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Obsolescence based on utilization

Inventory

Additional information on obsolescence based on utilization for telecommunication companies:

For telecommunication companies not required to file a complete Annual Report to the Public Service Commission there is a method that ORPTS has considered to measure obsolescence. We can examine the asset utilization your firm expected to have in its original business plan as compared to the actual utilization. Underutilization of a system does not necessarily equate to obsolescence. We recognize that a system is normally overbuilt to accommodate future growth and backup. You will need to provide business plan information to document the original expected usage and normal overbuild as well as document the current usage, projected growth and backup estimates. It's important to provide this information on a New York State level. A template using this method is posted on this website. (Utilization A) Documentation that demonstrates a shortfall in financial performance may also be required. This would normally compare financial performance in the original business plan versus actual performance. Typically financial losses are generally normal in the first several years of operation. You must demonstrate that the financial losses are beyond planned expectations.

The period 2001 - 2004 was one of troubled times for the telecommunication industry. This industry experienced numerous bankruptcies, mergers and acquisitions during this period. As a consequence an examination of original business plans has been difficult. In these situations you may want to consider an estimate for a normal excess overbuild (ORPTS normally uses 20% of fiber miles). We would also need the fiber miles of plant utilized, fiber miles leased to others, spare fiber miles for backup and growth fiber miles. A template using this method is posted on this website. (Utilization B).

You are encouraged to contact Sam Papa at (518) 530-4900, if you have any questions.

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