Accounting and Reporting of Business Combinations, Security Investments, Comprehensive Income, Derivative Instruments, and Hedging Activities, 39021-39045 [2015-15402]

Download as PDF Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules (e.g., CBI). To inspect the hard copy materials, please schedule an appointment during normal business hours with the contact listed in the FOR FURTHER INFORMATION CONTACT section. FOR FURTHER INFORMATION CONTACT: James Shears, EPA Region IX, (213) 244–1810, shears.james@epa.gov. SUPPLEMENTARY INFORMATION: This proposal addresses revisions to the FRAQMD portion of the California SIP. In the rules and regulations section of the Federal Register, we are approving the three RACT SIP revisions in a direct final action without prior proposal because we believe these SIP revisions are not controversial. This proposal also addresses the following local rule: FRAQMD Rule 3.8, Gasoline Dispensing Facilities. In the Rules and Regulations section of this Federal Register, we are approving this local rule in a direct final action without prior proposal because we believe this SIP revision is not controversial. Please note that if we receive adverse comment on a specific provision of these SIP revisions or the rule, we will publish a timely withdrawal of the direct final rule and address the comments in a subsequent action. If that provision may be severed from the remainder of the SIP revisions or the rule, we may adopt as final those provisions of the SIP revisions or the rule that are not the subject of an adverse comment. We do not plan to open a second comment period, so anyone interested in commenting should do so at this time. If we do not receive adverse comments, no further activity is planned. For further information, please see the direct final action. Dated: April 30, 2015. Jared Blumenfeld, Regional Administrator, Region IX. [FR Doc. 2015–16629 Filed 7–7–15; 8:45 am] BILLING CODE 6560–50–P DEPARTMENT OF TRANSPORTATION Surface Transportation Board 49 CFR Part 1201 srobinson on DSK5SPTVN1PROD with PROPOSALS [Docket No. EP 720] Accounting and Reporting of Business Combinations, Security Investments, Comprehensive Income, Derivative Instruments, and Hedging Activities AGENCY: Surface Transportation Board, DOT. ACTION: Notice of proposed rulemaking. The Surface Transportation Board proposes to revise its regulations SUMMARY: VerDate Sep<11>2014 15:15 Jul 07, 2015 Jkt 235001 to update the accounting and reporting requirements under its Uniform System of Accounts (USOA) for Class I Railroads to be more consistent with current generally accepted accounting principles (GAAP) and revise the schedules and instructions for the Annual Report for Class I Railroads (R– 1 or Form R–1) to better meet regulatory requirements and industry needs. The intent of the proposed revisions is to promote sound and uniform accounting and financial reporting for the types of transactions and events described herein. DATES: Comments on this proposed rulemaking are due on or before August 7, 2015; reply comments are due by September 8, 2015. ADDRESSES: Any filings submitted in this proceeding must be submitted either via the Board’s e-filing format or in the traditional paper format. Any person using e-filing should attach a document and otherwise comply with the instructions found at the E-FILING link on the Board’s Web site at www.stb.dot.gov. Any person submitting a filing in the traditional paper format should send an original and 10 copies and also an electronic version to: Surface Transportation Board, Attn: Docket No. EP 720, 395 E Street SW., Washington, DC 20423–0001. FOR FURTHER INFORMATION CONTACT: Pedro Ramirez at (202) 245–0333. Assistance for the hearing impaired is available through the Federal Information Relay Services (FIRS) at 1– 800–877–8339. SUPPLEMENTARY INFORMATION: Introduction In this notice of proposed rulemaking (NPR), the Surface Transportation Board (Board) proposes to amend its USOA and Form R–1.1 The Board proposes to add new general instructions and accounts to recognize changes in the fair value of certain security investments, items of other comprehensive income, derivative instruments, and hedging activities. Additionally, the Board proposes to revise the USOA to reflect current accounting practices for 1 The Board has broad economic regulatory oversight of railroads, addressing such matters as rates, service, construction, acquisition and abandonment of rail lines, carrier mergers, and interchange of traffic among carriers (49 U.S.C. 10101–11908). The Board monitors the financial condition of railroads as part of its oversight of the rail industry. The Board prescribes a uniform accounting system for railroads to use for regulatory purposes. 49 U.S.C. 11141–43, 11161–64; 49 CFR parts 1200 and 1201. In addition, the Board requires Class I railroads to submit quarterly and annual reports containing financial and operating statistics, including employment and traffic data (49 U.S.C. 11145; 49 CFR parts 1241 through 1246 and 1248). PO 00000 Frm 00032 Fmt 4702 Sfmt 4702 39021 business combinations by removing existing instructions for the pooling-ofinterest method of accounting. The Board also seeks to revise Form R–1 to include the new accounts and the new reporting schedule proposed by this rulemaking. The Board also solicits comments on the proposed elimination of certain schedules currently contained in Form R–1 that are not used for any regulatory or other purposes by the Board. As there may be other governmental agencies or interested parties that rely on the information in some of these schedules, we are requesting comments concerning their elimination. The purpose of the proposed revisions is to provide sound and uniform accounting and financial reporting for certain types of transactions and events. The Board believes that such requirements are needed because these types of transactions and events are neither specifically nor correctly addressed in the existing USOA. The new instructions, accounts, and reporting schedule would result in improved, consistent, and complete accounting and reporting. Background A. General The Interstate Commerce Act, as amended by the ICC Termination Act of 1995 (ICCTA), Public Law 104–88, 109 Stat. 803, authorizes the Board, in 49 U.S.C. 11142, to prescribe a uniform accounting system for rail carriers subject to our jurisdiction and, in 49 U.S.C. 11161, to maintain cost accounting rules for rail carriers. Sections 11142 and 11161 both require the Board to conform its accounting rules to GAAP ‘‘[t]o the maximum extent practicable.’’ In keeping with this requirement, we propose updates to the USOA to provide for: (1) Fair value presentation of certain security investments, derivative instruments and hedging activities; (2) presentation of comprehensive income and components of other comprehensive income; and (3) accounting for business combinations. The proposed revisions are based on the generally accepted accounting principles promulgated by the FASB in the following Accounting Standards Codifications (ASC): ASC 320 Investments—Debt and Equity Securities; ASC 220 Comprehensive Income; ASC 815 Derivatives and Hedging; and ASC 805 Business Combinations.1 1 These accounting pronouncements are available at https://asc.fasb.org. E:\FR\FM\08JYP1.SGM 08JYP1 39022 Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules srobinson on DSK5SPTVN1PROD with PROPOSALS The Board considers the requirements in ASC 320, 220, 815, and 805 to be an improvement in financial accounting and reporting practices. The Board also considers it important that its accounting requirements are consistent with the industry’s general purpose financial reporting requirements. Therefore, the Board proposes to implement the principles and concepts set forth in ASC 320, 220, 815, and 805 for railroad accounting and reporting purposes effective upon issuance of a final rule in this proceeding. The Board believes that the proposed accounting and reporting changes would provide consistent accounting and reporting of changes in the fair value of security investments, derivative instruments, and hedging activities. The proposed changes would also minimize the accounting and reporting burden on railroads under the Board’s jurisdiction, assist the Board in its overall monitoring effort, and improve transparency. To provide context for the Board’s proposed changes, the key aspects of the relevant FASB pronouncements are discussed in sections B through E of this Background. B. Investments in Debt and Equity Securities (ASC 320) ASC 320 establishes standards of financial accounting and reporting for investments in equity securities that have readily determinable fair values and for all investments in debt securities. Fair value of an equity security is readily determinable if sales prices and bid-and-asked quotations are currently available on a securities exchange registered with the U.S. Securities and Exchange Commission, or publicly reported in the over-thecounter market. ASC 320 requires entities to classify all debt securities and selected equity securities into one of three categories: (1) Trading securities; (2) available-forsale securities; or (3) held-to-maturity securities. Classification of the securities is based primarily on management’s intent for holding a particular investment. Trading securities. Trading securities are debt and equity securities that are bought and held principally for the purpose of selling them in the near term, usually less than one year. These securities are held for short periods of time with the objective of generating profits from short-term differences in price. Available-for-sale securities. Available-for-sale securities are investments in debt and equity securities that have readily determinable fair values not classified VerDate Sep<11>2014 15:15 Jul 07, 2015 Jkt 235001 as trading securities or held-to-maturity securities. Held-to-maturity securities. Held-tomaturity securities are debt securities that the entity has the positive intent and ability to hold to maturity. For debt securities held to maturity, amortized cost is a more relevant measure than fair value because that cost will be realized, absent default. Therefore, changes in the fair value of securities held to maturity are not recognized during the period the entity holds the security investment. ASC 320 states that a debt security that is available to be sold in response to changes in market interest rates, changes in the security’s prepayment risk, the enterprise’s need for liquidity, changes in foreign exchange risks, or other similar factors should not be included in the held-to-maturity category because the possibility of a sale indicates that the enterprise does not have a positive intent and ability to hold the security to maturity. However, under certain circumstances, a company may change its intent concerning securities originally classified as heldto-maturity, resulting in the securities’ sale or reclassification without calling into question the company’s intent to hold other securities to maturity. C. Comprehensive Income (ASC 220) The purpose of comprehensive income is to measure all changes in an entity’s equity that result from recognized transactions and other economic events of a period other than those transactions resulting from investment by owners and distributions to owners. When paired with disclosure notes and other information in the financial statements, the reporting of comprehensive income is intended to help investors, creditors, and others assess an entity’s activities and future cash flows. Under GAAP, comprehensive income is comprised of traditional net income and all components of other comprehensive income. ‘‘Other comprehensive income’’ includes revenues, expenses, gains and losses that are included in comprehensive income but not in net income. This includes foreign currency translation adjustments, unrealized holding gains and losses on available-for-sale securities, changes in pension or other post-retirement benefits, and changes in the fair value of derivative financial instruments classified as cash-flow hedges. GAAP requires financial statements to present comprehensive income in two parts: (1) Net income and its components (such as income from continuing operations, discontinued PO 00000 Frm 00033 Fmt 4702 Sfmt 4702 operations, and extraordinary items); and (2) Other Comprehensive Income and its components. Reclassifications of items from accumulated Other Comprehensive Income to net income must be measured and presented by income statement line item in both the statement where net income is presented and the statement where Other Comprehensive Income is presented. This accounting standard applies only to entities with items of Other Comprehensive Income. Entities without Other Comprehensive Income items are exempt from providing a statement of comprehensive income and instead should report only net income in the statement displaying the results of operations. D. Derivatives and Hedging (ASC 815) A derivative instrument is a security whose price is dependent upon or derived from one or more underlying assets. Derivative instruments represent rights or obligations that meet the definition of an asset or liability and should be reported in financial statements. For accounting purposes, a derivative instrument is a financial instrument or other contract that has all of the following characteristics: 1. The instrument has one or more underlyings. An underlying is a specified interest rate, security price, commodity price, foreign exchange rate, index of prices or rates, or other variable. An underlying may be a price or rate of an asset or liability but is not the asset or liability itself. 2. The instrument must have one or more notional amounts or payment provisions. A notional amount represents a quantity such as a number of currency units, shares, bushels, pounds, or other units specified in a derivative instrument. Those terms determine the amount of a contract’s settlement or settlements, and, in some cases, determine whether or not a settlement is required. 3. The instrument requires either no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have a similar response to changes in market factors. 4. The instrument requires or permits net settlement, and can readily be settled net by a means outside the contract, or provides for delivery of an asset that puts the recipient in a position not substantially different from net settlement. Certain types of contracts are exempted from the requirements of ASC 815 to avoid burdening certain industries and markets. For example, normal purchases and normal sales E:\FR\FM\08JYP1.SGM 08JYP1 srobinson on DSK5SPTVN1PROD with PROPOSALS Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules contracts that provide for the purchase or sale of goods that will be delivered in quantities expected to be used or sold by the reporting entity over a reasonable period of time and in the normal course of business are not considered derivative instruments. This exception is commonly referred to as the normal purchases and normal sales scope exception. The exception would include typical purchases and sales of inventory items, certain insurance contracts, and employee compensation agreements. Derivative instruments that do not qualify for the normal purchases and normal sales scope exception or other exceptions provided for under the statement are reflected in the financial statements. Consequently, most futures, forwards, swaps, and option contracts meet the definition of a derivative instrument and changes in their fair value would be reflected in the financial statements. Accounting for a Derivative Instrument. Accounting for changes in the fair value of a derivative instrument depends upon its intended use and designation. Essentially, for certain derivative instruments not designated as hedging instruments, gain or loss is recognized as earnings in the period of change. The change in the value of the derivative instrument is reflected on the balance sheet as an asset or liability with a corresponding amount recognized in earnings. This accounting effectively provides users of the financial statements with information concerning the value of the derivative instrument as if it had been settled in the market place. Hedge Accounting. A hedge is an instrument’s position intended to offset potential losses or gains that may be incurred by a companion investment. Entities hedge to manage risk to prices or interest rates (among other things). Provided certain criteria are met, a derivative may be specifically designated as a fair-value or cash-flow hedge. Under the rules for hedge accounting, the changes in the fair value of the derivative instrument are measured at fair value with adjustments made to the carrying amount of the items being hedged (as in a fair-value hedge) or to Other Comprehensive Income (as in a cash-flow hedge) to the extent the hedge is effective. 1. Fair-Value Hedge. In a fair-value hedge, a derivative instrument is designated as a hedge against exposure to changes in the fair value of a recognized asset, liability, or a firm commitment.2 The change in value of 2A firm commitment is an agreement with an unrelated party, binding on both parties, that is VerDate Sep<11>2014 15:15 Jul 07, 2015 Jkt 235001 the derivative instrument is recognized in earnings in the period of the change together with the offsetting gain or loss on the hedged item attributable to the risk. To the extent that a hedge is perfectly effective, it will produce the same offsetting amounts in earnings so that net income is not impacted by the hedge. However, amounts would be reflected in earnings to the extent that the hedge is not effective in offsetting the change in value of the item being hedged. Additionally, fair-value accounting results in an adjustment of the carrying amount of the hedged asset or liability. In the case of a fair-value hedge of a firm commitment, a new asset or liability is created. As a result of the hedge relationship, the new asset or liability ultimately becomes part of the carrying amount of the item being hedged. 2. Cash-Flow Hedge. A cash-flow hedge uses a derivative instrument to protect against the risk caused by variable prices or costs, which may cause future cash flows to be uncertain. This type of instrument protects against an anticipated or forecasted transaction that probably will occur in the future but the amount of which has not been fixed. In a cash-flow hedge, the effective portion of the derivative instrument’s gain or loss is initially reported as a component of Other Comprehensive Income (outside net income). The ineffective portion of the gain or loss is reported in earnings immediately. Amounts in accumulated Other Comprehensive Income are reclassified into earnings in the same period during which the hedged forecasted item affects earnings. Documentation of Hedge Relationship. Entities must keep extensive documentation of the hedge relationship. An entity that elects to apply the special hedge accounting principles is required to document, at the inception of the hedge, the risk management objective and strategy for undertaking the hedge, including the hedge instrument, the related transaction, the nature of the risk being hedged, and how effectiveness will be determined. A company’s documentation of its overall risk management philosophy is essential in addressing the role that derivative instruments and hedging activities play in achieving the company’s risk management objectives. Concurrent designation and documentation of a hedge is critical usually legally enforceable and that specifies all significant terms and includes a disincentive for nonperformance. PO 00000 Frm 00034 Fmt 4702 Sfmt 4702 39023 because an entity could retroactively identify a transaction as a hedge or change a method of measuring effectiveness to achieve a desired outcome. At the inception of the hedge, formal documentation is required that identifies the hedging instrument, and specifically the hedged item or transaction, along with the nature of the risk being hedged. Entities are required to formally document how effectiveness will be assessed at the adoption of the hedge and on an ongoing basis. E. Business Combinations (ASC 805) A business combination is a transaction or other event in which one or more businesses obtain control of another business. It also includes transactions involving mergers of equals and certain acquisitions by a not-forprofit entity. ASC 805—Business Combinations requires that a business combination be accounted for by applying the acquisition method. The acquisition method requires the acquiring entity to recognize and measure, as of the acquisition date, the identifiable assets acquired, liabilities assumed, and any noncontrolling interest in the acquired entity. The acquiring entity must also recognize and measure goodwill (the excess of purchase price over net assets, related to the acquisition) or a gain resulting from a bargain purchase. Discussion A. General. The Board’s existing USOA does not specifically address the proper accounting and reporting for changes in the fair value of certain security investments, derivative instruments, and hedging activities. Additionally, the existing USOA does not contain specific accounts to record amounts related to items of Other Comprehensive Income or provide a format to display comprehensive income in the Form R–1. The USOA’s accounting for business combinations must also be revised to reflect the acquisition accounting method, as required in ASC 805. Without specific instructions and accounts for recording and reporting certain transactions and events, inconsistent and incomplete accounting would result. For example, if the effects of certain derivative instruments and hedging activities are not properly reported to the Board in the Form R–1, it would be difficult for the Board and others to determine the impact of derivatives on regulated carriers’ financial statements and Results of E:\FR\FM\08JYP1.SGM 08JYP1 srobinson on DSK5SPTVN1PROD with PROPOSALS 39024 Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules Operations Statements.3 The addition of new accounts and related general instructions is intended to improve the visibility, completeness, and consistency of accounting and reporting of changes in the fair value of certain investment securities, items of Other Comprehensive Income, derivatives instruments, and hedging activities. Also, the addition of the proposed new accounts and related reporting requirements to the Form R–1 would reduce regulatory uncertainty as to the proper accounting and reporting for these items and minimize regulatory burden by reducing the potential differences in the manner in which these amounts are reported to shareholders and to the Board. Finally, the reporting of derivative instruments and hedging activities by regulated carriers would assist the Board in its overall monitoring effort as well as its ability to assess railroad industry growth and financial stability. Further, such reporting would assist the Board in identifying industry changes that may affect national transportation policy. B. Proposed Accounting for Trading and Available-for-Sale Type Securities. Under the Board’s USOA, all types of securities are recorded at cost, and subsequent changes in the fair value of security investments are not recognized in the financial statements. The Board is of the view that fairvalue measurement of trading and available-for-sale type securities presents relevant and useful information to existing and potential investors, creditors, regulators, and others in making credit and other decisions. Fairvalue measurements would also provide useful information to the Board concerning the status of certain amounts set aside to fund future obligations. Therefore, the Board proposes to add language to its investment account requirements for rail carriers to permit the recognition of changes in the fair value of trading and available-for-sale types of securities due to unrealized holding gains and losses. The security investment asset accounts for railroads are: Account 702, Temporary Cash Investments; Account 721, Investments and Advances: Affiliated Companies; Account 722, Other Investments and Advances; Account 715, Sinking Funds; Account 716, Capital Funds; and Account 717, Other Funds. 3 Results of Operations Statements, also referred to as a Profit and Loss Statement, Statement of Operations, or Statement of Income, appear in the Form R–1 and reflect the profitability (i.e. revenues, expenses, gains, and losses) of a company during the year specified in the heading of the R–1 annual report. The statements do not show cash receipts or cash disbursements. VerDate Sep<11>2014 15:15 Jul 07, 2015 Jkt 235001 C. Proposed Accounting for Other Comprehensive Income. The existing USOA does not contain specific accounts to record amounts related to items of Other Comprehensive Income or provide a format to display comprehensive income in the Form R– 1. Therefore, entities currently record items of Other Comprehensive Income in Account 606. However, as part of the proposed rule, the USOA would be revised to provide accounting for such items. Thus, the use of Account 606 in the USOA to record items of Other Comprehensive Income would no longer be appropriate. Instead, these items would be accounted for elsewhere in the USOA. A new equity account (Account 799, Accumulated Other Comprehensive Income) is also proposed to include the accumulated balance for items of Other Comprehensive Income. The account would require that railroads maintain supporting records for each category of Other Comprehensive Income and report such information in their Form R–1. Detailed records would be maintained so that the current period activity, year-to-date activity, and reclassification adjustments related to items of Other Comprehensive Income could be readily identified. Maintaining detailed records for items included in accumulated Other Comprehensive Income is necessary to ensure that a railroad can readily identify amounts when an item is included in net income in subsequent periods. As proposed, a new equity subaccount entitled Account 799.1, Other Comprehensive Income, would be established to include amounts for items of Other Comprehensive Income for the reporting year. The purpose of this account is to record the activity for items of Other Comprehensive Income during a fiscal year. At year end, the amounts recorded in sub-account 799.1 would be transferred to the new equity Account 799. Consequently, Account 799.1, as proposed, would always have a zero beginning and year-end balance. Therefore, the Board proposes not to include this account as part of the balance sheet schedules. To increase the prominence of items that are recorded in Other Comprehensive Income and also to improve comparability and transparency in financial statements, the Board has developed a two-statement approach. This two-statement approach includes Schedule 210, Results of Operations, and Schedule 210A, Consolidated Statement of Other Comprehensive Income. Schedule 210 would show the components of net income and total net income. Schedule PO 00000 Frm 00035 Fmt 4702 Sfmt 4702 210A, which would immediately follow Schedule 210, would reflect the components of Other Comprehensive Income, a total for Other Comprehensive Income, and a total for Comprehensive Income. Schedule 210A would begin with net income. The proposed instructions for the Other Comprehensive Income accounts for all railroads would require that supporting records be maintained by each category of Other Comprehensive Income. This level of detail would be required to ensure that the railroad is able to identify the amounts associated with an item when it is entered into the determination of net income, and the railroad effectively moves the recognition of the item from Other Comprehensive Income to net income. Finally, items recognized in Other Comprehensive Income that are later recognized in net income require a reclassification adjustment in order to avoid double counting an item in both net income and Other Comprehensive Income. The proposed instructions for Accounts 799 and 799.1 would require the railroad to make reclassification adjustments directly to these accounts, as appropriate. This proposed accounting treatment for reclassification adjustments would minimize the need for creating a new account to capture amounts solely related to reclassification adjustments. Items reclassified from Other Comprehensive Income to net income would no longer be presented in footnotes to the financial statements. Further, the adjustments must be shown on the face of the financial statements where the components of net income and Other Comprehensive Income are presented; corresponding adjustments must appear in both net income and Other Comprehensive Income. D. Proposed Accounting for Derivatives and Hedging Activities. The Board proposes to revise the USOA to provide accounting for derivative instruments and hedging activities. The Board’s existing USOA does not contain specific accounts to record changes in the fair value of derivative instruments used in hedging and non-hedging activities. The addition of new accounts and instructions would provide improved visibility and completeness of accounting and reporting of derivative instruments and hedging activities. Proposed General Instructions for Fair-Value and Cash-Flow Hedges. The Board proposes to add a new general instruction that would require railroads to record changes in the fair value of the derivative instrument (the effective portion of the gain or loss) designated as a cash-flow hedge to Other E:\FR\FM\08JYP1.SGM 08JYP1 srobinson on DSK5SPTVN1PROD with PROPOSALS Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules Comprehensive Income. The ineffective portion of the cash-flow hedge would be charged to the same income or expense account that would have been used if the hedged item had been disposed of, or otherwise settled. The proposed instructions would also require railroads to record changes in the fair value of a derivative instrument designated as a fair-value hedge in this account with a concurrent charge to a sub account of the asset or liability that carries the item being hedged. The ineffective portion of the fair-value hedge would be charged to the same income or expense account that would have been used if the hedged item had been disposed of, or otherwise settled. Proposed Accounting for Derivative Assets and Liabilities. The Board proposes to establish new asset and liability accounts that would include amounts related to the changes in the fair value of derivative instruments not designated as cash-flow or fair-value hedges. The proposed accounts are Account 713.5, Derivative Instrument Assets and Account 763.5, Derivative Instrument Liabilities. Railroads would charge Account 551, Miscellaneous Income Charges, with the corresponding amount of the change in the fair value of the derivative instruments. Proposed Accounting for Fair-Value and Cash-Flow Hedges. As proposed, railroads would be required to establish a new asset and liability account that would include amounts related to the changes in the fair value of derivative instruments designated as a cash-flow or fair-value hedge. The new asset account is Account 713.6, Derivative Instrument Assets-Hedges and the new liability account would be Account 763.6, Derivative Instrument Liabilities— Hedges. E. Proposed Changes to and Elimination of Certain Schedules to the Form R–1. The proposed accounting changes, if adopted, would require changes to existing Schedule 200, Comparative Statement of Financial Position, and Schedule 210, Results of Operations.4 The Board also would add a new Schedule 210A, entitled ‘‘Consolidated Statement of Comprehensive Income,’’ with instructions on the proper footnote disclosures for the Form R–1 in order to provide consistent accounting and reporting of items of Other Comprehensive Income. This proposed schedule is modeled after an incomestatement approach which provides the most transparency for the components of Other Comprehensive Income and is more consistent with the overall framework of the FASB Concepts Statement. The proposed incomestatement format would also avoid duplication of data already reported on other schedules. This new schedule would show the components of Other Comprehensive Income and would require the following to be contained in a footnote to the schedule: (1) Reporting of categories of Other Comprehensive Income on a net-of-tax basis, where appropriate, along with the reporting of related tax effects allocated to each component; (2) Reporting of accumulated Other Comprehensive Income balances at year end by category; (3) Reporting of fair-value hedge balances at year end by category. The Board concludes that the proposed reporting requirements would not be a significant reporting burden to the railroad industry since the information is already being captured by the railroads’ accounting systems for internal and external reporting. F. Proposed Accounting for Business Combinations. FASB established ASC 805 Business Combinations requiring the acquisition method of accounting for all business combinations. This methodology is now standard practice in the accounting industry, and the Board agrees that the acquisition method better reflects the investment made in an acquired entity and has affirmed the use of this treatment in Western Coal Traffic League—Petition for Declaratory Order, FD 35506, slip op at 6–17 (STB served July 25, 2013). We propose to update the USOA to reflect this accounting treatment. We also seek comment on the application of Instruction 2–15, paragraph (d) with respect to the utilization of the pooling of interest method for transactions involving the acquisition and merger of property of subsidiaries in Instructions for Property Accounts. G. Elimination of Certain Schedules in Annual Report Form R–1. The Board and its predecessor, the ICC, have collected financial and accounting data from regulated railroads since the 1880’s. Information from the carriers’ annual reports is used in the Board’s oversight and regulatory missions. Reduction of unnecessary reporting requirements has been a long-standing goal of the Board and ICC. In a policy statement issued in 1979, the ICC specified that only information needed to carry out its functions should be collected.5 Since then, reporting requirements have been eliminated for 4 The proposed revised schedules appear in Appendix A. 5 See Policy Statement on Fin. & Statistical Reporting, 44 FR 27537 (1979). VerDate Sep<11>2014 15:15 Jul 07, 2015 Jkt 235001 PO 00000 Frm 00036 Fmt 4702 Sfmt 4702 39025 non-Class I carriers and the dollar threshold for inclusion as a Class I carrier has been raised to $250 million, indexed for inflation. Thus, significant reductions in the financial and accounting reporting burden for railroads have already been accomplished. However, we have examined the current Form R–1 filed by the Class I railroads and have determined that 15 of the 47 schedules are no longer used by the STB to perform our regulatory and oversight functions. Therefore, we are proposing to eliminate these 15 schedules from the Form R–1, as listed below: 230 Capital Stock 339 Accrued Liability—Leased Property 340 Depreciation Base and Rates— Improvements to Road and Equipment Leased from Others 350 Depreciation Base and Rates— Road and Equipment Leased to Others 351 Accumulated Depreciation—Road and Equipment Leased to Others 416 Supporting Schedule—Road 418 Supporting Schedule—Capital Leases 460 Items in Selected Income and Retained Earnings Accounts for the Year 702 Miles of Road at Close of Year— By States and Territories (Single Track) 721 Ties Laid in Replacement 722 Ties Laid in Additional Tracks and in New Lines and Extensions 723 Rails Laid in Replacement 724 Rails Laid in Additional Tracks and in New Lines and Extensions 725 Weight of Rail 726 Summary of Track Replacements Periodic Review To ensure that the Board’s accounting and reporting requirements reflect, to the extent practicable, current GAAP principles, the Board will conduct a periodic review of its accounting standards not less than every five years. This periodic review will be initiated through the rulemaking process, thereby affording interested parties an opportunity for notice and comment. Paperwork Reduction Act Pursuant to the Paperwork Reduction Act (PRA), 44 U.S.C. 3501–3549, and Office of Management and Budget (OMB) regulations at 5 CFR 1320.8(d)(3), the Board seeks comments regarding: (1) Whether the revisions to the collection of information proposed here are necessary for the proper performance of the functions of the Board, including whether the collection E:\FR\FM\08JYP1.SGM 08JYP1 39026 Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules srobinson on DSK5SPTVN1PROD with PROPOSALS has practical utility; (2) the accuracy of the Board’s burden assessment; (3) ways to enhance the quality, utility, and clarity of the information collected; and (4) ways to minimize the burdens of the collections of information on the respondents, including the use of automated collection techniques or other forms of information technology, when appropriate. Additional information related to these questions can be found in Appendix B below. The proposed information-collection revisions described in this decision are being submitted to OMB for review as required under the PRA, 5 U.S.C. 3507(d) and OMB regulations at 5 CFR 1320.11. Comments received by the Board regarding the information collection will also be forwarded to OMB for its review when the final rule is published. Regulatory Flexibility Act Statement The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601–612, generally requires a description and analysis of new rules that would have a significant economic impact on a substantial number of small entities. In drafting a rule, an agency is required to: (1) Assess the effect that its regulation will have on small entities; (2) analyze effective alternatives that may minimize a regulation’s impact; and (3) make the analysis available for public comment. Sections 601–604. In its notice of proposed rulemaking, the agency must either include an initial regulatory flexibility analysis, section 603(a), or certify that the proposed rule would not have a ‘‘significant impact on a substantial number of small entities,’’ section 605(b). Because the goal of the RFA is to reduce the cost to small entities of complying with federal regulations, the RFA requires an agency to perform a regulatory flexibility analysis of small entity impacts only when a rule directly regulates those entities. In other words, the impact must be a direct impact on small entities ‘‘whose conduct is circumscribed or mandated’’ by the proposed rule. White Eagle Coop. Ass’n v. Conner, 553 F.3d 467, 478, 480 (7th Cir. 2009). This proposal will not have a significant economic impact upon a substantial number of small entities within the meaning of the RFA. The proposed rule would affect only entities that are required to file Form R–1 reports; these reports are only required to be submitted by Class I carriers. 49 CFR 1241.1. Class I carriers are large railroads; accordingly, there will be no impact on small railroads (small entities). VerDate Sep<11>2014 15:15 Jul 07, 2015 Jkt 235001 Authority. 