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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Federal Communications Commission Washington, D.C. 20554 In reply refer to: RAO Letter 22 Released: June 17, 1993 June 10, 1993; Responsible Accounting Officers: Re: Uniform Accounting for Postemployment Benefits in Part 32 The purpose of this letter is to provide guidance with respect to adopting Statement of Financial Accounting Standards No. 112 (SFAS-112), "Employers' Accounting for Postemployment Benefits" in Part 32, Uniform System of Accounts for Telecommunications Companies. SFAS-112 was issued by the Financial Accounting Standards Board (FASB) in November 1992, and covers accounting for benefits listed in paragraphs 4 and 5 of the Statement. It requires the accrual method of accounting for these benefits instead of the pay as you go method and is mandatory for fiscal years beginning after December 15, 1993, although the FASB encourages earlier implementation. Therefore, to be in compliance with generally accepted accounting principles (GAAP), companies must account for postemployment benefits on the accrual basis on or before January 1, 1994. The Ameritech Operating Companies (Ameritech) and US West Communications, Inc. (US West) on December 22, 1992, and February 22, 1993, respectively, filed notices of intent to adopt SFAS-112. These notices were filed pursuant to Section 32.16 of the Commission's rules, which requires carriers to apply new standards adopted by the FASB and provides for automatic Commission approval unless the Commission notifies carriers otherwise within 90 days after receiving a notice. We allowed Ameritech to adopt SFAS-112 for regulatory purposes under the automatic approval provision of  32.16. We did not object to Ameritech's notice because the carrier was adopting SFAS-112 pursuant to the requirements set forth in SFAS-112 and was doing so at the same time it was adopting SFAS- 112 for financial reporting purposes. We denied the US West notice, however, in a letter dated April 26, 1993, because the US West proposal requested permission to use a three year phase-in instead of the flash-cut approach that is required by SFAS-112. To avoid any confusion that could occur as a result of the above actions, this letter provides directions for adoption of SFAS-112. Carriers that have not yet adopted SFAS-112 are required to do so under the provisions of  32.16. Timing of Adoption. Carriers will adopt SFAS-112 for regulatory accounting purposes using the same effective date they use for financial reporting purposes, but no later than January 1, 1994. Notification. Each carrier shall file a notice of intent to adopt SFAS-112 90 days prior to adopting the standard, with October 1, 1993, being the last day to file notice in order to meet the January 1, 1994, mandatory adoption date. This notice shall provide us with the interstate revenue requirement impact for the current year and a projection for the next three years. An example of the format to be used in making this revenue requirement filing is attached. Accounts to be Utilized. Carriers shall use the following accounts to record entries related to SFAS-112. 1. Catch-up Entry. To record the effects of the catch-up entry, carriers should charge Account 6728, Other general and administrative, and credit Account 4310, Other long-term liabilities. 2. Cash payments. Cash payments made during the year for postemployment benefits will be charged to Account 6728, Other general and administrative, for all items not specifically required to be charged to the expense matrix, pursuant to  32.5999(f). The payroll related postemployment cash payments currently subject to the Expense matrix requirements in  32.5999(f) shall continue to be recorded through the matrix. 3. Annual Liability Adjustment. The postemployment liability recorded in Account 4310, Other long term liabilities, will be adjusted at least annually based on claims data with contra entries to Account 6728, Other general and administrative. This letter is issued pursuant to authority delegated under Section 0.291 of the Commission's Rules, 47 C.F.R.  0.291. Applications for review under Section 1.115 of the Commission's Rules, 47 C.F.R.  1.115, must be filed within 30 days of the date of this letter. See 47 C.F.R.  1.4(b)(2). Sincerely, Kenneth P. Moran Chief, Accounting and Audits Division Common Carrier Bureau ATTACHMENT CARRIER __________________ ESTIMATED INTERSTATE REVENUE REQUIREMENT IMPACT RESULTING FROM IMPLEMENTATION OF SFAS 112 (POSTEMPLOYMENT BENEFITS) (in Millions) 1994 1995 1996 1997 1. SFAS No. 112 Amounts 2. Pay-As-You Go Amounts 3. Incremental Expense 4. Imcremental Revenue Requirement