Frontier Communications 2007 Annual Report Download - page 59

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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,” “our,” or the
“Company” 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) Basis of Presentation and Use of Estimates:
Our consolidated financial statements have been prepared in accordance with accounting principles
generally accepted in the United States of America (U.S. 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 U.S. 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 and amortization rates,
pension assumptions, calculations of impairment amounts, reserves established for receivables, income taxes,
contingencies and purchase price allocations.
(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 consolidated statements 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.
The Company collects various taxes from its customers and subsequently remits such funds to governmental
authorities. Substantially all of these taxes are recorded through the consolidated balance sheet and presented on
a net basis in our consolidated statements of operations. We also collect Universal Service Fund (“USF”)
surcharges from customers (primarily federal USF) which have been recorded on a gross basis in our
consolidated statements of operations and have been included in revenue and other operating expenses at $35.9
million, $37.1 million and $39.1 million for the years ended December 31, 2007, 2006 and 2005, respectively.
F-9