Frontier Communications 2011 Annual Report Download - page 72

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FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
F-9
(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 – The Transaction.
(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, 2011, 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.
(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) that we have recorded on a gross basis in our
consolidated statements of operations and included in revenue and other operating expenses of $104.5 million,
$73.8 million and $35.5 million for the years ended December 31, 2011, 2010 and 2009, 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.