[Federal Register Volume 59, Number 64 (Monday, April 4, 1994)]
[Unknown Section]
[Page 0]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 94-7886]


[[Page Unknown]]

[Federal Register: April 4, 1994]


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FEDERAL COMMUNICATIONS COMMISSION

[RAO Letter 24 DA 94-268]

 

Responsible Accounting Officers: Accounting for Work Force 
Reduction Programs

    Recently, it has come to our attention that there is a lack of 
uniformity among the carriers in accounting for work force reduction 
programs under part 32. Several carriers have announced work force 
reduction programs in 1993 and have indicated that they plan to record 
the entire effects on their 1993 SEC Form 10-K filing in conformance 
with GAAP. Some of these carriers propose to follow this same 
accounting under part 32 while others propose to account for these 
programs under part 32 as the programs are implemented. The reason for 
this letter, therefore, is to establish uniformity in accounting for 
these work force reduction programs and to remind carriers of the 
Commission's policy with respect to the application of GAAP under part 
32. The accounting reflected herein should be reported in the ARMIS 
filings that are due at the Commission on or before April 1, 1994.
    The Commission's policy on GAAP is set forth in Sec. 32.12(a) of 
its rules. This Section states that ``The company's financial records 
shall be kept in accordance with generally accepted accounting 
principles to the extent permitted by this system of accounts.'' Thus, 
it is our belief that if a carrier is recording and event for financial 
reporting purposes pursuant to GAAP, then the carrier should also 
record this event for part 32 federal accounting purposes unless part 
32 prohibits the action or we have specifically advised the carrier to 
do otherwise.
    The Commission's policy on new GAAP standards is set forth in 
Sec. 32.16(a) of its rules. This Section states that ``[The company's 
records and accounts shall be adjusted to apply new accounting 
standards prescribed by the Financial Accounting Standards Board or 
successor authoritative accounting standard-setting groups, in a manner 
consistent with generally accepted accounting principles. Commission 
approval of a change in accounting standard will automatically take 
effect 90 days after the company informs this Commission of its 
intention to follow the new standard, unless the Commission notifies 
the company to the contrary * * *].''
    The Commission's policy with respect to uniformity of accounting 
standards for the industry is contained in the GAAP Order.\1\ The GAAP 
Order included the following statements demonstrating our intention to 
maintain uniformity of accounting standards for telephone companies:
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    \1\Revision of the Uniform System of Accounts for Telephone 
Companies to Accommodate Generally Accepted Accounting Principles 
(parts 31, 33, 42 and 43 of the Rules), CC Docket No. 84-469, 50 FR 
48408 (November 25, 1985) (hereinafter GAAP Order).
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    To promote the needed consistency and uniformity industry wide to 
properly carry out our regulatory responsibilities, we are applying the 
same accounting standards to all carriers.\2\ Furthermore, in order to 
maintain control over the USOA so that uniformity is maintained for all 
carriers, the Commission will select the accounting method carriers are 
to use under GAAP when GAAP permits several accounting options. The 
carriers will use the accounting method selected by the Commission 
unless we grant them a waiver to do otherwise.\3\
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    \2\GAAP Order at 69.
    \3\Id. at 71.
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    Based on the above guidelines, we see no basis for carriers to give 
accounting recognition to work force reductions for Form 10-K purposes 
but not for part 32 purposes. Since part 32 does not specifically 
address work force reductions, the proper accounting should be 
determined by applying the criteria established under GAAP to the 
circumstances of the work force reduction. We see no way that the same 
GAAP criteria applied to the same facts can result in accounting 
recognition under GAAP in one instance and not another. Accordingly, 
carriers that are showing liabilities, and one time charges for work 
force reductions in their 10-K reports for 1993 should reflect the work 
force reduction in their 1993 ARMIS filings.
    At the same time, we recognize that part 32 accounting and 
reporting may require modification to accommodate the Commission's 
regulatory needs. We believe that the accounting for work force 
reductions is such a case. Carriers recording liabilities for work 
force reductions shall record such amounts in Accounts 4120, Other 
Accrued Liabilities, and 4360, Other Deferred Credits, for the current 
and noncurrent portions, respectively, and shall charge Account 7360, 
Other Nonoperating Income. When the restructuring expenses are actually 
paid Nonoperating Income. When the restructuring expenses are actually 
paid or otherwise require part 32 recognition (for example, adjustment 
of the transition benefit obligation for the reductions under SFAS 
106), they will be charged to the appropriate part 32 expense accounts 
with a credit to cash or other appropriate account. At the same time, 
the liability established in Accounts 4120 and 4360 will be debited and 
Account 7360 will be credited. This accounting will recognize the 
liability consistent with GAAP, will show the effect of the 
restructuring on net income, and will allow delayed recognition in the 
regulatory operating accounts until the detailed amounts are known and 
amounts have actually been paid. The balance in Account 4360 related to 
these entries should not be deducted from the ratebase because it arose 
from charges to a below the line account.
    This letter is issued pursuant to authority delegated under 
Sec. 0.291 of the Commission's Rules, 47 CFR Sec. 0.291. Applications 
for review under Sec. 1.115 of the Commission's Rules, 47 CFR 
Sec. 1.115, must be filed within 30 days of the date of this letter. 
See 47 CFR Sec. 1.4(b)(2).
    If you have any questions, please contact Kenneth M. Ackerman at 
(202) 634-1861.

Sincerely,
Kenneth P. Moran,
Chief, Accounting and Audits Division, Common Carrier Bureau.
[FR Doc. 94-7886 Filed 4-1-94; 8:45 am]
BILLING CODE 6712-01-M