Earthlink 2008 Annual Report Download - page 292

HELIO, INC. and HELIO LLC
NOTES TO COMBINED FINANCIAL STATEMENTS
13. Income Taxes (continued)
At December 31, 2007, the Company had federal and state net operating loss carry forwards of approximately $9.7 million, which begin
to expire on December 31, 2015 for state purposes and December 31, 2025 for federal tax purposes .
The Company adopted the provisions of FIN 48 on January 1, 2007. The cumulative effect at adoption of this interpretation did not
result in any adjustment to retained earnings. At January 1, 2007 and at December 31, 2007, the Company had no unrecognized tax benefits for
purposes of this pronouncement.
The Company’s accounting policy is to recognize interest and penalties related to unrecognized tax benefits in income tax expense. At
December 31, 2007, the Company had no accrued interest or penalties related to unrecognized tax benefits.
The Company files income tax returns in the U.S. and in various state and local jurisdictions. The Company is subject to U.S. federal
and state income tax examinations by the taxing authorities in all of these jurisdictions for the years ended December 31, 2005 through
December 31, 2007. No examinations are currently in process.
The Company does not expect the amount of its unrecognized tax benefits to significantly increase within the next twelve months.
14. Financial Instruments and Concentration of Risk
The carrying amounts of cash and cash equivalents, accounts receivable, subscriptions receivable, prepaid expenses, other current assets
and accounts payable are reasonable estimates of their fair value due to the short-term nature of these instruments.
The majority of the Company’
s wireless airtime services are leased from a third party wireless network provider. Any disruption of this
service would have an adverse impact on the Company’s member experience and ongoing operating results.
15. Commitments and Contingencies
Leases
The Company leases certain of its facilities and equipment under non-cancelable operating leases expiring in various years through
2012. The leases generally contain annual escalation provisions as well as renewal options. The total amount of rental payments, net of
allowances and incentives, is being charged to expense using the straight-line method over the terms of the leases. In addition to the rental
payments, the Company generally pays a monthly allocation of the buildings’ operating expenses. Total rental expense in the periods ended
December 31, 2005, 2006 and 2007 for all operating leases amounted to $0.9 million, $3.7 million and $7.5 million, respectively.
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