Frontier Communications 2008 Annual Report Download - page 70

such contract advances that were transferred to the purchaser of our water and wastewater operations on
January 15, 2002 and accordingly should have been included in the gain recognized upon sale during that
period. Upon the adoption of SAB No. 108 in the fourth quarter of 2006, this error was corrected as of
January 1, 2006 through a decrease in other long-term liabilities and an increase in retained earnings.
Purchase Accounting. During the period 1991 to 2001, Frontier acquired a number of telecommunications
businesses, growing its asset base from approximately $400.0 million in 1991 to approximately $6.0 billion by
the end of 2001. As a result of these acquisitions, we recorded in accordance with purchase accounting standards,
all of the assets and liabilities associated with these properties. We have determined that approximately $18.8
million (net) of liabilities were established in error. Approximately $18.0 million of the liabilities should have
been recorded as a decrease to goodwill and $4.2 million should have been an increase to property, plant and
equipment ($1.99 million after amortization of $2.21 million). In addition, $4.964 million of liabilities should
have been reversed in 2001. We corrected this error by reversing the liability to retained earnings.
As permitted by the adoption of SAB No. 108, we have adjusted our previously recorded acquisition
entries as follows:
($ in thousands)
Increase/
(Decrease)
Property, Plant & Equipment ............................................... $ 1,990
Goodwill .................................................................. (18,049)
$(16,059)
Current Liabilities ......................................................... $(10,468)
Other Long-Term Liabilities ................................................ (8,345)
Retained Earnings. ......................................................... 2,754
$(16,059)
Tax Effect. The net effect on taxes (excluding the $23.5 million entry described above) resulting from the
adoption of SAB No. 108 was an increase to deferred tax liabilities of $6.2 million and an increase to goodwill
of $6.2 million.
(6) Accounts Receivable:
The components of accounts receivable, net at December 31, 2008 and 2007 are as follows:
($ in thousands) 2008 2007
End user. . . .................................................... $244,395 $244,592
Other .......................................................... 17,977 22,918
Less: Allowance for doubtful accounts . . ........................ (40,125) (32,748)
Accounts receivable, net . .................................. $222,247 $234,762
An analysis of the activity in the allowance for doubtful accounts for the years ended December 31, 2008,
2007 and 2006 is as follows:
Allowance for doubtful accounts
Balance at
beginning of
Period
Balance of
acquired
properties
Charged to
bad debt
expense*
Charged to other
accounts—
Revenue Deductions
Balance at
end of
Period
Additions
2006 ........................ $ 31,385 $ — $20,257 $ 80,003 $23,108 $108,537
2007 ........................ 108,537 1,499 31,131 (77,898) 30,521 32,748
2008 ........................ 32,748 1,150 31,700 2,352 27,825 40,125
* Such amounts are included in bad debt expense and for financial reporting purposes are classified as contra-
revenue.
F-19
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements