Wiley Blount Rutledge

“ That is not our understanding. In the first place, the Act imposes upon the company, not on the Commission, the burden of proof to justify accounting entries. Neither the Court nor the Commission, in action taken with relation to the 'stipulation,' can be thought to have undertaken to shift this burden in the teeth of the statutory provision, as the full terms of the 'stipulation,' set forth below, [22] disclose. ”

“ The effect of appellee's argument would be to render the Commission powerless to write off much of the inflation caused by the original accounting in this case. For, as has been pointed out, the inflation is not 'removed as property is retired. * * * When property is retired its cost is credited to the proper asset account and (neglecting the effect of salvage) the same cost is debited to depreciation reserve, and the resultant change in book value is zero. ”

“ We turn to the facts before undertaking to state the issues more precisely. Appellee, the New York Telephone Company, is a subsidiary of the American Telephone and Telegraph Company, which owns all its common stock. Since its incorporation in 189 appellee has engaged in the business of furnishing intrastate and interstate telephone service to the public in the states of New York and Connecticut. Prior to 1925, for historical reasons, American also had furnished intrastate toll service between certain points in New York State ”

“ True also, testimony showed it was decided at the time 'that without any increase in the rates the rates that were already in effect would be ample to provide for retirement of the property purchased.' Nevertheless the Commission apparently found that such was not the case. ”

“ See Kripke, A Case Study in the Relationship of Law and Accounting: Uniform Accounts 100.5 and 107 (1944) 57 Harv.L.Rev. 433, 438 ff., especially at 445.↑ All relevant facts pertaining to the transaction were before the Commission. The Commission found that there was no real increment of value to the assets as a result of the transfer and that the inclusive of any write-up would introduce 'inflationary elements' into the plant accounts which in time would be 'improperly reflected in the depreciation expense account as an alleged operating cost.' No other findings were necessary. ”

“ If New York's depreciation reserve is in excess of requirements, it means that New York has been making excessive charges to operating expenses for depreciation.' 52 P.U.R.,N.S., 101, 116-117.↑ Colbert, Advantages of Original Cost Classification of Plant (1945) 35 Public Utilities Fortnightly 333, 343.↑ For obvious reasons, the utility companies have not objected so much to the segregating of the difference between the cost to the accounting company of property acquired and original cost less depreciation as they have to removing this difference from the books. ”

“ Buyer and seller in such circumstances may not be dealing at arm's length, and the price agreed upon between them may be a poor criterion of value.' 299 U.S. at page 239, 57 S.Ct. at page 173, 81 L.Ed. 142. ”