[Federal Register Volume 65, Number 186 (Monday, September 25, 2000)]
[Notices]
[Pages 57650-57651]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-24583]


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DEPARTMENT OF TRANSPORTATION

[STB Ex Parte No. 634]


Consolidated Railroad Reporting

AGENCY: Surface Transportation Board, DOT.

ACTION: Proposal to Require Consolidated Financial Reporting by 
Commonly Controlled Railroads.

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SUMMARY: The Board intends, consistent with Financial Accounting 
Standards Board (FASB) Statement No. 94, to require consolidated 
reporting by commonly controlled U.S. railroads and their U.S. 
railroad-related affiliates.

DATES: Carriers and other interested parties may submit comments by 
October 25, 2000.

ADDRESSES: An original plus 10 copies of all comments, referring to STB 
Ex Parte No. 634, must be sent to: Surface Transportation Board, Office 
of the Secretary, Case Control Unit, Attn: STB Ex Parte No. 634, 1925 K 
Street, NW., Washington, DC 20423-0001. In addition, parties must 
submit to the Board, on 3.5-inch IBM-compatible floppy diskettes (in, 
or convertible by and into, WordPerfect 9.0 format), an electronic copy 
of each such paper document. The diskettes shall be clearly labeled 
with the filer's name and the docket number of this proceeding, STB Ex 
Parte No. 634. Any party may seek a waiver from the electronic 
submission requirement.\1\
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    \1\ Documents transmitted by facsimile (FAX) or electronic mail 
(e-mail) will not be accepted.
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    Copies of the written comments will be available from the Board's 
contractor, Da-To-Da Office Solutions, 1925 K Street, NW, Room 405, 
Washington, DC. 20423-0001, phone (202) 466-5530. The comments will 
also be available for viewing and self copying in the Board's Microfilm 
Unit, Room 755. All pleadings submitted will be posted on the Board's 
website (www.stb.dot.gov).

FOR FURTHER INFORMATION CONTACT: Paul A. Aguiar, (202) 565-1527. 
[Assistance for the hearing impaired is available through TDD services: 
1-800-877-8339.]

SUPPLEMENTARY INFORMATION: FASB is the organization responsible for the 
development of financial accounting standards. FASB issues statements 
of financial accounting standards that provide guidance on proper 
accounting procedures.\2\ Those pronouncements typically become 
``Generally Accepted Accounting Principles'' or ``GAAP.'' The Board, 
like most regulatory agencies, generally follows GAAP.
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    \2\ FASB statements can be obtained by contacting the FASB of 
the Financial Accounting Foundation at 401 Merritt 7, P.O. Box 5116, 
Norwalk, Connecticut 06856-5116. Information about FASB statements 
can be found on the internet at: http://www.rutgers.edu/accounting/raw/fasb.
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    FASB No. 94, Consolidation of All Majority-owned Subsidiaries, 
which was issued in 1987, requires the preparer of financial statements 
to use consolidated reporting for all majority-owned subsidiaries 
unless control is temporary or does not rest with the majority owner. 
In Supplemental Reporting of Information for Revenue Adequacy, 5 
I.C.C.2d 65 (1988) (Supplemental Reporting), our predecessor, the 
Interstate Commerce Commission (ICC), required railroads to use 
consolidated reporting for all railroad and railroad-related activities 
in conformance with GAAP for ``revenue adequacy'' purposes.\3\ While 
Supplemental Reporting was primarily concerned with gathering data for 
the annual railroad revenue adequacy determination, the ICC did not 
specifically limit adoption of consolidated reporting to only that 
issue. However, as a practical matter, over the past decade that 
decision has been interpreted to require mandatory consolidated 
reporting only for Annual Report Form R-1, Schedule 250 (related to 
revenue adequacy filings), and to permit--but not require--consolidated 
reporting for other R-1 schedules and reports filed with the agency.\4\
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    \3\ The STB is required by statute to ``annually determine which 
rail carriers are earning adequate revenues.'' 49 U.S.C. 
10704(a)(3).
    \4\ See 49 CFR Part 1201 Instruction 1-9(f).
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    We believe that we should adopt FASB No. 94 (with some 
modifications) and require reporting of all railroad and railroad-
related activities on a consolidated basis for all regulatory purposes. 
We believe that consolidated data would provide more meaningful and 
accurate information on major rail systems operating in the United 
States. Indeed, consolidated financial statements are generally 
recognized as being more meaningful than the

