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National Railroad Passenger Corporation and Subsidiaries (Amtrak)
Notes to Consolidated Financial Statements (continued)
1509-1694994 17
3. 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 their carrying amounts 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 disposition, and their carrying
amounts are 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 2. The
Company believes funding at historical levels is the best estimate to be used of the future. At this
approximate level of funding, the Company determined that no indicators of impairment existed
as of September 30, 2014. If future Federal Government funding drops below historical levels,
substantial impairment may occur as discussed in Note 2.
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, partial service was resumed on November 1st and full service was
resumed on November 15th. Amtrak sustained damage to tunnels and other structures in New
York and New Jersey, requiring repair work and disrupting passenger service. Costs incurred by
Amtrak during FY2014 and FY2013 totaled approximately $7.0 million and $21.7 million,
respectively, 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 $1.05 billion, most of which are related to cleaning the tunnels and
replacing certain assets inside them over time. The tunnels are currently operating at full
capacity, concurrently with the cleaning and replacement work. The Company determined that
there was no impairment to the tunnels as of September 30, 2014, and expenses related to
cleaning and replacement costs are being recognized as incurred. With the assistance of a third
party consultant, the Company reviewed the impacted assets and determined that certain
infrastructure assets associated with specific locations along the NEC route would need to be
replaced sooner than previously anticipated. Accordingly, the Company assigned unique group
depreciation rates to these assets. As a result, depreciation expense totaling $193.1 million will
be accelerated over the remaining life of these assets. Of this amount, $147.1 million for
ventilation facilities and bridges is being accelerated over a total of five years, $33.5 million for
the East River Tunnel is being accelerated over a total of 11 years, and $12.5 million for the
North River Tunnel is being accelerated over a total of 17 years. The acceleration of depreciation