43 



earned money that they have given the Forest Service to use to 

 invest in their natural assets? 



Senator Daschle. Mr. Riley, do you have any comment on that? 



Mr. Riley. Well, I'm not an accountant either, but I would say I 

 expect that what you'll find in the private sector, if this were an 

 investment on private land, is that as much of that is expensed as 

 possible, is quite frankly what goes on, according to IRS rules. That 

 is what motivates them as much as anything, and the rest of it be 

 darned. 



What does occur to me, though, which might help the under- 

 standing here is that if a private company were going to look to 

 acquire a piece of forest land, that forest land with a road prism in 

 place is valued higher than the same block of forest land without 

 the road prism in place. And the valuation of that forest land is 

 significantly increased by what we also view as a permanent asset 

 that is on the land in the form of the road prism. And I think it is 

 that reason why in the TSPIRS accounting, not being an account- 

 ant, that is viewed as an in-place asset which has not changed in 

 value over time. Have I done that right? 



Mr. Francis. Well, Jim, I would assume that if you bought a 

 piece of property that had a road prism in place that you would 

 then be forced to amortize that property over for your tax pur- 

 poses; that you have to write off those expenses. 



Mr. Riley. I'm not a tax accountant, but I don't think you have 

 to amortize 



Senator Daschle. Mr. Leonard, can you respond to that? 



Mr. Leonard. I don't believe you amortize real property. 



Mr. Francis. I know you don t amortize, but you have to account 

 for the cost. 



Senator Daschle. So what the Forest Service, Mr. Francis, is 

 saying is that they differentiate, they bifurcate the accounting 

 process, to include real property, which is part of the prism, and 

 depreciable property, which includes the culverts and the various 

 elements that wear out over time; that a road base does not wear 

 out, but the culverts and other elements within that road base 

 might. Is that correct? 



Mr. Leonard. That's correct, and Mr. Chairman, we'd be pleased 

 to provide you with a copy of the report of the independent ac- 

 countants. They lay out the rationale. 



Senator Daschle. I'd like to make it part of the record at this 

 time. 



Mr. Leonard. We'll do that. 



[The document is retained in the committee file.] 



Senator Daschle. Senator Craig. 



Senator Craig. Mr. Francis, I know that The Wilderness Society 

 is not one of the "big eight" accounting firms. 



Mr. Francis. I don't even want to try. 



Senator Craig. But I also noticed that in your figures of what 

 sales are below cost versus the Forest Service's figures of what 

 sales are below cost, I think you include some figures that they do 

 not include; is that correct? 



Mr. Francis. Yes. When assigning costs to the Forest Service, we 

 count these costs, payments to States, payments to counties; we put 

 back in the road cost, and we also take the Washington and region- 



