Here is the report from Subsidyscope; a program funded by the Pew Charitable Trust.
The issue that Subsidyscope addresses is that Amtrak, in its unaudited Monthly Performance Reports, is misstating the financial results (mostly losses that result in understatements) of each route in that they do not charge Depreciation as a cost of providing service over a route.
OK lets take a closer look at Depreciation and especially within Amtrak since on one hand it is a private enterprise and on the other a government agency.
To start, let's consider the definition of an Asset. Such is a piece of property, tangible or intangible notwithstanding, from which economic benefit will be derived over current and future accounting periods. Depreciation is a systematic method over which the cost, i.e. the expenditure of an asset incurred in a current period and from which economic benefit will be realized over a number of future accounting periods, is allocated to both the current and future periods.
Additionally, and this is important in the case of Amtrak and many another transportation company that use leased equipment, Depreciation also represents a restatement of lease obligations so that the cost of the economic benefit is better expressed over the asset's economic life as distinct from the timing of the lease payments. This is known as a Capitalized Lease and is required under existing accounting Literature so that a fair comparison may be made between enterprises that purchase their assets and those that acquire such by lease.
Virtually all of Amtrak's locomotives and rolling stock is leased.
Amtrak's audited Financial Statements of course recognize Depreciation as an expense; there is further recognition of Depreciation within the unaudited Monthly Performance Reports. However, it appears that no allocation of Depreciation is made to the routes resulting in an, as Pew sees it and for that matter the GAO, a misstatement of a Route's financial performance. Rather, Amtrak considers Depreciation be be an expense no different than that of the Bureaucracy - 60 Mass and elsewhere.
To restate route performance with depreciation of equipment assigned to such as an expense element would make for inconsistent reporting - and Consistency is a standard of financial statements considered by the Accounting profession. Additionally, we have to consider a significant difference between Government Accounting and that of private enterprises. In government, Depreciation is not recognized. For example if the Navy builds an aircraft carrier which takes five years to build and will see active service for thirty, the costs incurred each year it is being built will be reported during the construction period. After that, it sails the Ocean Blue and going "pop pop" after the Bad Guys, without any Depreciation. On one hand Amtrak is government so why have Depreciation and especially why allocate over each route? But on the other, Amtrak's "Depreciation" is mostly represented by lease payments so it IS 'cash out the door'. But on the other hand, Amtrak is private enterprise (or so they tell me ); therefore Depreciation should be recognized.
Wish I knew the answers - all I can do is set forth the parameters.
C is for Cigarettes. Also for Cancer.
14 hours ago