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Properties | 12 Months Ended
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Dec. 31, 2022
Property, Plant and Equipment [Abstract] |
Properties | Properties Details of the Company’s net properties are as follows:
(Dollars in Millions) |  |  |  | Accumulated |  | Net Book |  | Annual Depreciation |  | Estimated Useful Life |  | Depreciation
December 2022 |  | Cost |  | Depreciation |  | Value |  | Rate |  | ( Avg. Years) |  | Method
Road |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Rail and Other Track Material |  | $ | 8,660 |  |  | $ | (1,405) |  |  | $ | 7,255 |  |  | 2.5% |  | 41 |  | Group Life
|  | Ties |  | 6,763 |  |  | (2,010) |  |  | 4,753 |  |  | 3.5% |  | 28 |  | Group Life
|  | Grading |  | 2,741 |  |  | (637) |  |  | 2,104 |  |  | 1.3% |  | 75 |  | Group Life
|  | Ballast |  | 3,383 |  |  | (1,130) |  |  | 2,253 |  |  | 2.6% |  | 38 |  | Group Life
|  | Bridges, Trestles, and Culverts |  | 2,989 |  |  | (454) |  |  | 2,535 |  |  | 1.7% |  | 60 |  | Group Life
|  | Signals and Interlockers |  | 3,299 |  |  | (1,210) |  |  | 2,089 |  |  | 4.1% |  | 24 |  | Group Life
|  | Buildings |  | 1,416 |  |  | (558) |  |  | 858 |  |  | 2.5% |  | 40 |  | Group Life/ Straight Line (a)
|  | Other |  | 5,541 |  |  | (2,323) |  |  | 3,218 |  |  | 4.1% |  | 25 |  | Group Life/ Straight Line (a)
Total Road |  | 34,792 |  |  | (9,727) |  |  | 25,065 |  |  |  |  |  |  |
Equipment |  |  |  |  |  |  |  |  |  |  |  |
|  | Locomotive |  | 4,848 |  |  | (1,856) |  |  | 2,992 |  |  | 3.8% |  | 26 |  | Group Life
|  | Freight Cars |  | 2,316 |  |  | (369) |  |  | 1,947 |  |  | 3.1% |  | 32 |  | Group Life
|  | Work Equipment and Other |  | 3,132 |  |  | (1,911) |  |  | 1,221 |  |  | 8.9% |  | 11 |  | Group Life/ Straight Line (a)
Total Equipment |  | 10,296 |  |  | (4,136) |  |  | 6,160 |  |  |  |  |  |  |
Land |  |  |  | 2,272 |  |  | — |  |  | 2,272 |  |  | N/A |  | N/A |  | N/A
Construction In Progress |  | 745 |  |  | — |  |  | 745 |  |  | N/A |  | N/A |  | N/A
Total Properties |  | $ | 48,105 |  |  | $ | (13,863) |  |  | $ | 34,242 |  |  |  |  |  |  |
(a) For depreciation method, certain asset categories contain intermodal terminals, trucking or technology-related assets, which are depreciated using the straight-line method. NOTE 6. Properties, continued
(Dollars in Millions) |  |  |  | Accumulated |  | Net Book |  | Annual Depreciation |  | Estimated Useful Life |  | Depreciation
December 2021 |  | Cost |  | Depreciation |  | Value |  | Rate |  | (Avg. Years) |  | Method
Road |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | Rail and Other Track Material |  | $ | 8,761 |  |  | $ | (1,835) |  |  | $ | 6,926 |  |  | 2.5% |  | 41 |  | Group Life
|  | Ties |  | 6,522 |  |  | (1,923) |  |  | 4,599 |  |  | 3.5% |  | 28 |  | Group Life
|  | Grading |  | 2,751 |  |  | (624) |  |  | 2,127 |  |  | 1.3% |  | 75 |  | Group Life
|  | Ballast |  | 3,289 |  |  | (1,094) |  |  | 2,195 |  |  | 2.6% |  | 38 |  | Group Life
|  | Bridges, Trestles, and Culverts |  | 2,794 |  |  | (411) |  |  | 2,383 |  |  | 1.7% |  | 60 |  | Group Life
|  | Signals and Interlockers |  | 3,266 |  |  | (1,086) |  |  | 2,180 |  |  | 4.1% |  | 24 |  | Group Life
|  | Buildings |  | 1,388 |  |  | (514) |  |  | 874 |  |  | 2.5% |  | 40 |  | Group Life/ Straight Line (a)
|  | Other |  | 5,305 |  |  | (2,207) |  |  | 3,098 |  |  | 4.1% |  | 25 |  | Group Life/ Straight Line (a)
Total Road |  | 34,076 |  |  | (9,694) |  |  | 24,382 |  |  |  |  |  |  |
Equipment |  |  |  |  |  |  |  |  |  |  |  |
|  | Locomotive |  | 4,912 |  |  | (1,732) |  |  | 3,180 |  |  | 3.6% |  | 27 |  | Group Life
|  | Freight Cars |  | 2,322 |  |  | (358) |  |  | 1,964 |  |  | 2.9% |  | 35 |  | Group Life
|  | Work Equipment and Other |  | 2,891 |  |  | (1,706) |  |  | 1,185 |  |  | 8.2% |  | 12 |  | Group Life/ Straight Line (a)
Total Equipment |  | 10,125 |  |  | (3,796) |  |  | 6,329 |  |  |  |  |  |  |
Land |  |  |  | 1,885 |  |  | — |  |  | 1,885 |  |  | N/A |  | N/A |  | N/A
Construction In Progress |  | 419 |  |  | — |  |  | 419 |  |  | N/A |  | N/A |  | N/A
Total Properties |  | $ | 46,505 |  |  | $ | (13,490) |  |  | $ | 33,015 |  |  |  |  |  |  |
(a) For depreciation method, certain asset categories contain intermodal terminals or technology-related assets, which are depreciated using the straight-line method. NOTE 6. Properties, continued Capital Expenditures The Company’s capital investment includes purchased and self-constructed assets and property additions that substantially extend the service life or increase the utility of those assets. Indirect costs that can be specifically traced to capital projects are also capitalized. The Company is committed to maintaining and improving its existing infrastructure and expanding its network capacity for long-term growth. Rail operations are capital intensive and CSX accounts for these costs in accordance with GAAP and the Company’s capitalization policy. All properties are stated at historical cost less an allowance for accumulated depreciation. The Company’s largest category of capital investment is the replacement of track assets and the acquisition or construction of new assets that enable CSX to enhance its operations or provide new capacity offerings to its customers. These construction projects are primarily completed by CSXT employees. Costs for track asset replacement and capacity projects that are capitalized include: •labor costs, because many of the assets are self-constructed; •costs to purchase or construct new track or to prepare ground for the laying of track; •welding (rail, field and plant), which are processes used to connect segments of rail; •new ballast, which is gravel and crushed stone that holds track in line; •fuels and lubricants associated with tie, rail and surfacing work, which is the process of raising track to a designated elevation over an extended distance; •cross, switch and bridge ties, which are the braces that support the rails on a track; •gauging, which is the process of standardizing the distance between rails; •handling costs associated with installing rail, ties or ballast; •usage charge of machinery and equipment utilized in construction or installation; and •other track materials. Labor is a significant cost in self-constructed track replacement work. CSXT engineering employees directly charge their labor to the track replacement project (the capitalized depreciable property). In replacing track, these employees concurrently perform deconstruction and installation of track material. Because of this concurrent process, CSX must estimate the amount of labor that is related to deconstruction versus installation. As a component of the depreciation study for road and track assets, management performs an analysis of labor costs related to the self-constructed track replacement work, which includes direct observation of track replacement processes. Through this analysis, CSX determined that approximately 20% of labor costs associated with track replacement is related to the deconstruction of old track, for which certain elements are expensed, and 80% is associated with the installation of new track, which is capitalized. Capital investment related to locomotives and freight cars comprises the second largest category of the Company’s capital assets. This category includes purchases of locomotives and freight cars as well as certain equipment leases that are considered to be finance leases in accordance with the Leases Topic in the ASC. In addition, costs to modify or rebuild these assets are capitalized if the investment incurred extends the asset’s service life or improves utilization. Improvement projects must meet specified dollar thresholds to be capitalized and are reviewed by management to determine proper accounting treatment. Routine repairs, overhauls and other maintenance costs, for all asset categories, are expensed as incurred. NOTE 6. Properties, continued Depreciation Method The depreciable assets of the Company are depreciated using either the group-life or straight-line method of accounting, which are both acceptable depreciation methods in accordance with GAAP. The Company depreciates its railroad assets, including main-line track, locomotives and freight cars, using the group-life method. Assets depreciated under the group-life method comprise 84% of total fixed assets of $48.1 billion on a gross basis as of December 2022. The remaining depreciable assets of the Company, including non-railroad assets and assets under finance leases, are depreciated using the straight-line method on a per asset basis. Land is not depreciated. The group-life method aggregates assets with similar lives and characteristics into groups and depreciates each of these groups as a whole. When using the group-life method, an underlying assumption is that each group of assets, as a whole, is used and depreciated to the end of its group’s recoverable life. The Company currently utilizes different depreciable asset categories to account for depreciation expense for the railroad assets that are depreciated under the group-life method. By utilizing various depreciable categories, the Company can more accurately account for the use of its assets. All assets of the Company are depreciated on a time or life basis. The group-life method of depreciation closely approximates the straight-line method of depreciation. Additionally, due to the nature of most of its assets (e.g. track is one contiguous, connected asset), the Company believes that this is the most accurate and effective way to properly depreciate its assets. Depreciation Studies Management performs a review of depreciation expense and useful lives on a regular basis. Under the group-life method, the service lives and salvage values for each group of assets are determined by completing periodic depreciation studies and applying management’s methods to determine the service lives of its properties. A depreciation study is the periodic review of asset service lives, salvage values, accumulated depreciation, and other related factors for group assets conducted by a third-party specialist, analyzed by the Company’s management and approved by the STB, the regulatory board that has broad jurisdiction over railroad practices. The STB requires depreciation studies be performed every three years for equipment assets (e.g., locomotives and freight cars) and every six years for road and track assets (e.g., bridges, signals, rail, ties, and ballast). The Company believes the frequency of depreciation studies currently required by the STB, complemented by annual data reviews conducted by a third-party specialist and analyzed by the Company's management, provides adequate review of asset service lives and that a more frequent review would not result in a material change due to the long-lived nature of most of the assets. The Company completed a depreciation study for its road and track assets in 2020 and for equipment assets in 2022, both of which resulted in changes to accumulated depreciation, service lives, salvage values, and other related factors for certain assets. The 2022 equipment study resulted in an expected increase in annual depreciation expense of approximately $80 million primarily due to deferred losses on assets depreciated using the group-life method. Recent experience with depreciation studies has resulted in changes to accumulated depreciation and depreciation rates that did not materially affect the Company's depreciation expense of $1.4 billion in both 2021 and 2020. NOTE 6. Properties, continued Group-Life Assets Sales and Retirements Since the rail network is one contiguous, connected network it is impractical to maintain specific identification records for these assets. For track assets (e.g., rail, ties, and ballast), CSX utilizes a first-in, first-out approach to asset retirements. Equipment assets (e.g., locomotives and freight cars) are specifically identified at retirement. When an equipment asset is retired that has been depreciated using the group-life method, the cost is reduced from the cost base and recorded in accumulated depreciation. For sales or retirements of assets depreciated under the group-life method that occur in the ordinary course of business, the asset cost (net of salvage value or sales proceeds) is charged to accumulated depreciation and no gain or loss is immediately recognized. This practice is consistent with accounting treatment prescribed under the group-life method. As part of the depreciation study, an assessment of the recorded amount of accumulated depreciation is made to determine if it is deficient (or in excess) of the appropriate amount indicated by the study. Any such deficiency (or excess), including any deferred gains or losses, is amortized as a component of depreciation expense over the remaining service life of the asset group until the next required depreciation study. Since the overall assumption with the group-life method is that the assets within the group on average have the same service life and characteristics, it is therefore concluded that the deferred gains and losses offset over time. For sales or retirements of assets depreciated under the group-life method that do not occur in the ordinary course of business, a gain or loss may be recognized if the sale or retirement meets each of the following three criteria: (i) it is unusual, (ii) it is material in amount, and (iii) it varies significantly from the retirement profile identified through our depreciation studies. No material gains or losses were recognized on the sale of assets depreciated using the group-life method in 2022, 2021 or 2020, as no sales met the criteria described above. Land and Straight-line Assets Sales and Retirements When the Company sells or retires land, land-related easements or assets depreciated under the straight-line method, a gain or loss is recognized in purchased services and other on the consolidated statements of income. Primarily as a result of its initiative to monetize non-core properties, the Company recognized gains on the sale of properties of $238 million, $454 million and $35 million in 2022, 2021 and 2020, respectively. Sale of Property Rights to the Commonwealth of Virginia On March 26, 2021, the Company entered into a comprehensive agreement to sell certain property rights in three CSX-owned line segments to the Commonwealth of Virginia (“Commonwealth”) over three phases for a total of $525 million. The timing and amount of gains recognized were based on the allocation of fair value to each conveyance, the timing of future conveyances and collectability. In April 2021, upon closing of the first phase of the agreement, the Company collected $200 million in proceeds and recognized a $349 million gain. In fourth quarter 2021, the Company collected additional proceeds of $200 million, a portion of which was attributable to the first phase with the remainder attributable to the second phase. The second phase closed in January 2022, which resulted in a $20 million gain in first quarter 2022. During June 2022, the Commonwealth approved the remaining proceeds, which resulted in a $122 million gain in second quarter 2022 related to property rights previously conveyed. Those remaining proceeds of $125 million were collected during fourth quarter 2022 upon closing of the third phase, resulting in a $2 million gain. Over the course of this transaction, which is now complete, total proceeds of $525 million have been collected and total gains of $493 million have been recognized. NOTE 6. Properties, continued Gains and proceeds in 2022 and 2021 related to this transaction are summarized in the following table.
|  | Years Ended
(Dollars in Millions) |  | 2022 | 2021
Gains |  | $ | 144 |  | $ | 349 |
Proceeds |  | 125 |  | 400
Impairment Review Properties and other long-lived assets are reviewed for impairment whenever events or business conditions indicate the carrying amount of such assets may not be fully recoverable. Initial assessments of recoverability are based on estimates of undiscounted future net cash flows associated with an asset or a group of assets in accordance with the Property, Plant, and Equipment Topic in the ASC. Where impairment is indicated, the assets are evaluated and their carrying amount is reduced to fair value based on discounted net cash flows or other estimates of fair value. Impairment expense of $4 million in 2022, $2 million in 2021 and $8 million in 2020 was primarily due to the discontinuation of certain in-progress projects. Impairment expense is recorded in purchased services and other expense on the consolidated income statement. Government Assistance The Company is a party to contracts with recipients and subrecipients of awards from federal, state and local governmental agencies. These contracts meet the disclosure requirements under ASU 2021-10, Disclosure by Business Entities about Government Assistance, which the Company adopted effective year end 2022. These awards are typically in the form of cash for purposes of making improvements to the rail network as part of public safety, corridor expansion or economic revitalization initiatives. The awarding agency generally specifies how the awards are to be spent by the recipients and may include limited conditions requiring return of the assistance. Government funding received or receivable related to a property asset is netted with the cost of the asset in properties on the consolidated balance sheet, and the net asset is subject to depreciation. Any amounts owed by the government entity are recorded within accounts receivable until reimbursed. For the years ended December 31, 2022, and December 31, 2021, the total amounts received under contracts with government entities to improve the rail network was $49 million and $66 million, respectively. Non-freight accounts receivable related to these government projects was $34 million and $7 million as of December 31, 2022, and 2021, respectively.

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