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42.21.157    PREPARATION OF TREND FACTOR SCHEDULES

(1) On or before January 1 of every year, the Department of Revenue shall prepare schedules of trend factors for each of the groups of equipment specified in ARM 42.21.156.

(2) The data used to compute the trend factors are the monthly values of the "Producer Price Indexes" (PPI) specified in ARM 42.21.156. The values shall be taken from the most recent on-line publication of the United States Department of Labor, Bureau of Labor Statistics as of July 15.

(3) In order to compute the trend factors to be used in year Y for a given equipment group, it is first necessary to calculate average annual values of the appropriate PPI for as many years as are in the useful life attributed to the group. Average annual values of the PPI for year Y are calculated by adding together the 12 values of the PPI listed for the months July of year Y-2 through June of the year Y-1 and dividing the sum by 12.

(4) The trend factors for a specific equipment group are quotients whose numerators are the most recent average annual PPI for the group and whose denominators are, in succession, the most recent average annual PPI, the average annual PPI for the period immediately preceding the most recent one, and so on, until a number of factors equal to the number of years of useful life have been calculated. In general, the trend factor to be applied to equipment in the group which is X years old (where X is less than or equal to the useful life of the equipment) is the quotient of the most recent average annual PPI and the average annual PPI for the (S-1)st period preceding the most recent one. The trend factor to be applied to equipment in the group which is older than the specified useful life L for the group is the quotient of the most recent average annual PPI for the group and the average annual PPI for the (L-1)st period preceding the most recent one. The following example is presented in order to make the mechanics of the calculation clear.

Suppose that the trend factors to be used in year Y for an equipment group which has a three-year useful life are to be calculated. The calculation is to be based on the following hypothetical PPI data for the group:

 Year J F M A M J J A S O N D Y-1 91.1 90.8 91.3 91.2 90.6 90.1 N/A N/A N/A N/A N/A N/A Y-2 86.8 88.5 89.3 90.4 91.2 92.0 92.1 91.8 92.0 91.8 91.2 91.6 Y-3 84.1 84.2 84.4 84.7 84.7 84.7 84.2 84.3 84.7 85.1 85.6 86.4 Y-4 N/A N/A N/A N/A N/A N/A 84.3 84.1 83.8 84.1 84.2 84.4

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The July-June 12-month average values are:

92.1+91.8+92.0+91.8+91.2+91.6+91.1+90.8+91.3+91.2+90.6+90.1 =91.3

12

84.2+84.3+84.7+85.1+85.6+86.4+86.8+88.5+89.3+90.4+91.2+92.0 =87.4

12

84.3+84.1+83.8+84.1+84.2+84.4+84.1+84.2+84.4+84.7+84.7+84.7 =84.3

12

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The trend factors are:

 Age of Equip. in Years Trend Factor 1 91.3/91.3 = 1.000 2 91.3/87.4 = 1.045 3 and older 91.3/84.3 = 1.083

History: 15-1-201, MCA; IMP, 15-6-138, MCA; NEW, 1982 MAR p. 1052, Eff. 5/14/82; AMD, 1991 MAR p. 915, Eff. 6/14/91; AMD, 1992 MAR p. 2394, Eff. 10/30/92; AMD, 1999 MAR p. 309, Eff. 2/12/99; AMD, 2006 MAR p. 3108, Eff. 12/22/06; AMD, 2010 MAR p. 3022, Eff. 12/24/10.

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