Oil Pipeline Uniform Accounting Regulations (C.R.C., c. 1058)

Regulations are current to 2017-11-20

Equalization of Maintenance Expenses

 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 73 (Maintenance Expense Equalization) and credited to account 610-7 or 710-7 (Equalization — Plant);

  • (c) the excess of a budgeted expense over an actual monthly expense shall be debited to account 610-7 or 710-7 (Equalization — Plant) and credited to account 73 (Maintenance Expense Equalization); and

  • (d) at the end of the fiscal year, the balance in account 73 (Maintenance Expense Equalization) shall be transferred to account 610-7 or 710-7 (Equalization — Plant).

Depreciation

General

 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 d’amortissement par catégorie)

service life

service life means the period of time between the placement of plant in service and its retirement for accounting purposes; (durée d’utilisation)

service value

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

  •  (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) Individual 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.

  •  (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 Board 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.

  • SOR/86-999, s. 9.

Depreciable Assets

 All plant accounts, with the exception of accounts 101, 151 and 171 (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.

Depreciation Charges

  •  (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 Board, 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 of 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 30 (Transportation Plant) or account 38 (Transportation Plant Leased to Others) shall be debited to account 414 (Depreciation).

  • (7) Depreciation on assets included in account 34 (Other Plant) shall be debited to account 412 (Other Expenses).

  • SOR/86-999, s. 10.

Rates of Depreciation

  •  (1) A separate depreciation rate shall be used in computing depreciation charges for each group of plant accounts, each plant account or each group of assets within a plant account.

  • (2) In determining the rate of depreciation, consideration shall be given to all relevant factors including variations in use, increasing obsolescence or inadequacy.

  • (3) Each depreciation rate used shall be approved by the Board but where no rate has previously been approved for any class of plant, an interim rate as estimated by the company shall be used.

  •  (1) As soon as the information can be assembled, a company shall file with the Board depreciation rates estimated to be appropriate for each group of plant accounts, each plant account or each group of assets within a plant account.

  • (2) The rates referred to in subsection (1) shall be based on the service value and estimated service life of plant, as developed by a study of the company’s history and experience and such engineering and other information as may be available with respect to future operating conditions.

  • (3) The rates referred to in subsection (1) shall be established to produce a charge for depreciation equal to the sum of the amounts that would otherwise be chargeable as depreciation for each of the various classes of plant included in a group of plant accounts, for each plant account or for each group of assets within a plant account.

  • (4) The rates referred to in subsection (1) may be developed by a company by the method deemed most appropriate for the portrayal of the depreciation experienced and, when filed, shall be accompanied by a statement showing their bases and the methods employed in their computation.

  • (5) A company shall, at any time, upon direction of the Board, conduct a study on the suitability of depreciation rates in use in the light of the company’s history and available engineering data, and shall submit to the Board for approval a report of the results of such study together with recommendations for any desired changes in depreciation rates.

  •  (1) Where, in the opinion of a company, depreciation rates which have been filed with the Board are no longer applicable, the company shall file revised rates with the Board for approval.

  • (2) Where a company acquires plant for which no depreciation rates have been approved by the Board, the company shall immediately compile and submit to the Board its estimate of the appropriate depreciation rates, developed in accordance with the provisions of sections 53 and 54.

Accumulated Depreciation

  •  (1) Accumulated depreciation shall be subdivided to show separately the amount applicable to

    • (a) each group of plant accounts,

    • (b) each plant account, or

    • (c) each group of assets within a plant account,

    for which a separate weighted average rate of depreciation has been established.

  • (2) Where the amount is material, accumulated depreciation applicable to the assets in one depreciation group shall not be transferred by a company to another depreciation group without the approval of the Board.

Plant Records

  •  (1) A company shall keep records of depreciable plant and plant retirements in sufficient detail to show the service life of plant that has been retired and to permit the service life of plant to be estimated by the use of the mortality method or other appropriate method.

  • (2) The records referred to in subsection (1) shall reflect, for each group of depreciable plant in respect of which a separate depreciation rate has been established, the percentage of the value of salvage from plant retired from that group.

  • (3) Where the amount is material, assets shall not be transferred from a group of plant accounts, plant account or group of assets within a plant account to another group of plant accounts, plant account or group of assets within a plant account without the approval of the Board.

 
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