CFR > Title 7 - Agriculture > SUBTITLE B—Regulations of the Department of Agriculture > CHAPTER XVII—RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE (parts 1700 to 1794) > PART 1767—ACCOUNTING REQUIREMENTS FOR RUS ELECTRIC BORROWERS > SUBPART B—Uniform System of Accounts (§1767.10 to §1767.42-1767.45) > 1767.41—Accounting methods and procedures required of all RUS borrowers.

1767.41—Accounting methods and procedures required of all RUS borrowers.

All RUS 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 section. Interpretations Nos. 133, 134, 137, 403, 404, 602, 606, 618, 627, 628, and 629 adopt and implement the provisions of standards issued by the Financial Accounting Standards Board (FASB). Each interpretation includes a synopsis of the requirements of the standard as well as specific accounting requirements and interpretations required by RUS. The synopsis provides general information to assist borrowers in determining whether the standard applies to an individual cooperative's operations. The synopsis is not intended to change the requirements of the FASB standards unless it is set forth in the section entitled RUS Accounting Requirements in each interpretation. If a particular borrower believes a conflict exists between the FASB standard and an RUS interpretation, the borrower shall contact the Director, PASD, to seek resolution of the issue.
Numerical Index
Num-ber Title
101 Work Order Procedures
102 Line Conversion
103 Sacrificial Anodes and the Replacement of a Neutral
104 Terminal Facilities
105 Pole Top Disconnect Switch
106 Steel Pole Reinforcers
107 Mobile Substations
108 Security Lights
109 Joint Use
110 First Clearing and Grading of Land and Rights of Way
111 Engineering Contracts for System Planning
112 Determination of Availability of Service
113 Temporary Facilities (Services)
114 Construction Work-in-Progress Damaged or Destroyed by Storm
Code of Federal Regulations 147
115 Liquidated Damages
116 Nonrefundable Payments for Construction
117 Refunds of Overpayments for Materials and Equipment
118 Load Control Equipment
119 Special Equipment
120 Meter Sockets and Meters
121 Minimum—Maximum Voltmeters
122 Retrofitting Demand Meters
123 Transformer Conversions
124 Transclosures
125 Retirement Units
126 Establishment of Continuing Property Records
127 Continuing Property Records for Buildings
128 Sale of Property
129 Gain or Loss on the Sale of an Office Building
130 Salvage and Obsolete Material
131 Plant Acquisition Adjustments
132 General Plant
133 Plant Abandonments and Disallowances of Plant Cost
134 Utility Plant Phase-in Plans
135 Accounting for Removal or Relocation of Electric Facilities Resulting from the Action of Others
136 Storm Damage
137 Impairment of Long-Lived Assets.
138 Automatic Meter Reading Systems-Turtles.
139 Global Positioning Systems.
140 Radio-Based Automatic Meter Reading Systems.
201 Supplemental Financing
301 Forfeited Customers' Deposits
401 Computer Software Costs
402 Legal Expenses
403 Leases
404 Consolidated Financial Statements
501 Patronage Capital Assignments
502 Patronage Capital Retirements
503 Operating and Nonoperating Margins
504 Patronage Capital from G&T Cooperatives
505 Patronage Capital Furnished by Other Cooperative Service Organizations
506 Forfeited Membership Fees
601 Employee Benefits
602 Compensated Absences
603 Employee Retirement and Group Insurance
604 Deferred Compensation
605 Life Insurance Premium on Life of a Borrower Employee
606 Pension Costs
607 Unproductive Time
608 Training Costs, Attendance at Meetings, etc.
609 Maintenance and Operations
610 Financial Forecast
611 Advertising Expense
612 Special Power Cost Study
613 Mapping Costs
614 Member Relations Costs
615 Statewide Fees
616 Power Supply/Distribution Cooperative Borrowings
617 Rate Discount Allowed by the Power Cooperative to Distribution Cooperative Owning Connecting Transmission Lines
618 Theft Losses not Covered by Insurance
619 Self Billing
620 Purchase Rebates
621 Integrity Fund
622 In-Substance Defeasance
