Earthlink 2009 Annual Report Download - page 80

Table of Contents
EARTHLINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
severance payments and amounts due under lease obligations, net of estimated sublease income, if any. Key variables in determining lease
estimates include operating expenses due under lease arrangements, the timing and amounts of sublease rental payments, tenant improvement
costs and brokerage and other related costs. The Company periodically evaluates and, if necessary, adjusts its estimates based on currently-
available information. Such adjustments are classified as facility exit and restructuring costs in the Consolidated Statements of Operations.
Post
-Employment Benefits
Post-
employment benefits primarily consist of the Company's severance plans. When the Company has either a formal severance plan or a
history of consistently providing severance benefits representing a substantive plan, the Company recognizes severance costs when they are both
probable and reasonably estimable.
Comprehensive Income (Loss)
Comprehensive income (loss) as presented in the Consolidated Statements of Stockholders' Equity and Comprehensive Income (Loss)
includes unrealized gains and losses which are excluded from the Consolidated Statements of Operations. For the years ended December 31,
2007, 2008 and 2009, these amounts included changes in unrealized gains and losses, net of tax, on certain investments classified as available-
for-sale.
Certain Risks and Concentrations
Credit Risk. By their nature, all financial instruments involve risk, including credit risk for non-
performance by counterparties. Financial
instruments that potentially subject the Company to credit risk consist principally of cash, cash equivalents, marketable securities, trade
receivables and long-
term investments. In addition, credit risk for the Company's cash, cash equivalents and marketable securities may be
exacerbated by unfavorable economic conditions. If financial markets experience prolonged periods of decline, the value or liquidity of the
Company's cash, cash equivalents and marketable securities could decline and result in an other-than-
temporary decline in fair value, which
could adversely affect the Company's financial position, results of operations and cash flows.
The Company's cash investment policy limits investments to investment grade instruments. Accounts receivable are typically unsecured and
are derived from revenues earned from customers primarily located in the U.S. Credit risk with respect to trade receivables is limited due to the
large number of customers comprising the Company's customer base. Additionally, the Company maintains allowances for potential credit
losses. As of December 31, 2008, one company accounted for more than 10% of gross accounts receivable. As of December 31, 2009, two
companies each accounted for more than 10% of gross accounts receivable. Management regularly evaluates the recoverability of its investments
in other companies based on the performance and the financial position of those companies as well as other evidence of market value.
Regulatory Risk.
EarthLink purchases broadband access from incumbent local exchange carriers, competitive local exchange carriers and
cable providers. Please refer to "Regulatory Environment" in the Business section of this Annual Report on Form 10-
K for a discussion of the
regulatory environment as well as a discussion regarding the Company's contracts with broadband access providers.
Supply Risk. The Company's business depends on the capacity, affordability, reliability and security of third-
party telecommunications
service providers. Only a small number of providers offer the network
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