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W. P. G. HARDING, GoVERNOR EX-OFFICIO MEMBERS ALBERT STRAUSS, VICE GoVERNOit ADOLPH C. MILLER WILLIAM G. MCADOO CHARLES ~UN SECRETARY OF THE TREASURY CHAIRMAN JOHN SKELTON WILLIAMS C'""t; c' J. A. BRODERICK, SECRETARY FEDERAL RESERVE BOARD COMPTROllER OF THE CURRENCY , L. C. ADELSON, ASSISTANT SECRITARY W. T. CHAPMAN, AS~ISTANT SECRETARY W. M. IMLAY, FISCAL AGENT WASHINGTON ADDRES9i REPL. Y TO FEDERAL RESERVE BOARD December 14.1918~ X-1308 SUBJECT: Treatment of Extraordinary Charges against Earnings of Federal Reserve Banks at the closing of Books December 31~ 1918. Dear Sir: In order that there rrey be 1..:ni1or-:.:Jj:~y Reserve Board has approved for Federal RE~serve cf practice, the 'Federal Banks t:1e adoption of the following r..A1es for the treatmer.t of depreclat:..on and e::.t:r.r.ord5.nary charges against earnings and profit and loss act::ou:1t at the closing of books Dece~ber 31~ 1. Cos~ 1918u of Feq~ral Resexv~ a:qQ_Federal Reserve Bank Notes8 Balance of account, as shown by books on December 31 1 to be charged to current expense account. 2. FUrniture and Eguiument Account. Balance of account 1 as shown by books on Dec6~ber 31 1 to be charged to current expense a~count. 3. Cost of Vaults • (a) All expenditures rrade during the year 1918 for vaults a:.1d vault equiprr.ent to be charged to current E:Jxpense account; (b) Balance of account; as shown by books on Decerrber 31.., 1917 1 to be charged to Profit and Loss account. 4. Alterations and Improvements. Charge against current expense account all expenditures made during the year 1918 in repairing 1 altering or remodeling bank premises. 5. Bank Pre!f-1.ses. (a) ~~ere properties have been purchased with the intention of erecting new bank buildings 1 banks to be permitted to charge X-1308 -2- against Profit and Loss account an amount suff ieient to cover the estirrated value of buildings which will have to be razed, such. esti~ated valuation of buildings to be submitted to the Federal Reserve_Board for approval before depreciation allowance is determin~d._ -· (b) Where properties have been remodeled and are now used as penranent banking quarters by a Reserve Bank. a reasonable depreciation charge will be permitted but in no case shall it exceed 10 per cent of the estimated value of buildings on December 31.1918. (c) Where a Reserve Bank has purchased, or rray purchase. a site for a new building~ it will be permitted to charge down the book value of premises now owned and occupied to a fair selling price, such price to be submitted to the Federal Reserve Board for approval before depreciation allowance is determined. 6. Apparent D~preciation on Government Securities. Full provision to be rrade for apparent depreciation (based on market value)- in Government securities before any sum is transferred to surplus account, and provision made for Government franchise tax. No change should be rrade in book value of securities but depreciation allowance should be charged to Profit and Loss account and credited to account "Reserye for Depreciatiort". Depreciation should be figured on the follovving basis: · 2% 4% 3% 3% 3t% 4% Bonds 1930-8. . . • . • . •98 " 1925 • . . . . . • 106 ConYersion 1946-7 •• 85 One-year notes • • • 100 Liberty Loan 1947 • 98 11 n 1942-7 • • • 93 4!% n II 1928-~7 • • • 96 7. Surplus and Franchise Tax. After dividends and all allowable charge-offs have been made. one half the remainder, up to 40% of capital paid in, to be credited to $Urplus account and the balance credited to an acc~tnt to be opened under the title "Reserve for Franchise Tax", to retrain in such account until derrand therefor is made by th~ Qovernment, of which due notice will be given you by the Federal Reserve Board. Kindly acknowledge receipt. Respectfully, ' . Governor, Federal Reserve Bank, Governor.
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