623 Satellite or Cable Television Services
624 Pollution Control Bonds
625 Prepayment of Debt
626 Rural Economic Development Loan and Grant Program
627 Postretirement Benefits
628 Postemployment Benefits
629 Investments in Debt and Equity Securities
630 Split Dollar Life Insurance.
631 Special Early Retirement Plan.
633 Cushion of Credit.
Subject Matter Index
Number
A
Abandonments—Plant 133
Acquisition Adjustments—Plant 131
Advertising Expenses 611
Assignments—Patronage Capital 501
Attendance at Meetings 608
Automatic Meter Reading Systems—Radio-Based 140
Automatic Meter Reading Systems—Turtles 138
Availability of Service—Determination of 112
B
Benefits—Employee 601
Bonds—Pollution Control 624
Borrowing—Power Supply Cooperative/Distribution Cooperative 616
Buildings—Continuing Property Records 127
Buildings, Office—Gain or Loss on Sale of 129
Code of Federal Regulations 148
C
Cable Television Services 623
Capital Credits—Assignment 501
Capital Credits—G&T Cooperative 504
Capital Credits—Other Service Cooperatives 505
Capital Credits—Retirement 502
Compensated Absences 602
Computer Software Costs 401
Consolidated Financial Statements 404
Construction Work in Progress Damaged or Destroyed by Storm 114
Continuing Property Records—Buildings 127
Continuing Property Records—Establishment of 126
Contributions—Nonrefundable 116
Conversion—Line 102
Conversion—Transformer 123
Cushion of Credit 633
Customers' Deposits—Forfeited 301
D
Damaged or Destroyed Construction Work in Progress 114
Damages—Liquidated 115
Debt—Prepayment of 625
Debt Securities—Investments in 629
Deferred Compensation 604
Demand Meters—Retrofitting 122
Determination of Availability of Service 113
Disallowances of Plant Costs 133
Disconnect Switch—Pole Top 105
Discounts Allowed by Power Cooperative to Distribution Cooperative Owning Transmission Lines 617
Distribution Cooperative/Power Supply Cooperative Borrowing 616
E
Early Retirement Plan 631.
Economic Development Loan and Grant Program 626
Employee Benefits 601
Equity Securities—Investments in 629
F
Fees—Statewide 615
Financial Forecast 610
Financial Statements—Consolidated 404
Financing—Supplemental 201
First Clearing and Grading of Land and Rights of Way 110
Forfeited Customer Deposits 301
Forfeited Membership Fees 506
G
Gain or Loss on Sale of Office Building 129
General Plant 132
Generation and Transmission (G&T) Capital Credits 504
Global Positioning Systems 139
I
Impairment of Long-Lived Assets 137
In-substance Defeasance 622
Insurance—Employee Retirement and Group 603
Insurance—Premium on Life of a Borrower Employee 605
Insurance—Split Dollar 630
Integrity Fund 621
Investments in Debt and Equity Securities 629
J
Joint Use 109
L
Land—First Clearing and Grading 110
Leases 403
Legal Expenses 402
Life Insurance Premiums on Life of a Borrower Employee 605
Life Insurance—Split Dollar 630
Line Conversion 102
Line Relocations 135
Liquidated Damages 115
Load Control Equipment 118
Long-Lived Assets-Impairment 137
M
Maintenance and Operations 609
Mapping Costs 613
Margins—Operating and Nonoperating 503
Material—Salvage and Obsolete 130
Materials and Supplies—Refund for Overpayments 117
Member Relation Costs 614
Membership Fees—Forfeited 506
Meter Reading Systems—Radio-Based 140
Meter Reading Systems—Turtles 138
Meter Sockets and Meters 120
Minimum—Maximum Voltmeters 121
Mobile Substations 107
N
Neutral—Replacement of 103
Nonoperating Margins 503
Nonrefundable Payments for Construction 116
O
Obsolete Material 130
Operating and Nonoperating Margins 503
Operations Costs 609
P
Patronage Capital Assignments 501
Patronage Capital Furnished by Other Cooperative Service Organizations 505
Patronage Capital from G&T Cooperatives 504
Patronage Capital Retirements 502
Payments for Construction—Nonrefundable 116
Code of Federal Regulations 149
Pension Costs 606
Phase-in Plans 134
Plant Abandonments 133
Plant Acquisition Adjustments 131
Plant Costs—Disallowances 133
Plant—General 132
Pole Reinforcers—Steel 106
Pole Top Disconnect Switch 105
