Sec. 32.1401  Investments in affiliated companies.

    (a) This account shall include the acquisition cost of the company's 
investment in equity or other securities issued or assumed by affiliated 
companies, other than securities held in special funds which shall be 
charged to Account 1408, Sinking Funds. The carrying value of the 
investment (securities) accounted for on the equity method shall be 
adjusted to recognize the company's share of the earnings or losses and 
dividends received or receivable of the affiliated company from the date 
of acquisition. (Note also Account 1210, Interest and Dividends 
Receivable, and Account 7310, Dividend Income.)
    (b) Declines in value of investments accounted for under the cost 
method shall be charged to Account 4540, Other Capital, if temporary and 
as a current period loss if permanent. Detail records shall be 
maintained to reflect unrealized losses for each investment.
    (c) A subsidiary record shall be kept identifying separately common 
stocks, preferred stocks, advances to affiliates, and long-term debt. 
Further, the company's records shall identify the securities pledged as 
collateral for any of the company's long-term debt or short-

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term loans or to secure performance of contracts.
    (d) This account shall also include advances represented by book 
accounts only with respect to which it is carried or intended that they 
shall be either settled by issuance of capital stock or debt; or shall 
not be subject to current cost settlement.
    (e) Amounts due from affiliated companies which are subject to 
current settlement shall be included in Account 1180, Telecommunications 
Accounts Receivable, Account 1190, Other Accounts Receivable, or Account 
1200, Notes Receivable, as appropriate.
    (f) Subsidiary record categories shall be maintained in order that 
the entity may separately report the amounts contained herein that 
relate to the equity method and the cost method. Such subsidiary record 
categories shall be reported as required by part 43 of this Commission's 
Rules and Regulations.