Frontier Communications 2008 Annual Report Download - page 68

(4) Property, Plant and Equipment:
The components of property, plant and equipment at December 31, 2008 and 2007 are as follows:
($ in thousands)
Estimated
Useful Lives 2008 2007
Land . . . .................................................... N/A $ 22,631 $ 23,347
Buildings and leasehold improvements ....................... 41 years 344,839 343,826
General support . . ........................................... 5 to 17 years 508,825 492,771
Central office/electronic circuit equipment .................... 5 to 11 years 2,959,440 2,855,645
Cable and wire . . ........................................... 15 to 60 years 3,623,193 3,484,838
Other. . . .................................................... 20 to 30 years 24,703 46,620
Construction work in progress ............................... 97,429 128,250
7,581,060 7,375,297
Less: Accumulated depreciation.............................. (4,341,087) (4,040,053)
Property, plant and equipment, net . . . ........................ $ 3,239,973 $ 3,335,244
Depreciation expense is principally based on the composite group method. Depreciation expense was
$379.5 million, $374.4 million and $350.1 million for the years ended December 31, 2008, 2007 and 2006,
respectively. Effective with the completion of an independent study of the estimated useful lives of our plant
assets we adopted new lives beginning October 1, 2008.
(5) Retained Earnings—Cumulative Effect Adjustment:
In September 2006, the SEC staff issued Staff Accounting Bulletin (SAB) Topic 1N (SAB No. 108),
“Financial Statements—Considering the Effects of Prior Year Misstatements when Quantifying Misstatements
in Current Year Financial Statements”. SAB No. 108 provides guidance on how prior year misstatements
should be taken into consideration when quantifying misstatements in current year financial statements for
purposes of determining whether the financial statements are materially misstated. Under this guidance,
companies should take into account both the effect of a misstatement on the current year balance sheet as well
as the impact upon the current year income statement in assessing the materiality of a current year
misstatement. Once a current year misstatement has been quantified, the guidance in SAB Topic 1M,
“Financial Statements Materiality,” (SAB No. 99) will be applied to determine whether the misstatement is
material.
SAB No. 108 allowed for a one-time transitional cumulative effect adjustment to retained earnings as of
January 1, 2006 for errors that were not previously deemed material as they were being evaluated under a
single method but were material when evaluated under the dual approach prescribed by SAB No. 108. The
Company adopted SAB No. 108 in connection with the preparation of its financial statements for the year
ended December 31, 2006. The adoption did not have any impact on the Company’s cash flow or prior year
financial statements. As a result of adopting SAB No. 108 in the fourth quarter of 2006 and electing to use the
one-time transitional cumulative effect adjustment, the Company made adjustments to the beginning balance of
retained earnings as of January 1, 2006 in the fourth quarter of 2006 for the following errors (all of which were
determined to be immaterial under the Company’s previous methodology):
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FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements