[Code of Federal Regulations]
[Title 7, Volume 11]
[Revised as of January 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 7CFR1735.92]

[Page 323-324]
 
                          TITLE 7--AGRICULTURE
 
    CHAPTER XVII--RURAL UTILITIES SERVICE, DEPARTMENT OF AGRICULTURE
 
PART 1735--GENERAL POLICIES, TYPES OF LOANS, LOAN REQUIREMENTS--TELECOMMUNICATIONS PROGRAM--Table of Contents
 
        Subpart I--Requirements for All Acquisitions and Mergers
 
Sec. 1735.92  Accounting considerations.

    (a) Proper accounting shall be applied to all acquisitions and 
mergers, as required by the regulatory commission having jurisdiction, 
or in the absence of such a commission, as required by RUS based on 
Generally Accepted Accounting Principles or other accounting conventions 
as deemed necessary by RUS.
    (b) If RUS determines that the plant accounts are not properly 
depreciated, the borrower should adjust its depreciation rates. 
Depending upon the characteristics of the case, commission jurisdiction 
and requirements, and similar factors, one of the following actions 
shall be taken:
    (1) In states where commission approval of depreciation rates is 
required, a covenant shall be included in the loan contract that 
requires the borrower to:
    (i) Have the consulting engineer make an original cost less 
depreciation inventory and appraisal of retained plant as part of the 
final inventory, and

[[Page 324]]

    (ii) Request commission approval of adjustments to its records on 
the basis of this inventory.
    (2) In states where commission approval is not required, informal 
discussions between RUS and the borrower may be undertaken to reach 
satisfactory voluntary adjustments. If this does not resolve the 
situation to RUS's satisfaction, a covenant similar to that in paragraph 
(b)(1)(i) of this section shall be included in the loan contract and the 
borrower shall agree to submit evidence satisfactory to the 
Administrator that it has adjusted its records on the basis of the 
inventory.