Record here the cost of securities and other collectible obligations acquired for the purpose of temporarily investing cash, other than those issued by the United States Government or associated companies. This account shall be charged or credited for discount or premium to be amortized to profit and loss account 83 Interest Income.

1220 Accounts Receivable-U.S. Government.

Record here amounts due on open account with the United States Government. The balances in this account shall be maintained in such fashion as will clearly and separately identify service mail pay receivables, subsidy receivables and other than mail transportation receivables.

settled through airline clearing houses or with individual carriers.

(b) Amounts payable, includible in account 2030 Collections as AgentTraffic shall not be credited to this account.

1250

Notes and Accounts ReceivableAssociated Companies.

Record here gross amounts due from associated companies including traffic accounts receivable, which are settled currently. Balances payable to associated companies shall not be offset against amounts carried in this account. Balances with associated companies which are not normally settled currently shall not be included in this account but in balance sheet account 1510 Investments in Associated Companies. 1260 Notes and Accounts Receivable— Company Personnel.

Record here amounts due from officers and employees of the air carrier. 1280 Notes and Accounts ReceivableOther.

Record here notes receivable and accounts due from others, which are to be settled currently, not provided for in accounts 1220 to 1260, inclusive.

1290 Reserve for Uncollectible Accounts.

(a) Record here accruals for estimated losses from uncollectible accounts.

(b) All accounts against which reserves have been established shall be examined at least annually for the purpose of redetermining the basis of accruals to be applied to subsequent accounting periods and the reasonableness of reserves already provided.

1310 Flight Equipment Expendable Parts.

(a) Record here the cost of flight equipment replacement parts of a type which ordinarily would be recurrently expended and replaced rather than repaired and reused. The cost of rotable parts and assemblies of material value which ordinarily are repaired and reused and possess a service life approximating that of the primary property types to which related shall not be recorded in this account but in balance sheet account 1608 Flight Equipment Rotable Parts and Assemblies. For purposes of identifying rotable parts and assemblies of insignificant unit value which may be included in this account,

a reasonable maximum unit value limitation may be established.

(b) Costs paid by the air carrier such as transportation charges and customs duties; excise, sales, use and other taxes; special insurance; and other charges applicable to the cost of flight equipment expendable parts shall be charged to this account when they can be definitely allocated to specific items or units of property. If such costs cannot be so allocated, or if of minor significance in relation to the cost of such property, the amounts thereof may be charged to balance sheet account 1890 Other Deferred Charges, and cleared either by a suitable "loading charge" as the parts are used or by current charges to appropriate expense or property accounts: Provided, That the method of application does not cause material distortion in operating expenses from one accounting period to another.

(c) Reusable parts recovered in connection with construction, maintenance, or retirement of property and equipment shall be included in this account at fair and reasonable values but in no case shall such values exceed original cost. Recoveries of normally repairable and reusable parts of a type for which losses in value may be covered on a practical basis through valuation reserve provisions shall be included in this account on an original cost basis. Scrap and nonusable parts, expensed from this account and recovered, shall be included at net amounts realizable therefrom with contra credit to the expense accounts initially charged.

(d) Any losses sustained or gains realized upon the abandonment or other disposition of flight equipment expendable parts shall be taken up as capital gains or losses in the periods in which sustained or realized. (See balance sheet account 1311.)

(e) Items in this account shall be charged to appropriate expense accounts as issued for use. Profit and loss on sales of inventory items as a routine service to others shall be included in profit and loss accounts 14 General Service Sales Associated Companies, or 16 General Service Sales-Outside, and the parts sold shall be removed from this account at full cost.

(f) Subaccounts shall be established within this account for the separate recording of each class or type of flight equipment expendable repair parts.

1311 Obsolescence and Deterioration Reserves-Expendable Parts.

(a) Accruals shall be made to this account when reserves are established for losses in the value of expendable parts. The accruals to this account shall be made by charges to profit and loss account 73 Provisions for Obsolescence and Deterioration-Expendable Parts. Records shall be maintained in sufficient detail to permit association of the reserves with each class or type of expendable parts.

(b) The accruals to this account shall be based upon a predetermination by the air carrier of that portion of the total inventory of each class and type of expendable parts against which a reserve for loss is to be accrued. Expendable parts issued for use in operations shall be charged to operating expenses as issued and shall not be charged to this account. If at the end of any calendar year the amount of the reserve exceeds the product of the applicable inventory for the year determined consistently on a year-end or average basis, and the sum of the standard percentage accrual rates for all prior years including the current, the reserve shall be adjusted downward by the amount of the excess. Such adjustments shall be charged to this account and credited to profit and loss account 73 Provisions for Obsolescence and Deterioration-Expendable Parts.

