Frontier Communications 2006 Annual Report Download - page 58

CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
assets and liabilities, including property, plant and equipment, goodwill and other identifiable intangibles. We
annually (during the fourth quarter) examine the carrying value of our goodwill and trade name to determine
whether there are any impairment losses and have determined for the year ended December 31, 2006 that there
was no impairment.
Statement of Financial Accounting Standards (SFAS) No. 142 also requires that intangible assets with
estimated useful lives be amortized over those lives and be reviewed for impairment in accordance with SFAS
No. 144, “Accounting for Impairment or Disposal of Long-Lived Assets” to determine whether any changes to
these lives are required. We periodically reassess the useful life of our intangible assets to determine whether any
changes to those lives are required.
(g) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of:
We review long-lived assets to be held and used and long-lived assets to be disposed of, including intangible
assets with estimated useful lives, for impairment whenever events or changes in circumstances indicate that the
carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured
by comparing the carrying amount of the asset to the future undiscounted net cash flows expected to be generated
by the asset. Recoverability of assets held for sale is measured by comparing the carrying amount of the assets to
their estimated fair market value. If any assets are considered to be impaired, the impairment is measured by the
amount by which the carrying amount of the assets exceeds the estimated fair value.
(h) Derivative Instruments and Hedging Activities:
We account for derivative instruments and hedging activities in accordance with SFAS No. 133,
“Accounting for Derivative Instruments and Hedging Activities,” as amended. SFAS No. 133, as amended,
requires that all derivative instruments, such as interest rate swaps, be recognized in the financial statements and
measured at fair value regardless of the purpose or intent of holding them.
On the date we enter into a derivative contract that qualifies for hedge accounting, we designate the
derivative as either a fair value or cash flow hedge. A hedge of the fair value of a recognized asset or liability or
of an unrecognized firm commitment is a fair value hedge. A hedge of a forecasted transaction or the variability
of cash flows to be received or paid related to a recognized asset or liability is a cash flow hedge. We formally
document all relationships between hedging instruments and hedged items, as well as our risk-management
objective and strategy for undertaking the hedge transaction. This process includes linking all derivatives that are
designated as fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific
firm commitments or forecasted transactions.
We also formally assess, both at the hedge’s inception and on an ongoing basis, whether the derivatives that
are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged
items. If it is determined that a derivative is not highly effective as a hedge or that it has ceased to be a highly
effective hedge, we would discontinue hedge accounting prospectively.
All derivatives are recognized on the balance sheet at their fair value. Changes in the fair value of derivative
financial instruments are either recognized in income or shareholders’ equity (as a component of other
comprehensive income), depending on whether the derivative is being used to hedge changes in fair value or cash
flows.
We have interest rate swap arrangements related to a portion of our fixed rate debt. These hedge strategies
satisfy the fair value hedging requirements of SFAS No. 133, as amended. As a result, the fair value of the swaps
is carried on the balance sheet in other liabilities and the related hedged liabilities are also adjusted to fair value
by the same amount.
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