49 U.S.C. 11142 and 11164. List of Subjects in 49 CFR Part 1201 Railroads, Uniform System of Accounts. Decided: June 18, 2015. By the Board, Acting Chairman Miller and Vice Chairman Begeman. Brendetta S. Jones, Clearance Clerk. For the reasons set forth in the preamble, the Surface Transportation Board proposes to amend part 1201 of title 49, chapter X, of the Code of Federal Regulations as follows: PART 1201—RAILROAD COMPANIES 1. The authority citation for part 1201 continues to read as follows: ■ Authority: 49 U.S.C. 11142 and 11164. Subpart A—Uniform System of Accounts 2. Amend Regulations Prescribed by revising paragraph (ii), item 16(c), to read as follows: ■ List of Instructions and Accounts REGULATIONS PRESCRIBED * * * * * (ii) * * * 16. * * * (c) Cost, as applied to a marketable equity security, refers to the original cost as adjusted for unrealized holding gains and losses. * * * * * 3. Amend General Instructions by adding Instructions 1–19 and 1–20 to read as follows: GENERAL INSTRUCTIONS * * * * * 1–19 Accounting for Other Comprehensive Income. (a) Railroads will record items of Other Comprehensive Income in account 799.1, Other comprehensive income. Amounts included in this account will be maintained by each category of Other Comprehensive Income. Examples of categories of Other Comprehensive Income include foreign currency items, minimum pension liability adjustments, unrealized gains and losses on available-for-sale type securities and cash-flow hedge amounts. (b) Supporting records will be maintained for account 799 so that the company can readily identify the cumulative amount of Other Comprehensive Income for each item included in this account. (c) When an item of Other Comprehensive Income enters into the determination of earnings in the current PO 00000 Frm 00037 Fmt 4702 Sfmt 4702 or subsequent periods, a reclassification adjustment will be recorded in accounts 799 to avoid double counting of when an item included in net income was also included in Other Comprehensive Income in the same or prior period. 1–20 Accounting for derivative instruments and hedging activities. (a) A carrier will recognize derivative instruments as either assets or liabilities in the financial statements and measure those instruments at fair value. A derivative instrument is a financial instrument or other contract with all three of the following characteristics: (1) The derivative instrument has one or more underlyings and a notional amount or payment provision. Those terms determine the amount of the settlement or settlements, and, in some cases, whether or not a settlement is required. (2) The derivative instrument requires no initial net investment or an initial net investment that is smaller than would be required for other types of contracts that would be expected to have similar responses to changes in market factors. (3) The derivative instrument’s terms require or permit net settlement; the derivative instrument can readily be settled net by a means outside the contract; or the derivative instrument’s terms provide for delivery of an asset that puts the recipient in a position not substantially different from net settlement. (b) The accounting for the changes in the fair value of derivative instruments depends upon their intended use and designation. Changes in the fair value of derivative instruments not designated as fair value or cash flow hedges will be recorded in account 713.5, Derivative instrument assets, or account 763.5, Derivative instrument liabilities, as appropriate, with the gains or losses charged to earnings in account 551, Miscellaneous income charges. (c) A derivative instrument may be specifically designated as a fair-value or cash-flow hedge. A hedge may be used to manage risk to price, interest rates, or foreign currency transactions. An entity will maintain documentation of the hedge relationship at the inception of the hedge that details the risk management objective and strategy for undertaking the hedge, the nature of the risk being hedged, and how hedge effectiveness will be determined. (d) If the carrier designates the derivative instrument as a fair-value hedge against exposure to changes in the fair value of a recognized asset, liability, or a firm commitment, it will record the change in fair value of the derivative instrument designated as a E:\FR\FM\08JYP1.SGM 08JYP1 39027 Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules fair-value hedge to account 713.6, Derivative instruments assets—hedges, or account 763.6, Derivative instrument liabilities—hedges, as appropriate, with a corresponding adjustment to the subaccount of the item being hedged. The ineffective portion of the hedge transaction will be reflected in the same income or expense account that would have been used if the hedged item had been disposed of or settled. In the case of a fair-value hedge of a firm commitment, a new asset or liability is created. As a result of the hedge relationship, the new asset or liability will become part of the carrying amount of the item being hedged. (e) If the carrier designates the derivative instrument as a cash-flow hedge against exposure to variable cash flows of a probable forecasted transaction it will record changes in the fair value of the derivative instrument in account 713.6, Derivative instrument assets—hedges, or account 763.6, Derivative instrument liabilities— hedges, as appropriate, with a corresponding amount in account 799.1, Other comprehensive income, for the effective portion of the hedge. The ineffective portion of the hedge transaction will be reflected in the same income or expense account that would have been used if the hedged item had been disposed of or settled. Amounts recorded in Other Comprehensive Income will be reclassified into earnings in the same period or periods that the hedged forecasted item affects earnings. ■ 4. Amend Instructions For Property Accounts by: ■ a. Revising paragraph (a) in Instruction 2–15; ■ b. Removing paragraph (b) in Instruction 2–15; ■ c. Redesignating paragraph (c) as paragraph (b) in Instruction 2–15; ■ d. Revising the newly designated paragraph (b) in Instruction 2–15; and ■ e. Redesignating paragraph (d) as paragraph (c) in Instruction 2–15. The revisions read as follows: INSTRUCTIONS FOR PROPERTY ACCOUNTS srobinson on DSK5SPTVN1PROD with PROPOSALS * * * * * 2–15 * * * (a) When a railway or portion thereof constituting an operating unit or system is acquired in a business combination, that business combination shall be recorded in the accounts in the manner stated hereunder. (b) Purchase: (1) The amount includible in account 731, Road and equipment property, shall be the cost at the date of acquisition to the purchaser of the transportation property acquired. The cost assigned the property, as well as VerDate Sep<11>2014 15:15 Jul 07, 2015 Jkt 235001 other assets acquired, shall be the amount of the cost consideration given. Where property and other assets are acquired for other than cash, including liabilities assumed and shares of stock issued, cost shall be determined by either the fair value of the consideration given or the fair value of the assets acquired, whichever is more clearly evident. In addition to any liabilities assumed, provision shall be made for such estimated liabilities as may be necessary. (2) When the costs of individual units or classes of transportation property are not specified in the agreement, the cost assigned such property shall be apportioned among the appropriate primary accounts using the percentage relationship between the fair values for each class of property acquired and the total of such values. * * * * * ■ 5. Amend Instructions For Income And Balance Sheet Accounts by revising Instruction 5–2, paragraph (a), items (2), (3), and (4) to read as follows: INSTRUCTIONS FOR INCOME AND BALANCE SHEET ACCOUNTS * * * * * 5–2 * * * (a) * * * (2) Account 702, Temporary cash investments, account 721, Investments and advances; affiliated companies, and account 722, Other investments and advances, shall be maintained in such a manner as to reflect the marketable equity portion (see definition 26) and other securities or investments. (3) For the purpose of determining net ledger value, the marketable equity securities in account 702 shall be considered the current portfolio and the marketable equity securities in accounts 721 and 722 (combined) shall be considered the noncurrent portfolio. (4) Carriers will categorize their security investments as held-tomaturity, trading, or available-for-sale. Unrealized holding gains and losses on trading type investment securities will be recorded in account 551, Miscellaneous income charges. Unrealized holding gains and losses on available-for-sale type investment securities will be recorded in account 799.1, Other comprehensive income. * * * * * ■ 6. Amend Income Accounts— Ordinary Items by adding a sentence at the end of the list of inclusions for account 551 ‘‘Miscellaneous income charges,’’ paragraph (a) to read as follows: PO 00000 Frm 00038 Fmt 4702 Sfmt 4702 INCOME ACCOUNTS Ordinary Items * * * * * 551 Miscellaneous income charges. (a) * * * Unrealized holding gains and losses on trading type investment securities. * * * * * ■ 7. Amend General Balance Sheet Accounts Explanations—Assets, Current Assets by: ■ a. Adding a sentence to the end of the first paragraph in account 702 ‘‘Temporary cash investment’’; ■ b. Adding accounts 713.5 ‘‘Derivative instrument assets’’ and 713.6 ‘‘Derivative instrument assets–hedges.’’ The additions read as follows: GENERAL BALANCE SHEET ACCOUNTS EXPLANATIONS Assets Current Assets * * * * * 702 Temporary cash investments. * * * This account shall also include unrealized holding gains and losses on trading and available-for-sale types of security investments. * * * * * 713.5 Derivative instrument assets. This account shall include the amounts paid for derivative instruments, and the change in the fair value of all derivative instrument assets not designated as cash-flow or fair-value hedges. Account 551, Miscellaneous income charges, will be charged with the corresponding amount of the change in the fair value of the derivative instrument. 713.6 Derivative instrument assets– hedges. (a) This account shall include the amounts paid for derivative instruments, and the change in the fair value of derivative instrument assets designated by the utility as cash-flow or fair-value hedges. (b) When a carrier designates a derivative instrument asset as a cashflow hedge, it will record the change in the fair value of the derivative instrument in this account with a concurrent charge to account 799.1, Other comprehensive income, with the effective portion of the derivative’s gain or loss. The ineffective portion of the cash-flow hedge will be charged to the same income or expense account that would have been used if the hedged item had been disposed of or otherwise settled. E:\FR\FM\08JYP1.SGM 08JYP1 39028 Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules (c) When a carrier designates a derivative instrument as a fair-value hedge, it will record the change in the fair value of the derivative instrument in this account with a concurrent charge to a sub-account of the asset or liability that carries the item being hedged. The ineffective portion of the fair-value hedge will be charged to the same income or expense account that would have been used if the hedged item had been disposed of or otherwise settled. * * * * * ■ 8. Amend General Balance Sheet Accounts Explanations—Assets, Special Funds by: ■ a. In account 715 ‘‘Sinking funds,’’ adding two sentences to the end of paragraph (b); ■ b. In account 716 ‘‘Capital funds,’’ adding a sentence to the end of paragraph (a); and ■ c. In account 717 ‘‘Other funds,’’ adding Note E. The additions read as follows: The addition reads as follows: GENERAL BALANCE SHEET ACCOUNTS EXPLANATIONS Assets Investments * * * * * 722 Other investments and advances. (a) * * * This account shall also include unrealized holding gains and losses on trading and available-for-sale types of security investments. Include also the offsetting entry to the recording of amortization of discount or premium on interest bearing investments. * * * * * ■ 10. Amend General Balance Sheet Accounts Explanations—Liabilities and Shareholders’ Equity, Current Liabilities by adding accounts 763.5 ‘‘Derivative instrument liabilities’’ and 763.6 ‘‘Derivative instrument liabilities– hedges’’,to read as follows: GENERAL BALANCE SHEET ACCOUNTS EXPLANATIONS GENERAL BALANCE SHEET ACCOUNTS EXPLANATIONS Assets Liabilities and Shareholders’ Equity Special Funds Current Liabilities 715 * Sinking funds. * * * * * * * * * (b) * * * This account shall also include unrealized holding gains and losses on trading and available-for-sale types of security investments. The cash value of life insurance policies on the lives of employees and officers to the extent that the carrier is the beneficiary of such policies shall also be included in this account. * * * * * 763.5 716 (a) This account shall include the change in the fair value of derivative instrument liabilities designated by the carrier as cash-flow or fair-value hedges. (b) A carrier will record the change in the fair value of a derivative instrument liability related to a cash-flow hedge in this account, with a concurrent charge to account 799.1, Other comprehensive income, with the effective portion of the derivative instrument’s gain or loss. The ineffective portion of the cash-flow hedge will be charged to the same income or expense account that would have been used if the hedged item had been disposed of or otherwise settled. (c) A carrier will record the change in the fair value of a derivative instrument liability related to a fair-value hedge in this account, with a concurrent charge to a sub-account of the asset or liability that carries the item being hedged. The Capital funds. (a) * * * This account shall also include unrealized holding gains and losses on trading and available-for-sale types of security investments. * * * * * 717 Other funds. * * * * * This account shall also include unrealized holding gains and losses on trading and available-for-sale types of security investments. ■ 9. Amend General Balance Sheet Accounts Explanations—Assets, Investments by: ■ a. In account 722 ‘‘Other investments and advances,’’ adding two sentences to the end of paragraph (a); and ■ b. Removing account 724 ‘‘Allowance for net unrealized loss on noncurrent marketable equity securities—Cr.’’ srobinson on DSK5SPTVN1PROD with PROPOSALS NOTE E: VerDate Sep<11>2014 15:15 Jul 07, 2015 Jkt 235001 Derivative instrument liabilities. This account shall include the change in the fair value of all derivative instrument liabilities not designated as cash-flow or fair-value hedges. Account 551, Miscellaneous income charges, will be charged with the corresponding amount of the change in the fair value of the derivative instrument. 763.6 Derivative instrument liabilities– hedges. PO 00000 Frm 00039 Fmt 4702 Sfmt 4702 ineffective portion of the fair-value hedge will be charged to the same income or expense account that would have been used if the hedged item had been disposed of or otherwise settled. * * * * * ■ 11. Amend General Balance Sheet Accounts Explanations—Liabilities and Shareholders’ Equity, Shareholders’ Equity by: ■ a. Removing account 798.1 ‘‘Net unrealized loss on noncurrent marketable securities’’; and ■ b. Adding account 799 ‘‘Accumulated Other Comprehensive Income.’’ The addition reads as follows: GENERAL BALANCE SHEET ACCOUNTS EXPLANATIONS Liabilities and Shareholders’ Equity Shareholders’ Equity * * * * * 799 Accumulated Other Comprehensive Income. (a) This account shall include revenues, expenses, gains, and losses that are properly includable in Other Comprehensive Income during the period. Examples of items of Other Comprehensive Income include foreign currency items, minimum pension liability adjustments, unrealized gains and losses on certain investments in debt and equity securities, and cashflow hedges. Records supporting the entries to this account shall be maintained so that the carrier can furnish the amount of Other Comprehensive Income for each item included in this account. (b) This account shall also be debited or credited, as appropriate, with amounts of accumulated Other Comprehensive Income that have been included in the determination of net income during the period and in accumulated Other Comprehensive Income in prior periods. Separate records for each category of items will be maintained to identify the amount of the reclassification adjustments from accumulated Other Comprehensive Income to earnings made during the period. ■ 12. Revise the Form of General Balance Sheet Statement, Assets to read as follows: Form of General Balance Sheet Statement The classified form of general balance sheet statement is designed to show the financial condition of the accounting company at any specified date. E:\FR\FM\08JYP1.SGM 08JYP1 Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules ASSETS srobinson on DSK5SPTVN1PROD with PROPOSALS Current assets: 701. Cash. 702. Temporary cash investments. 703. Special deposits. 704. Loans and notes receivable. 705. Accounts receivable; Interline and other balances. 706. Accounts receivable; Customers. 707. Accounts receivable; Other. 708. Interest and dividends receivable. 708.5. Receivables from affiliated companies. 709. Accrued accounts receivable. 709.5. Allowance for uncollectible accounts. Net receivables. 710. Working funds. 711. Prepayments. 712. Material and supplies. 713. Other current assets. 713.5 Derivative instrument assets 713.6 Derivative instrument assets—hedges 714. Deferred income tax debits. Total current assets. Special funds: 715. Sinking funds. 716. Capital funds. 717. Other funds. Total special funds. Investments: 721. Investments and advances; affiliated companies. Undistributed earnings from certain investments in account 751. 721.5. Adjustments; investments and advances— affiliated companies. Net—investments and advances—affiliated companies. 722. Other investments and advances. 723. Adjustments; Other investments and advances. Net—other investments and advances. Total investments. Tangible property: 731. Road and equipment property. 735. Accumulated depreciation; Road and equipment property. 736. Accumulated amortization; Road and equipment property—Defense projects. Net road and equipment property. 732. Improvements on leased property. 733. Accumulated depreciation; Improvements on leased property. 734. Accumulated amortization; Improvements on leased property—Defense projects. Net improvements on leased property. Total carrier property. 737. Property used in other than carrier operations. 738. Accumulated depreciation; Property used in other than carrier operations. Net—property used in other than carrier operations. Total tangible property. Intangible property: 739. Organization expenses. Other assets and deferred debits: 741. Other assets. 743. Other deferred debits. 744. Accumulated deferred income tax debits. Total other assets and deferred debits. Total assets. LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: 751. Loans and notes payable. VerDate Sep<11>2014 15:15 Jul 07, 2015 Jkt 235001 PO 00000 Frm 00040 Fmt 4702 Sfmt 4702 E:\FR\FM\08JYP1.SGM 08JYP1 39029 39030 Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules ASSETS—Continued 752. Accounts payable; Interline and other balances. 753. Audited accounts and wages payable. 754. Accounts payable; Other. 755. Interest payable. 756. Dividends payable. 757. Payables to affiliated companies. 759. Accrued accounts payable. 760. Federal income taxes accrued. 761. State and other income taxes accrued. 761.5. Other taxes accrued. 762. Deferred income tax credits. 763. Other current liabilities. 763.5 Derivative instrument liabilities 763.6 Derivative instrument liabilities-hedges 764. Equipment obligations and other long-term debt due within one year. Total current liabilities. Long-term debt due after one year: 1 765. Funded debt unmatured. 766. Equipment obligations. 766.5. Capitalized lease obligations. 767. Receivers’ and trustees’ securities. 768. Debt in default. 769. Accounts payable; Affiliated companies. 770.1 Unamortized debt discount. 770.2 Unamortized premium on debt. Total long-term debt due after one year. Other long-term liabilities: 771. Accrued liability; Pension and welfare. 772. Accrued liability; Leased property. 774. Accrued liability; Casualty and other claims. 775. Other accrued liabilities. 781. Interest in default. 782. Other liabilities. Total other long-term liabilities. Deferred credits: 783. Deferred revenues—transfers from government authorities. 784. Other deferred credits. 786. Accumulated deferred income tax credits. Total deferred credits. Shareholders’ equity: Capital stock: 791. Capital stock. 792. Liability for conversion of capital stock. 