AT&T, Verizon, FCC Staff Discuss Possible Part 32 Accounting Shift to GAAP
AT&T and Verizon officials discussed possible accounting rule changes with FCC staffers last week in a proceeding that appears to be heating up after being quiet for most of 2015. AT&T’s meeting discussed “the impact of replacing Part 32 rules with GAAP [generally accepted accounting principles] in two areas: materiality and pole attachment costs,” said a company filing posted Friday in docket 14-130 on a recent meeting. Verizon also discussed materiality and pole-attachment issues, said a Thursday filing on the company's meeting with FCC officials.
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The Wireline Bureau is developing a draft order on Part 32 accounting rules, said Bureau Chief Matt DelNero in December (see 1512030060). The FCC opened the current rulemaking in August 2014 with an NPRM that sought comment on ways to streamline the Part 32 Uniform System of Accounts that would reduce carrier compliance burdens while ensuring the commission still has access to data needed to perform its oversight duties. A review of the docket shows just one document has been filed since the comment period closed in December 2014: a filing by the Nevada Public Utilities Commission on its views in response to a bureau request for state input. Neither the Bells nor the FCC commented Monday.
In its Friday filing, AT&T said materiality under GAAP won’t reduce the FCC’s ability to review and analyze financial data in performing its regulatory duties. “Materiality under GAAP would be assessed on a legal-entity basis, rather than at the holding company level, and the criteria would take into consideration the user of the data,” the telco said. “Anything that could influence the conclusions that the regulator might draw from the data would be considered material. AT&T also explained that it would be able to continue to provide the same level of data for the pole attachment rate calculation based on GAAP rather than Part 32 rules. AT&T recognized that there may be some fluctuation in rates, both up and down, but that GAAP produces reasonable results.”
Verizon discussed various sources used to calculate pole attachment rates. It also detailed Part 32 and other inputs for such rate calculations, “and how the same or similar information is available in GAAP accounting ledgers or elsewhere and could be used” to calculate the pole attachment rates if Part 32 requirements were eliminated. Verizon also discussed the role of the materiality concept in accounting decisions. “Verizon makes every reasonable effort to comply with GAAP and records all transactions, regardless of materiality. We further explained that materiality is an auditing construct, not a bookkeeping one,” the telco’s filing said. It provided an SEC document that offered guidance on assessments of materiality in accounting decisions, and said such considerations could help track differences between GAAP and Part 32 ledgers.
Large, price-cap telcos largely backed Part 32 deregulation or streamlining during the comment period. Rural telcos voiced concern that full adoption of GAAP could cause “unpredictable changes” to RLEC rates and USF mechanisms (the latter are under review), and CenturyLink and NCTA cited the need for pole-attachment data. The National Association of State Utility Consumer Advocates opposed scrapping the rules and the Ad Hoc Telecommunications Users Committee, representing business customers, supported only partial streamlining.