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Accounting Changes Needed in the Railroad Industry

AFMD-81-26 Published: Feb 04, 1981. Publicly Released: Feb 04, 1981.
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Highlights

Betterment accounting is the method that railroads are required to use to account for the track structure in reports to the Interstate Commerce Commission (ICC), and is generally used in reports to the Securities and Exchange Commission (SEC) and stockholders. Under betterment accounting, the original cost of the track structure is added to the asset account, and no systematic depreciation is taken. The cost of replacements of track structure material of equal quality is charged to expense in the periods when replacements occur. "Betterments" occur when track structure materials are replaced by superior quality assets. The added cost of the new superior material over the current cost of the material removed is also added to the asset account.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
United States Securities and Exchange Commission The Commissioners of SEC should complete the April 1977 Advance Notice of Proposed Rulemaking on railroad accounting by adopting depreciation accounting for the track structure.
Closed – Implemented
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Interstate Commerce Commission The Commissioners of ICC should complete the October 1978 Advance Notice of Proposed Rulemaking and adopt depreciation accounting for the track structure.
Closed – Implemented
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Interstate Commerce Commission The Commissioners of ICC should coordinate future changes in deferred maintenance reporting requirements with SEC to guard against conflicting requirements being placed on the railroad industry.
Closed – Not Implemented
The railroads' adoption of depreciation accounting puts their deferred maintenance reporting on a comparable basis with other industries.
United States Securities and Exchange Commission The Commissioners of SEC should complete the study of deferred maintenance reporting covered by the April 1977 Advance Notice of Proposed Rulemaking and require railroads to report deferred maintenance information which fulfills SEC needs yet does not conflict with ICC requirements.
Closed – Not Implemented
The railroads' adoption of depreciation accounting puts their deferred maintenance reporting on a comparable basis with other industries.

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Topics

Accounting systemsDepreciationFederal taxesFinancial management systemsIncome taxesIndependent regulatory commissionsMaintenance (upkeep)Railroad industryRailroad regulationFinancial reporting