793. Discount on capital stock. Total capital stock. Additional capital: 794. Premiums and assessments on capital stock. 795. Other capital. Total additional capital. Retained earnings: 797. Retained earnings; Appropriated. 798. Retained earnings; Unappropriated. Total retained earnings. 798.5 Treasury stock. 799. Accumulated Other Comprehensive Income Total shareholders’ equity. Total liabilities and shareholders’ equity. srobinson on DSK5SPTVN1PROD with PROPOSALS 1To be divided as to ‘‘Total issued’’ and ‘‘Held by or for company.’’ 13. Amend Conversion Tables by revising General Balance Sheet ■ VerDate Sep<11>2014 15:15 Jul 07, 2015 Jkt 235001 Accounts conversion table to read as follows: PO 00000 Frm 00041 Fmt 4702 Sfmt 4702 CONVERSION TABLES * E:\FR\FM\08JYP1.SGM * 08JYP1 * * * Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules 39031 GENERAL BALANCE SHEET ACCOUNTS CONVERSION TABLE System of accounts eff. prior to Month XX, 2015 Account title System of accounts eff. Month, XX, 2015 No. No. Account title Cash ............................................................................. Temporary cash investments ....................................... Special deposits ........................................................... Loans and notes receivable ......................................... 701 702 703 704 Traffic, car service and other balances—dr ................. 705 Net balance receivable from agents and conductors .. Miscellaneous accounts receivable .............................. 706 707 Interest and dividends receivable ................................. 708 Accrued accounts receivable ....................................... Working fund advances ................................................ Prepayments ................................................................. Material and supplies ................................................... Other current assets ..................................................... 709 710 711 712 713 Deferred income tax charges ....................................... Sinking funds ................................................................ Capital and other reserve funds ................................... Insurance and other funds ........................................... Investment in affiliated companies ............................... Other investments ........................................................ Reserve for adjustment of investment in securities—cr 714 715 716 717 721 722 723 701 702 703 704 708.5 709.5 705 709.5 752 706 707 708.5 709.5 708 708.5 709.5 709 710 711 712 713 713.5 713.6 714 715 716 717 721 722 721.5 737 738 737 738 741 770.1 743 744 741 770.1 743 744 Cash. Temporary cash investments. Special deposits. Loans and notes receivable. Receivables from affiliated companies. Allowance for uncollectible accounts. Accounts receivable; interline and other balances. Allowances for uncollectible accounts. Accounts payable; interline and other balances. Accounts receivable; customers. Accounts receivable; other. Receivables from affiliated companies. Allowance for uncollectible accounts. Interest and dividends receivable. Receivables from affiliated companies. Allowance for uncollectible accounts. Accrued accounts receivable. Working funds. Prepayments. Material and supplies. Other current assets. Derivative instrument assets Derivative instrument assets—hedges Deferred income tax debits. Sinking funds. Capital funds. Other funds. Investments and advances; affiliated companies. Other investments and advances. Adjustments; investments and advances—affiliated companies. Adjustments; other investments and advances. Road and equipment property. Organization expenses. Improvements on leased property. Accumulated depreciation; improvements on leased property. Accumulated depreciation; road and equipment property. Accumulated amortization; road and equipment property—defense projects. Accumulated amortization; improvements on leased property—defense projects. Property used in other than carrier operations. Accumulated depreciation; property used in other than carrier operations. Other assets. Unamortized debt discount. Other deferred debits. Accumulated deferred income tax debits. Road and equipment property ...................................... Organization expenses ................................................. Improvements on leased property ................................ Accrued depreciation; improvements on leased property. Accrued depreciation; road and equipment ................. 731 71 732 733 723 731 739 732 733 735 735 Amortization of defense projects; road and equipment 736 736 751 757 752 705 709.5 753 754 757 755 757 756 757 755 757 756 757 759 Loans and notes payable. Payables to affiliated companies. Accounts payable; interline and other balances. Accounts receivable; interline and other balances. Allowance for uncollectible accounts. Audited accounts and wages payable. Accounts payable; other. Payables to affiliated companies. Interest payable. Payables to affiliated companies. Dividends payable. Payables to affiliated companies. Interest payable. Payables to affiliated companies. Dividends payable. Payables to affiliated companies. Accrued accounts payable. 734 Miscellaneous physical property .................................. Accrued depreciation; miscellaneous physical property. Other assets ................................................................. Unamortized discount on long-term debt ..................... Other deferred charges ................................................ Accumulated deferred income tax charges .................. Liabilities 751 Traffic, car service and other balances—cr ................. 752 Audited accounts and wages payable ......................... Miscellaneous accounts payable .................................. srobinson on DSK5SPTVN1PROD with PROPOSALS Loans and notes payable ............................................. 753 754 Interest matured unpaid ............................................... 755 Dividends matured unpaid ............................................ 756 Unmatured interest accrued ......................................... 757 Unmatured dividends declared ..................................... 758 Accrued accounts payable ........................................... 759 VerDate Sep<11>2014 19:43 Jul 07, 2015 Jkt 235001 PO 00000 Frm 00042 Fmt 4702 Sfmt 4702 E:\FR\FM\08JYP1.SGM 08JYP1 39032 Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules GENERAL BALANCE SHEET ACCOUNTS CONVERSION TABLE—Continued System of accounts eff. prior to Month XX, 2015 System of accounts eff. Month, XX, 2015 Account title No. No. Federal income taxes accrued ..................................... Other taxes accrued ..................................................... 760 761 Deferred income tax credits ......................................... Other current liabilities .................................................. 762 763 Equipment obligations and other debt due within one year. Funded debt unmatured ............................................... Equipment obligations .................................................. Capitalized lease obligations ........................................ Receivers’ and trustees’ securities ............................... Debt in default .............................................................. Amounts payable to affiliated companies .................... Pension and welfare reserves ...................................... Casualty and other reserves ........................................ 764 Account title 760 711 761 761.5 762 763 763.5 763.6 764 765 766 766.5 767 768 769 771 774 781 782 783 790.2 784 785 786 Interest in default .......................................................... Other liabilities .............................................................. Deferred revenues—transfers from government authorities. Unamortized premium on long-term debt .................... Other deferred credits .................................................. Accrued liability; leased property ................................. Accumulated deferred income tax credits .................... 765 766 766.5 767 768 769 771 774 775 781 782 783 770.2 784 772 786 Federal income taxes accrued. Prepayments. State and other income taxes accrued. Other taxes accrued. Deferred income tax credits. Other current liabilities. Derivative instrument liabilities Derivative instrument liabilities—hedges Equipment obligations and other long-term debt due within 1 year. Funded debt unmatured. Equipment obligations. Capitalized lease obligations. Receivers’ and trustees’ securities. Debt in default. Accounts payable; affiliated companies. Accrued liability; pension and welfare. Accrued liability; casualty and other claims. Other accrued liabilities. Interest in default. Other liabilities. Deferred revenues—transfers from government authorities Unamortized premium on debt. Other deferred credits. Accrued liability; leased property. Accumulated deferred income tax credits. Shareholders’ Equity Capital stock issued ..................................................... Stock liability for conversion ......................................... Discount on capital stock ............................................. Premiums and assessment on capital stock ................ Paid-in surplus .............................................................. Other capital surplus .................................................... Retained income; appropriated .................................... Retained income; unappropriated ................................ Treasury stock .............................................................. srobinson on DSK5SPTVN1PROD with PROPOSALS Note: The following appendices will not appear in the Code of Federal Regulations. VerDate Sep<11>2014 19:43 Jul 07, 2015 Jkt 235001 791 792 793 794 795 796 797 798 798.5 791 792 793 794 795 795 797 798 798.5 799 Capital stock. Liability for conversion of capital stock. Discount on capital stock. Premiums and assessments on capital stock. Other capital. Do. Retained earnings; appropriated. Retained earnings; unappropriated. Treasury stock. Accumulated Other Comprehensive Income. Appendix A BILLING CODE 4915–01–P PO 00000 Frm 00043 Fmt 4702 Sfmt 4702 E:\FR\FM\08JYP1.SGM 08JYP1 EP08JY15.001</GPH> 39033 VerDate Sep<11>2014 15:15 Jul 07, 2015 Jkt 235001 PO 00000 Frm 00044 Fmt 4702 Sfmt 4725 E:\FR\FM\08JYP1.SGM 08JYP1 EP08JY15.000</GPH> srobinson on DSK5SPTVN1PROD with PROPOSALS Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules EP08JY15.003</GPH> Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules VerDate Sep<11>2014 15:15 Jul 07, 2015 Jkt 235001 PO 00000 Frm 00045 Fmt 4702 Sfmt 4725 E:\FR\FM\08JYP1.SGM 08JYP1 EP08JY15.002</GPH> srobinson on DSK5SPTVN1PROD with PROPOSALS 39034 EP08JY15.005</GPH> 39035 VerDate Sep<11>2014 15:15 Jul 07, 2015 Jkt 235001 PO 00000 Frm 00046 Fmt 4702 Sfmt 4725 E:\FR\FM\08JYP1.SGM 08JYP1 EP08JY15.004</GPH> srobinson on DSK5SPTVN1PROD with PROPOSALS Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules 39036 Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules !I 2110. COM PARAliVE STATeMENT OF FINANCIAl POS!liON I!XI'lANATORV NOTeS -ContlnU<Id VerDate Sep<11>2014 15:15 Jul 07, 2015 Jkt 235001 PO 00000 Frm 00047 Fmt 4702 Sfmt 4725 E:\FR\FM\08JYP1.SGM 08JYP1 EP08JY15.006</GPH> srobinson on DSK5SPTVN1PROD with PROPOSALS NOTES TO FINANCIAL STATeMENTS Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules 39037 ZOO. COMPARAllVE STATEMENT Of fiNANCIAl POSITION· EXPLANATORY NOTES ·Coolinood EP08JY15.008</GPH> VerDate Sep<11>2014 15:15 Jul 07, 2015 Jkt 235001 PO 00000 Frm 00048 Fmt 4702 Sfmt 4725 E:\FR\FM\08JYP1.SGM 08JYP1 EP08JY15.007</GPH> srobinson on DSK5SPTVN1PROD with PROPOSALS NOTES TO FINANCIAL STATEMENTS 39038 Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules 11 Year: 200. COM PARA llVE STA llEIIIENT Of fiNANCIAl POSillON ·EXPLANATORY NOTES· ConllnU<I<em EP08JY15.010</GPH> VerDate Sep<11>2014 15:15 Jul 07, 2015 Jkt 235001 PO 00000 Frm 00049 Fmt 4702 Sfmt 4725 E:\FR\FM\08JYP1.SGM 08JYP1 EP08JY15.009</GPH> srobinson on DSK5SPTVN1PROD with PROPOSALS NOllES TO FINANCIAL STATEMENTS Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules 39039 Road 13 lnl!lals: 200. COM PARA 11\IE STAllEMENT OF FINANCIAL POSillON ·EXPLANATORY NOTES· CoodnU!Id EP08JY15.012</GPH> VerDate Sep<11>2014 15:15 Jul 07, 2015 Jkt 235001 PO 00000 Frm 00050 Fmt 4702 Sfmt 4725 E:\FR\FM\08JYP1.SGM 08JYP1 EP08JY15.011</GPH> srobinson on DSK5SPTVN1PROD with PROPOSALS NOllE! TO FINANCIAL STATEMENTS 39040 Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules l'li!llroaa Annual EP08JY15.014</GPH> VerDate Sep<11>2014 15:15 Jul 07, 2015 Jkt 235001 PO 00000 Frm 00051 Fmt 4702 Sfmt 4725 E:\FR\FM\08JYP1.SGM 08JYP1 EP08JY15.013</GPH> srobinson on DSK5SPTVN1PROD with PROPOSALS NOTES TO FINANCIAl STATEMENTS Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules 39041 EP08JY15.016</GPH> VerDate Sep<11>2014 15:15 Jul 07, 2015 Jkt 235001 PO 00000 Frm 00052 Fmt 4702 Sfmt 4725 E:\FR\FM\08JYP1.SGM 08JYP1 EP08JY15.015</GPH> srobinson on DSK5SPTVN1PROD with PROPOSALS NOTI!!S TO FINANCIAL STATI!MI!IITS EP08JY15.018</GPH> Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules VerDate Sep<11>2014 15:15 Jul 07, 2015 Jkt 235001 PO 00000 Frm 00053 Fmt 4702 Sfmt 4725 E:\FR\FM\08JYP1.SGM 08JYP1 EP08JY15.017</GPH> srobinson on DSK5SPTVN1PROD with PROPOSALS 39042 EP08JY15.020</GPH> 39043 VerDate Sep<11>2014 15:15 Jul 07, 2015 Jkt 235001 PO 00000 Frm 00054 Fmt 4702 Sfmt 4725 E:\FR\FM\08JYP1.SGM 08JYP1 EP08JY15.019</GPH> srobinson on DSK5SPTVN1PROD with PROPOSALS Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules EP08JY15.022</GPH> Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules VerDate Sep<11>2014 15:15 Jul 07, 2015 Jkt 235001 PO 00000 Frm 00055 Fmt 4702 Sfmt 4725 E:\FR\FM\08JYP1.SGM 08JYP1 EP08JY15.021</GPH> srobinson on DSK5SPTVN1PROD with PROPOSALS 39044 Federal Register / Vol. 80, No. 130 / Wednesday, July 8, 2015 / Proposed Rules Information Collection Title: Class I Railroad Annual Report OMB Control Number: 2140–0009. Form Number: R1. Type of Review: Revision of a currently approved collection. Respondents: Class I railroads. Number of Respondents: 7. Estimated Time per Response: The railroads currently spend no more than 800 hours preparing this report, including time spent reviewing instructions; searching existing data sources; gathering and maintaining the data needed; completing and reviewing the collection of information; and converting the data from the carrier’s individual accounting system to the Board’s Uniform System of Accounts (USOA), which ensures that the information will be presented in a consistent format across all reporting railroads, see 49 U.S.C. 11141–43, 11161–64, 49 CFR parts 1200 and 1201. The proposed modifications would not increase the hourly burden. Frequency of Response: Annual. Total Annual Hour Burden: No more than 5,600 hours. Total Annual ‘‘Non-Hour Burden’’ Cost: Respondents are currently required to submit a signed hard copy of this report. We estimate a total annual cost for all respondents of $28. The proposed modifications would not increase the cost burden. Needs and Uses: Annual reports are required to be filed by Class I railroads under 49 U.S.C. 11145. The reports show operating expenses and operating statistics of the carriers. Operating expenses include costs for right-of-way and structures, equipment, train and yard operations, and general and administrative expenses. Operating statistics include such items as car-miles, revenue-tonmiles, and gross ton-miles. The reports are used by the Board, other Federal agencies, and industry groups to monitor and assess railroad industry growth, financial stability, traffic, and operations, and to identify industry changes that may affect national transportation policy. Information from this report is also entered into the Board’s Uniform Rail Costing System (URCS), which is a cost measurement methodology. URCS, which was developed by the Board pursuant to 49 U.S.C. 11161, is used as a tool in rail rate proceedings, in accordance with 49 U.S.C. 10707(d), to calculate the variable costs associated with providing a particular VerDate Sep<11>2014 15:15 Jul 07, 2015 Jkt 235001 service. The Board also uses this information to more effectively carry out other of its regulatory responsibilities, including: acting on railroad requests for authority to engage in Board-regulated financial transactions such as mergers, acquisitions of control, and consolidations, see 49 U.S.C. 11323–11324; analyzing the information that the Board obtains through the annual railroad industry waybill sample, see 49 CFR part 1244; measuring off-branch costs in railroad abandonment proceedings, in accordance with 49 CFR 1152.32(n); developing the ‘‘rail cost adjustment factors,’’ in accordance with 49 U.S.C. 10708; and conducting investigations and rulemakings. Information from certain schedules contained in these reports is compiled and published on the Board’s Web site, http:// www.stb.dot.gov. Information in these reports is not available from any other source. [FR Doc. 2015–15402 Filed 7–7–15; 8:45 am] BILLING CODE 4915–01–C DEPARTMENT OF TRANSPORTATION Surface Transportation Board 49 CFR Parts 1241, 1242, 1243, 1244, 1245, 1246, 1247, and 1248 [Docket No. EP 701] Accelerating Reporting Requirements for Class I Railroads Surface Transportation Board. Notice of proposed rulemaking. AGENCY: ACTION: The Surface Transportation Board (Board or STB) proposes to revise its regulations to accelerate the filing deadlines for eight reports submitted by Class I railroads: Schedule 250 (required under the Annual Report Form R–1); Quarterly Condensed Balance Sheet Forms (CBS); Quarterly Revenue, Expenses, and Income Reports (RE&I); Quarterly and Annual Wage Forms A&B; Quarterly Reports of Fuel Cost, Consumption, and Surcharge Revenue; Quarterly and Annual Freight Commodity Statistics Report Forms (QCS); Annual Report of Cars Loaded and Terminated (Form STB–54); and Monthly Report of Number of Employees (Form C). SUMMARY: PO 00000 Frm 00056 Fmt 4702 Sfmt 4702 Comments on this proposed rulemaking are due on or before August 7, 2015; reply comments are due by September 8, 2015. ADDRESSES: Comments may be submitted either via the Board’s e-filing format or in the traditional paper format. Any person using e-filing should attach a document and otherwise comply with the instructions at the EFILING link on the Board’s Web site, at http://www.stb.dot.gov. Any person submitting a filing in the traditional paper format should send an original and 10 copies to: Surface Transportation Board, Attn: Docket No. EP 701, 395 E Street SW., Washington, DC 20423– 0001. Copies of written comments received by the Board will be posted to the Board’s Web site at http:// www.stb.dot.gov and will be available for viewing and self-copying in the Board’s Public Docket Room, Suite 131, 395 E Street SW., Washington, DC. Copies of the comments will also be available (for a fee) by contacting the Board’s Chief Records Officer at (202) 245–0238 or 395 E Street SW., Washington, DC 20423–0001. FOR FURTHER INFORMATION CONTACT: Pedro Ramirez, (202) 245–0333. Assistance for the hearing impaired is available through Federal Information Relay Service (FIRS) at (800) 877–8339. SUPPLEMENTARY INFORMATION: The Board has authority to collect financial and statistical data from Class I railroads as necessary for the economic oversight of the industry. 49 U.S.C. 721(b), 11145. To this end, the Board’s regulations require Class I railroads to submit annual, quarterly, and monthly reports containing financial and operating statistics, including employment and traffic data. 49 U.S.C. 11145; 49 CFR parts 1241 through 1248. The data collected is used by the Board in various decisions as well as by other governmental agencies and interested parties in evaluating the railroad industry. The proposed changes to filing deadlines would further facilitate the DATES: E:\FR\FM\08JYP1.SGM 08JYP1 EP08JY15.023</GPH> srobinson on DSK5SPTVN1PROD with PROPOSALS Appendix B 39045

