Frontier Communications 2010 Annual Report Download - page 69

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(1) Description of Business and Summary of Significant Accounting Policies:
(a) Description of Business:
Frontier Communications Corporation (Frontier) is a communications company providing services
predominantly to rural areas and small and medium-sized towns and cities as an incumbent local exchange
carrier, or ILEC. Frontier was incorporated in 1935, originally under the name of Citizens Utilities Company
and was known as Citizens Communications Company until July 31, 2008. Frontier and its subsidiaries are
referred to as “we,” “us,” “our” or the “Company” in this report. On July 1, 2010, Frontier completed the
Transaction for the acquisition of the Acquired Business, as described further in Note 3.
(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.
For our financial statements as of and for the periods ended December 31, 2010, we evaluated subsequent
events and transactions for potential recognition or disclosure through the date that we filed this annual report
on Form 10-K with the Securities and Exchange Commission (SEC).
The preparation of our financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect (i) the reported amounts of assets and liabilities at the date of the
financial statements, (ii) the disclosure of contingent assets and liabilities, and (iii) 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. Certain information and footnote disclosures have
been excluded and/or condensed pursuant to SEC rules and regulations.
(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 network access services, special access services and
monthly recurring local line and unlimited fixed long distance bundle charges. The unearned portion of these
fees is initially deferred as a component of other liabilities on our consolidated balance sheet and recognized as
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 these fees is recognized as 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.
As required by law, the Company collects various taxes from its customers and subsequently remits these
taxes 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
F-10
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements