Frontier Communications 2005 Annual Report Download - page 34

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32
CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
obligation. Although a liability exists for the removal of poles and asbestos, sufficient information is not available
currently to estimate our liability, as the range of time over which we may settle theses obligations is unknown or
cannot be reasonably estimated. The adoption of FIN 47 during the fourth quarter of 2005 had no impact on our
financial position or results of operations.
Accounting Changes and Error Corrections
In May 2005, the FASB issued SFAS No. 154, “Accounting Changes and Error Corrections,” a replacement of
APB Opinion No. 20 and FASB Statement No. 3. SFAS No. 154 changes the accounting for, and reporting of, a change
in accounting principle. SFAS No. 154 requires retrospective application to prior period’s financial statements of
voluntary changes in accounting principle, and changes required by new accounting standards when the standard does
not include specific transition provisions, unless it is impracticable to do so. SFAS No. 154 is effective for accounting
changes and corrections of errors made in fiscal years beginning after December 15, 2005.
Partnerships
In June 2005, the FASB issued EITF No. 04-5, “Determining Whether a General Partner, or the General
Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain
Rights,” which provides new guidance on how general partners in a limited partnership should determine whether
they control a limited partnership. EITF No. 04-5 is effective for fiscal periods beginning after December 15, 2005.
The Company does not expect the adoption of EITF No. 04-5 to have a material impact on our financial position, results
of operations or cash flows.
(b) RESULTS OF OPERATIONS
REVENUE
Frontier revenue is generated primarily through the provision of local, network access, long distance and data
services. Such services are provided under either a monthly recurring fee or based on usage at agreed upon rates and
are not dependent upon significant judgments by management, with the exception of a determination of a provision
for uncollectible amounts.
CLEC revenue is generated through local, long distance, data and long-haul services. These services are
primarily provided under a monthly recurring fee or based on usage at agreed upon rates and are not dependent upon
significant judgments by management with the exception of the determination of a provision for uncollectible
amounts and realizability of reciprocal compensation. CLEC usage based revenue includes amounts determined
under reciprocal compensation agreements. While this revenue is governed by specific contracts with the counterparty,
management defers recognition of disputed portions of such revenue until realizability is assured. Revenue earned
from long-haul contracts is recognized over the term of the related agreement.
Consolidated revenue decreased $5.9 million in 2005. The decrease in 2005 is primarily due to a $9.7 million
decrease resulting from the sale in 2004 of our electric utility property, partially offset by an increase of $3.8 million
in ILEC and ELI revenue.
Consolidated revenue decreased $255.8 million, or 11% in 2004. The decrease in 2004 was primarily due to
$228.9 million of decreased gas and electric revenue primarily due to the disposition of our Arizona gas and electric
operations, The Gas Company in Hawaii and our Vermont electric division and $26.9 million of decreased
telecommunications revenue.
Consolidated revenue decreased $223.5 million, or 8% in 2003. The decrease in 2003 was primarily due to
$192.7 million of decreased gas and electric revenue primarily due to the disposition of our Arizona gas and electric
operations and The Gas Company in Hawaii division and $30.8 million of decreased telecommunications revenue.
On March 15, 2005, we completed the sale of our conferencing service business. As a result of the sale, we
have classified the results of operations as discontinued operations in our consolidated statement of operations and
restated prior periods.