Agencies

[Federal Register Volume 80, Number 130 (Wednesday, July 8, 2015)]
[Proposed Rules]
[Pages 39021-39045]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-15402]


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DEPARTMENT OF TRANSPORTATION

Surface Transportation Board

49 CFR Part 1201

[Docket No. EP 720]


Accounting and Reporting of Business Combinations, Security 
Investments, Comprehensive Income, Derivative Instruments, and Hedging 
Activities

AGENCY: Surface Transportation Board, DOT.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Surface Transportation Board proposes to revise its 
regulations to update the accounting and reporting requirements under 
its Uniform System of Accounts (USOA) for Class I Railroads to be more 
consistent with current generally accepted accounting principles (GAAP) 
and revise the schedules and instructions for the Annual Report for 
Class I Railroads (R-1 or Form R-1) to better meet regulatory 
requirements and industry needs. The intent of the proposed revisions 
is to promote sound and uniform accounting and financial reporting for 
the types of transactions and events described herein.

DATES: Comments on this proposed rulemaking are due on or before August 
7, 2015; reply comments are due by September 8, 2015.

ADDRESSES: Any filings submitted in this proceeding must be submitted 
either via the Board's e-filing format or in the traditional paper 
format. Any person using e-filing should attach a document and 
otherwise comply with the instructions found at the E-FILING link on 
the Board's Web site at www.stb.dot.gov. Any person submitting a filing 
in the traditional paper format should send an original and 10 copies 
and also an electronic version to: Surface Transportation Board, Attn: 
Docket No. EP 720, 395 E Street SW., Washington, DC 20423-0001.

FOR FURTHER INFORMATION CONTACT: Pedro Ramirez at (202) 245-0333. 
Assistance for the hearing impaired is available through the Federal 
Information Relay Services (FIRS) at 1-800-877-8339.

SUPPLEMENTARY INFORMATION: 

Introduction

    In this notice of proposed rulemaking (NPR), the Surface 
Transportation Board (Board) proposes to amend its USOA and Form R-
1.\1\ The Board proposes to add new general instructions and accounts 
to recognize changes in the fair value of certain security investments, 
items of other comprehensive income, derivative instruments, and 
hedging activities. Additionally, the Board proposes to revise the USOA 
to reflect current accounting practices for business combinations by 
removing existing instructions for the pooling-of-interest method of 
accounting. The Board also seeks to revise Form R-1 to include the new 
accounts and the new reporting schedule proposed by this rulemaking.
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    \1\ The Board has broad economic regulatory oversight of 
railroads, addressing such matters as rates, service, construction, 
acquisition and abandonment of rail lines, carrier mergers, and 
interchange of traffic among carriers (49 U.S.C. 10101-11908). The 
Board monitors the financial condition of railroads as part of its 
oversight of the rail industry. The Board prescribes a uniform 
accounting system for railroads to use for regulatory purposes. 49 
U.S.C. 11141-43, 11161-64; 49 CFR parts 1200 and 1201. In addition, 
the Board requires Class I railroads to submit quarterly and annual 
reports containing financial and operating statistics, including 
employment and traffic data (49 U.S.C. 11145; 49 CFR parts 1241 
through 1246 and 1248).
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    The Board also solicits comments on the proposed elimination of 
certain schedules currently contained in Form R-1 that are not used for 
any regulatory or other purposes by the Board. As there may be other 
governmental agencies or interested parties that rely on the 
information in some of these schedules, we are requesting comments 
concerning their elimination.
    The purpose of the proposed revisions is to provide sound and 
uniform accounting and financial reporting for certain types of 
transactions and events. The Board believes that such requirements are 
needed because these types of transactions and events are neither 
specifically nor correctly addressed in the existing USOA. The new 
instructions, accounts, and reporting schedule would result in 
improved, consistent, and complete accounting and reporting.

Background

A. General

    The Interstate Commerce Act, as amended by the ICC Termination Act 
of 1995 (ICCTA), Public Law 104-88, 109 Stat. 803, authorizes the 
Board, in 49 U.S.C. 11142, to prescribe a uniform accounting system for 
rail carriers subject to our jurisdiction and, in 49 U.S.C. 11161, to 
maintain cost accounting rules for rail carriers. Sections 11142 and 
11161 both require the Board to conform its accounting rules to GAAP 
``[t]o the maximum extent practicable.''
    In keeping with this requirement, we propose updates to the USOA to 
provide for: (1) Fair value presentation of certain security 
investments, derivative instruments and hedging activities; (2) 
presentation of comprehensive income and components of other 
comprehensive income; and (3) accounting for business combinations. The 
proposed revisions are based on the generally accepted accounting 
principles promulgated by the FASB in the following Accounting 
Standards Codifications (ASC): ASC 320 Investments--Debt and Equity 
Securities; ASC 220 Comprehensive Income; ASC 815 Derivatives and 
Hedging; and ASC 805 Business Combinations.\1\
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    \1\ These accounting pronouncements are available at https://asc.fasb.org.

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[[Page 39022]]

    The Board considers the requirements in ASC 320, 220, 815, and 805 
to be an improvement in financial accounting and reporting practices. 
The Board also considers it important that its accounting requirements 
are consistent with the industry's general purpose financial reporting 
requirements. Therefore, the Board proposes to implement the principles 
and concepts set forth in ASC 320, 220, 815, and 805 for railroad 
accounting and reporting purposes effective upon issuance of a final 
rule in this proceeding. The Board believes that the proposed 
accounting and reporting changes would provide consistent accounting 
and reporting of changes in the fair value of security investments, 
derivative instruments, and hedging activities. The proposed changes 
would also minimize the accounting and reporting burden on railroads 
under the Board's jurisdiction, assist the Board in its overall 
monitoring effort, and improve transparency.
    To provide context for the Board's proposed changes, the key 
aspects of the relevant FASB pronouncements are discussed in sections B 
through E of this Background.

B. Investments in Debt and Equity Securities (ASC 320)

    ASC 320 establishes standards of financial accounting and reporting 
for investments in equity securities that have readily determinable 
fair values and for all investments in debt securities. Fair value of 
an equity security is readily determinable if sales prices and bid-and-
asked quotations are currently available on a securities exchange 
registered with the U.S. Securities and Exchange Commission, or 
publicly reported in the over-the-counter market.
    ASC 320 requires entities to classify all debt securities and 
selected equity securities into one of three categories: (1) Trading 
securities; (2) available-for-sale securities; or (3) held-to-maturity 
securities. Classification of the securities is based primarily on 
management's intent for holding a particular investment.
    Trading securities. Trading securities are debt and equity 
securities that are bought and held principally for the purpose of 
selling them in the near term, usually less than one year. These 
securities are held for short periods of time with the objective of 
generating profits from short-term differences in price.
    Available-for-sale securities. Available-for-sale securities are 
investments in debt and equity securities that have readily 
determinable fair values not classified as trading securities or held-
to-maturity securities.
    Held-to-maturity securities. Held-to-maturity securities are debt 
securities that the entity has the positive intent and ability to hold 
to maturity. For debt securities held to maturity, amortized cost is a 
more relevant measure than fair value because that cost will be 
realized, absent default. Therefore, changes in the fair value of 
securities held to maturity are not recognized during the period the 
entity holds the security investment. ASC 320 states that a debt 
security that is available to be sold in response to changes in market 
interest rates, changes in the security's prepayment risk, the 
enterprise's need for liquidity, changes in foreign exchange risks, or 
other similar factors should not be included in the held-to-maturity 
category because the possibility of a sale indicates that the 
enterprise does not have a positive intent and ability to hold the 
security to maturity. However, under certain circumstances, a company 
may change its intent concerning securities originally classified as 
held-to-maturity, resulting in the securities' sale or reclassification 
without calling into question the company's intent to hold other 
securities to maturity.

C. Comprehensive Income (ASC 220)

    The purpose of comprehensive income is to measure all changes in an 
entity's equity that result from recognized transactions and other 
economic events of a period other than those transactions resulting 
from investment by owners and distributions to owners. When paired with 
disclosure notes and other information in the financial statements, the 
reporting of comprehensive income is intended to help investors, 
creditors, and others assess an entity's activities and future cash 
flows.
    Under GAAP, comprehensive income is comprised of traditional net 
income and all components of other comprehensive income. ``Other 
comprehensive income'' includes revenues, expenses, gains and losses 
that are included in comprehensive income but not in net income. This 
includes foreign currency translation adjustments, unrealized holding 
gains and losses on available-for-sale securities, changes in pension 
or other post-retirement benefits, and changes in the fair value of 
derivative financial instruments classified as cash-flow hedges.
    GAAP requires financial statements to present comprehensive income 
in two parts: (1) Net income and its components (such as income from 
continuing operations, discontinued operations, and extraordinary 
items); and (2) Other Comprehensive Income and its components.
    Reclassifications of items from accumulated Other Comprehensive 
Income to net income must be measured and presented by income statement 
line item in both the statement where net income is presented and the 
statement where Other Comprehensive Income is presented. This 
accounting standard applies only to entities with items of Other 
Comprehensive Income. Entities without Other Comprehensive Income items 
are exempt from providing a statement of comprehensive income and 
instead should report only net income in the statement displaying the 
results of operations.

D. Derivatives and Hedging (ASC 815)

    A derivative instrument is a security whose price is dependent upon 
or derived from one or more underlying assets. Derivative instruments 
represent rights or obligations that meet the definition of an asset or 
liability and should be reported in financial statements. For 
accounting purposes, a derivative instrument is a financial instrument 
or other contract that has all of the following characteristics:
    1. The instrument has one or more underlyings. An underlying is a 
specified interest rate, security price, commodity price, foreign 
exchange rate, index of prices or rates, or other variable. An 
underlying may be a price or rate of an asset or liability but is not 
the asset or liability itself.
    2. The instrument must have one or more notional amounts or payment 
provisions. A notional amount represents a quantity such as a number of 
currency units, shares, bushels, pounds, or other units specified in a 
derivative instrument. Those terms determine the amount of a contract's 
settlement or settlements, and, in some cases, determine whether or not 
a settlement is required.
    3. The instrument requires either no initial net investment or an 
initial net investment that is smaller than would be required for other 
types of contracts that would be expected to have a similar response to 
changes in market factors.
    4. The instrument requires or permits net settlement, and can 
readily be settled net by a means outside the contract, or provides for 
delivery of an asset that puts the recipient in a position not 
substantially different from net settlement.
    Certain types of contracts are exempted from the requirements of 
ASC 815 to avoid burdening certain industries and markets. For example, 
normal purchases and normal sales

