120.16, Cash--General Fund--Economic Development
Loan Funds
To record the repayment, to REA, of the economic development loan
funds.
105 Satellite and Cable Television Services
Borrowers have become involved in providing either satellite or
cable television services to their members and others through
subsidiaries, joint ventures, or as segments of their current
operations.
Accounting Requirements
This section outlines the accounting to be followed when
recording transactions involving satellite or cable television
services.
1. Separate Subsidiary
If a Borrower provides satellite or cable television services
through a separate subsidiary, the investment in the subsidiary
shall be debited to Account 1401, Investments in Affiliated
Companies. The net income or loss of the subsidiary shall be debited
or credited to Account 1401, as appropriate, with an offsetting
entry to Account 7360, Other Nonoperating Income.
2. Joint Venture
If a Borrower provides satellite or cable television services
through a joint venture, the Borrower's ownership interest dictates
the accounting methodology. If the Borrower has less than a 20
percent ownership interest in the joint venture, the investment is
accounted for under the cost method of accounting in Account 1402,
Investments in Nonaffiliated Companies. Under the cost method, the
joint venture's net income or loss is not recorded in the Borrower's
records. Income is only recognized to the extent of any dividends
declared by the joint venture. When a dividend is declared, the
Borrower shall debit Account 1210, Interest and Dividends
Receivable, and credit Account 7310, Dividend Income. When the
dividend is received in cash, the Borrower shall debit Account
1130.1, Cash--General Fund, and credit Account 1210.
If a Borrower has a 20-percent or more ownership interest in
the joint venture, the investment is accounted for under the equity
method in Account 1401, Investments in Affiliated Companies. The
Borrower's proportionate share of the joint venture's net income or
loss shall be debited or credited to Account 1401, as appropriate,
with an offsetting entry to Account 7360, Other Nonoperating Income.
3. Segment of Current Operations
If a Borrower provides satellite or cable television services as
a segment of current operations and there are no shared assets
between this activity and the regulated telephone activities of the
Borrower, the investment shall be debited to Account 1406.1,
Nonregulated Investments--Permanent Investment. The net income or
loss from providing such services shall be debited or credited, as
appropriate, to Account 1406.3, Nonregulated Investments--Current
Net Income, with an offsetting entry to Account 7990, Nonregulated
Net Income.
If a Borrower provides satellite or cable television services as
a segment of current operations and shares assets between this
activity and the regulated telephone activities of the Borrower, the
franchise and application fees shall be debited to Account 2690,
Intangibles. The cost of the satellite or cable television equipment
shall be debited to Account 2231, Radio Systems. Revenues earned
from providing satellite or cable services shall be credited to
Account 5280, Nonregulated Operating Revenue, while the associated
expenses shall be recorded in a subaccount of the applicable
regulated expense accounts.
4. Sale and Installation of Satellite or Cable Television Equipment
If a Borrower sells or installs satellite or cable television
equipment as a segment of current operations and there are no shared
assets between this activity and the regulated telephone activities
of the Borrower, the purchase of the equipment shall be debited to
Account 1406.1, Nonregulated Investments--Permanent Investment. The
net income or loss from providing such services shall be debited or
credited, as appropriate, to Account 1406.3, Nonregulated
Investments--Current Net Income, with an offsetting entry to Account
7990, Nonregulated Net Income.
If a Borrower sells or installs satellite or cable television
equipment as a segment of current operations and shares assets
between this activity and the regulated telephone activities of the
Borrower, the purchase of the equipment shall be debited to Account
1220.2, Property Held for Sale or Lease. Revenues received for the
sale or installation of the equipment shall be credited to Account
5280, Nonregulated Operating Revenue, while the associated expenses
shall be debited to a subaccount of the applicable regulated expense
accounts.
106 Consolidated Financial Statements
In October 1987, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 94, Consolidation of
All Majority-Owned Subsidiaries (Statement No. 94). For purposes of
reporting to REA, Statement No. 94 shall be applied as follows:
1. A Borrower that is a subsidiary of another entity shall
prepare and submit to REA separate financial statements even though
this financial information is presented in the parent's consolidated
statements.
2. In those cases in which a Borrower has a majority-ownership
in a subsidiary, the Borrower shall prepare consolidated financial
statements in accordance with the requirements of Statement No. 94.
These consolidated statements must also include supplementary
schedules presenting a Balance Sheet and Income Statement for each
majority-owned subsidiary included in the consolidated statements.
Although Statement No. 94 requires the consolidation of
majority-owned subsidiaries, the REA Form 479 is required to be
prepared on an unconsolidated basis by all Borrowers.
Dated: September 7, 1994.
Bob J. Nash,
Under Secretary, Small Community and Rural Development.
[FR Doc. 94-22609 Filed 9-13-94; 8:45 am]
BILLING CODE 3410-15-P
