Frontier Communications 2008 Annual Report Download - page 61

(1) Description of Business and Summary of Significant Accounting Policies:
(a) Description of Business:
Frontier Communications Corporation (formerly known as Citizens Communications Company through
July 30, 2008) 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.
(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 reported amounts of assets and liabilities at the date of the financial
statements, the disclosure of contingent assets and liabilities, and the reported amounts of revenue and expenses
during the reporting period. Actual results may differ from those estimates. Estimates and judgments are used
when accounting for allowance for doubtful accounts, impairment of long-lived assets, intangible assets,
depreciation and amortization, income taxes, purchase price allocations, contingencies, and pension and other
postretirement benefits, among others.
(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 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 we have recorded on a gross basis in our
consolidated statements of operations and included in revenue and other operating expenses at $37.1 million,
$35.9 million and $37.1 million for the years ended December 31, 2008, 2007 and 2006, respectively.
(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-10
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements