Frontier Communications 2007 Annual Report Download - page 89

CITIZENS COMMUNICATIONS COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements
available on long-term, high quality corporate bonds that approximate the benefit obligation. In making this
determination we consider, among other things, the yields on the Citigroup Pension Discount Curve and Bloomberg
Finance and the changes in those rates from one period to the next. This rate can change from year-to-year based on
market conditions that impact corporate bond yields. Our discount rate increased from 6.00% at year-end 2006 to
6.50% at year-end 2007.
The expected long-term rate of return on plan assets is applied in the determination of periodic pension and
postretirement benefit cost as a reduction in the computation of the expense. In developing the expected long-term rate
of return assumption, we considered published surveys of expected market returns, 10 and 20 year actual returns of
various major indices, and our own historical 5-year and 10-year investment returns. The expected long-term rate of
return on plan assets is based on an asset allocation assumption of 35% to 55% in fixed income securities, 35% to 55%
in equity securities and 5% to 15% in alternative investments. We review our asset allocation at least annually and
make changes when considered appropriate. In 2007, we did not change our expected long-term rate of return from the
8.25% used in 2006. Our pension plan assets are valued at actual market value as of the measurement date. The
measurement date used to determine pension and other postretirement benefit measures for the pension plan and the
postretirement benefit plan is December 31.
In September 2006, the FASB issued SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension and
Other Postretirement Plans” (SFAS No. 158). We adopted SFAS No. 158 prospectively on December 31, 2006. SFAS
No. 158 requires that we recognize all obligations related to defined benefit pensions and other postretirement benefits.
This statement requires that we quantify the plans’ funded status as an asset or a liability on our consolidated balance
sheets. In accordance with SFAS No. 158, our 2005 accounting and related disclosures were not affected by the
adoption of the new standard. The table below summarizes the incremental effects of SFAS No. 158 adoption on the
individual line items in our consolidated balance sheet at December 31, 2006:
($ in thousands)
Pre SFAS
No. 158
Adoption
SFAS
No. 158
Adjustment
Post SFAS
No. 158
Adoption
Liabilities:
Deferred income taxes ..................................... $564,041 $ (49,911) $514,130
Other liabilities ........................................... 199,100 133,545 332,645
Shareholders’ Equity:
Accumulated other comprehensive loss ........................ 1,735 (83,634) (81,899)
SFAS No. 158 requires that we measure the plan’s assets and obligations that determine our funded status as of
the end of the fiscal year. We are also required to recognize as a component of Other Comprehensive Income “OCI”
the changes in funded status that occurred during the year that are not recognized as part of net periodic benefit cost as
explained in SFAS No. 87, “Employers’ Accounting for Pensions,” or SFAS No. 106, “Employers’ Accounting for
Postretirement Benefits Other Than Pensions.”
Based on the funded status of our defined benefit pension and postretirement benefit plans as of December 31,
2006, we reported a gain (net of tax) to our AOCI of $41.4 million, a decrease of $66.1 million to accrued pension
obligations and an increase of $24.7 million to accumulated deferred income taxes. Our adoption of SFAS No. 158 on
December 31, 2006, had no impact on our earnings. The following tables present details about our pension plans.
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