Frontier Communications 2006 Annual Report Download - page 57

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CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) Description of Business:
Citizens Communications Company and its subsidiaries are referred to as “we,” “us,” the “Company,” or
“our” in this report. We are a communications company providing services to rural areas and small and
medium-sized towns and cities as an incumbent local exchange carrier, or ILEC. We offer our ILEC services
under the “Frontier” name.
(b) Principles of Consolidation and Use of Estimates:
Our consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (GAAP). Certain reclassifications of balances previously
reported have been made to conform to the current presentation. All significant intercompany balances and
transactions have been eliminated in consolidation.
The preparation of financial statements in conformity with GAAP requires management to make estimates
and assumptions which affect the amounts of assets, liabilities, revenue and expenses we have reported and our
disclosure of contingent assets and liabilities at the date of the financial statements. Actual results may differ
from those estimates. We believe that our critical estimates are depreciation rates, pension assumptions,
calculations of impairment amounts, reserves established for receivables, income taxes and contingencies.
(c) Cash Equivalents:
We consider all highly liquid investments with an original maturity of three months or less to be cash
equivalents.
(d) Revenue Recognition:
Revenue is recognized when services are provided or when products are delivered to customers. Revenue
that is billed in advance includes: monthly recurring network access services, special access services and monthly
recurring local line charges. The unearned portion of this revenue is initially deferred as a component of other
liabilities on our consolidated balance sheet and recognized in revenue over the period that the services are
provided. Revenue that is billed in arrears includes: non-recurring network access services, switched access
services, non-recurring local services and long-distance services. The earned but unbilled portion of this revenue
is recognized in revenue in our statement of operations and accrued in accounts receivable in the period that the
services are provided. Excise taxes are recognized as a liability when billed. Installation fees and their related
direct and incremental costs are initially deferred and recognized as revenue and expense over the average term
of a customer relationship. We recognize as current period expense the portion of installation costs that exceeds
installation fee revenue.
(e) Property, Plant and Equipment:
Property, plant and equipment are stated at original cost or fair market value for our acquired properties,
including capitalized interest. Maintenance and repairs are charged to operating expenses as incurred. The gross
book value of routine property, plant and equipment retired is charged against accumulated depreciation.
(f) Goodwill and Other Intangibles:
Intangibles represent the excess of purchase price over the fair value of identifiable tangible assets acquired.
We undertake studies to determine the fair values of assets and liabilities acquired and allocate purchase prices to
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