[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
------------------------------------------------------------------------
                                                                        
                                  *****                                 
Deferred Tax Regulatory Asset.......................      1437      1437
                                                                        
                                  *****                                 
------------------------------------------------------------------------

* * * * *
    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:

------------------------------------------------------------------------
                                                       Class A   Class B
                    Account title                      account   account
------------------------------------------------------------------------
                                                                        
                                                                        
                                  *****                                 
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