Cincinnati Bell 2012 Annual Report Download - page 154

allowance for uncollectible accounts in the Consolidated Balance Sheets. The Company establishes the
allowances for uncollectible accounts using percentages of aged accounts receivable balances to reflect the
historical average of credit losses as well as specific provisions for certain identifiable, potentially uncollectible
balances. When internal collection efforts on accounts have been exhausted, the accounts are written off and the
associated allowance for uncollectible accounts is reduced.
Inventory, Materials and Supplies — Inventory, materials and supplies consists of wireless handsets,
wireline network components, various telephony and IT equipment to be sold to customers, maintenance
inventories, and other materials and supplies, which are carried at the lower of average cost or market.
Property, Plant and Equipment — Property, plant and equipment is stated at original cost and presented
net of accumulated depreciation and impairment losses. Maintenance and repairs are charged to expense as
incurred while improvements which extend an asset’s useful life or increase its functionality are capitalized and
depreciated over the asset’s remaining life. The majority of the Wireline network property, plant and equipment
used to generate its voice and data revenue is depreciated using the group method, which develops a depreciation
rate annually based on the average useful life of a specific group of assets rather than for each individual asset as
would be utilized under the unit method. The estimated life of the group changes as the composition of the group
of assets and their related lives change. Provision for depreciation of other property, plant and equipment, except
for leasehold improvements, is based on the straight-line method over the estimated economic useful life.
Depreciation of leasehold improvements is based on a straight-line method over the lesser of the economic useful
life of the asset or the term of the lease, including optional renewal periods if renewal of the lease is reasonably
assured.
Additions and improvements, including interest and certain labor costs incurred during the construction
period, are capitalized. The Company records the fair value of a legal liability for an asset retirement obligation
in the period it is incurred. The estimated removal cost is initially capitalized and depreciated over the remaining
life of the underlying asset. The associated liability is accreted to its present value each period. Once the
obligation is ultimately settled, any difference between the final cost and the recorded liability is recognized as
income or loss on disposition.
Goodwill and Indefinite-Lived Intangible Assets
Goodwill — Goodwill represents the excess of the purchase price consideration over the fair value of net
assets acquired and recorded in connection with business acquisitions. Goodwill is generally allocated to
reporting units one level below business segments. Goodwill is tested for impairment on an annual basis or when
events or changes in circumstances indicate that such assets may be impaired. If the net book value of the
reporting unit exceeds its fair value, an impairment loss may be recognized. An impairment loss is measured as
the excess of the carrying value of goodwill of a reporting unit over its implied fair value. The implied fair value
of goodwill represents the difference between the fair value of the reporting unit and the fair value of all the
assets and liabilities of that unit, including any unrecognized intangible assets.
Intangible assets not subject to amortization — Intangible assets represent purchased assets that lack
physical substance but can be separately distinguished from goodwill because of contractual or legal rights, or
because the asset is capable of being separately sold or exchanged. Federal Communications Commission
(“FCC”) licenses for wireless spectrum represent indefinite-lived intangible assets. The Company may renew the
wireless licenses in a routine manner every ten years for a nominal fee, provided the Company continues to meet
the service and geographic coverage provisions required by the FCC. Intangible assets not subject to amortization
are tested for impairment annually, or when events or changes in circumstances indicate that the asset might be
impaired.
Long-Lived Assets — Management reviews the carrying value of property, plant and equipment and other
long-lived assets, including intangible assets with definite lives, when events or changes in circumstances
indicate that the carrying amount of the assets may not be recoverable. An impairment loss is recognized when
the estimated future undiscounted cash flows expected to result from the use of an asset (or group of assets) and
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Form 10-K Part II Cincinnati Bell Inc.