Earthlink 2008 Annual Report Download - page 76

Table of Contents
EARTHLINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
purchased from a limited number of telecommunications service providers. Although management believes that alternate telecommunications
providers could be found in a timely manner, any disruption of these services could have a material adverse effect on the Company's financial
position, results of operations and cash flows.
The Company also relies on the reliability, capacity and effectiveness of its outsourced contact center service providers. The Company
purchases contact center services from geographically dispersed service providers. The contact center service providers may become subject to
financial, economic and political risks beyond the Company's or the providers' control which could jeopardize their ability to deliver services.
Although management believes that alternate contact center service providers could be found in a timely manner, any disruption of these services
could have a material adverse effect on the Company's financial position, results of operations and cash flows.
Fair Value of Financial Instruments
The carrying amounts of the Company's cash, cash equivalents, trade receivables and trade payables approximate their fair values because
of their nature and respective durations. The Company's short- and long-term investments in marketable securities consist of available-for-
sale
and trading securities that are carried at market value. The Company's equity investments in publicly-
held companies are stated at fair value,
which is based on quoted market prices, with unrealized gains and losses included in stockholders' equity. The Company's investments in
privately-held companies are stated at cost, net of other-than-temporary impairments, because it is impracticable to estimate fair value.
Reclassifications
Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation.
Recently Issued Accounting Pronouncements
In December 2007, the Financial Accounting Standards Board ("FASB") issued SFAS No. 141R, "Business Combinations," which replaces
SFAS No. 141, "Business Combinations." SFAS No. 141R changes the accounting for business combinations by requiring that an acquiring
entity measure and recognize identifiable assets acquired and liabilities assumed at fair value with limited exceptions on the acquisition date. The
changes include the treatment of acquisition-
related transaction costs, the valuation of any noncontrolling interest at acquisition date fair value,
the recognition of capitalized in-process research and development, the accounting for acquisition-
related restructuring cost accruals subsequent
to the acquisition date, and the recognition of changes in the acquirer's income tax valuation allowance. SFAS No. 141R is effective for business
combinations or transactions entered into for fiscal years beginning on or after December 15, 2008. The adoption of SFAS No. 141R is expected
to change the Company's accounting treatment prospectively for all business combinations consummated after the effective date. The nature and
magnitude of the specific impact will depend upon the nature, terms, and size of any acquisitions consummated after the effective date. In
addition, after the effective date, reversals of valuation allowances related to acquired deferred tax assets and changes to acquired income tax
uncertainties related to any business combinations, even those completed prior to the statement's effective date, will generally be recognized in
earnings.
In May 2008, FASB issued Staff Position No. APB 14-
1, "Accounting for Convertible Debt Instruments that May be Settled in Cash Upon
Conversion" ("FSP APB 14-1"). FSP APB 14-
1 requires that the liability and equity components of convertible debt instruments that may be
settled in cash upon
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