Pollution Control Bonds 624
Postemployment Benefits 628
Postretirement Benefits 627
Power Cost Study 612
Power Supply/Distribution Cooperative Borrowing 616
Prepayment of Debt 625
Property—Sale of 128
Purchase Rebates 620
R
Radio-Based Automatic Meter Reading Systems 140
Rate Discount Allowed by Power Cooperative to a Distribution Cooperative Owning Transmission Lines 617
Rebates—Purchase 620
Refunds for Overpayments for Materials and Supplies 117
Reimbursement for Line Relocations 135
Relocations of Lines 135
Replacement of a Neutral 103
Retirement Units 125
Retirements—Patronage Capital 502
Retrofitting Demand Meters 122
Rights of Way—First Clearing and Grading 110
Rural Economic Development Loan and Grant Program 626
S
Sacrificial Anodes and the Replacement of a Neutral 103
Sale of an Office Building 129
Sale of Property 128
Salvage and Obsolete Material 130
Satellite Television Services 623
Securities—Investments in Debt and Equity 136
Security Lights 108
Self Billing 619
Software Costs 401
Special Early Retirement Plan 631
Special Equipment 119
Special Power Cost Study 612
Split Dollar Life Insurance 630
Statewide Fees 615
Steel Pole Reinforcers 106
Storm Damage 136
Substation—Mobile 107
Supplemental Financing 201
System Planning—Engineering Contracts 111
T
Temporary Facilities (Services) 113
Terminal Facilities 104
Theft Losses not Covered by Insurance 618
Training Costs, Attendance at Meetings, etc. 608
Transclosures 124
Transformer Conversions 123
Turtles—Automatic Meter Reading Systems 138
U
Unproductive Time 607
V
Voltmeters—Minimum/Maximum 121
W
Work Order Procedures 101
When a minor item of property is removed from service and not replaced, a retirement work order is not required except in the case of a conductor. The cost of the minor item shall remain in the appropriate plant account until the retirement unit, of which it is a part, is retired. However, as conductor is recorded in feet and is not part of any specific retirement unit, conductor shall be retired even though the amount taken down and not replaced is less than a retirement unit (two spans).
When minor items of plant are removed and not replaced, material salvaged shall be recorded on a material salvage ticket. Items of material recorded on this ticket shall be charged to the materials and supplies account and credited in the miscellaneous columns of the Materials Register to the Accumulated Provision for Depreciation. In this example, it is assumed that the cost of removal is nil. If, however, costs are incurred during the removal of minor items of plant, these costs shall reduce the credit to the Accumulated Provision for Depreciation.
When a staking sheet supporting a single work order reflects a combination of new construction and replacements, or system improvements, the predominant cost shall be the governing factor in determining the amount of cost RUS will finance. To illustrate, assume that a service is to be run to a new home near the end of an existing line. On inspection, the pole from which the service is to be run is found to be in very poor physical condition and must be replaced. In addition, a single span of wire and a service are presently connected to this pole which serve no purpose. The home originally served has been demolished and the existing span, pole, and service were retired. In other words, what started out to be simply the installation of a new service now includes the retirement of a span of wire, a pole, and a service; the replacement of a pole; and the running of a new service. Assuming the replacement of the pole is the costliest part of this project, the construction and retirement activity shall be classified as an ordinary replacement even though the work includes new construction and retirements without replacement.
If it is necessary to move a conductor from one location to another on a pole assembly during the conversion of a line from one phase to another phase, the cost of moving the conductor is capitalizable as a system improvement.
