Sec. 32.2  Basis of the accounts.

    (a) The financial accounts of a company are used to record, in 
monetary terms, the basic transactions which occur. Certain natural 
groupings of these transactions are called (in different contexts) 
transaction cycles, business processes, functions or activities. The 
concept, however, is the same in each case; i.e., the natural groupings 
represent what happens within the company on a consistent and continuing 
basis. This repetitive nature of the natural groupings, over long 
periods of time, lends an element of stability to the financial account 
structure.
    (b) Within the telecommunications industry companies, certain 
recurring functions (natural groupings) do take place in the course of 
providing products and services to customers. These accounts reflect, to 
the extent feasible, those functions. For example, the primary bases of 
the accounts containing the investment in telecommunications plant are 
the functions performed by the assets. In addition, because of the 
anticipated effects of future innovations, the telecommunications plant 
accounts are intended to permit technological distinctions. Similarly, 
the primary bases of plant operations, customer operations and corporate 
operations expense accounts are the functions performed by individuals. 
The revenue accounts, on the other hand, reflect a market perspective of 
natural groupings based primarily upon the products and services 
purchased by customers.

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    (c) In the course of developing the bases for this account 
structure, several other alternatives were explored. It was, for 
example, determined that, because of the variety and continual changing 
of various cost allocation mechanisms, the financial accounts of a 
company should not reflect an a priori allocation of revenues, 
investments or expenses to products or services, jurisdictions or 
organizational structures. (Note also Sec. 32.14 (c) and (d) of subpart 
B.) It was also determined that costs (in the case of assets) should not 
be recorded based solely upon physical attributes such as location, 
description or size.
    (d) Care has been taken in this account structure to avoid confusing 
a function with an organizational responsibility, particularly as it 
relates to the expense accounts. Whereas in the past, specific 
organizations may have performed specific functions, the future 
environment with its increasing mechanization and other changes will 
result in entirely new or restructured organizations. Thus, any 
relationships drawn between organizations and accounts would become 
increasingly meaningless with the passage of time.
    (e) These accounts, then, are intended to reflect a functional and 
technological view of the telecommunications industry. This view will 
provide a stable and consistent foundation for the recording of 
financial data.
    (f) The financial data contained in the accounts, together with the 
detailed information contained in the underlying financial and other 
subsidiary records required by this Commission, will provide the 
information necessary to support separations, cost of service and 
management reporting requirements. The basic account structure has been 
designed to remain stable as reporting requirements change.