[[Page 39023]]

contracts that provide for the purchase or sale of goods that will be 
delivered in quantities expected to be used or sold by the reporting 
entity over a reasonable period of time and in the normal course of 
business are not considered derivative instruments. This exception is 
commonly referred to as the normal purchases and normal sales scope 
exception. The exception would include typical purchases and sales of 
inventory items, certain insurance contracts, and employee compensation 
agreements. Derivative instruments that do not qualify for the normal 
purchases and normal sales scope exception or other exceptions provided 
for under the statement are reflected in the financial statements. 
Consequently, most futures, forwards, swaps, and option contracts meet 
the definition of a derivative instrument and changes in their fair 
value would be reflected in the financial statements.
    Accounting for a Derivative Instrument. Accounting for changes in 
the fair value of a derivative instrument depends upon its intended use 
and designation. Essentially, for certain derivative instruments not 
designated as hedging instruments, gain or loss is recognized as 
earnings in the period of change. The change in the value of the 
derivative instrument is reflected on the balance sheet as an asset or 
liability with a corresponding amount recognized in earnings. This 
accounting effectively provides users of the financial statements with 
information concerning the value of the derivative instrument as if it 
had been settled in the market place.
    Hedge Accounting. A hedge is an instrument's position intended to 
offset potential losses or gains that may be incurred by a companion 
investment. Entities hedge to manage risk to prices or interest rates 
(among other things). Provided certain criteria are met, a derivative 
may be specifically designated as a fair-value or cash-flow hedge. 
Under the rules for hedge accounting, the changes in the fair value of 
the derivative instrument are measured at fair value with adjustments 
made to the carrying amount of the items being hedged (as in a fair-
value hedge) or to Other Comprehensive Income (as in a cash-flow hedge) 
to the extent the hedge is effective.
    1. Fair-Value Hedge. In a fair-value hedge, a derivative instrument 
is designated as a hedge against exposure to changes in the fair value 
of a recognized asset, liability, or a firm commitment.\2\ The change 
in value of the derivative instrument is recognized in earnings in the 
period of the change together with the offsetting gain or loss on the 
hedged item attributable to the risk. To the extent that a hedge is 
perfectly effective, it will produce the same offsetting amounts in 
earnings so that net income is not impacted by the hedge. However, 
amounts would be reflected in earnings to the extent that the hedge is 
not effective in offsetting the change in value of the item being 
hedged. Additionally, fair-value accounting results in an adjustment of 
the carrying amount of the hedged asset or liability. In the case of a 
fair-value hedge of a firm commitment, a new asset or liability is 
created. As a result of the hedge relationship, the new asset or 
liability ultimately becomes part of the carrying amount of the item 
being hedged.
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    \2\ A firm commitment is an agreement with an unrelated party, 
binding on both parties, that is usually legally enforceable and 
that specifies all significant terms and includes a disincentive for 
nonperformance.
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    2. Cash-Flow Hedge. A cash-flow hedge uses a derivative instrument 
to protect against the risk caused by variable prices or costs, which 
may cause future cash flows to be uncertain. This type of instrument 
protects against an anticipated or forecasted transaction that probably 
will occur in the future but the amount of which has not been fixed.
    In a cash-flow hedge, the effective portion of the derivative 
instrument's gain or loss is initially reported as a component of Other 
Comprehensive Income (outside net income). The ineffective portion of 
the gain or loss is reported in earnings immediately. Amounts in 
accumulated Other Comprehensive Income are reclassified into earnings 
in the same period during which the hedged forecasted item affects 
earnings.
    Documentation of Hedge Relationship. Entities must keep extensive 
documentation of the hedge relationship. An entity that elects to apply 
the special hedge accounting principles is required to document, at the 
inception of the hedge, the risk management objective and strategy for 
undertaking the hedge, including the hedge instrument, the related 
transaction, the nature of the risk being hedged, and how effectiveness 
will be determined.
    A company's documentation of its overall risk management philosophy 
is essential in addressing the role that derivative instruments and 
hedging activities play in achieving the company's risk management 
objectives. Concurrent designation and documentation of a hedge is 
critical because an entity could retroactively identify a transaction 
as a hedge or change a method of measuring effectiveness to achieve a 
desired outcome. At the inception of the hedge, formal documentation is 
required that identifies the hedging instrument, and specifically the 
hedged item or transaction, along with the nature of the risk being 
hedged. Entities are required to formally document how effectiveness 
will be assessed at the adoption of the hedge and on an ongoing basis.

E. Business Combinations (ASC 805)

    A business combination is a transaction or other event in which one 
or more businesses obtain control of another business. It also includes 
transactions involving mergers of equals and certain acquisitions by a 
not-for-profit entity. ASC 805--Business Combinations requires that a 
business combination be accounted for by applying the acquisition 
method.
    The acquisition method requires the acquiring entity to recognize 
and measure, as of the acquisition date, the identifiable assets 
acquired, liabilities assumed, and any noncontrolling interest in the 
acquired entity. The acquiring entity must also recognize and measure 
goodwill (the excess of purchase price over net assets, related to the 
acquisition) or a gain resulting from a bargain purchase.

Discussion

    A. General. The Board's existing USOA does not specifically address 
the proper accounting and reporting for changes in the fair value of 
certain security investments, derivative instruments, and hedging 
activities. Additionally, the existing USOA does not contain specific 
accounts to record amounts related to items of Other Comprehensive 
Income or provide a format to display comprehensive income in the Form 
R-1. The USOA's accounting for business combinations must also be 
revised to reflect the acquisition accounting method, as required in 
ASC 805.
    Without specific instructions and accounts for recording and 
reporting certain transactions and events, inconsistent and incomplete 
accounting would result. For example, if the effects of certain 
derivative instruments and hedging activities are not properly reported 
to the Board in the Form R-1, it would be difficult for the Board and 
others to determine the impact of derivatives on regulated carriers' 
financial statements and Results of

[[Page 39024]]

Operations Statements.\3\ The addition of new accounts and related 
general instructions is intended to improve the visibility, 
completeness, and consistency of accounting and reporting of changes in 
the fair value of certain investment securities, items of Other 
Comprehensive Income, derivatives instruments, and hedging activities.
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    \3\ Results of Operations Statements, also referred to as a 
Profit and Loss Statement, Statement of Operations, or Statement of 
Income, appear in the Form R-1 and reflect the profitability (i.e. 
revenues, expenses, gains, and losses) of a company during the year 
specified in the heading of the R-1 annual report. The statements do 
not show cash receipts or cash disbursements.
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    Also, the addition of the proposed new accounts and related 
reporting requirements to the Form R-1 would reduce regulatory 
uncertainty as to the proper accounting and reporting for these items 
and minimize regulatory burden by reducing the potential differences in 
the manner in which these amounts are reported to shareholders and to 
the Board. Finally, the reporting of derivative instruments and hedging 
activities by regulated carriers would assist the Board in its overall 
monitoring effort as well as its ability to assess railroad industry 
growth and financial stability. Further, such reporting would assist 
the Board in identifying industry changes that may affect national 
transportation policy.
    B. Proposed Accounting for Trading and Available-for-Sale Type 
Securities. Under the Board's USOA, all types of securities are 
recorded at cost, and subsequent changes in the fair value of security 
investments are not recognized in the financial statements.
    The Board is of the view that fair-value measurement of trading and 
available-for-sale type securities presents relevant and useful 
information to existing and potential investors, creditors, regulators, 
and others in making credit and other decisions. Fair-value 
measurements would also provide useful information to the Board 
concerning the status of certain amounts set aside to fund future 
obligations.
    Therefore, the Board proposes to add language to its investment 
account requirements for rail carriers to permit the recognition of 
changes in the fair value of trading and available-for-sale types of 
securities due to unrealized holding gains and losses. The security 
investment asset accounts for railroads are: Account 702, Temporary 
Cash Investments; Account 721, Investments and Advances: Affiliated 
Companies; Account 722, Other Investments and Advances; Account 715, 
Sinking Funds; Account 716, Capital Funds; and Account 717, Other 
Funds.
    C. Proposed Accounting for Other Comprehensive Income. The existing 
USOA does not contain specific accounts to record amounts related to 
items of Other Comprehensive Income or provide a format to display 
comprehensive income in the Form R-1. Therefore, entities currently 
record items of Other Comprehensive Income in Account 606. However, as 
part of the proposed rule, the USOA would be revised to provide 
accounting for such items. Thus, the use of Account 606 in the USOA to 
record items of Other Comprehensive Income would no longer be 
appropriate. Instead, these items would be accounted for elsewhere in 
the USOA.
    A new equity account (Account 799, Accumulated Other Comprehensive 
Income) is also proposed to include the accumulated balance for items 
of Other Comprehensive Income. The account would require that railroads 
maintain supporting records for each category of Other Comprehensive 
Income and report such information in their Form R-1. Detailed records 
would be maintained so that the current period activity, year-to-date 
activity, and reclassification adjustments related to items of Other 
Comprehensive Income could be readily identified. Maintaining detailed 
records for items included in accumulated Other Comprehensive Income is 
necessary to ensure that a railroad can readily identify amounts when 
an item is included in net income in subsequent periods.
    As proposed, a new equity sub-account entitled Account 799.1, Other 
Comprehensive Income, would be established to include amounts for items 
of Other Comprehensive Income for the reporting year. The purpose of 
this account is to record the activity for items of Other Comprehensive 
Income during a fiscal year. At year end, the amounts recorded in sub-
account 799.1 would be transferred to the new equity Account 799. 
Consequently, Account 799.1, as proposed, would always have a zero 
beginning and year-end balance. Therefore, the Board proposes not to 
include this account as part of the balance sheet schedules.
    To increase the prominence of items that are recorded in Other 
Comprehensive Income and also to improve comparability and transparency 
in financial statements, the Board has developed a two-statement 
approach. This two-statement approach includes Schedule 210, Results of 
Operations, and Schedule 210A, Consolidated Statement of Other 
Comprehensive Income. Schedule 210 would show the components of net 
income and total net income. Schedule 210A, which would immediately 
follow Schedule 210, would reflect the components of Other 
Comprehensive Income, a total for Other Comprehensive Income, and a 
total for Comprehensive Income. Schedule 210A would begin with net 
income.
    The proposed instructions for the Other Comprehensive Income 
accounts for all railroads would require that supporting records be 
maintained by each category of Other Comprehensive Income. This level 
of detail would be required to ensure that the railroad is able to 
identify the amounts associated with an item when it is entered into 
the determination of net income, and the railroad effectively moves the 
recognition of the item from Other Comprehensive Income to net income.
    Finally, items recognized in Other Comprehensive Income that are 
later recognized in net income require a reclassification adjustment in 
order to avoid double counting an item in both net income and Other 
Comprehensive Income. The proposed instructions for Accounts 799 and 
799.1 would require the railroad to make reclassification adjustments 
directly to these accounts, as appropriate. This proposed accounting 
treatment for reclassification adjustments would minimize the need for 
creating a new account to capture amounts solely related to 
reclassification adjustments. Items reclassified from Other 
Comprehensive Income to net income would no longer be presented in 
footnotes to the financial statements. Further, the adjustments must be 
shown on the face of the financial statements where the components of 
net income and Other Comprehensive Income are presented; corresponding 
adjustments must appear in both net income and Other Comprehensive 
Income.
    D. Proposed Accounting for Derivatives and Hedging Activities. The 
Board proposes to revise the USOA to provide accounting for derivative 
instruments and hedging activities. The Board's existing USOA does not 
contain specific accounts to record changes in the fair value of 
derivative instruments used in hedging and non-hedging activities. The 
addition of new accounts and instructions would provide improved 
visibility and completeness of accounting and reporting of derivative 
instruments and hedging activities.
    Proposed General Instructions for Fair-Value and Cash-Flow Hedges. 
The Board proposes to add a new general instruction that would require 
railroads to record changes in the fair value of the derivative 
instrument (the effective portion of the gain or loss) designated as a 
cash-flow hedge to Other

[[Page 39025]]

Comprehensive Income. The ineffective portion of the cash-flow hedge 
would be charged to the same income or expense account that would have 
been used if the hedged item had been disposed of, or otherwise 
settled.
    The proposed instructions would also require railroads to record 
changes in the fair value of a derivative instrument designated as a 
fair-value hedge in this account with a concurrent charge to a sub 
account of the asset or liability that carries the item being hedged. 
The ineffective portion of the fair-value hedge would be charged to the 
same income or expense account that would have been used if the hedged 
item had been disposed of, or otherwise settled.
    Proposed Accounting for Derivative Assets and Liabilities. The 
Board proposes to establish new asset and liability accounts that would 
include amounts related to the changes in the fair value of derivative 
instruments not designated as cash-flow or fair-value hedges. The 
proposed accounts are Account 713.5, Derivative Instrument Assets and 
Account 763.5, Derivative Instrument Liabilities. Railroads would 
charge Account 551, Miscellaneous Income Charges, with the 
corresponding amount of the change in the fair value of the derivative 
instruments.
    Proposed Accounting for Fair-Value and Cash-Flow Hedges. As 
proposed, railroads would be required to establish a new asset and 
liability account that would include amounts related to the changes in 
the fair value of derivative instruments designated as a cash-flow or 
fair-value hedge. The new asset account is Account 713.6, Derivative 
Instrument Assets-Hedges and the new liability account would be Account 
763.6, Derivative Instrument Liabilities--Hedges.
    E. Proposed Changes to and Elimination of Certain Schedules to the 
Form R-1. The proposed accounting changes, if adopted, would require 
changes to existing Schedule 200, Comparative Statement of Financial 
Position, and Schedule 210, Results of Operations.\4\ The Board also 
would add a new Schedule 210A, entitled ``Consolidated Statement of 
Comprehensive Income,'' with instructions on the proper footnote 
disclosures for the Form R-1 in order to provide consistent accounting 
and reporting of items of Other Comprehensive Income. This proposed 
schedule is modeled after an income-statement approach which provides 
the most transparency for the components of Other Comprehensive Income 
and is more consistent with the overall framework of the FASB Concepts 
Statement. The proposed income-statement format would also avoid 
duplication of data already reported on other schedules. This new 
schedule would show the components of Other Comprehensive Income and 
would require the following to be contained in a footnote to the 
schedule:
---------------------------------------------------------------------------

    \4\ The proposed revised schedules appear in Appendix A.
---------------------------------------------------------------------------

    (1) Reporting of categories of Other Comprehensive Income on a net-
of-tax basis, where appropriate, along with the reporting of related 
tax effects allocated to each component;
    (2) Reporting of accumulated Other Comprehensive Income balances at 
year end by category;
    (3) Reporting of fair-value hedge balances at year end by category.
    The Board concludes that the proposed reporting requirements would 
not be a significant reporting burden to the railroad industry since 
the information is already being captured by the railroads' accounting 
systems for internal and external reporting.
    F. Proposed Accounting for Business Combinations. FASB established 
ASC 805 Business Combinations requiring the acquisition method of 
accounting for all business combinations. This methodology is now 
standard practice in the accounting industry, and the Board agrees that 
the acquisition method better reflects the investment made in an 
acquired entity and has affirmed the use of this treatment in Western 
Coal Traffic League--Petition for Declaratory Order, FD 35506, slip op 
at 6-17 (STB served July 25, 2013). We propose to update the USOA to 
reflect this accounting treatment. We also seek comment on the 
application of Instruction 2-15, paragraph (d) with respect to the 
utilization of the pooling of interest method for transactions 
involving the acquisition and merger of property of subsidiaries in 
Instructions for Property Accounts.
    G. Elimination of Certain Schedules in Annual Report Form R-1. The 
Board and its predecessor, the ICC, have collected financial and 
accounting data from regulated railroads since the 1880's. Information 
from the carriers' annual reports is used in the Board's oversight and 
regulatory missions. Reduction of unnecessary reporting requirements 
has been a long-standing goal of the Board and ICC. In a policy 
statement issued in 1979, the ICC specified that only information 
needed to carry out its functions should be collected.\5\ Since then, 
reporting requirements have been eliminated for non-Class I carriers 
and the dollar threshold for inclusion as a Class I carrier has been 
raised to $250 million, indexed for inflation. Thus, significant 
reductions in the financial and accounting reporting burden for 
railroads have already been accomplished.
---------------------------------------------------------------------------

    \5\ See Policy Statement on Fin. & Statistical Reporting, 44 FR 
27537 (1979).
---------------------------------------------------------------------------

    However, we have examined the current Form R-1 filed by the Class I 
railroads and have determined that 15 of the 47 schedules are no longer 
used by the STB to perform our regulatory and oversight functions. 
Therefore, we are proposing to eliminate these 15 schedules from the 
Form R-1, as listed below:

230 Capital Stock
339 Accrued Liability--Leased Property
340 Depreciation Base and Rates--Improvements to Road and Equipment 
Leased from Others
350 Depreciation Base and Rates--Road and Equipment Leased to Others
351 Accumulated Depreciation--Road and Equipment Leased to Others
416 Supporting Schedule--Road
418 Supporting Schedule--Capital Leases
460 Items in Selected Income and Retained Earnings Accounts for the 
Year
702 Miles of Road at Close of Year--By States and Territories (Single 
Track)
721 Ties Laid in Replacement
722 Ties Laid in Additional Tracks and in New Lines and Extensions
723 Rails Laid in Replacement
724 Rails Laid in Additional Tracks and in New Lines and Extensions
725 Weight of Rail
726 Summary of Track Replacements

Periodic Review

    To ensure that the Board's accounting and reporting requirements 
reflect, to the extent practicable, current GAAP principles, the Board 
will conduct a periodic review of its accounting standards not less 
than every five years. This periodic review will be initiated through 
the rulemaking process, thereby affording interested parties an 
opportunity for notice and comment.