Many utilities conduct studies to determine whether sacrificial anodes are needed to protect underground cable against corrosion. The following procedures shall be followed to account for sacrificial anodes and the replacement of a neutral:
1. If the study results in the installation of sacrificial anodes, the cost of the study shall be capitalized to Account 367, Underground Conductors and Devices. If the study does not result in the installation of anodes, the cost shall be charged to Account 594, Maintenance of Underground Lines.
2. Costs incurred in the first installation are capitalizable even though anodes are considered minor items of property. However, only the first costs of installation shall be capitalized. All subsequent replacements of anodes shall be expensed.
3. Sacrificial anodes do not constitute a record unit; therefore, the cost of anodes shall be added to the cost of the underground cable unit.
4. Because a neutral is part of an underground cable record unit, and is not, in and of itself, a record unit, the cost to replace a corroded neutral shall be charged to Account 594, Maintenance of Underground Lines.
Borrowers are sometimes required to construct terminal facilities in the transmission line of another utility in order to receive power from their power supplier. The document executed between the borrower and the utility is normally referred to as a “License Agreement”. The license agreement may stipulate that certain items of the terminal facilities are to be transferred to, and become the property of, the other utility upon completion of the construction. The accounting for this type of transaction shall be as follows:
1. All construction costs incurred shall be charged to a work order. Upon completion of the construction and accumulation of all costs, the cost of the facilities that become the property of another utility shall be transferred from construction work-in-progress to Account 303, Miscellaneous Intangible Plant. The cost of the plant for which the borrower retains title shall be charged to the appropriate plant accounts.
2. The cost of the facilities recorded in Account 303 shall be amortized to Account 405, Amortization of Other Electric Plant, over the contract term or the estimated useful service life of the plant, whichever is shorter. If the related contract or contracts for this power supply are terminated, the unamortized balance shall be expensed, in the current period, in Account 557.
The installation of pole top service disconnect switches, where title is retained by the utility, shall be capitalized in Account 371, Installations on Customers' Premises. If a switch cabinet is purchased with a current transformer included as an integral part of the cabinet, the entire cost of the switch shall be charged to Account 371. If the current transformer is installed outside of the switch cabinet, the transformer, meter, and meter base, together with the first installation costs, shall be capitalized, upon purchase, in Account 370, Meters.
Payments received from the customer toward construction costs shall be credited to Account 371, Installations on Customers' Premises. Such payments, together with any amount not financed by RUS, shall be entered in column 9 of the RUS Form 219, Inventory of Work Orders. The associated maintenance costs shall be charged to Account 587, Customer Installations Expenses, or to Account 597, Maintenance of Meters, as appropriate.
When pole top disconnect switches are installed and title is held by the customer, the cost of the material shall be charged to Account 456, Other Electric Revenues and the receipts from the sale of line material shall be credited to Account 456. The portion of the receipts for resale material as well as that for installation shall be credited to Account 415, Revenues from Merchandising, Jobbing, and Contract Work. The cost of resale material sold and the cost of installation shall be charged to Account 416, Costs and Expenses of Merchandising, Jobbing and Contract Work.
Future maintenance costs incurred by the cooperative that are not billed to the customer shall be charged to Account 587, Customer Installations Expenses.
The cost associated with the purchase and installation of steel pole reinforcers shall be charged to Account 593, Maintenance of Overhead Lines.
Mobile substations shall be accounted for in a manner similar to that for a spare and are, therefore, included as part of transmission or distribution station equipment, depending upon the use of the mobile substation. The mobile substation, together with the trailer on which it is permanently mounted, shall be capitalized upon purchase. A general purpose truck or tractor used to relocate a mobile substation and trailer shall be classified as transportation equipment.
The composite depreciation rate used for transmission plant or distribution plant, as appropriate, shall be applied to the mobile substation.
Where a pole supports both a secondary wire and a security light, the cost of the pole shall be charged to Account 364, Poles, Towers, and Fixtures, even though the plant investment in security lights is recorded in Account 371, Installations on Customers' Premises.
There are many cases in which an electric utility and a communications utility enter into an agreement that provides for joint use of poles. Under the terms of these agreements, either utility may occupy the poles of the other upon payment of a stipulated annual rental. If such joint occupancy necessitates the use of a higher than standard pole, the new pole shall be provided at the expense of the utility having the need for the higher pole.