[[Page 57651]]

separate statements of affiliated companies. Furthermore, adherence to 
FASB No. 94 for all regulatory reporting purposes would be in keeping 
with our general policy of following GAAP unless such procedures are 
inconsistent with our regulatory requirements.
    Certain modifications to FASB No. 94 would seem to be appropriate 
for our use, however. FASB No. 94 generally requires consolidated 
reporting for all majority-owned subsidiaries,\5\ whether or not 
operating in the United States. For our regulatory reporting purposes, 
however, we would require consolidated reports for only the activities 
of commonly controlled U.S. railroads and their U.S. railroad-related 
affiliates.\6\ We would not expect data on non-U.S. railroads and on 
non-railroad related operations to be included in consolidated reports 
filed with the Board.\7\ Parties may comment on this issue, and on 
whether there are situations in which railroads under common control 
ought not to be required to report on a consolidated basis (for 
example, where the railroads under common control have no connection 
with one another except for a common parent).
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    \5\ Under GAAP, consolidated reporting is required when an 
entity has greater than 50 percent (direct or indirect) ownership of 
an affiliate.
    \6\ An affiliate is considered rail-related if it could not 
exist but for the revenues derived from, or support provided for, 
railroad operations. See Supplemental Reporting, 5 I.C.C.2d at 67-
68.
    \7\ Indeed, when non-railroad-related activities are included in 
carrier reports to facilitate complete disclosure, the non-railroad-
related activities should be segregated and the information reported 
separately.
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    We propose to require all railroads to follow FASB No. 94 standards 
in their reporting and to file reports on a consolidated basis, 
beginning with calendar year 2001 operations. This approach could 
change the ``classification'' status of some railroads,\8\ whose 
revenues would be combined with the revenues of their corporate 
siblings to determine whether the railroads that are part of the 
commonly controlled families should be classified as Class I, Class II, 
or Class III.\9\
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    \8\ Railroads are classified according to their revenues. A 
Class I railroad is one that has annual revenues of at least $250 
million, as indexed for inflation. A Class II railroad has 
inflation-adjusted annual revenues between $20 million and $250 
million. And a Class III railroad has inflation-adjusted revenues 
below $20 million. See 49 CFR 1201, General Instruction 1-1.
    \9\ The parent of the commonly controlled railroads, whether 
that parent is a railroad or non-railroad, would be required to file 
consolidated financial reports. See 49 U.S.C. 721(b) (authorization 
for the collection of data from persons controlling a carrier). And 
if a family of carriers were to attain Class I status, it would be 
required to follow the Uniform System of Accounts (49 CFR Part 1201) 
and to file a variety of reports (49 CFR Part 1241-1248).
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    Carriers and other interested parties have 30 days following the 
issuance of this notice to submit comments regarding this proposal. 
After considering the comments, we will decide whether use of the FASB 
No. 94 standards will be mandated for all railroad reporting.\10\
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    \10\ Some Class I railroads currently file consolidated reports 
with the STB.
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    This action will not significantly affect either the quality of the 
human environment or the conservation of energy resources.

    Decided: September 18, 2000.

    By the Board, Chairman Morgan, Vice Chairman Burkes, and 
Commissioner Clyburn.
Vernon A. Williams,
Secretary.
[FR Doc. 00-24583 Filed 9-22-00; 8:45 am]
BILLING CODE 4915-00-P