Frontier Communications 2009 Annual Report Download - page 73

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 $35.5 million,
$37.1 million and $35.9 million for the years ended December 31, 2009, 2008 and 2007, 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) 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) or more frequently, if appropriate, examine the
carrying value of our goodwill and trade name to determine whether there are any impairment losses. We test
for goodwill impairment at the “operating segment” level, as that term is defined in ASC Topic 350 (formerly
Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets”). The
Company revised its management and operating structure during the first quarter of 2009 and now has three
“operating segments.” Our “operating segments” are aggregated into one reportable segment.
(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
customer lists, 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. Also, we periodically
reassess the useful lives of our tangible and intangible assets to determine whether any changes are required.
(h) Derivative Instruments and Hedging Activities:
We account for derivative instruments and hedging activities in accordance with ASC 815 (formerly SFAS
No. 133, “Accounting for Derivative Instruments and Hedging Activities”) ASC 815 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.
(i) Investments:
Investments in entities that we do not control, but where we have the ability to exercise significant
influence over operating and financial policies, are accounted for using the equity method of accounting.
(j) Income Taxes and Deferred Income Taxes:
We file a consolidated federal income tax return. We utilize the asset and liability method of accounting
for income taxes. Under the asset and liability method, deferred income taxes are recorded for the tax effect of
temporary differences between the financial statement basis and the tax basis of assets and liabilities using tax
rates expected to be in effect when the temporary differences are expected to reverse.
F-11
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements