Sec. 663.7. Standard practices for establishing and maintaining continuing property records

(a) Accounting area.

(1) The continuing property record, as related to each primary plant account, shall be established and maintained by subaccount for each accounting area. An accounting area is the smallest territory of the company for which accounting records of investment are maintained for all plant accounts within the area. Areas already established for administrative, accounting, valuation, or other purposes may be adopted for this purpose when appropriate. In no case shall the boundaries of accounting areas cross either State lines or boundaries prescribed by the commission.

(2) In determining the limit of each area, consideration shall be given to the quantities of property, construction conditions, operating districts, county and township lines, taxing district boundaries, city limits, and other political or geographical limits, in order that the area adopted may have maximum adaptability, within the confines of practicability, for both the company's purpose and those of Federal, State, and municipal authorities.

(b) Property record units.

(1) In each of the established accounting areas, the property record units which are to be maintained in the continuing property record shall be set forth separately, classified by size and type with the amount of original cost (or other appropriate book cost) associated with such units. Such units shall apply to only the regulated portion of this system of accounts.

(2) When it is found necessary to revise this list because of the addition of units used in providing new types of service, or new units resulting from improvements in technology, or because of the grouping or elimination of units which no longer merit separate recognition as property record units, one copy of such changes shall be submitted to the commission. Upon appropriate showing by the company, the commission may specifically exempt the company from these filing requirements.

(3) The continuing property record shall reveal the description, location, date of placement, the essential details of construction, and the original cost (note also subdivision [c] of this section) of the property record units. The continuing property record and other underlying records of construction costs shall be so maintained that, upon retirement of one or more retirement units or of minor items without replacement when not included in the costs of retirement units, the actual cost or a reasonably accurate estimate of the cost of the plant retired can be determined.

(c) Methods of determining original cost of property record units.

The original cost of the property record units shall be determined by analyses of the construction costs incurred as shown by completion reports and other data, accumulated in the respective construction work orders or authorizations. Costs shall be allocated to and associated with the property record units to facilitate accounting for retirements. The original cost of property record units shall be determined by unit identification or averaging as described below:

(1) Unit identification.

Cost shall be identified and maintained by specific location for property record units contained within certain regulated plant accounts or account groupings such as land, buildings, central office assets, motor vehicles, garage work equipment and furniture. In addition, units involved in any unusual or special type of construction shall be recorded by their specific location costs (note also subparagraph [2][ii] of this subdivision).

(2) Averaging.

(i) Average costs may be developed for plant consisting of a large number of similar units such as terminal equipment, poles, wire, cable, cable terminals, conduit, furniture, and work equipment. Units of similar size and type within each specified accounting area and regulated plant account may be grouped. Each such average cost shall be set forth in the continuing property record of the units with which it is associated.

(ii) The averaging of costs permitted under the provisions of the foregoing paragraph is restricted to plant installed in a particular vintage or band of years, incurred within an accounting area. This paragraph does not permit the inclusion of the cost of units involved in any unusual or special type of construction. The units involved in such unusual or special type of construction shall be recorded at cost by location.

(d) Estimates.

In cases where the actual original cost of property cannot be ascertained, such as pricing an inventory for the initial entry of a continuing property record or the pricing of an acquisition for which a continuing property record has not been maintained, the original cost may be estimated. Any estimated original cost shall be consistent with the accounting practices in effect at the time the property was constructed.

(e) Identification of property record units.

There shall be shown in the continuing property record or in record supplements thereof, a complete description of the property record units in such detail as to identify such units. The description shall include the identification of the work order under which constructed, the year of installation (unless not determinable per subdivision [d] of this section), the specific location of the property within each accounting area in such manner that it can be readily spot-checked for proof of physical existence, the accounting company's number or designation, and any other description used in connection with the determination of the original cost. Descriptions of units of similar size and type shall follow prescribed groupings.

(f) Reinstalled units.

When units to which average costs are not applied, i.e.,specific and fixed location units, are removed or retired and subsequently reinstalled, the date when the unit was first charged to the appropriate plant account shall, when required for adequate service life studies and reasonably accurate retirement accounting, be shown in addition to the date of reinstallation.

(g) Age and service life of property.

The continuing property record shall disclose the age of existing property and the supporting records shall disclose the service life of property retired.

(h) Reference to sources of information.

There shall be shown by appropriate reference the source of all entries. All drawings, computations, and other detailed records which support quantities and costs or estimated costs shall be retained as a part of or in support of the continuing property record.

(i) Jointly owned property.

(1) With respect to jointly owned property, there shall be shown in the continuing property record or records supplemental thereto:

(i) the identity of all joint owners; and

(ii) the percentage owned by the accounting company.

(2) When regulated plant is constructed under arrangements for joint ownership, the amount received by the constructing company from the other joint owner or owners shall be credited as a reduction of the gross cost of the plant in place.

(3) When a sale of a part interest in regulated plant is made, the fractional interest sold shall be treated as a retirement and the amount received shall be treated as salvage. The continuing property record or records supplemental thereto shall be so maintained as to identify separately retirements of this nature from physical retirements of jointly owned plant.

(4) If jointly owned regulated property is substantial in relation to the total of the same kind of regulated property owned wholly by the company, such jointly owned regulated property shall be appropriately segregated in the continuing property record.