Amtrak 2013 Annual Report Download - page 63

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National Railroad Passenger Corporation and Subsidiaries (Amtrak)
Notes to Consolidated Financial Statements (continued)
1411-1359280 24
4. Basis of Presentation and Summary of Significant Accounting Policies (continued)
Impairment of Long-Lived Assets
Properties and other long-lived assets are reviewed for impairment whenever events or business
conditions indicate that the carrying amount of an asset may not be recoverable. Initial
assessments of recoverability are based on estimates of undiscounted future net cash flows. If
impairment indicators are present, the assets are evaluated for sale or other dispositions, and their
carrying amount is reduced to fair value based on discounted cash flows or other estimates of fair
value.
In performing its impairment analysis, the Company assumes future Federal Government
subsidies at levels consistent with the historical funding levels discussed in Note 3. The
Company believes funding at historical levels is the best estimate of the future. At this
approximate level of funding, the Company determined that no indicators of impairment existed
as of September 30, 2013. If future Federal Government funding drops below historical levels,
substantial impairment may occur as discussed in Note 3.
On October 29, 2012, Super Storm Sandy (“Sandy”), one of the largest Atlantic storms on
record, came ashore in the Northeast and mid-Atlantic region of the United States. NEC service
was suspended on October 29th and partial service resumed on November 1st with full service
resuming by November 15th. Amtrak sustained damages to tunnels and other structures in New
York and New Jersey, requiring repair work and disrupting passenger-related revenue. Costs
incurred by Amtrak during the year ended September 30, 2013 totaled approximately
$21.7 million, including repairs to damaged property and emergency incurred expenses to
continue operating the affected tunnels. Amtrak currently estimates that total damages related to
Sandy will be at least $1.1 billion, most of which are related to cleaning the tunnels and
replacing certain assets inside them over time. The tunnels are currently operating in full
capacity as normal, concurrently with the cleaning and replacement work. The Company
determined that there is no impairment to the tunnels as of September 30, 2013, and future
expenses related to cleaning and replacement costs will be recognized when incurred. However,
the Company with the assistance of a third party consultant reviewed the impacted assets and
determined that certain infrastructure assets associated with specific locations along the NEC
route will need to be replaced sooner than previously anticipated. Accordingly, the Company has
assigned unique group depreciation rates to these assets and as a result depreciation expense
totaling $231.8 million will be accelerated beginning in fiscal year 2013 over the remaining life
of these assets. Of this amount, $175.5 million for ventilation facilities and bridges is being