Problems in Implementing Regulatory Accounting and Costing Systems for Railroads

Railroads have faced major difficulties for many years; difficulties which have caused great concern among shippers and the Government as well as among the railroads themselves. Because the Interstate Commerce Commission (ICC) prescribes regulatory accounting requirements for railroads and uses the accounting data that railroads submit to judge the appropriateness of their rates, its actions and decisions can bear heavily on whether the railroad's financial viability improves. Until recently, the Uniform System of Accounts for railroads had remained essentially unchanged since 1907. Effective January 1, 1978, ICC prescribed a revised and expanded system which resulted from several years of developmental efforts and was required by the Railroad Revitalization and Regulatory Reform Act of 1976 (4-R Act). The 4-R Act also required ICC to develop a revised costing system for estimating the cost of service by using data that railroads report under the revised system of accounts. The revised costing system is intended for use not only by ICC, but also by railroads and shippers in rate proceedings. Legislation was introduced in Congress and passed in the Senate, which would place added importance on cost of service as a basis for setting rates in the railroad industry.