Paperwork Reduction Act

    Pursuant to the Paperwork Reduction Act (PRA), 44 U.S.C. 3501-3549, 
and Office of Management and Budget (OMB) regulations at 5 CFR 
1320.8(d)(3), the Board seeks comments regarding: (1) Whether the 
revisions to the collection of information proposed here are necessary 
for the proper performance of the functions of the Board, including 
whether the collection

[[Page 39026]]

has practical utility; (2) the accuracy of the Board's burden 
assessment; (3) ways to enhance the quality, utility, and clarity of 
the information collected; and (4) ways to minimize the burdens of the 
collections of information on the respondents, including the use of 
automated collection techniques or other forms of information 
technology, when appropriate. Additional information related to these 
questions can be found in Appendix B below. The proposed information-
collection revisions described in this decision are being submitted to 
OMB for review as required under the PRA, 5 U.S.C. 3507(d) and OMB 
regulations at 5 CFR 1320.11. Comments received by the Board regarding 
the information collection will also be forwarded to OMB for its review 
when the final rule is published.

Regulatory Flexibility Act Statement

    The Regulatory Flexibility Act of 1980 (RFA), 5 U.S.C. 601-612, 
generally requires a description and analysis of new rules that would 
have a significant economic impact on a substantial number of small 
entities. In drafting a rule, an agency is required to: (1) Assess the 
effect that its regulation will have on small entities; (2) analyze 
effective alternatives that may minimize a regulation's impact; and (3) 
make the analysis available for public comment. Sections 601-604. In 
its notice of proposed rulemaking, the agency must either include an 
initial regulatory flexibility analysis, section 603(a), or certify 
that the proposed rule would not have a ``significant impact on a 
substantial number of small entities,'' section 605(b).
    Because the goal of the RFA is to reduce the cost to small entities 
of complying with federal regulations, the RFA requires an agency to 
perform a regulatory flexibility analysis of small entity impacts only 
when a rule directly regulates those entities. In other words, the 
impact must be a direct impact on small entities ``whose conduct is 
circumscribed or mandated'' by the proposed rule. White Eagle Coop. 
Ass'n v. Conner, 553 F.3d 467, 478, 480 (7th Cir. 2009).
    This proposal will not have a significant economic impact upon a 
substantial number of small entities within the meaning of the RFA. The 
proposed rule would affect only entities that are required to file Form 
R-1 reports; these reports are only required to be submitted by Class I 
carriers. 49 CFR 1241.1. Class I carriers are large railroads; 
accordingly, there will be no impact on small railroads (small 
entities).

    Authority. 49 U.S.C. 11142 and 11164.

List of Subjects in 49 CFR Part 1201

    Railroads, Uniform System of Accounts.

    Decided: June 18, 2015.

    By the Board, Acting Chairman Miller and Vice Chairman Begeman.
Brendetta S. Jones,
Clearance Clerk.

    For the reasons set forth in the preamble, the Surface 
Transportation Board proposes to amend part 1201 of title 49, chapter 
X, of the Code of Federal Regulations as follows:

PART 1201--RAILROAD COMPANIES

0
1. The authority citation for part 1201 continues to read as follows:

    Authority: 49 U.S.C. 11142 and 11164.

Subpart A--Uniform System of Accounts

0
2. Amend Regulations Prescribed by revising paragraph (ii), item 16(c), 
to read as follows:

List of Instructions and Accounts

REGULATIONS PRESCRIBED

* * * * *
    (ii) * * *
    16. * * *
    (c) Cost, as applied to a marketable equity security, refers to the 
original cost as adjusted for unrealized holding gains and losses.
* * * * *
    3. Amend General Instructions by adding Instructions 1-19 and 1-20 
to read as follows:

GENERAL INSTRUCTIONS

* * * * *
    1-19 Accounting for Other Comprehensive Income. (a) Railroads will 
record items of Other Comprehensive Income in account 799.1, Other 
comprehensive income. Amounts included in this account will be 
maintained by each category of Other Comprehensive Income. Examples of 
categories of Other Comprehensive Income include foreign currency 
items, minimum pension liability adjustments, unrealized gains and 
losses on available-for-sale type securities and cash-flow hedge 
amounts.
    (b) Supporting records will be maintained for account 799 so that 
the company can readily identify the cumulative amount of Other 
Comprehensive Income for each item included in this account.
    (c) When an item of Other Comprehensive Income enters into the 
determination of earnings in the current or subsequent periods, a 
reclassification adjustment will be recorded in accounts 799 to avoid 
double counting of when an item included in net income was also 
included in Other Comprehensive Income in the same or prior period.
    1-20 Accounting for derivative instruments and hedging activities. 
(a) A carrier will recognize derivative instruments as either assets or 
liabilities in the financial statements and measure those instruments 
at fair value. A derivative instrument is a financial instrument or 
other contract with all three of the following characteristics:
    (1) The derivative instrument has one or more underlyings and a 
notional amount or payment provision. Those terms determine the amount 
of the settlement or settlements, and, in some cases, whether or not a 
settlement is required.
    (2) The derivative instrument requires no initial net investment or 
an initial net investment that is smaller than would be required for 
other types of contracts that would be expected to have similar 
responses to changes in market factors.
    (3) The derivative instrument's terms require or permit net 
settlement; the derivative instrument can readily be settled net by a 
means outside the contract; or the derivative instrument's terms 
provide for delivery of an asset that puts the recipient in a position 
not substantially different from net settlement.
    (b) The accounting for the changes in the fair value of derivative 
instruments depends upon their intended use and designation. Changes in 
the fair value of derivative instruments not designated as fair value 
or cash flow hedges will be recorded in account 713.5, Derivative 
instrument assets, or account 763.5, Derivative instrument liabilities, 
as appropriate, with the gains or losses charged to earnings in account 
551, Miscellaneous income charges.
    (c) A derivative instrument may be specifically designated as a 
fair-value or cash-flow hedge. A hedge may be used to manage risk to 
price, interest rates, or foreign currency transactions. An entity will 
maintain documentation of the hedge relationship at the inception of 
the hedge that details the risk management objective and strategy for 
undertaking the hedge, the nature of the risk being hedged, and how 
hedge effectiveness will be determined.
    (d) If the carrier designates the derivative instrument as a fair-
value hedge against exposure to changes in the fair value of a 
recognized asset, liability, or a firm commitment, it will record the 
change in fair value of the derivative instrument designated as a

[[Page 39027]]

fair-value hedge to account 713.6, Derivative instruments assets--
hedges, or account 763.6, Derivative instrument liabilities--hedges, as 
appropriate, with a corresponding adjustment to the sub-account of the 
item being hedged. The ineffective portion of the hedge transaction 
will be reflected in the same income or expense account that would have 
been used if the hedged item had been disposed of or settled. In the 
case of a fair-value hedge of a firm commitment, a new asset or 
liability is created. As a result of the hedge relationship, the new 
asset or liability will become part of the carrying amount of the item 
being hedged.
    (e) If the carrier designates the derivative instrument as a cash-
flow hedge against exposure to variable cash flows of a probable 
forecasted transaction it will record changes in the fair value of the 
derivative instrument in account 713.6, Derivative instrument assets--
hedges, or account 763.6, Derivative instrument liabilities--hedges, as 
appropriate, with a corresponding amount in account 799.1, Other 
comprehensive income, for the effective portion of the hedge. The 
ineffective portion of the hedge transaction will be reflected in the 
same income or expense account that would have been used if the hedged 
item had been disposed of or settled. Amounts recorded in Other 
Comprehensive Income will be reclassified into earnings in the same 
period or periods that the hedged forecasted item affects earnings.
0
4. Amend Instructions For Property Accounts by:
0
a. Revising paragraph (a) in Instruction 2-15;
0
b. Removing paragraph (b) in Instruction 2-15;
0
c. Redesignating paragraph (c) as paragraph (b) in Instruction 2-15;
0
d. Revising the newly designated paragraph (b) in Instruction 2-15; and
0
e. Redesignating paragraph (d) as paragraph (c) in Instruction 2-15.
    The revisions read as follows:

INSTRUCTIONS FOR PROPERTY ACCOUNTS

* * * * *
    2-15 * * * (a) When a railway or portion thereof constituting an 
operating unit or system is acquired in a business combination, that 
business combination shall be recorded in the accounts in the manner 
stated hereunder.
    (b) Purchase:
    (1) The amount includible in account 731, Road and equipment 
property, shall be the cost at the date of acquisition to the purchaser 
of the transportation property acquired. The cost assigned the 
property, as well as other assets acquired, shall be the amount of the 
cost consideration given. Where property and other assets are acquired 
for other than cash, including liabilities assumed and shares of stock 
issued, cost shall be determined by either the fair value of the 
consideration given or the fair value of the assets acquired, whichever 
is more clearly evident. In addition to any liabilities assumed, 
provision shall be made for such estimated liabilities as may be 
necessary.
    (2) When the costs of individual units or classes of transportation 
property are not specified in the agreement, the cost assigned such 
property shall be apportioned among the appropriate primary accounts 
using the percentage relationship between the fair values for each 
class of property acquired and the total of such values.
* * * * *
0
5. Amend Instructions For Income And Balance Sheet Accounts by revising 
Instruction 5-2, paragraph (a), items (2), (3), and (4) to read as 
follows:

INSTRUCTIONS FOR INCOME AND BALANCE SHEET ACCOUNTS

* * * * *
    5-2 * * *
    (a) * * *
    (2) Account 702, Temporary cash investments, account 721, 
Investments and advances; affiliated companies, and account 722, Other 
investments and advances, shall be maintained in such a manner as to 
reflect the marketable equity portion (see definition 26) and other 
securities or investments.
    (3) For the purpose of determining net ledger value, the marketable 
equity securities in account 702 shall be considered the current 
portfolio and the marketable equity securities in accounts 721 and 722 
(combined) shall be considered the noncurrent portfolio.
    (4) Carriers will categorize their security investments as held-to-
maturity, trading, or available-for-sale. Unrealized holding gains and 
losses on trading type investment securities will be recorded in 
account 551, Miscellaneous income charges. Unrealized holding gains and 
losses on available-for-sale type investment securities will be 
recorded in account 799.1, Other comprehensive income.
* * * * *
0
6. Amend Income Accounts--Ordinary Items by adding a sentence at the 
end of the list of inclusions for account 551 ``Miscellaneous income 
charges,'' paragraph (a) to read as follows:

INCOME ACCOUNTS

Ordinary Items

* * * * *


551  Miscellaneous income charges.

    (a) * * *
    Unrealized holding gains and losses on trading type investment 
securities.
* * * * *
0
7. Amend General Balance Sheet Accounts Explanations--Assets, Current 
Assets by:
0
a. Adding a sentence to the end of the first paragraph in account 702 
``Temporary cash investment'';
0
b. Adding accounts 713.5 ``Derivative instrument assets'' and 713.6 
``Derivative instrument assets-hedges.''
    The additions read as follows:

GENERAL BALANCE SHEET ACCOUNTS EXPLANATIONS

Assets

Current Assets
* * * * *


702  Temporary cash investments.

    * * * This account shall also include unrealized holding gains and 
losses on trading and available-for-sale types of security investments.
* * * * *


713.5  Derivative instrument assets.

    This account shall include the amounts paid for derivative 
instruments, and the change in the fair value of all derivative 
instrument assets not designated as cash-flow or fair-value hedges. 
Account 551, Miscellaneous income charges, will be charged with the 
corresponding amount of the change in the fair value of the derivative 
instrument.


713.6  Derivative instrument assets-hedges.

    (a) This account shall include the amounts paid for derivative 
instruments, and the change in the fair value of derivative instrument 
assets designated by the utility as cash-flow or fair-value hedges.
    (b) When a carrier designates a derivative instrument asset as a 
cash-flow hedge, it will record the change in the fair value of the 
derivative instrument in this account with a concurrent charge to 
account 799.1, Other comprehensive income, with the effective portion 
of the derivative's gain or loss. The ineffective portion of the cash-
flow hedge will be charged to the same income or expense account that 
would have been used if the hedged item had been disposed of or 
otherwise settled.

[[Page 39028]]

    (c) When a carrier designates a derivative instrument as a fair-
value hedge, it will record the change in the fair value of the 
derivative instrument in this account with a concurrent charge to a 
sub-account of the asset or liability that carries the item being 
hedged. The ineffective portion of the fair-value hedge will be charged 
to the same income or expense account that would have been used if the 
hedged item had been disposed of or otherwise settled.
* * * * *
0
8. Amend General Balance Sheet Accounts Explanations--Assets, Special 
Funds by:
0
a. In account 715 ``Sinking funds,'' adding two sentences to the end of 
paragraph (b);
0
b. In account 716 ``Capital funds,'' adding a sentence to the end of 
paragraph (a); and
0
c. In account 717 ``Other funds,'' adding Note E.
    The additions read as follows:

GENERAL BALANCE SHEET ACCOUNTS EXPLANATIONS

Assets

Special Funds


715  Sinking funds.

* * * * *
    (b) * * * This account shall also include unrealized holding gains 
and losses on trading and available-for-sale types of security 
investments. The cash value of life insurance policies on the lives of 
employees and officers to the extent that the carrier is the 
beneficiary of such policies shall also be included in this account.
* * * * *


716  Capital funds.

    (a) * * * This account shall also include unrealized holding gains 
and losses on trading and available-for-sale types of security 
investments.
* * * * *


717  Other funds.

* * * * *
    Note E: This account shall also include unrealized holding gains 
and losses on trading and available-for-sale types of security 
investments.
0
9. Amend General Balance Sheet Accounts Explanations--Assets, 
Investments by:
0
a. In account 722 ``Other investments and advances,'' adding two 
sentences to the end of paragraph (a); and
0
b. Removing account 724 ``Allowance for net unrealized loss on 
noncurrent marketable equity securities--Cr.''
    The addition reads as follows:

GENERAL BALANCE SHEET ACCOUNTS EXPLANATIONS

Assets

Investments

* * * * *


722  Other investments and advances.

    (a) * * * This account shall also include unrealized holding gains 
and losses on trading and available-for-sale types of security 
investments. Include also the offsetting entry to the recording of 
amortization of discount or premium on interest bearing investments.
* * * * *
0
10. Amend General Balance Sheet Accounts Explanations--Liabilities and 
Shareholders' Equity, Current Liabilities by adding accounts 763.5 
``Derivative instrument liabilities'' and 763.6 ``Derivative instrument 
liabilities-hedges'',to read as follows:

GENERAL BALANCE SHEET ACCOUNTS EXPLANATIONS

Liabilities and Shareholders' Equity

Current Liabilities
* * * * *


763.5  Derivative instrument liabilities.

    This account shall include the change in the fair value of all 
derivative instrument liabilities not designated as cash-flow or fair-
value hedges. Account 551, Miscellaneous income charges, will be 
charged with the corresponding amount of the change in the fair value 
of the derivative instrument.


763.6  Derivative instrument liabilities-hedges.

    (a) This account shall include the change in the fair value of 
derivative instrument liabilities designated by the carrier as cash-
flow or fair-value hedges.
    (b) A carrier will record the change in the fair value of a 
derivative instrument liability related to a cash-flow hedge in this 
account, with a concurrent charge to account 799.1, Other comprehensive 
income, with the effective portion of the derivative instrument's gain 
or loss. The ineffective portion of the cash-flow hedge will be charged 
to the same income or expense account that would have been used if the 
hedged item had been disposed of or otherwise settled.
    (c) A carrier will record the change in the fair value of a 
derivative instrument liability related to a fair-value hedge in this 
account, with a concurrent charge to a sub-account of the asset or 
liability that carries the item being hedged. The ineffective portion 
of the fair-value hedge will be charged to the same income or expense 
account that would have been used if the hedged item had been disposed 
of or otherwise settled.
* * * * *
0
11. Amend General Balance Sheet Accounts Explanations--Liabilities and 
Shareholders' Equity, Shareholders' Equity by:
0
a. Removing account 798.1 ``Net unrealized loss on noncurrent 
marketable securities''; and
0
b. Adding account 799 ``Accumulated Other Comprehensive Income.''
    The addition reads as follows:

GENERAL BALANCE SHEET ACCOUNTS EXPLANATIONS

Liabilities and Shareholders' Equity

Shareholders' Equity
* * * * *


799  Accumulated Other Comprehensive Income.

    (a) This account shall include revenues, expenses, gains, and 
losses that are properly includable in Other Comprehensive Income 
during the period. Examples of items of Other Comprehensive Income 
include foreign currency items, minimum pension liability adjustments, 
unrealized gains and losses on certain investments in debt and equity 
securities, and cash-flow hedges. Records supporting the entries to 
this account shall be maintained so that the carrier can furnish the 
amount of Other Comprehensive Income for each item included in this 
account.
    (b) This account shall also be debited or credited, as appropriate, 
with amounts of accumulated Other Comprehensive Income that have been 
included in the determination of net income during the period and in 
accumulated Other Comprehensive Income in prior periods. Separate 
records for each category of items will be maintained to identify the 
amount of the reclassification adjustments from accumulated Other 
Comprehensive Income to earnings made during the period.
0
12. Revise the Form of General Balance Sheet Statement, Assets to read 
as follows:
Form of General Balance Sheet Statement
    The classified form of general balance sheet statement is designed 
to show the financial condition of the accounting company at any 
specified date.