(c) Where changing conditions necessitate a revision or adjustment in rates of accrual, such revision or adjustment shall be made applicable to current and subsequent accounting periods and shall not be applied retroactively to prior accounting periods. Following retirement of airframe or aircraft engine types to which related, any balance remaining in this account shall be offset against related balances carried in balance sheet account 1310 Flight Equipment Expendable Parts and the net cleared to profit and loss account 81 Capital Gains and Losses.

(d) In accordance with the provisions of section 22(d) or 32(d), as applicable, each air carrier shall file with the Civil Aeronautics Board a statement fully describing its plans of accounting for reserves for obsolescence and deterioration of expendable parts. The required statement shall indicate for each class or type of parts the predetermined level of the inventory against which a reserve is being accrued and shall fully explain the

bases of the estimated losses and the rate of reserve accrual.

[ER-327, 26 F.R. 4222, May 16, 1961, as amended by ER-524, 32 F.R. 20770, Dec. 23, 1967]

1330 Miscellaneous Materials and Supplies.

(a) Record here the cost of unissued and unapplied materials and supplies, including motor fuels and lubricating oils, held in stock such as unissued shop materials, expendable tools, stationery and office supplies, passenger service supplies, and restaurant and food service supplies.

(b) This account shall not include flight equipment replacement parts. Such items shall be recorded, as appropriate, in balance sheet account 1310 Flight Equipment Expendable Parts or 1608 Flight Equipment Rotable Parts and Assemblies.

(c) Materials and supplies held in small supply and purchased currently may be charged to appropriate expense accounts when purchased. Costs paid by the air carrier such as transportation charges and customs duties; excise, sales, use and other taxes; special insurance; and other charges applicable to the cost of materials and supplies shall be charged to this account when they can be definitely allocated to specific items or units of property. If such costs cannot be allocated, or if of minor significance in relation to the cost of such property, the amounts thereof may be charged to balance sheet account 1890 Other Deferred Charges, and cleared either by a suitable "loading charge" as the parts are used or by current charges to appropriate expense or property accounts: Provided, That the method of application does not cause material distortion in operating expenses from one accounting period to another.

(d) Reusable materials and supplies recovered in connection with the construction, maintenance, or retirement of property and equipment shall be included in this account at fair and reasonable values but in no case shall such values exceed original cost. Scrap and nonusable materials and supplies, expensed from this account and recovered, shall be included at net amounts realizable therefrom with contra credit to the expense accounts initially charged.

(e) A reserve for inventory adjustment applicable to materials and supplies is prohibited. Items in this account shall be charged to appropriate expense ac

(a) Record here net investments in associated companies together with advances, loans, and other amounts not settled currently. Balances receivable from and payable to different associated companies shall not be offset.

(b) This account shall be subdivided by all air carrier groups as follows: [ER-546, 33 F.R. 18697, Dec. 18, 1968] 1510.1 Investments in Subsidiary Companies.

Record here the cost of investments in subsidiary companies (except as provided in section 5-2(c)) plus the equity in undistributed earnings or losses since acquisition. In the event dividends are declared by such companies, the air carrier shall credit this account for its share in dividends declared and debit balance sheet account 1250 Notes and Accounts Receivable-Associated Companies. This cost of such investments at date of acquisition and (2) the equity in undistributed earnings or losses since aquisiaccount shall separately state: (1) The tion. Such accounting method shall not apply to investments in nontransport foreign subsidiary companies.

[ER-546, 33 F.R. 18697, Dec. 18, 1968]

1510.2 Investments in Other Associated Companies.

Record here the cost of investments in associated companies other than subsidiary companies. Cost shall represent the amount paid at date of acquisition without regard to subsequent changes in the net assets through earnings or losses of such associated companies, except as provided in section 5-2(c).

(c) In accordance with the provisions of section 22(d) or 32(d), as applicable, a statement shall be filed with the Civil Aeronautics Board which fully explains the procedures for accounting for investments in subsidiary and other associated companies, including change in status from associated to subsidiary company, or vice versa.

[ER-546, 33 F.R. 18697, Dec. 18, 1968]

1520 Advances to Nontransport Divi

sions.

(a) Record here investments in and advances (including amounts due on open accounts) to nontransport divisions for which separate records and books of account are maintained.

(b) Three subaccounts shall be maintained for each nontransport division: (1) net investment; (2) current net profit or loss; and (3) current accounts receivable or payable between the air carrier and the nontransport division.

(c) Each nontransport division shall be accounted for separately in net amounts receivable which shall be included in this account or net amounts payable which shall be included in balance sheet account 2245 Advances From Nontransport Divisions.

1530 Other Investments and Receivables.

Record here notes and accounts receivable not due within one year and investments in securities issued by others. Securities held as temporary cash investments shall not be included in this account but in either balance sheet account 1110 United States Government Securities or 1120 Other Temporary Cash Investments as appropriate. Investments in and receivables from associated companies which are not settled currently shall be included in balance sheet account 1510 Investments in Associated Companies.

1540 Special Funds-Self-Insurance.

Record here funds segregated as part of a plan for the operation of a reserve for self-insurance.

(a) Record here the total cost to the air carrier of airframes of all types and classes, as provided in section 5-3, together with the full complement of instruments, appurtenances and fixtures comprising complete airframes including accessories necessary to the installation of engines and flight control and transmission systems, except as specifically provided otherwise in accounts 1602 to 1607, inclusive and excluding main and tail rotor heads of rotary wing aircraft.

(b) Airframes designed to permit multiple payload configurations shall be recorded in this account at the total cost of the maximum complement of instruments, appurtenances and fixtures used in the air carrier's operations. 1602 Aircraft Engines.

Record here the total cost to the air carrier of complete units of aircraft engines of all types and classes, as provided in section 5-3, together with a full complement of accessories, appurtenances, parts and fixtures comprising fully assembled engines as delivered by the engine manufacturer ready for operation in test but without the accessories necessary to its installation in airframes. 1603 Aircraft Propellers.

Record here the total cost to the air carrier of installed aircraft propellers and rotary wing aircraft rotors, and other similar assemblies, of all types and classes, pursuant to section 5-3. Values recorded in this account shall not be changed with the substitution of parts and assemblies except as provided by section 5-3(e) (2).

1604 Aircraft Communications and Navigational Equipment.

Record here the total cost to the air carrier of installed airborne communica

tions and electronic navigational equipment, and other similar assemblies, of all types and classes pursuant to section 5-3. Values recorded in this account shall not be changed with the substitution of parts and assemblies except as provided by section 5-3(e) (2).

1606 Miscellaneous Flight Equipment.

Record here the total cost to the air carrier of complete units of miscellaneous airborne flight equipment of all types and classes, not otherwise provided for in accounts 1601 through 1604, inclusive, as provided in section 5-3, such as miscellaneous flight crew equipment, life rafts, etc.

1607_ Improvements to Leased Flight Equipment.

Record here the total cost to the air carrier incurred in connection with modification, conversion or other improvements to leased flight equipment, as provided in section 5-3.

1608 Flight Equipment Rotable Parts and Assemblies.

(a) Record here the total cost to the air carrier of all spare instruments, parts, appurtenances and subassemblies related to the primary components of flight equipment units provided for in balance sheet accounts 1601 through 1607, inclusive, as provided in section 5-3. This account shall include all parts and assemblies of material value which are rotable in nature, are generally reserviced or repaired, are used repeatedly and possess a service life approximating that of the property type to which they relate. Items of an expendable nature which generally may not be repaired and reused, shall not be recorded in this account but in account 1310 Flight Equipment Expendable Parts. Except for recurrent service sales, flight equipment parts recorded in this account shall be accounted for in accordance with the instructions related to property and equipment generally and shall not be charged to operating expense as retired. Profit or loss on sales of parts as a routine service to others shall be included in profit and loss account 14 General Service Sales Associated Companies, or 16 General Service Sales-Outside, and parts sold shall be removed from this account at full cost irrespective of any reserve for depreciation which has been provided.

(b) This account shall be subdivided as follows by Group II and Group III air carriers:

1608.1

1608.5 1608.9

Airframe Parts and Assemblies.

Aircraft Engine Parts and Assemblies. Other Parts and Assemblies. 1609 Flight Equipment.

This classification is established only for purposes of control by the Civil Aeronautics Board and shall reflect the total cost of property and equipment of all types and classes used in the in-flight operations of aircraft.

1619 Reserve for Depreciation—Flight Equipment.

(a) Record in accounts 1611 through 1618, inclusive, accruals for depreciation of flight equipment as provided in section 5-4.

(b) As set forth in section 3, Chart of Balance Sheet Accounts, separate accounts shall be established for depreciation reserves to parallel balance sheet accounts 1601 through 1608 established for recording the cost of flight equipment.

1629 Flight Equipment Airworthiness Reserves.

(a) Record here accumulated provisions for overhauls of flight equipment as provided in section 5-4 (f) and (g).

(b) Separate subaccounts shall be established for recording accumulated provisions related to each type of airframe and aircraft engine, respectively.

NOTE: At the option of the air carrier the number "2629" may be assigned to this account for accounting purposes. However, for purposes of reporting on CAB Form 41, the balance in this account shall be reported under account "1629".

1630 Passenger Service Equipment.

Record here the total cost to the air carrier of full complements of equipment assigned to aircraft or active line operations as opposed to items held in stock for servicing passengers, as provided in section 5-3, such as broilers, bettleware, dishes, food boxes, thermos jugs, blankets, first aid kits, etc. Spare items shall be carried in balance sheet account 1330 Miscellaneous Materials and Supplies and shall be charged directly to expense upon withdrawal from stock for replacing original complements.