When an electric utility replaces, at its own expense, a standard pole belonging to the communications utility with a higher pole, the cost of the higher pole, less net salvage (if any) of the pole replaced, shall be charged to the account in which the pole rental is included.
Contributions made to an electric utility by a communications utility for the costs incurred in stubbing joint use electric poles shall be credited to Account 593, Maintenance of Overhead Lines. The cost of pole stubbing on electric plant distribution facilities shall be charged to Account 593.
An investment in outside plant that is held in joint ownership shall be recorded in the appropriate plant accounts at its cost to the utility. For continuing property record purposes, jointly owned property units shall be priced at their cost to the utility and shall be appropriately segregated in the CPRs to indicate joint ownership.
Utility accounting practice requires the costs associated with the first clearing and grading of land and rights of way and any resulting damage thereto, to be included in the accounts for structures and improvements or equipment to which such costs relate. Since the first clearing, as well as clearing which is “directly occasioned by the building of a structure,” is done, not for the purpose of enhancing the value of the land or the rights of way, but for the purpose of constructing plant, these costs are more directly related to the construction of plant than to the purchase of land or rights of way. The accounts shall be charged as follows:
1. For overhead transmission pole lines, Account 356, Overhead Conductors and Devices;
2. For overhead distribution lines, Account 365, Overhead Conductors and Devices; and
3. For underground distribution lines, Account 366, Underground Conduit, for a conduit installation; or Account 367, Underground Conductors and Devices, for a direct burial installation.
Engineering costs for long-range system plans shall be charged to Account 183, Preliminary Survey and Investigation Charges, as incurred. The cost of engineering services incurred in preparing a long-range system plan represents a legitimate component of the total cost of construction of all system improvements detailed in the plan. The amount of engineering costs to be associated with any specific system improvement is the annual costs incurred up to the time of the allocation (not previously allocated), plus that portion of the initial cost which relates to the particular construction in question. If any major system improvement included in the engineering plan is not constructed, or if the study is superseded by another complete study, the cost of that portion of the original study not resulting in construction shall be charged to Account 182.2, Unrecovered Plant and Regulatory Study Costs, if the costs are to be recovered through future rates. Costs recorded in Account 182.2 shall be amortized to Account 407, Amortization of Property Losses, Unrecovered Plant and Regulatory Study Costs, as the costs are recovered through the rates. Any costs included in Account 182.2 that are disallowed for rate-making purposes shall be charged to Account 426.5, Other Deductions.
The allocation of engineering services to the various construction projects requires the exercise of judgment. In some cases, system improvements are continuous over a period of months or years, thus permitting the engineering cost to be spread monthly as overhead in relation to the direct costs incurred in construction. (If a substantial amount of retirement work is performed in connection with system improvements, a proportionate share of the engineering cost shall be allocated on the basis of direct retirement labor.) If the system improvements detailed in the plan are not performed in a continuous manner, the engineering cost shall be allocated on the basis of the estimated costs of the various larger system improvement projects which result from the long-range plan.
If construction is performed by contract, the engineering cost applicable thereto shall be transferred from Account 183 to Account 107, Construction Work-in-Progress—Electric, and thereby spread to the appropriate plant accounts on the basis of contract costs.
In the case of system improvement construction performed on the basis of work orders, engineering costs shall be transferred to Account 107, Construction Work-in-Progress—Electric, and included in total work order costs as either overhead or special services. If engineering services are not readily identifiable with individual work orders, they shall be capitalized as overhead. If engineering costs for each work order are readily separable from the engineering costs for all other work orders, they shall be capitalized as special services.
In summarizing system improvement work orders on the RUS Form 219, Inventory of Work Orders, the amount of engineering costs previously approved for advance on the long range plan, if any, shall be deducted to determine the balance of loan funds subject to advance by RUS.
