Frontier Communications 2004 Annual Report Download - page 59

CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
F-15
Financial Instruments with Characteristics of Both Liabilities and Equity
In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of
Both Liabilities and Equity.” The Statement establishes standards for the classification and measurement of certain
financial instruments with characteristics of both liabilities and equity. Generally, the Statement is effective for
financial instruments entered into or modified after May 31, 2003 and is otherwise effective at the beginning of the
first interim period beginning after June 15, 2003. We adopted the provisions of the Statement on July 1, 2003. The
adoption of SFAS No. 150 did not have any material impact on our financial position or results of operations.
Variable Interest Entities
In December 2003, the FASB issued FASB Interpretation No. 46 (revised December 2003) (“FIN 46R”),
“Consolidation of Variable Interest Entities,” which addresses how a business enterprise should evaluate whether it
has a controlling financial interest in an entity through means other than voting rights and accordingly should
consolidate the entity. FIN 46R replaces FASB Interpretation No. 46, “Consolidation of Variable Interest Entities,”
which was issued in January 2003. We are required to apply FIN 46R to variable interests in variable interest entities
or VIEs created after December 31, 2003. For any VIEs that must be consolidated under FIN 46R that were created
before January 1, 2004, the assets, liabilities and noncontrolling interests of the VIE initially would be measured at
their carrying amounts with any difference between the net amount added to the balance sheet and any previously
recognized interest being recognized as the cumulative effect of an accounting change. If determining the carrying
amounts is not practicable, fair value at the date FIN 46R first applies may be used to measure the assets, liabilities
and noncontrolling interest of the VIE. We reviewed all of our investments and determined that the Trust
Convertible Preferred Securities (EPPICS), issued by our consolidated wholly-owned subsidiary, Citizens Utilities
Trust and the related Citizens Utilities Capital L.P., were our only VIEs. The adoption of FIN 46R on January 1,
2004 did not have any material impact on our financial position or results of operations.
Pension and Other Postretirement Benefits
In December 2003, the FASB issued SFAS No. 132 (revised), “Employers’ Disclosures about Pensions and Other
Postretirement Benefits.” This statement retains and revises the disclosure requirements contained in the original
statement. It requires additional disclosures including information describing the types of plan assets, investment
strategy, measurement date(s), plan obligations, cash flows, and components of net periodic benefit cost recognized in
interim periods. This statement is effective for fiscal years ending after December 15, 2003. We have adopted the
expanded disclosure requirements of SFAS No. 132 (revised).
Investments
In March 2004, the FASB issued EITF Issue No. 03-1, “The Meaning of Other-Than-Temporary Impairment and Its
Application to Certain Investments” (EITF 03-1) which provides new guidance for assessing impairment losses on
debt and equity investments. Additionally, EITF 03-1 includes new disclosure requirements for investments that are
deemed to be temporarily impaired. In September 2004, the FASB delayed the accounting provisions of EITF 03-1;
however, the disclosure requirements remain effective and have been adopted for our year ended December 31, 2004.
Although we have no material investments at the present time, we will evaluate the effect, if any, of EITF 03-1 when
final guidance is released.
(3) Accounts Receivable:
The components of accounts receivable, net at December 31, 2004 and 2003 are as follows:
The Company maintains an allowance for estimated bad debts based on its estimate of collectibility of its accounts
receivables. Bad debt expense, which is recorded as a reduction of revenue, was $17,859,000, $21,525,000 and
$24,249,000 for the years ended December 31, 2004, 2003, and 2002, respectively. In addition, additional reserves
($ in thousands) 2004 2003
Customers 230,029$ 250,515$
Other 42,319 45,567
Less: Allowance for doubtful accounts (36,042) (47,332)
Accounts receivable, net 236,306$ 248,750$