Frontier Communications 2007 Annual Report Download - page 60

CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(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 net assets
acquired. We undertake studies to determine the fair values of assets and liabilities acquired and allocate
purchase prices to 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,
2007 that there was no impairment.
Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets,”
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.
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