Amtrak 2014 Annual Report Download - page 22

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National Railroad Passenger Corporation and Subsidiaries (Amtrak)
Notes to Consolidated Financial Statements (continued)
1509-1694994 14
3. Basis of Presentation and Summary of Significant Accounting Policies (continued)
On November 2, 2012, in conjunction with the Pennsylvania Economic Development Financing
Authority (PEDFA) Garage Bond reissuance (see Note 6), Amtrak entered into an interest rate
swap arrangement. As of September 30, 2014 and 2013, the fair value of the PEDFA Garage
Bond interest rate swap derivative contract was $0.5 million and $1.0 million, respectively,
which is included in “Deferred charges, deposits, and other” in the Consolidated Balance Sheets.
Property, Equipment, and Depreciation
Except as described below, property and equipment owned by the Company are carried at cost
and depreciated using the group method of depreciation (group method) in which a single
composite depreciation rate is applied to the gross investment in a particular class of property or
equipment, despite differences in the service life or salvage value of individual property units
within the same class. This excludes computer equipment and software, which are stated at cost
and are individually depreciated on a straight-line basis over their estimated useful lives, which
are generally five to ten years. Properties held under capital leases and leasehold improvements
are depreciated over the shorter of their estimated useful lives or their respective lease terms.
Land is carried at cost.
For assets depreciated under the group method, upon normal sale or retirement, the cost less the
net salvage value is charged to “Accumulated depreciation” in the Consolidated Balance Sheets
and no gain or loss is recognized. Gains or losses related to significant premature retirements of
depreciable property and the disposal of land are recorded as gains and losses in the
Consolidated Statements of Operations at time of occurrence. There were no significant
premature retirements of depreciable property or disposals of land for which gains or losses were
recorded in FY2014 and FY2013.
Amtrak periodically engages an outside civil engineering firm with expertise in railroad property
usage to conduct a study to evaluate depreciation rates for assets subject to the group method.
These rates are used for the group depreciation calculations. In addition to the adjustment to
group depreciation rates because of periodic depreciation studies, certain other events could
occur that would materially affect Amtrak’ s estimates and assumptions related to depreciation.
Unforeseen changes in operations or technology could substantially alter assumptions regarding
Amtrak’ s ability to realize the return on its investment in operating assets and, therefore, affect
the amounts of current and future depreciation expense. Because group method depreciation
expense is a function of analytical studies made of property and equipment, subsequent studies
could result in different estimates of useful lives and net salvage values. If future group method