Sec.  36.1   General.

   (a)  This  part  contains  an  outline  of  separations procedures for
   telecommunications  companies  on  the station-to-station basis. These
   procedures are applicable either to property costs, revenues, expenses,
   taxes, and reserves as recorded on the books of the company or to estimated
   amounts.

   (1) Where a value basis is used instead of book costs, the “costs” referred
   to are the “values” of the property derived from the valuation.

   (b) The separations procedures set forth in this part are designed primarily
   for the allocation of property costs, revenues, expenses, taxes and reserves
   between state and interstate jurisdictions. For separations, where required,
   of  the  state portion between exchange and toll or for separations of
   individual exchanges or special services, further analyses and studies may
   be required to adapt the procedures to such additional separations.

   (c)  The fundamental basis on which separations are made is the use of
   telecommunications plant in each of the operations. The first step is the
   assignment of the cost of the plant to categories. The basis for making this
   assignment is the identification of the plant assignable to each category
   and the determination of the cost of the plant so identified. The second
   step is the apportionment of the cost of the plant in each category among
   the operations by direct assignment where possible, and all remaining costs
   are assigned by the application of appropriate use factors.

   (d) In assigning book costs to categories, the costs used for certain plant
   classes  are  average  unit  costs which equate to all book costs of a
   particular account or subaccount; for other plant classes, the costs used
   are those which either directly approximate book cost levels or which are
   equated to match total book costs at a given location.

   (e) The procedures outlined herein reflect “short-cuts” where practicable
   and where their application produces substantially the same separations
   results as would be obtained by the use of more detailed procedures, and
   they assume the use of records generally maintained by Telecommunications
   Companies.

   (f) The classification to accounts of telecommunications property, revenues,
   expenses, etc., set forth in this manual is that prescribed by the Federal
   Communications   Commission's   Uniform   System   of   Accounts   for
   Telecommunications Companies.

   (g)  In  the  assignment  of  property  costs to categories and in the
   apportionment of such costs among the operations, each amount so assigned
   and apportioned is identified as to the account classification in which the
   property is included. Thus, the separated results are identified by property
   accounts and apportionment bases are provided for those expenses which are
   separated on the basis of the apportionment of property costs. Similarly,
   amounts  of  revenues and expenses assigned each of the operations are
   identified as to account classification.

   (h)  The  separations  procedures described in this part are not to be
   interpreted as indicating what property, revenues, expenses and taxes, or
   what items carried in the income, reserve and retained earnings accounts,
   should or should not be considered in any investigation or rate proceeding.