Gas Pipeline Uniform Accounting Regulations (SOR/83-190)

Second-Hand Plant

35 Where second-hand plant not previously owned by the company is acquired in a physical condition that necessitates extensive expenditures to bring it up to the standard required by the company, the expenditures shall be debited to the appropriate plant account.

Retirements of Plant

General

• 36 (1) Where a plant unit, whether replaced or not, is retired from pipeline operations, the book cost of the plant unit shall be credited to the appropriate plant account.

• (2) The book cost and the costs of removal of a depreciable plant unit retired and not replaced shall be debited to account 105 (Accumulated Depreciation — Gas Plant) or account 106 (Accumulated Amortization — Gas Plant), as applicable.

• (3) The net salvage value of a plant unit retired shall be credited to the accumulated depreciation or accumulated amortization account referred to in subsection (2).

• (4) Each retirement project shall be supported by subsidiary records that show separately the details thereof.

Book Cost

37 Where the book cost of any retired plant is not recorded separately, the book cost of that plant shall be its appropriate share of the book cost of the entire group in which the particular plant is located.

Salvage Value

• 38 (1) Where salvaged material is retained for use by a company, the original cost, estimated if not known, of the material, less a fair allowance for depreciation, shall be debited to account 150 (Plant Materials and Operating Supplies).

• (2) The salvage value of depreciable plant or salvaged material therefrom shall be credited to account 105 (Accumulated Depreciation — Gas Plant) or account 106 (Accumulated Amortization — Gas Plant), as applicable.

• (3) The removal costs incurred in dismantling or demolishing retired depreciable plant and in recovering salvage therefrom shall be debited to account 105 (Accumulated Depreciation — Gas Plant) or account 106 (Accumulated Amortization — Gas Plant), as applicable, except that the current cost of removing and replacing a minor item of plant in maintenance operations shall be included in the appropriate expense account.

Ordinary Retirement

• 39 (1) In respect of depreciable plant, ordinary retirement means a retirement of depreciable plant that results from causes reasonably assumed to have been anticipated or contemplated in prior depreciation or amortization provisions.

• (2) There shall be no debit or credit to income or to retained earnings for an ordinary retirement.

Extraordinary Retirement

• 40 (1) In respect of depreciable plant, extraordinary retirement means a retirement of depreciable plant that results from causes that could not reasonably have been anticipated or contemplated in previously making provision for depreciation or amortization, including such causes as fire, storm, flood, premature obsolescence or unexpected and permanent shutdown of an entire operating assembly for reasons other than ordinary wear and tear.

• (2) Where the gain or loss on an extraordinary retirement is material, the company shall inform the Regulator and shall transfer the amount of the gain or loss from account 105 (Accumulated Depreciation-Gas Plant) or account 106 (Accumulated Amortization-Gas Plant) to account 331 (Extraordinary Income) or account 341 (Extraordinary Income Deductions), as applicable.

• (3) Notwithstanding subsection (2), a company may, with the approval of the Commission, transfer all or part of the amount of a material gain or loss on an extraordinary retirement to account 279 (Other Deferred Credits) or account 171 (Extraordinary Plant Losses), as applicable, for amortization at a rate approved by the Commission.

• (4) Immaterial gains or losses resulting from extraordinary retirements shall be accounted for in the same way as ordinary retirements.

Pipeline Relocations

• 41 (1) Where a plant unit of pipeline is relocated, it shall be considered as plant retired and its book cost shall be credited to the appropriate plant account.

• (2) Where a plant unit of pipeline has been relocated, the relocated plant unit shall be considered as an addition and the cost shall be debited to the appropriate plant account.

• (3) Where a company’s pipeline or any part thereof is located in accordance with an agreement that may require the company to relocate all or part of its pipeline and the circumstances are such that the company has no reasonable alternative but to relocate more than a plant unit of pipeline, the company may, with the approval of the Commission, debit the costs of relocation to expenses for the period in which the relocation was carried out.

• (4) Where a relocation of a type referred to in subsection (3) results from action by a governmental authority, the cost of relocation may be accounted for in the manner set out in subsection (3).

Line Pipe Replacements

• 42 (1) Where a plant unit of line pipe is replaced with other pipe in the same location, a company shall debit to the appropriate plant account the cost of opening and back filling the trench together with the cost of hauling, laying and connecting the pipe, the cost of removing retired pipe from the trench and other costs of pipeline construction.

• (2) The cost of reconditioning line pipe not removed shall be accounted for as repairs and not as retirements or replacements.

• (3) Where the plant unit of line pipe referred to in subsection (1) is not replaced by new pipe in the same location, the cost of opening and back filling the trench from which the pipe is removed together with the cost of removing the pipe shall be accounted for as cost of salvage.

Other Plant

• 43 (1) Where plant is no longer required for pipeline purposes but is retained by the company, its book cost shall be transferred to account 110 (Other Plant) and the accumulated depreciation or accumulated amortization, if any, with respect thereto shall be transferred from account 105 (Accumulated Depreciation — Gas Plant) or account 106 (Accumulated Amortization — Gas Plant) to account 111 (Accumulated Depreciation — Other Plant) or account 112 (Accumulated Amortization — Other Plant), as applicable.

• (2) Where depreciable other plant included in account 110 (Other Plant) is retired or sold, the book cost, salvage and removal costs shall be recorded in account 111 (Accumulated Depreciation — Other Plant).

• (3) Where the gain or loss from the sale or retirement of depreciable other plant is material, the company shall inform the Regulator and shall transfer the amount of the gain or loss from account 111 (Accumulated Depreciation — Other Plant) or account 112 (Accumulated Amortization — Other Plant) to account 331 (Extraordinary Income) or account 341 (Extraordinary Income Deductions), as applicable.

• (4) Where the gain or loss from the sale or retirement of depreciable other plant included in account 110 (Other Plant) is not material, the company shall transfer the amount of the gain or loss from account 111 (Accumulated Depreciation — Other Plant) or account 112 (Accumulated Amortization — Other Plant) to account 319 (Other Income) or account 329 (Other Income Deductions), as applicable.

Land Retired or Sold

• 44 (1) Where land is retired or sold, account 100 (Gas Plant in Service), account 101 (Gas Plant Leased to Others), account 102 (Gas Plant Held for Future Use) or account 110 (Other Plant) shall be credited with the book cost of the land.

• (2) Where the gain or loss from the sale or retirement of land is material, the company shall inform the Regulator and shall transfer the amount of the gain or loss to account 331 (Extraordinary Income) or account 341 (Extraordinary Income Deductions), as applicable.

• (3) Where the gain or loss from the sale or retirement of land is not material, the company shall transfer the amount of the gain or loss to account 319 (Other Income) or to account 329 (Other Income Deductions), as applicable.

Maintenance

General

45 The cost of repairs recorded in the maintenance accounts for gas plant shall include

• (a) the cost of inspection to determine the repairs that are necessary;

• (b) the cost of adjusting, repairing or replacing parts; and

• (c) the cost of inspection, testing and running of parts to determine whether or not the repairs have been properly made and the repaired item is ready for service.

• 46 (1) Maintenance accounts kept in accordance with Schedule VII shall be debited with the costs of repairing and maintaining plant and shall include

  • (a) incidental costs including the construction and removal of false work in connection with maintenance;

  • (b) the cost of relocating pipeline plant where retirement accounting for units of plant is not involved;

  • (c) the cost of raising or lowering line pipe in the trench where retirement accounting for units of plant is not involved;

  • (d) the cost of repairing fences, sidewalks, driveways and streets within or adjacent to the plant;

  • (e) the cost of installing, maintaining and removing temporary facilities to prevent any interruptions in operations; and

  • (f) the cost of maintaining public improvements included in account 176 (Public Improvements).

• (2) Where employees whose pay is normally debited to operating expenses

  • (a) mow and beautify grounds and buildings,

  • (b) periodically restore seasonal features such as gardens, shrubbery and lawns, or

  • (c) clear and remove snow, ice and fallen timber,

  their pay and any other costs arising from such employment may be debited to the maintenance or operating account, at the option of the company.

Equalization of Maintenance Expenses

47 Where a company prepares a budget for its maintenance expenses for a fiscal year, the following procedure may be followed:

• (a) the actual monthly expenses shall be debited to the appropriate maintenance accounts;

• (b) the excess of an actual expense over a budgeted monthly expense shall be debited to account 275 (Gas Cost and Maintenance Equalization) and credited to the appropriate expense account;

• (c) the excess of a budgeted expense over an actual monthly expense shall be debited to the appropriate expense account and credited to account 275 (Gas Cost and Maintenance Equalization); and

• (d) at the end of the fiscal year, the balance in account 275 (Gas Cost and Maintenance Equalization) shall be transferred to the appropriate expense account.

Depreciation

General

48 In sections 49 to 57,

group system

group system means a system by which a weighted average rate of depreciation is calculated for a particular group of plant accounts, a plant account, or a group of assets within a plant account, and established in recognition of the fact that some part of the investment in a group of assets may be recovered through salvage realization and that there will be variations in the service lives of the assets constituting the group, even among assets of the same class; (système de dépréciation en groupe)

service life

service life means the period of time between the placement of plant in service and its retirement; (vie utile)

service value

service value means the book cost of plant minus the estimated net salvage value of that plant. (valeur de service)

• 49 (1) Under the group system, in the case of an ordinary retirement of an individual asset in a group of assets, the accumulated depreciation attributable to the asset shall, for the purposes of these Regulations, be considered to be equal to the cost of the asset minus any amount that may reasonably be recoverable through salvage realization, whether or not the actual service life of the asset is shorter or longer than the anticipated average service life for the group.

• (2) Assets, within a group of assets, remaining in use after reaching their average service life expectancy shall not be regarded as fully depreciated until actual retirement or until the group is fully depreciated, whichever is earlier.

• 50 (1) Charges for depreciation with respect to accounts that are classed by section 51 as being accounts covering assets that are depreciable shall be computed in conformity with the group system.

• (2) A company shall charge depreciation by using such one of the following methods as is chosen by the company and approved by the Commission for use by the company:

  • (a) the straight line method;

  • (b) the use or unit of production method;

  • (c) the diminishing value method; or

  • (d) any other systematic method consistent with generally accepted accounting principles.

Depreciable Assets

• 51 (1) All plant accounts, with the exception of accounts 410, 420, 450, 460 and 480 (Land), are classed as accounts covering assets that are depreciable and, for the purpose of the group system of depreciation accounting, depreciable asset accounts may be grouped according to the nature of the plant included in each account.

• (2) Accounts 401 (Franchises and Consents) and 402 (Other Intangible Plant) are depreciable only to the extent of items included therein that are subject to recognizable loss in value.

Depreciation Charges

• 52 (1) There shall be debited each month to expenses or other appropriate accounts and credited to the accounts for accumulated depreciation amounts that will allocate, in a systematic and rational manner, the service value of plant over its estimated service life.

• (2) Monthly depreciation charges under the straight line method shall be computed by

  • (a) applying the annual percentage rate of depreciation to the depreciation base as of the first of each month and dividing the result by 12; or

  • (b) with the prior approval of the Commission, applying the annual percentage rate of depreciation to the depreciation base at the beginning of the company fiscal year and dividing the result by 12.

• (3) Monthly depreciation charges under the use or unit of production method shall be computed by applying the appropriate rate or use or production per unit for the year to the number of units of use or production for the month.

• (4) Monthly depreciation charges under the diminishing value method shall be computed by applying the annual percentage rate to the depreciation base as of the first of each month and dividing the result by 12.

• (5) A company shall compute depreciation in accordance with subsection 28(1).

• (6) The monthly debits for depreciation of plant included in account 100 (Gas Plant in Service), account 101 (Gas Plant Leased to Others) or account 102 (Gas Plant Held for Future Use) shall be debited to account 303 (Depreciation).

• (7) Depreciation on assets included in account 110 (Other Plant) shall be debited to account 311 (Expense of Other Plant).