[[Page 39029]]



                                 Assets
------------------------------------------------------------------------
 
-------------------------------------------------------------------------
Current assets:
    701. Cash.
    702. Temporary cash investments.
    703. Special deposits.
    704. Loans and notes receivable.
    705. Accounts receivable; Interline and other balances.
    706. Accounts receivable; Customers.
    707. Accounts receivable; Other.
    708. Interest and dividends receivable.
    708.5. Receivables from affiliated companies.
    709. Accrued accounts receivable.
    709.5. Allowance for uncollectible accounts.
        Net receivables.
    710. Working funds.
    711. Prepayments.
    712. Material and supplies.
    713. Other current assets.
    713.5 Derivative instrument assets
    713.6 Derivative instrument assets--hedges
    714. Deferred income tax debits.
        Total current assets.
Special funds:
    715. Sinking funds.
    716. Capital funds.
    717. Other funds.
        Total special funds.
Investments:
    721. Investments and advances; affiliated companies.
 Undistributed earnings from certain investments in account 751.
    721.5. Adjustments; investments and advances--affiliated companies.
 Net--investments and advances--affiliated companies.
    722. Other investments and advances.
    723. Adjustments; Other investments and advances.
 Net--other investments and advances.
 Total investments.
Tangible property:
    731. Road and equipment property.
    735. Accumulated depreciation; Road and equipment property.
    736. Accumulated amortization; Road and equipment property--Defense
     projects.
 
    Net road and equipment property.
    732. Improvements on leased property.
    733. Accumulated depreciation; Improvements on leased property.
    734. Accumulated amortization; Improvements on leased property--
     Defense projects.
 Net improvements on leased property.
 Total carrier property.
    737. Property used in other than carrier operations.
    738. Accumulated depreciation; Property used in other than carrier
     operations.
 Net--property used in other than carrier operations.
 Total tangible property.
Intangible property:
    739. Organization expenses.
Other assets and deferred debits:
    741. Other assets.
    743. Other deferred debits.
    744. Accumulated deferred income tax debits.
 Total other assets and deferred debits.
 Total assets.
                  LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
    751. Loans and notes payable.

[[Page 39030]]

 
    752. Accounts payable; Interline and other balances.
    753. Audited accounts and wages payable.
    754. Accounts payable; Other.
    755. Interest payable.
    756. Dividends payable.
    757. Payables to affiliated companies.
    759. Accrued accounts payable.
    760. Federal income taxes accrued.
    761. State and other income taxes accrued.
    761.5. Other taxes accrued.
    762. Deferred income tax credits.
    763. Other current liabilities.
    763.5 Derivative instrument liabilities
    763.6 Derivative instrument liabilities-hedges
    764. Equipment obligations and other long-term debt due within one
     year.
 Total current liabilities.
Long-term debt due after one year: \1\
    765. Funded debt unmatured.
    766. Equipment obligations.
    766.5. Capitalized lease obligations.
    767. Receivers' and trustees' securities.
    768. Debt in default.
    769. Accounts payable; Affiliated companies.
    770.1 Unamortized debt discount.
    770.2 Unamortized premium on debt.
 Total long-term debt due after one year.
Other long-term liabilities:
    771. Accrued liability; Pension and welfare.
    772. Accrued liability; Leased property.
    774. Accrued liability; Casualty and other claims.
    775. Other accrued liabilities.
    781. Interest in default.
    782. Other liabilities.
 Total other long-term liabilities.
Deferred credits:
    783. Deferred revenues--transfers from government authorities.
    784. Other deferred credits.
    786. Accumulated deferred income tax credits.
 Total deferred credits.
Shareholders' equity:
    Capital stock:
        791. Capital stock.
        792. Liability for conversion of capital stock.
        793. Discount on capital stock.
 Total capital stock.
Additional capital:
    794. Premiums and assessments on capital stock.
    795. Other capital.
 Total additional capital.
Retained earnings:
    797. Retained earnings; Appropriated.
    798. Retained earnings; Unappropriated.
        Total retained earnings.
798.5 Treasury stock.
799. Accumulated Other Comprehensive Income
 Total shareholders' equity.
 Total liabilities and shareholders' equity.
------------------------------------------------------------------------
\1\To be divided as to ``Total issued'' and ``Held by or for company.''

0
13. Amend Conversion Tables by revising General Balance Sheet Accounts 
conversion table to read as follows:

CONVERSION TABLES

* * * * *

[[Page 39031]]



                                 General Balance Sheet Accounts Conversion Table
----------------------------------------------------------------------------------------------------------------
      System of accounts eff. prior to Month XX, 2015              System of accounts eff. Month, XX, 2015
----------------------------------------------------------------------------------------------------------------
               Account title                       No.             No.                  Account title
----------------------------------------------------------------------------------------------------------------
Cash.......................................             701             701  Cash.
Temporary cash investments.................             702             702  Temporary cash investments.
Special deposits...........................             703             703  Special deposits.
Loans and notes receivable.................             704             704  Loans and notes receivable.
                                             ..............           708.5  Receivables from affiliated
                                                                              companies.
                                             ..............           709.5  Allowance for uncollectible
                                                                              accounts.
Traffic, car service and other balances--dr             705             705  Accounts receivable; interline and
                                                                              other balances.
                                             ..............           709.5  Allowances for uncollectible
                                                                              accounts.
                                             ..............             752  Accounts payable; interline and
                                                                              other balances.
Net balance receivable from agents and                  706             706  Accounts receivable; customers.
 conductors.
Miscellaneous accounts receivable..........             707             707  Accounts receivable; other.
                                             ..............           708.5  Receivables from affiliated
                                                                              companies.
                                             ..............           709.5  Allowance for uncollectible
                                                                              accounts.
Interest and dividends receivable..........             708             708  Interest and dividends receivable.
                                             ..............           708.5  Receivables from affiliated
                                                                              companies.
                                             ..............           709.5  Allowance for uncollectible
                                                                              accounts.
Accrued accounts receivable................             709             709  Accrued accounts receivable.
Working fund advances......................             710             710  Working funds.
Prepayments................................             711             711  Prepayments.
Material and supplies......................             712             712  Material and supplies.
Other current assets.......................             713             713  Other current assets.
                                             ..............           713.5  Derivative instrument assets
                                             ..............           713.6  Derivative instrument assets--
                                                                              hedges
Deferred income tax charges................             714             714  Deferred income tax debits.
Sinking funds..............................             715             715  Sinking funds.
Capital and other reserve funds............             716             716  Capital funds.
Insurance and other funds..................             717             717  Other funds.
Investment in affiliated companies.........             721             721  Investments and advances;
                                                                              affiliated companies.
Other investments..........................             722             722  Other investments and advances.
Reserve for adjustment of investment in                 723           721.5  Adjustments; investments and
 securities--cr.                                                              advances--affiliated companies.
                                             ..............             723  Adjustments; other investments and
                                                                              advances.
Road and equipment property................             731             731  Road and equipment property.
Organization expenses......................              71             739  Organization expenses.
Improvements on leased property............             732             732  Improvements on leased property.
Accrued depreciation; improvements on                   733             733  Accumulated depreciation;
 leased property.                                                             improvements on leased property.
Accrued depreciation; road and equipment...             735             735  Accumulated depreciation; road and
                                                                              equipment property.
Amortization of defense projects; road and              736             736  Accumulated amortization; road and
 equipment.                                                                   equipment property--defense
                                                                              projects.
                                             ..............             734  Accumulated amortization;
                                                                              improvements on leased property--
                                                                              defense projects.
Miscellaneous physical property............             737             737  Property used in other than carrier
                                                                              operations.
Accrued depreciation; miscellaneous                     738             738  Accumulated depreciation; property
 physical property.                                                           used in other than carrier
                                                                              operations.
Other assets...............................             741             741  Other assets.
Unamortized discount on long-term debt.....           770.1           770.1  Unamortized debt discount.
Other deferred charges.....................             743             743  Other deferred debits.
Accumulated deferred income tax charges....             744             744  Accumulated deferred income tax
                                                                              debits.
----------------------------------------------------------------------------------------------------------------
                                                   Liabilities
----------------------------------------------------------------------------------------------------------------
Loans and notes payable....................             751             751  Loans and notes payable.
                                             ..............             757  Payables to affiliated companies.
Traffic, car service and other balances--cr             752             752  Accounts payable; interline and
                                                                              other balances.
                                             ..............             705  Accounts receivable; interline and
                                                                              other balances.
                                             ..............           709.5  Allowance for uncollectible
                                                                              accounts.
Audited accounts and wages payable.........             753             753  Audited accounts and wages payable.
Miscellaneous accounts payable.............             754             754  Accounts payable; other.
                                             ..............             757  Payables to affiliated companies.
Interest matured unpaid....................             755             755  Interest payable.
                                             ..............             757  Payables to affiliated companies.
Dividends matured unpaid...................             756             756  Dividends payable.
                                             ..............             757  Payables to affiliated companies.
Unmatured interest accrued.................             757             755  Interest payable.
                                             ..............             757  Payables to affiliated companies.
Unmatured dividends declared...............             758             756  Dividends payable.
                                             ..............             757  Payables to affiliated companies.
Accrued accounts payable...................             759             759  Accrued accounts payable.

[[Page 39032]]

 
Federal income taxes accrued...............             760             760  Federal income taxes accrued.
Other taxes accrued........................             761             711  Prepayments.
                                             ..............             761  State and other income taxes
                                                                              accrued.
                                             ..............           761.5  Other taxes accrued.
Deferred income tax credits................             762             762  Deferred income tax credits.
Other current liabilities..................             763             763  Other current liabilities.
                                             ..............           763.5  Derivative instrument liabilities
                                             ..............           763.6  Derivative instrument liabilities--
                                                                              hedges
Equipment obligations and other debt due                764             764  Equipment obligations and other
 within one year.                                                             long-term debt due within 1 year.
Funded debt unmatured......................             765             765  Funded debt unmatured.
Equipment obligations......................             766             766  Equipment obligations.
Capitalized lease obligations..............           766.5           766.5  Capitalized lease obligations.
Receivers' and trustees' securities........             767             767  Receivers' and trustees'
                                                                              securities.
Debt in default............................             768             768  Debt in default.
Amounts payable to affiliated companies....             769             769  Accounts payable; affiliated
                                                                              companies.
Pension and welfare reserves...............             771             771  Accrued liability; pension and
                                                                              welfare.
Casualty and other reserves................             774             774  Accrued liability; casualty and
                                                                              other claims.
                                             ..............             775  Other accrued liabilities.
Interest in default........................             781             781  Interest in default.
Other liabilities..........................             782             782  Other liabilities.
Deferred revenues--transfers from                       783             783  Deferred revenues--transfers from
 government authorities.                                                      government authorities
Unamortized premium on long-term debt......           790.2           770.2  Unamortized premium on debt.
Other deferred credits.....................             784             784  Other deferred credits.
Accrued liability; leased property.........             785             772  Accrued liability; leased property.
Accumulated deferred income tax credits....             786             786  Accumulated deferred income tax
                                                                              credits.
----------------------------------------------------------------------------------------------------------------
                                              Shareholders' Equity
----------------------------------------------------------------------------------------------------------------
Capital stock issued.......................             791             791  Capital stock.
Stock liability for conversion.............             792             792  Liability for conversion of capital
                                                                              stock.
Discount on capital stock..................             793             793  Discount on capital stock.
Premiums and assessment on capital stock...             794             794  Premiums and assessments on capital
                                                                              stock.
Paid-in surplus............................             795             795  Other capital.
Other capital surplus......................             796             795  Do.
Retained income; appropriated..............             797             797  Retained earnings; appropriated.
Retained income; unappropriated............             798             798  Retained earnings; unappropriated.
Treasury stock.............................           798.5           798.5  Treasury stock.
                                             ..............             799  Accumulated Other Comprehensive
                                                                              Income.
----------------------------------------------------------------------------------------------------------------


    Note: The following appendices will not appear in the Code of 
Federal Regulations.

Appendix A

BILLING CODE 4915-01-P

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Appendix B

Information Collection

    Title: Class I Railroad Annual Report
    OMB Control Number: 2140-0009.
    Form Number: R1.
    Type of Review: Revision of a currently approved collection.
    Respondents: Class I railroads.
    Number of Respondents: 7.
    Estimated Time per Response: The railroads currently spend no 
more than 800 hours preparing this report, including time spent 
reviewing instructions; searching existing data sources; gathering 
and maintaining the data needed; completing and reviewing the 
collection of information; and converting the data from the 
carrier's individual accounting system to the Board's Uniform System 
of Accounts (USOA), which ensures that the information will be 
presented in a consistent format across all reporting railroads, see 
49 U.S.C. 11141-43, 11161-64, 49 CFR parts 1200 and 1201. The 
proposed modifications would not increase the hourly burden.
    Frequency of Response: Annual.
    Total Annual Hour Burden: No more than 5,600 hours.
    Total Annual ``Non-Hour Burden'' Cost: Respondents are currently 
required to submit a signed hard copy of this report. We estimate a 
total annual cost for all respondents of $28. The proposed 
modifications would not increase the cost burden.
    Needs and Uses: Annual reports are required to be filed by Class 
I railroads under 49 U.S.C. 11145. The reports show operating 
expenses and operating statistics of the carriers. Operating 
expenses include costs for right-of-way and structures, equipment, 
train and yard operations, and general and administrative expenses. 
Operating statistics include such items as car-miles, revenue-ton-
miles, and gross ton-miles. The reports are used by the Board, other 
Federal agencies, and industry groups to monitor and assess railroad 
industry growth, financial stability, traffic, and operations, and 
to identify industry changes that may affect national transportation 
policy. Information from this report is also entered into the 
Board's Uniform Rail Costing System (URCS), which is a cost 
measurement methodology. URCS, which was developed by the Board 
pursuant to 49 U.S.C. 11161, is used as a tool in rail rate 
proceedings, in accordance with 49 U.S.C. 10707(d), to calculate the 
variable costs associated with providing a particular service. The 
Board also uses this information to more effectively carry out other 
of its regulatory responsibilities, including: acting on railroad 
requests for authority to engage in Board-regulated financial 
transactions such as mergers, acquisitions of control, and 
consolidations, see 49 U.S.C. 11323-11324; analyzing the information 
that the Board obtains through the annual railroad industry waybill 
sample, see 49 CFR part 1244; measuring off-branch costs in railroad 
abandonment proceedings, in accordance with 49 CFR 1152.32(n); 
developing the ``rail cost adjustment factors,'' in accordance with 
49 U.S.C. 10708; and conducting investigations and rulemakings.
    Information from certain schedules contained in these reports is 
compiled and published on the Board's Web site, http://www.stb.dot.gov. Information in these reports is not available from 
any other source.

[FR Doc. 2015-15402 Filed 7-7-15; 8:45 am]
 BILLING CODE 4915-01-C