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Table of Contents
EARTHLINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
December 31, 2008 and 2009, respectively, and approximately $11.5 million and $8.1 million was reclassified from selling, general and
administrative expenses to depreciation and amortization during the years ended December 31, 2008 and 2009, respectively.
Recently Issued Accounting Pronouncements
In September 2009, the Financial Accounting Standards Board ("FASB") issued new guidance on revenue recognition. The new guidance
addresses the accounting for multiple-
deliverable arrangements to enable vendors to account for products or services (deliverables) separately
rather than as a combined unit and to modify the manner in which the transaction consideration is allocated across the separately identifiable
deliverables and how revenue is recognized. The new guidance also significantly expands the disclosure requirements for multiple-
element
arrangements. The new guidance is effective prospectively for revenue arrangements entered into or materially modified in fiscal years
beginning on or after June 15, 2010. The Company does not expect the adoption of the new guidance to have a material impact on its financial
statements.
In December 2010, the FASB issued new guidance on when to perform Step 2 of the goodwill impairment test for reporting units with zero
or negative carrying amounts. The new guidance modifies Step 1 of the goodwill impairment test for reporting units with zero or negative
carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not
that a goodwill impairment exists. In determining whether it is more likely than not that a goodwill impairment exists, an entity should consider
whether there are any adverse qualitative factors indicating that an impairment may exist. The new guidance is effective for fiscal years, and
interim periods within those years, beginning after December 15, 2010. Early adoption is not permitted. The Company does not expect the
adoption of the new guidance to have a material impact on its financial statements.
Also in December 2010, the FASB issued new guidance on disclosure of supplementary pro forma financial information for business
combinations. The new guidance specifies that if a public entity presents comparative financial statements, the entity should disclose revenue
and earnings of the combined entity as though the business combination(s) that occurred during the current year had occurred as of the beginning
of the comparable prior annual reporting period only. The new guidance also expands the supplemental pro forma disclosures for business
combinations to include a description of the nature and amount of material, nonrecurring pro forma adjustments directly attributable to the
business combination included in the reported pro forma revenue and earnings. The new guidance is effective prospectively for business
combinations for which the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15,
2010. The Company does not expect the adoption of the new guidance to have a material impact on its financial statements.
3. Acquisitions
Acquisition of ITC^DeltaCom
On December 8, 2010, EarthLink completed its acquisition of ITC^DeltaCom, a provider of integrated communications services to
customers in the southeastern U.S., for $3.00 per share and the assumption of debt. Under the terms of the merger agreement, EarthLink acquired
100% of ITC^DeltaCom in a merger transaction with ITC^DeltaCom surviving as a wholly-
owned subsidiary of EarthLink. The acquisition will
enable EarthLink to become an IP infrastructure and managed services provider by combining its existing business services with
ITC^Deltacom's integrated communications business.
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