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

Date Placed in Service

• 28 (1) On the date that plant is placed in service, the company shall cease to capitalize an allowance for funds used during construction on the plant and shall compute and charge to the appropriate account an amount representing depreciation as determined under sections 49 to 57.

• (2) The date that the plant is in service, for the purpose of subsection (1), shall not be later than the first day of the month following issuance of a Leave to Open Order by the Commission.

Analogous Elements of Cost

• 29 (1) Elements of cost analogous to those defined in sections 16 to 27 may be included in the cost of plant.

• (2) The costs incurred in disposing of material excavated may be included as an element referred to in subsection (1).

Additions to Plant

General

• 30 (1) For the purposes of these Regulations, additions to plant shall include

  • (a) increases in plant through purchase or construction of additional plant,

  • (b) the replacement of existing plant units, and

  • (c) the capitalization of major renewals to plant

  and, subject to the approval of the Commission, may include substantial improvements made to existing plant in order to make such plant more useful, more efficient, more durable or of greater capacity than the plant was when it was originally placed in service.

• (2) The cost of additions referred to in subsection (1) shall be debited to the appropriate plant accounts.

• (3) Typical elements of construction are set out in sections 16 to 27 and section 29.

• (4) All expenditures relevant to new construction shall be capitalized.

• (5) After the completion of initial construction, only the costs directly connected with additions or replacements of plant shall be capitalized.

• (6) All property charged to plant accounts shall consist of plant units or minor items of plant.

Plant Units

• 31 (1) Each company shall establish its own list of plant units for each plant account.

• (2) A company’s list of plant units shall be filed with and be subject to the approval of the Commission.

• (3) Subject to the approval of the Commission, the list of plant units, as filed, may be revised and amended from time to time.

• (4) The cost of an additional plant unit shall be debited to the appropriate plant account.

• (5) The book cost of a plant unit retired, whether replaced or not, shall be credited to the appropriate plant account.

• (6) Where a plant unit is replaced, the book cost of the original plant unit shall be credited to the appropriate plant account and the cost of the replacement unit shall be debited to the appropriate plant account.

Minor Items of Plant

• 32 (1) Subject to section 33, the cost of a minor item of additional plant not constituting a replacement but identified with a plant unit shall be debited to the appropriate plant account.

• (2) The cost of a minor item of plant that constitutes a replacement shall be debited to the appropriate expense account and the book cost of the minor item replaced shall not be adjusted.

Minimum Rules for Minor Items of Plant

• 33 (1) Where a minor item of plant is acquired at a cost of less than $5,000, the cost shall be debited to expense.

• (2) A company shall not

  • (a) combine unrelated items of plant for the purpose of excluding the items from the provisions of subsection (1); or

  • (b) divide expenditures made under a general plan for related items that cost $5,000 or more per item into smaller parcels for the purpose of debiting capital items to expense.

• (3) With the approval of the Commission after the filing of a request by a company, the company may, for the purpose of its accounting, adopt a limit of less than the amount set out in subsection (1) for any class of plant.

• (4) No change may be made in the amount of a limit referred to in subsection (3) except with the prior approval of the Commission.

Major Renewals

• 34 (1) In this section, cost of renewals means the aggregate of

  • (a) the cost of material, other than old parts remaining in a rebuilt plant unit, and

  • (b) the cost of labour used in the rebuilding process,

  but does not include the cost of dismantling and repairing old parts that are re-used.

• (2) Subject to subsection (3), where the cost of renewals to parts of a plant unit exceeds 50 per cent of the new replacement cost of a plant unit of the same kind and class, the plant unit shall be considered as rebuilt.

• (3) Subsection (2) does not apply to the renewal of a plant unit where the new replacement cost of that unit would not exceed $120,000.

• (4) A rebuilt plant unit shall be accounted for as an addition and the old plant unit that the rebuilt plant unit replaced shall be accounted for as retired from service.

• (5) Subject to subsection (6), the charge to the appropriate plant account for a rebuilt plant unit shall be the aggregate of

  • (a) the value of old parts remaining in the rebuilt plant unit; and

  • (b) the cost of labour and material applied.

• (6) The cost of dismantling and repairing old parts used in the renewal of plant shall be debited to maintenance expense.

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.