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 Federal  Communications  Commission  DA  02-  3562 
 Before  the  Federal  Communications  Commission 
 Washington,  D.  C.  20554 


 In  the  matter  of 
 Financial  Accounting  Standards  Board 
 Statement  of  Financial  Accounting  Standards  No.  143,  Accounting  for  Asset 
 Retirement  Obligations 


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 WCB/  Pricing  02-  35 


 ORDER 
 Adopted:  December  20,  2002  Released:  December  20,  2002 
 By  the  Chief,  Wireline  Competition  Bureau: 
 1.  In  June  2001,  the  Financial  Accounting  Standards  Board  (FASB)  1  adopted  Statement  of  Financial  Accounting  Standards  No.  143,  Accounting  for  Asset  Retirement  Obligations  (SFAS  143). 
 SFAS  143  requires  companies  to  record  liabilities  for  asset  retirement  obligations  at  fair  value  in  the  period  that  the  obligation  is  incurred  and  to  increase  the  liability  over  the  life  of  the  related  asset  through 
 periodic  charges  to  expense.  The  fair  value  of  the  retirement  obligation  is  also  capitalized  as  part  of  the  carrying  value  of  the  asset  and  is  depreciated  over  the  remaining  life  of  the  asset.  This  accounting  is 
 followed  only  when  the  company  determines  that  it  has  an  actual  legal  obligation  associated  with  an  asset  retirement. 


 2.  In  a  letter  dated  December  4,  2002,  BellSouth  Corporation  notified  the  Commission  that  it  would  adopt  SFAS  143  for  financial  reporting  purposes  beginning  January  1,  2003,  as  required  by  SFAS 
 143.  2  BellSouth  states  that  it  does  not  plan  to  adopt  the  new  standard  for  the  Commission’s  regulatory  accounting  purposes,  however,  because  it  believes  the  new  accounting  required  in  SFAS  143  conflicts 
 with  the  Commission’s  accounting  rules  prescribed  in  Part  32.  3 
 3.  The  Commission’s  rules  do  not  provide  for  capitalization  of  an  asset  and  recognition  of  a  liability  for  asset  retirement  obligations.  Instead,  the  Commission’s  rules  account  for  the  cost  of  asset 


 retirements  as  part  of  the  net  salvage  estimates  included  in  the  calculation  of  depreciation  rates,  and  under  §32.3100(  c)  4  costs  associated  with  plant  removal  are  charged  to  Account  3100,  Accumulated 


 1  The  Financial  Accounting  Standards  Board  is  the  authoritative  standard  setting  body  responsible  for 
 accounting  and  disclosure  practices  to  be  used  for  published  financial  statements  in  the  American  business  community. 


 2  Letter  from  Mary  L.  Henze,  Executive  Director,  Federal  Regulatory  Affairs,  BellSouth,  to  William  Maher, 
 Chief,  Wireline  Competition  Bureau,  FCC  (December  3,  2002).  3 
 47  C.  F.  R.  Part  32.  4 
 47  C.  F.  R.  §  32.  3100(  c). 
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 Federal  Communications  Commission  DA  02-  3562 
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 depreciation,  rather  than  charging  them  to  a  liability  account.  Moreover,  the  Commission’s  accounting  rules  and  prescribed  depreciation  rates  include  the  cost  of  plant  removal  in  depreciation  whether  or  not  an 
 actual  legal  obligation  exists.  The  accounting  required  by  SFAS  143,  therefore,  is  not  only  inconsistent  with  the  Commission’s  accounting  rules,  but  its  implementation  also  could  require  revision  of  prescribed 
 depreciation  rates. 
 4.  It  is  the  Commission’s  policy  to  incorporate  changes  in  generally  accepted  accounting  principles  into  its  regulatory  accounting,  unless  the  changes  conflict  with  its  regulatory  objectives.  5 


 Section  32.16  of  the  Commission’s  rules,  Changes  in  Accounting  Standards,  provides  for  automatic  adoption  of  new  FASB  standards  unless  the  Commission  notifies  carriers  that  a  new  standard  should  not 
 be  adopted  within  90  days  after  receiving  notification.  6  After  reviewing  SFAS  143,  we  conclude  that  its  adoption  for  federal  accounting  purposes  would  conflict  with  the  Commission’s  current  accounting  rules. 
 Accordingly,  we  are  notifying  carriers  that  they  shall  not  adopt  SFAS  143  for  Part  32  federal  accounting  purposes  unless  the  Commission  specifically  requires  the  adoption  of  SFAS  143  accounting  in  the  future. 


 5.  ACCORDINGLY,  IT  IS  ORDERED,  pursuant  to  Section  4(  i),  4(  j),  and  220  of  the  Communications  Act  of  1934,  as  amended,  47  U.  S.  C.  §§  154  (i),  154(  j),  and  220,  section32.16  of  the 
 Commission’s  rules,  47  C.  F.  R.  §32.16,  and  the  authority  delegated  pursuant  to  0.91  and  0.291  of  the  Commission’s  rules,  47  C.  F.  R.  §§  0.91,  0.291,  that  all  subject  carriers  are  notified  that  they  shall  not 
 adopt  SFAS  143  for  federal  accounting  purposes. 


 FEDERAL  COMMUNICATIONS  COMMISSION 


 William  F.  Maher,  Jr.  Chief,  Wireline  Competition  Bureau 


 5  Revision  of  the  Uniform  System  of  Accounts  for  Telephone  Companies  to  Accommodate  Generally 
 Accepted  Accounting  Principles,  CC  Docket  No.  84-  469,  Report  and  Order,  50  F.  R.  48408  (November  25,  1985).  6 
 47  CFR  §  32.  16. 
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