Sam1 schlimm According to IRS Publication 946: Class Life is 14 years for locomotives and passenger train cars owned by the railroad company.GDS (MACRS) = 7 years. ADS = 14 years. The useful lives of equipment frequently are different for GAAP and IRS purposes. The differences show up as deferred debits and credits on the Balance Sheet. Under GAAP a company estimates the useful life of "its" assets for depreciation. The IRS tables, which apply to a generic asset class, may have little to do with an entity's experience and, therefore, result in dramatically different depreciation schedules. Amtrak's locomotives operate under different constraints than UP's locomotives and, therefore, for GAAP purposes probably have different expected useful lives. But the IRS treats them alike. The shorter useful life expectancy allowed by the IRS means that the company can deduct a higher amount of depreciation for the accounting period. This results in a lower tax obligation than would be the case under GAAP. And it results in a deferred credit on the Balance Sheet. Without access to Amtrak's books, we don't know how long Amtrak depreciates the locomotives and cars used for its trains. I am using the 42 years, unless someone has better information, because it results in a lower amount of depreciation allocated to the Texas trains than would be the case using the IRS tables or other generic tables.
schlimm According to IRS Publication 946: Class Life is 14 years for locomotives and passenger train cars owned by the railroad company.GDS (MACRS) = 7 years. ADS = 14 years.
According to IRS Publication 946:
Class Life is 14 years for locomotives and passenger train cars owned by the railroad company.GDS (MACRS) = 7 years. ADS = 14 years.
The useful lives of equipment frequently are different for GAAP and IRS purposes. The differences show up as deferred debits and credits on the Balance Sheet.
Under GAAP a company estimates the useful life of "its" assets for depreciation. The IRS tables, which apply to a generic asset class, may have little to do with an entity's experience and, therefore, result in dramatically different depreciation schedules.
Amtrak's locomotives operate under different constraints than UP's locomotives and, therefore, for GAAP purposes probably have different expected useful lives. But the IRS treats them alike.
The shorter useful life expectancy allowed by the IRS means that the company can deduct a higher amount of depreciation for the accounting period. This results in a lower tax obligation than would be the case under GAAP. And it results in a deferred credit on the Balance Sheet.
Without access to Amtrak's books, we don't know how long Amtrak depreciates the locomotives and cars used for its trains. I am using the 42 years, unless someone has better information, because it results in a lower amount of depreciation allocated to the Texas trains than would be the case using the IRS tables or other generic tables.
C&NW, CA&E, MILW, CGW and IC fan
Bruce LA Sam1 Are you sure about the 42 years? I've never heard of tangible personal property depreciated over that long a period. BruceLA
Sam1
Are you sure about the 42 years? I've never heard of tangible personal property depreciated over that long a period.
BruceLA
As per Page 15 of Amtrak's 2012 Financial Statements, "the useful lives of locomotives, passenger cars, and other rolling stock assets for depreciation purposes range up to 42 years."
Accounting is a conservative discipline. That is to say, given the accounting problem, accountants will opt for the most conservative approach. Thus, I used the most conservative estimate, which would be the 42 years. The group depreciation period for the locomotives, cars, etc. may be less than 42 years.
I believe the Superliner I cars will be 40 years old in 2015. As far as I can tell they make up most of the cars running on the Amtrak trains that serve Texas. If I am correct regarding the depreciation for these cars, the Texas Amtrak trains are still wearing a small amount of depreciation.
As per several previous postings, without access to Amtrak's detailed property accounting records, we don't know how long it is depreciating the locomotives and cars used on its trains that serve Texas.
The Consumer Price Index went up 175 per cent between 1975 and 1994. The Producer Price Index, which is the government's oldest price index, would be a better indicator of the cost of railway equipment, but to get the 1975 to 1994 data, one has to submit a special request. It is not readily available on-line.
Inflation would be part of the answer for the price change. Other factors could include the value of the dollar, technical upgrades, willingness of manufactures to bid for the contract, etc. Politics also could have been a variable. If I remember correctly, Bombardier built the Superliner II cars. It is a Canadian firm and, therefore, foreign exchange values could have impacted the outcome. Moreover, as is true for a lot of government contracts, the builder had to build them in the U.S. so that the work could be done by U.S. workers. To do so it had to refurbish a Vermont plant, which could have added greatly to the cost of the cars.
If an overhaul is designed to keep a locomotive running throughout its expected useful life, the cost would not be capitalized. If the locomotive was upgraded, and the upgrade meets these tests, the cost of the upgrade would be capitalized: 1) the useful live of the asset increases, 2) the number of units the asset produces increases, and 3) the quality of the units produced by the asset increases. In any case, the initial price does not change, but the capitalized amount of the asset on the balance sheet increases, and the amount of depreciation flowing through the income statement increases.
SAM1; One has to wonder at the extremes in purchase costs over the years ?. To make an unlikely example the ACS-64s have a performance, overhaul, and parts warranty of 20 years. That would naturally increase the initial costs very much but would make operational costs much oower? Main problem might be if builder goes into bankruptcy ? That might make sale lease backs interesting ?
V.Payne Just be sure to not add the depreciation to the full cost. Remember the direct cost is about 1/0.88 x Revenue for most of the long distance trains. Amtrak has about $200 million of large station and security expenses and about $600 million of Shared NEC infrastructure costs that the full costs try to send everywhere, I believe by a route to total revenue ratio.
Just be sure to not add the depreciation to the full cost. Remember the direct cost is about 1/0.88 x Revenue for most of the long distance trains. Amtrak has about $200 million of large station and security expenses and about $600 million of Shared NEC infrastructure costs that the full costs try to send everywhere, I believe by a route to total revenue ratio.
Deprecation is a non-cash item that flows through the income statement. It reflects the capitalized cost of the asset, i.e. cash expenditure at the time of purchase, interest charges, transportation-in costs, training costs, as well as any other make ready costs, less salvage value. It also includes the cost of subsequent upgrades that materially extend the life span of the asset.
Amtrak uses straight line depreciation, i.e. the capitalized amounts flow through the income statement in equal chunks until the asset is retired. It depreciates its locomotives and cars up to 42 years, but it does not break out the depreciation periods by class of equipment.
In 2000 Amtrak sold 624 passenger coaches and leased them back under 12 separate lease agreements. Each had different terms. One would need access to all of these agreements to understand their terms and the impacts on the company's financials. Most importantly would be the impacts on the cash flow statements.
To show how murky the picture can get, previously Amtrak had sold 40 of its locomotives and leased them back. Subsequently, it reacquired the locomotives and recapitalized them. These transactions resulted in deferred gains and/or losses depending on the asset and the lease terms. Without inside information one would not have a clue as to the financial impact of these transactions.
As a rule, when a company sells its equipment and leases it back, it needs cash or working capital. It is willing to trade off a short term cash flow gain for higher long term cash outflows. However, financing is dynamic. It changes every day. So it is possible that the company realized a short term deferred cash gain, and then mitigated it by a subsequent transaction that softened the longer term consequences. However, the next paragraph, which was lifted from Amtrak's September 2012 Monthly Operating Report, suggests that it did not work out so well.
Amtrak does not report depreciation on a route level due to the distortion caused by the sale and leaseback transactions of the late 1990’s and early 2000’s. Allocating depreciation and interest would unfairly burden routes whose equipment was sold and then leased back. Those transactions caused the value of those assets to increase and therefore their depreciation to increase, which is unrelated to the actual capital cost of that equipment. A synthetic capital charge is under development and will be allocated to routes and included in this report when available.
Without access to Amtrak's books, it is not possible to know how Amtrak allocates its common costs to various routes. I raised this point with Don Phillips, who claimed in a recent Trains article that Amtrak was assigning a disproportionate amount of the NEC costs to the long distance trains traversing the NEC. He said that he had a contact, who he did not disclosed, who claimed that he had inside knowledge about the practice. I asked Phillips to provide me with the person's name and the numbers. I am still waiting.
The depreciation associated with Amtrak's Texas trains probably is very small. Based on the numbers I have pulled to date, from the public information that Amtrak makes available, which I will post in the late fall or early winter, after the FY13 numbers are in, these trains hemorrhage red ink, and the red ink has been increasing at a greater rate than the increase in riders, revenues, etc.
If you have a pipeline into Amtrak's books and, therefore, can get me the depreciation numbers for Amtrak's Texas trains, it would be most helpful.
oltmannd Found this: "AMD-103 "Genesis":1993-$2.3 mil each-52 units" and "Anyway, according to an article of Trains magazine (Oct. 2002, page 33) the author pegs the cost of P42 locomotives at "about $2 million each", although I suspect that the figure is closer to the $2.3 million that Genesis indicated for the AMD-103s. The author also says that an Acela Express trainset costs $35 million." here: http://www.railforum.com/cgi-bin/ultimatebb.cgi/topic/11/2107.html I think you could ratchet the AMD-103 cost up by inflation to get a good, usable price for the P42s. They are near twins.
Found this:
"AMD-103 "Genesis":1993-$2.3 mil each-52 units"
and
"Anyway, according to an article of Trains magazine (Oct. 2002, page 33) the author pegs the cost of P42 locomotives at "about $2 million each", although I suspect that the figure is closer to the $2.3 million that Genesis indicated for the AMD-103s.
The author also says that an Acela Express trainset costs $35 million."
here: http://www.railforum.com/cgi-bin/ultimatebb.cgi/topic/11/2107.html
I think you could ratchet the AMD-103 cost up by inflation to get a good, usable price for the P42s. They are near twins.
This was helpful. Thanks for the reference.
-Don (Random stuff, mostly about trains - what else? http://blerfblog.blogspot.com/)
As a result of a previous discussion regarding the Texas Eagle, I decided to pull together the five year numbers for Amtrak's trains that touch Texas, i.e. Heartland Flyer, Sunset Limited, and Texas Eagle. A missing piece is the depreciation charge, which probably consists solely of depreciation on the locomotives and cars.
Does anyone know how I can find out how much the P42 locomotives cost? I have run several Google searches without any luck. I can find the roster of Amtrak's equipment and heaps of pictures, but none of the sites have any cost information.
The average cost of the first tranche of Superliner cars was $848,592 per car. The average cost of the second tranche was $2,545,776. I got these numbers from a Wikipedia posting. Presumably the cost of a coach was different from the cost of the sleeper, lounge car, dinning car, etc. Does anyone know how I can get the average cost of the Superliner coach, sleeping car, dinning car, lounge car, etc.?
I appreciate any help.
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