The U.S. Surface Transportation Board has taken actions to delay the revaluation of BNSF Railway’s assets, in part because of Berkshire Hathaway’s purchase of BNSF in 2010 without prior board authorization.
The board reaffirmed that generally accepted accounting principles must be followed in rail carrier acquisitions, which permit the revaluation of BNSF’s assets. However, because of the “unique circumstances” of this transaction, the board directed BNSF to transition the revaluation over seven years to reduce the possible impact on captive shippers, according to STB.
Berkshire failed to obtain agency authorization for its purchase of BNSF, as required under federal law. As a result, the board directed BNSF to refile its annual financial reports for 2010, 2011 and 2012, the years when Berkshire had unauthorized control of BNSF. The board required BNSF to remove the approximate $8.1 billion net markup of its rail assets derived from Berkshire’s purchase of BNSF over its book value or premium. The board also ordered BNSF to transition in the markup of its rail assets equally over a four-year period beginning in 2013, until full recognition of the markup under GAAP.
Shippers had asked STB to prohibit the company from counting the premium in its cost base, saying Berkshire was unfairly trying to make them reimburse its expenses in the $26.5 billion BNSF acquisition, Bloomberg reports.
In light of these actions, the agency also reopened rate prescriptions in two rail rate reasonableness cases involving BNSF and Western Fuels Association and the Basin Electric Power Cooperative, collectively known as WFA, as well as Arizona Electric Power Cooperative.