CenturyLink 2015 Annual Report Download - page 152

CENTURYLINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
References in the Notes to “CenturyLink,” “we,” “us” and “our” refer to CenturyLink, Inc. and its
consolidated subsidiaries, unless the content otherwise requires and except in Note 3, where such references
refer solely to CenturyLink, Inc.
(1) Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
We are an integrated communications company engaged primarily in providing an array of communications
services to our residential and business customers. Our communications services include local and long-distance
voice, high-speed Internet, Multi-Protocol Label Switching (“MPLS”), private line (including special access),
data integration, Ethernet, colocation, managed hosting (including cloud hosting), network, public access,
wireless, video and other ancillary services.
The accompanying consolidated financial statements include our accounts and the accounts of our
subsidiaries. Intercompany amounts and transactions with our consolidated subsidiaries have been eliminated.
To simplify the overall presentation of our consolidated financial statements, we report immaterial amounts
attributable to noncontrolling interests in certain of our subsidiaries as follows: (i) income attributable to
noncontrolling interests in other income, net, (ii) equity attributable to noncontrolling interests in additional paid-
in capital and (iii) cash flows attributable to noncontrolling interests in other, net financing activities.
We reclassified certain prior period amounts to conform to the current period presentation, including the
categorization of our revenues and our segment reporting. See Note 12—Segment Information for additional
information. These changes had no impact on total revenues, total operating expenses or net income (loss) for
any period.
Connect America Fund Support Payments
In 2015, we accepted funding from the Federal Communications Commission’s (“FCC”) Connect America
Fund (“CAF”) of approximately $500 million per year for six years to fund the deployment of voice and high-
speed Internet infrastructure for approximately 1.2 million rural households and businesses in 33 states under the
CAF Phase 2 high-cost support program. The funding from the CAF Phase 2 support program in these 33 states
will substantially supplant funding from the interstate Universal Service Fund (“USF”) high-cost program that
we previously utilized to support voice services in high-cost rural markets. In September of 2015, we began
receiving these support payments from the FCC under the new CAF Phase 2 support program, which included
(i) monthly support payments at a higher rate than under the interstate USF support program and (ii) a one-time
cumulative catch-up payment representing the incrementally higher funding under the CAF Phase 2 support
program over the interstate USF support program for the first seven months of 2015. During 2015, we recorded
$215 million more revenue than we would have otherwise recorded during the same period under the interstate
USF support program.
Changes in Estimates
As a result of our annual reviews to evaluate the reasonableness of the depreciable lives for our property,
plant and equipment, effective January 2014, we changed the estimates of the remaining economic lives of
certain switch and circuit network equipment. These changes resulted in a net increase in depreciation expense of
approximately $78 million for the year ended December 31, 2014. This net increase in depreciation expense, net
of tax, reduced consolidated net income by approximately $48 million, or $0.08 per basic and diluted common
share, for the year ended December 31, 2014.
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