Frontier Communications 2009 Annual Report Download - page 74

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(k) Stock Plans:
We have various stock-based compensation plans. Awards under these plans are granted to eligible
officers, management employees, non-management employees and non-employee directors. Awards may be
made in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted
stock, restricted stock units or other stock-based awards. We have no awards with market or performance
conditions. Our general policy is to issue shares upon the grant of restricted shares and exercise of options from
treasury.
The compensation cost recognized is based on awards ultimately expected to vest. ASC Topic 718 requires
forfeitures to be estimated and revised, if necessary, in subsequent periods if actual forfeitures differ from those
estimates.
(l) Net Income Per Common Share Attributable to Common Shareholders:
Basic net income per common share is computed using the weighted average number of common shares
outstanding during the period being reported on, excluding unvested restricted stock awards. The impact of
dividends paid on unvested restricted stock awards have been deducted in the determination of basic and
diluted net income attributable to common shareholders of Frontier. Except when the effect would be
antidilutive, diluted net income per common share reflects the dilutive effect of the assumed exercise of stock
options using the treasury stock method at the beginning of the period being reported on as well as common
shares that would result from the conversion of convertible preferred stock (EPPICS) and convertible notes. In
addition, the related interest on convertible debt (net of tax) is added back to income since it would not be paid
if the debt was converted to common stock.
(2) Recent Accounting Literature and Changes in Accounting Principles:
Fair Value Measurements
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (currently ASC Topic
820), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about
fair value measurements. In February 2008, the FASB amended SFAS No. 157 (ASC Topic 820) to defer the
application of this standard to nonfinancial assets and liabilities until 2009. The provisions of SFAS No. 157
(ASC Topic 820) related to financial assets and liabilities were effective as of the beginning of 2008. Our
partial adoption of SFAS No. 157 (ASC Topic 820) in the first quarter of 2008 had no impact on our financial
position, results of operations or cash flows. The adoption of SFAS No. 157 (ASC Topic 820), as amended, in
the first quarter of 2009 with respect to its effect on nonfinancial assets and liabilities had no impact on our
financial position, results of operations or cash flows.
Business Combinations
In December 2007, the FASB revised SFAS No. 141, “Business Combinations” (currently ASC Topic
805). The revised statement, SFAS No. 141R (ASC Topic 805), as amended by FSP SFAS No. 141(R)-1 (ASC
Topic 805), requires an acquiring entity to recognize all the assets acquired and liabilities assumed in a
transaction at the acquisition date at fair value, to recognize and measure preacquisition contingencies,
including contingent consideration, at fair value (if possible), to remeasure liabilities related to contingent
consideration at fair value in each subsequent reporting period and to expense all acquisition related costs. The
effective date of SFAS No. 141R (ASC Topic 805) was for business combinations for which the acquisition
date was on or after the beginning of the first annual reporting period beginning on or after December 15, 2008.
We will account for our pending acquisition of approximately 4.2 million access lines (as of December 31,
2009) from Verizon Communications Inc. (Verizon) using the guidance included in SFAS No. 141R (ASC
Topic 805). For the year ended December 31, 2009, we incurred approximately $28.3 million of acquisition and
integration costs in connection with our pending acquisition from Verizon. In accordance with SFAS No. 141R
F-12
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements