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PROFIT AND LOSS CLASSIFICATIONS--Continued
Section 7-Chart of Profit and Loss Accounts-Continued

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52, 53, 52, 53, 52, 53.

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70.

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72 Flight equipment airworthiness provisions.

72.1 Airworthiness reserve provisions-airframes.
72.2 Airworthiness reserve charges-airframes (credit)....
72.8 Airworthiness reserve provisions--aircraft engines..

72.7 Airworthiness reserve charges-aircraft engines (credit). 52, 53,
73 Provisions for obsolescence and deterioration-expendable parts.
73,1 Current provisions...

70. 73.9 Inventory decline credits.....

70. 74 Amortizatio 18.

74.1 Developmental and preoperating expenses.. 74.2 Other intangibles...

70. 75 Depreciation. 75.1 Airframes..

70. 75.2 Aircraft engines..

70. 75.3 Airframe parts..

70. 75.4 Aircraít engine parts.

70. 75.6 Other tlight equipment.

70. 75.6 Flight equipment..

70. 75.8 Maintenance equipment and hangars..

70. 75.9 General ground property.

70. 77 Uncleared expense credits.

77.8 Uncleared interchange expense credits.

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53, 69.

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53, 55, 61, 62,

63, 65, 66,

68. 52,

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78 Direct maintenance-fight equipment...
79 Applied burden Dr/Cr.

79.6 Flight equipment...
79.8 General ground property..

52 Dr, 53 Cr... 52 Dr, 53 Cr... 52 Dr, 53 Cr. 52 Dr, 53 Cr... 52 Dr, 53 Or... 52 Dr, 53 Cr.

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PROFIT AND LOSS CLASSIFICATIONS—Continued
Section 7—Chart of Profit and Loss Accounts—Continued

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NOTE: Digits to right of decimals and italicized codes established for OAB control purposes only. (80 Stat. 383, 5 U.S.C. 662) (ER-827, 26 FR. 4222, May 16, 1961 as amended by ER-437 30 F.R. 8830, July 14, 1965; ER-484, 32 F.R. 5368, Mar. 30, 1967; ER-546, 33 F.R. 18697, Dec. 18, 1968] Section 8-General

(1) Operating revenues. (i) This pri

mary classification shall include revenues (a) The profit and loss accounts are

of a character usually and ordinarily designed to reflect, through natural derived from the performance of air groupings, the elements entering into the

transportation, and net revenues from derivation of income or loss accruing to services performed incidental to the perthe proprietary interests during each ac- formance of air transportation, which counting period.

relate to services performed during the (b) The prescribed system of accounts current accounting year, and adjustprovides for the co-ordinate grouping ments of a recurrent nature applicable of all revenues and expenses in terms of to services performed in prior accountboth major natural objectives and func

ing years. (See section 2–7.) tional activities and for subdivision of

(ii) Operating revenues shall be subboth to provide varying degrees of detail classified in terms of functional activifor air carriers of differing accounting ties as provided in section 9. capacities and/or requirements.

(2) Operating expenses. (1) This (c) The detailed objective accounts primary classification shall include exestablished for each air carrier group, penses of a character usually and ordiby the dual subdivision of profit and loss narily incurred in the performance of elements in terms of both natural ob- air transportation which are attributable jectives and functional activities, are to services performed during the curset forth in section 7, Chart of Profit and rent accounting year, and adjustments of Loss Accounts.

a recurring nature attributable to sery(d) The prescribed system of accounts ices performed in prior accounting years. provides generally that profit and loss (See section 2-7.) elements shall be grouped in accordance (ii) Operating expenses shall be subwith their inherent characteristics within classified in terms of functional activithe following primary classifications: ties as provided in sections 10 and 11.

(3) Nonoperating income and expense-net. This primary classification (8100) shall include income and loss incident to commercial ventures not inherently related to the performance of the common carrier air transport services of the accounting entity; other revenues and expenses attributable to financing or other activities which are extraneous to and not an integral part of air transportation or its incidental services; and special recurrent items of a nonperiod nature.

(4) Income taxes for current period. This primary classification (9100) shall include provisions for Federal, state, local and foreign taxes which are based upon the net income of the air carrier for the current period together with refunds for excess profits credits or carry back of losses and increases or reductions of income taxes of prior years of a magnitude which will not distort net income of the current accounting year. Income taxes applicable to special income credits or debits recorded in profit and loss classification 9700 Special Items, and other material income tax items not allocable to income of the current accounting year, shall not be included in this classification but in profit and loss classification 9700 Special Items.

(5) Special items. This primary classification (9700) shall include extraordinary credits and debits, exclusive of ordinary adjustments of a recurring nature, that are of suficient magnitude to materially distort the total operating revenues or total operating expenses and permit misleading inferences to be drawn therefrom (see sec. 2–7). (ER-327, 26 F.R. 4222, May 16, 1961 as amended by ER-437, 30 F.R. 8830, July 14, 1965) Section 9-Functional Classification

Operating Revenues 3900 Transport Revenues.

This classification is prescribed for all air carrier groups and shall include all revenues from the air transportation of traffic of all classes. It shall consist of the following subclassifications: 3100 Scheduled Services.

This subclassification shall include revenues from the transportation by air of traific between points prescribed in certificates of public convenience and necessity issued by the Civil Aeronautics Board and held by the air carrier, for the transportation of individual passengers or cargo shipments (as opposed to charter of aircraft) on flights

performed pursuant to published schedules, filled with the Civil Aeronautics Board, and extra section or other flights performed as an integral part of the air carrier's published flight schedules. 3200 Nonscheduled Services.

This subclassification shall include revenues from the transportation by air of traffic between points not prescribed in certificates of public convenience and necessity issued by the Civil Aeronautics Board and held by the air carrier; from the performance of aircraft charter services; and from the performance of other air transportation services not constituting an integral part of services performed pursuant to published schedules fled with the Civil Aeronautics Board. Flights performed as extra sections of flights performed pursuant to published schedules shall not be included in this subclassification but in subclassification 8100 Scheduled Services. 4900 Nontransport Revenues.

This classification is prescribed for all air carrier groups and shall include all revenues, grants or aids for providing air transportation facilities, but not as direct payment for the carriage of traffic, and all revenues and fees, less expenses directly associated with the performance of services which grow from and are incidental to air transportation services performed by the air carrier. It shall consist of the following subclassifications: 4100 Federal Subsidy.

This subclassification shall include revenues from the United States Government as direct grants or aids for providing alr transportation facillties. It shall not include revenues from the carriage of traffic or the performance of other specific contractual services for the United States Government. 4600 Incidental Revenues-Net.

(a) This subclasslication shall include net revenues from services which grow from and are incidental to the air transportation services performed by the air carrier.

(b) This subclassification shall include revenues, less related expenses, from only those services which are performed as an incidental adjunct to air transportation servo ices and which provide improved utilization of plant and organization required for the performance of air transportation services. Revenues and expenses related to services of a magnitude or scope beyond an incidental adjunct to air transportation services shall not be included in this subclassification. Revenues and expenses applicable to such services shall be included in profit and loss classification 8100 Nonoperating Income and Expense-Net, and the accounting modified to conform with that of a nontransport division whether or not the service is organized as a nontransport division.

(c) This subclassification shall embrace (b) This function shall include the all expense items directly identified with

cost of direct labor, materials, and outparticular incidental services performed as well as amounts representing increases in

side services and maintenances overhead costs incurred in common with the air trans

or other costs specifically associated with port service, to the extent such increases re

maintenance operations regardless of the sult from the added incidental services, as

location at which incurred. well as a pro rata share of the costs incurred (c) his function shall not include by the air carrier in operating facilities which costs incurred in the construction, imare used jointly with others. As a general rule, this subclassification shall not include

provement, or modification of property those costs, other than joint facilities costs,

and equipment even when necessitated which would remain as an essential part of to meet new or changed operating or the air transport services the incidental

safety standards. Such costs shall be service were terminated. (d) In accordance with the provisions of

charged to appropriate property and section 22(d) or 32(d), as applicable, each

equipment accounts. air carrier shall file with the Civil Aeronau- (d) Costs incurred by aircraft hantics Board a statement of accounting pro- dling personnel in visual inspection, cedures setting forth methods used in

minor check and servicing of aircraft, assigned or prorating expenses between incidental services and transport operations.

while in line service, shall not be included (ER-327, 26 F.R. 4222, May 18, 1961, es

in this function when performed as an amended by ER-483, 32 F.R. 2810, Feb. 11, incidental routine during the normal 1967]

productive use of aircraft but shall be Section 10-Functional Classifica

included in function 3900 General Serytion-Operating Expenses of

ices and Administration. Group | Air Carriers

(e) Each Gro'll, I air carrier shall

maintain the following subfunctions: 5100 Flying Operations.

5200 Direct Maintenance. (a) This function shall include ex

a. This subfunction shall include the costs penses incurred directly in the in-flight

of labor, materials and outside services conoperation of aircraft and expenses

Bumed directly in periodic maintenance attaching to the holding of aircraft and

operations and the maintenance and repair aircraft operational personnel in readi- of property and equipment, of all types and ness for assignment to an in-flight status. classes, regardless of the location at which

(b) This function shall not include incurred, exclusive of costs specifically idenexpenses incurred in repairing, servicing

tified with maintenance of property and or storing aircraft, expenses incurred on

equipment carried in balance sheet accounts

1634 Maintenance and Engineering Equipthe ground in protecting and controlling

ment and 1640.1 Maintenance Buildings and the in-flight movement of aircraft, or

Improvements which shall be included in the compensation of ground personnel subfunction 5300 Maintenance Burden. and other expenses incurred in sched- b. The cost of direct labor, materials and uling or preparing aircraft or aircraft supplies, as well as outside repairs, used in operational personnel for flight assign- the maintenance and repair of property and ment. Such expenses shall be included equipment shall be recorded on running Job in function 5400 Maintenance or func

orders or tickets covering repairs and periodic tion 6900 General Services and

inspections except servicing. Where a num

ber of like items are maintained on a group Administration,

basis, it will be necessary to maintain only 5400 Maintenance.

one job order for each group.

c. When supervisory personnel such (a) This function shall include all ex

crew chiefs, inspectors and foremen penses, both direct and indirect, specifi- engaged in direct labor in connection with cally identifiable with the repair and equipment maintenance, a proportionato upkeep of property and equipment as part of their salaries and wages shall be may be required to meet operating and charged to the appropriate direct labor

accounts. The cost of transporting property safety standards; in inspecting or check

to and from shops for repair and mainteing property and equipment in accord

nance shall be included as a part of the cost ance with prescribed operational stand

of the materials and supplies used in the ards; and in polishing or cleaning prop- repair or maintenance of such property and erty and equipment when such polishing equipment. Transportation charges, cusor cleaning is not an incidental routine toms and duties, etc; shall be included in in connection with the normal productive the cost of repairs and maintenance operause of property and equipment.

tions when made by outside parties.

ag

are

5300 Maintenance Burden.

the provisions of section 22(d) or 32(d), as a. This subfunction shall include all over- applicable, each air carrier shall file with head or general expenses which are specifi

the Civil Aeronautics Board a statement in cally identified with activities involved in

which procedures followed in allocating periodic maintenance operations and the

maintenance burden between current transmaintenance and repair of property and

port services, overhauls, capital projects and equipment of all types and classes, including

outside services are fully explained. the cost of direct labor, materials and out- (ER-327, 26 F.R. 4222, May 16, 1961, as side services identified with the maintenance amended by ER-483, 32 F.R. 2810, Feb. 11, and repair of property and equipment car- 1967) ried in balance sheet accounts 1634 Mainte

6900 and Engineering Equipment, and nance

General Services and Administra1640.1 Maintenance Buildings and Improve

tion. ments. It shall include expenses specifically

This function shall include expenses related to the administration of maintenance incurred on the ground in controlling stocks and stores, the keeping of pertinent

and protecting the in-flight movement of maintenance operations records, and the

aircraft; landing, handling, or servicing scheduling, controlling, planning and supervision of maintenance operations.

aircraft on the ground; selling transb. This subfunction shall not include ex- portation; servicing and handling traffic penses related to financial accounting. pur

of all classes; promoting the developchasing or other overhead activities which ment of trafic; administering operations are of general applicability to all operating generally; and all other expenses not functions. Such expenses shall be included otherwise provided for in functions 5100 in function 6900 General Services and

Flying Operations, 5400 Maintenance Administration.

and 7000 Depreciation and Amortization. c. This subfunction shall include only those expenses attributable to the current 7000 Depreciation and Amortization. air transport operations of the air carrier.

This function shall include all charges Maintenance burden associated with capital projects of the air carrier, other than over

to expense to record losses suffered hauls of airframes and aircraft engines, shall through current exhaustion of the servbe allocated thereto in accordance with the iceability of property and equipment due provisions of section 2-9(b). Maintenance to wear and tear from use and the action burden incurred in common with services to

of time and the elements, which are not other companies and operating entities shall

replaced by current repairs as well as be allocated thereto on a pro rata basis

losses in serviceability occasioned by unless such services are so infrequent in performance or small in volume as to result

obsolescence, supersession, discoveries, in no appreciable demands upon the air

change in popular demand or action by carrier's maintenance facilities. When over- public authority. It shall also include hauls of airframes or aircraft engines are charges for the amortization of capitalas a consistent practice accounted for on ized developmental and preoperating an accrual basis instead of expensed directly,

costs and other intangible assets applimaintenance burden shall be allocated

cable to the performance of air transthereto on a pro rata basis. Standard burden rates may be employed for quarterly

portation. (See sections 5-5 and 6-1830 allocations of maintenance burden provided

and 1880.) the rates are reviewed at the close of each

Section 11-Functional Classificafiscal year, at least. When the actual burden rate for the year differs materially from tion-Operating Expenses of the standard burden rate applied, adjust- Group II and Group III Air Carriers ment shall be made to reflect the actual costs incurred for the full accounting year. 5100 Flying Operations. Allocations of maintenance burden to capital

(a) This function shall include exprojects, and service sales to others shall be effected through the individual main

penses incurred directly in the in-flight tenance burden objective accounts, except operation of aircraft and expenses that the air carrier may effect such alloca- attaching to the holding of aircraft and tions by credits to profit and loss account aircraft operational personnel in readi77 Uncleared Expense Credits under circum

ness for assignment to an in-flight stances in which the use of that account

status. will not undermine the significance of the individual maintenance burden objective

(b) This function shall not include accounts in terms of the expense levels expenses incurred in repairing, servicing associated with the air carrier's air trans

or storing aircraft, expenses incurred on port services. Maintenance burden allocated to overhauls shall be credited to profit and

the ground in protecting and controlling loss subaccounts 5372.2 or 5372.7 Airworthi- the in-flight movement of aircraft, or ness Reserve Charges. In accordance with compensation of ground personnel and

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