Costs relating to the determination of availability of service, rates, and similar items for individual applicants shall be charged to Account 912, Demonstrating and Selling Expenses. If it is expected that construction will result, the costs incurred to provide service, including staking, shall be charged to Account 107, Construction Work-in-Progress—Electric. If construction does not result, Account 107 shall be credited and Account 426.5, Other Deductions, shall be charged.
Plant installed for temporary use, a period of less than 1.ar, shall be recorded in Account 185, Temporary Facilities, net of any payments received from customers. Upon retirement, this net cost plus cost of removal, less any salvage value, shall be cleared to Account 451, Miscellaneous Service Revenues.
When a temporary service is installed at the site of a building under construction, the location of the permanent service entrance and the load and its characteristics are usually known. The temporary service is of the proper capacity and is so located or has sufficient slack, that it can be relocated to serve the new building as a permanent service. Under these conditions, the service shall be charged to Account 369, Services, when first installed. The cost of moving and attaching the service to the permanent service entrance shall be charged to Account 593, Maintenance of Overhead Lines or Account 594, Maintenance of Underground Lines, as appropriate.
When installed plant, not yet completed or completed but not yet placed in service, has been damaged or destroyed by storm, the cost of the repair and restoration shall be added to the cost of construction and capitalized if the plant was constructed under force account or work order construction, and the utility paid for the cost of the repairs. If the plant was constructed under contract, the contractor is required to deliver the plant in new condition. Therefore, any repairs required prior to the completion of construction and acceptance by the utility, are ordinarily borne by the contractor.
Liquidated damages are amounts paid by or assessed against contractors for the completion of construction after an agreed upon date. Liquidated damages shall be credited to Account 107, Construction Work-in-Progress—Electric. Since these damages accrue during the construction period, they become one of the components of construction cost. Even though a portion of these damages may compensate the utility for costs which are not “identifiable,” no portion of the damages shall be credited to revenue or expense.
When a contractor has been paid in full from loan funds or from funds to be reimbursed by loan funds without a deduction for liquidated damages, the amount of liquidated damages received shall be deposited in the Construction Fund. This amount shall be reflected by a decrease in column 5, “Total Expenditures to Date,” of the RUS Form 595, Financial Requirement and Expenditure Statement, and as an increase in column 6, “Cash Balance.” If liquidated damages are obtained by withholding an equivalent amount from the contractor's payment, the net result will be the same.
Nonrefundable payments (contributions) from customers and developers for underground construction shall first be credited to Account 107.2, Construction Work-in-Progress—Force Account. When the constructed plant is unitized and distributed to the individual plant accounts, the contributions shall be credited to those plant accounts which gave rise to the contribution.
When a customer or developer furnishes a trench or other service in connection with buried plant, the cooperative shall debit Account 107.2 with the actual or estimated cost of the service performed, and account for the credit as set forth above.
Refunds of overpayments for materials and equipment previously purchased are occasionally received as the result of legal action brought against electrical suppliers for price fixing in violation of antitrust laws. Such refunds shall be accounted for as follows:
1. The refund shall first be applied to any litigation costs that were incurred.
2. Refunds for special equipment items shall be accounted for, in detail, on the Summary of Special Equipment Costs and credited against the appropriate plant accounts.
3. Other material or equipment items that were installed through work orders or a materials furnished contract shall be adjusted on an amended work order. The amended work order shall include full details of the refund.
4. Continuing property records shall be adjusted to reflect the above transactions.
5. Amounts approved for advance on the RUS Form 595, Financial Requirement and Expenditure Statement, and on the loan budget records, shall be adjusted. For special equipment items, the adjustment shall be requested in a letter to RUS. For materials installed by work order or contract, the adjustments shall be made through credits shown on the RUS Form 219, Inventory of Work Orders.
6. Refunds for material currently in stock shall be credited to Account 154, Plant Materials and Operating Supplies.
7. If the material was used in maintenance activities or operations, the refund shall be credited to the appropriate maintenance or operations expense account.
8. Refunds for materials or equipment financed from loan funds shall be deposited in the Construction Fund—Trustee Account or remitted to RUS as a special payment on a note. Other refunds shall be deposited in the general funds.
The primary purpose of a Load Management System is to