Cincinnati Bell 2009 Annual Report Download - page 132

Recognition.” Under ASC 605, revenue is recognized when there is persuasive evidence of a sale arrangement,
delivery has occurred or services have been rendered, the sales price is fixed or determinable, and collectibility is
reasonably assured.
Service revenue — The Company recognizes service revenue as services are provided. Revenue from local
telephone, special access and data and internet product services, which are billed monthly prior to performance of
service, and from prepaid wireless service, which is collected in advance, is not recognized upon billing or cash
receipt but rather is deferred until the service is provided. Postpaid wireless, long distance, switched access and
reciprocal compensation are billed monthly in arrears. The Company bills service revenue in regular monthly
cycles, which are spread throughout the days of the month. As the last day of each billing cycle rarely coincides
with the end of the Company’s reporting period for usage-based services such as postpaid wireless, long distance,
and switched access, the Company must estimate service revenues earned but not yet billed. The Company bases
its estimates upon historical usage and adjusts these estimates during the period in which the Company can
determine actual usage, typically in the following reporting period.
Initial billings for Wireline service connection and activation are deferred and amortized into revenue on a
straight-line basis over the average customer life. The associated connection and activation costs, to the extent of
the upfront fees, are also deferred and amortized on a straight-line basis over the average customer life.
Data center and managed services consist primarily of recurring revenue streams from collocation,
interconnection, and managed infrastructure services. These recurring revenue streams are billed monthly and
recognized ratably over the term of the contract. Data center and managed services can also include revenues
from non-recurring revenue streams such as installation revenues. Certain non-recurring installation fees,
although generally paid in lump sum upon installation, are also deferred and recognized ratably over the term of
the contract. Agreements with data center customers require certain levels of service or performance. Although
the occurrence is rare, if the Company fails to meet these levels, customers may be able to receive service credits
for their accounts. The Company records these credits against revenue when an event occurs that gives rise to
such credits. In multi-year data center and managed services arrangements with increasing or decreasing monthly
billings, revenues are recognized on a straight-line basis. Revenue for leased data center assets is also recognized
on a straight-line basis over the contract term.
Technology Solutions professional services, including product installations, are recognized as the service is
provided. Technology Solutions also provides maintenance services on telephony equipment under one to four
year contract terms. This revenue is deferred and recognized ratably over the term of the underlying customer
contract.
Product revenue — The Company recognizes equipment revenue upon the completion of contractual
obligations, such as shipment, delivery, installation, or customer acceptance, as appropriate. Wireless handset
revenue and the related activation revenue are recognized when the products are delivered to and accepted by the
customer, as this is considered to be a separate earnings process from the sale of wireless services. Wireless
equipment costs are also recognized upon handset sale, and are in excess of the related handset and activation
revenue.
The Company is a reseller of IT and telephony equipment and considers the gross versus net revenue
recording criteria of ASC 605, such as title transfer, risk of product loss, and collection risk. Based on this
criteria, these equipment revenues and associated costs have generally been recorded on a gross basis, rather than
recording the revenues net of the associated costs. The Company benefits from vendor rebate plans, particularly
rebates on hardware sold by Technology Solutions. If the rebate is earned and the amount is determinable based
on the sale of the product, the Company recognizes the rebate as an offset to costs of products sold upon sale of
the related equipment to the customer.
With respect to arrangements with multiple deliverables, the Company determines whether more than one
unit of accounting exists in an arrangement. To the extent that the deliverables are separable into multiple units
of accounting, total consideration is allocated to the individual units of accounting based on their relative fair
value, determined by the price of each deliverable when it is regularly sold on a stand-alone basis. Revenue is
recognized for each unit of accounting as delivered or as service is performed depending on the nature of the
deliverable comprising the unit of accounting.
62