Frontier Communications 2014 Annual Report Download - page 72

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unearned portion of these fees is initially deferred as a component of “Advanced billings” 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 (including data
services), switched access services, non-recurring voice and video services. The earned but unbilled
portion of these fees is recognized as revenue in our consolidated statements of income 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
income. 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 income and included
within “Revenue” and “Network related expenses” of $125 million, $118 million and $120 million for the
years ended December 31, 2014, 2013 and 2012, respectively.
(e) Property, Plant and Equipment:
Property, plant and equipment are stated at original cost, including capitalized interest, or fair
market value as of the date of acquisition for acquired properties. Maintenance and repairs are
charged to operating expenses as incurred. The gross book value of routine property, plant and
equipment retirements is charged against accumulated depreciation.
(f) Goodwill and Other Intangibles:
Goodwill represents the excess of purchase price over the fair value of identifiable tangible and
intangible 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 as of December 31, or more
frequently, as circumstances warrant, 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 U.S. GAAP. In October 2014, and as a result of the
completion of the Connecticut Acquisition, the Company reorganized into five regional operating
segments. Our operating segments consist of the following regions: Central, East, Mid-Atlantic,
National and West. Our regional operating segments are aggregated into one reportable segment. In
conjunction with the reorganization of our operating segments, we reassigned goodwill using a relative
fair value allocation approach.
The Company amortizes finite-lived intangible assets over their estimated useful lives on the
accelerated method of sum of the years digits. We review such intangible assets at least annually as of
December 31 to assess whether any potential impairment exists and whether factors exist that would
necessitate a change in useful life and a different amortization period.
(g) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of:
We review long-lived assets to be held and used, including customer lists, and long-lived assets to
be disposed of 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
F-11
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements