Cincinnati Bell 2012 Annual Report Download - page 156

Pricing of local voice services is generally subject to oversight by both state and federal regulatory
commissions. Such regulation also covers services, competition, and other public policy issues. Various
regulatory rulings and interpretations could result in increases or decreases to revenue in future periods.
Wireless — Postpaid wireless and reciprocal compensation are billed monthly in arrears. Wireless bills
service revenue in regular monthly cycles, which are spread throughout the days of the month. As the last day of
each billing cycle rarely coincides with the end of the reporting period for usage-based services such as postpaid
wireless, we estimate service revenues earned but not yet billed. Our estimates are based upon historical usage,
and we adjust these estimates during the period in which actual usage is determinable, typically in the following
reporting period.
Revenue from prepaid wireless service, which is collected in advance, is not recognized upon billing or cash
receipt, but rather is deferred until the service is provided.
Wireless handset revenue and the related activation revenue are recognized when the products are delivered
to and accepted by the customer, as this is considered to be a separate earnings process from the sale of wireless
services. Wireless equipment costs are also recognized upon handset sale and are generally in excess of the
related handset and activation revenue. Revenue from termination fees are recognized when collection is deemed
reasonably assured.
IT Services and Hardware — Professional services, including product installations, are recognized as the
service is provided. Maintenance services on telephony equipment are deferred and recognized ratably over the
term of the underlying customer contract, generally one to four years.
Equipment revenue is recognized upon the completion of our contractual obligations, such as shipment,
delivery, installation, or customer acceptance. Installation service revenue is generally recognized when
installation is complete. The revenue recognition guidance in ASC 605 is applied. We have vendor specific
evidence of selling price for installation services, as we sell these services on a standalone basis.
The Company is a reseller of IT and telephony equipment. For these transactions, we consider the gross
versus net revenue recording criteria of ASC 605. Based on this criteria, these equipment revenues and associated
costs have generally been recorded on a gross basis, rather than recording the revenues net of the associated
costs. Vendor rebates are earned on certain equipment sales. If the rebate is earned and the amount is
determinable, we recognize the rebate as an offset to cost of products sold.
Data Center Colocation — Data center colocation rentals are generally billed monthly in advance and some
contracts have escalating payments over the non-cancellable term of the contract. If rents escalate without the
lessee gaining access to or control over additional leased space or power, and the lessee takes possession of, or
controls the physical use of the property (including all contractually committed power) at the beginning of the
lease term, the rental payments by the lessee are recognized as revenue on a straight-line basis over the term of
the lease. If rents escalate because the lessee gains access to and control over additional leased space or power,
revenue is recognized in proportion to the additional space or power in the years that the lessee has control over
the use of the additional space or power. The excess of revenue recognized over amounts contractually due is
recognized in other current and noncurrent assets in the accompanying Consolidated Balance Sheets.
Some of our leases are structured on a full-service gross basis in which the customer pays a fixed amount
for both colocation rental and power. Other leases provide that the customer will be billed for power based upon
actual usage which is separately metered. In both cases, this revenue is presented on a gross basis in the
accompanying Consolidated Statements of Operations. Power is generally billed one month in arrears and an
estimate of this revenue is accrued in the month that the associated costs are incurred. We generally are not
entitled to reimbursements for real estate taxes, insurance or other operating expenses.
Revenue is recognized for services or products that are deemed separate units of accounting. When a
customer makes an advance payment which is not deemed a separate unit of accounting, deferred revenue is
recorded. This revenue is recognized ratably over the expected term of the customer relationship, unless the
pattern of service suggests otherwise.
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Form 10-K Part II Cincinnati Bell Inc.