Earthlink 2013 Annual Report Download - page 106

Legal proceedings and other disputes
General
. The Company is party to various legal proceedings and other disputes arising in the normal course of business, including, but
not limited to, regulatory audits, trademark and patent infringement, billing disputes, rights of access, tax, consumer protection, employment and
tort. The Company accrues for such matters when it is both probable that a liability has been incurred and the amount of the loss can be
reasonably estimated. Where it is probable that a liability has been incurred and there is a range of expected loss for which no amount in the
range is more likely than any other amount, the Company accrues at the low end of the range. The Company reviews its accruals each reporting
period.
The Company's management believes that there are no disputes, litigation or other legal proceedings, audits or disputes asserted or
pending against the Company that could have, individually or in the aggregate, a material adverse effect on its financial position, results of
operations or cash flows, and believes that adequate provision for any probable and estimable losses has been made in the Company's
consolidated financial statements. However, the ultimate result of any current or future litigation or other legal proceedings, audits or disputes is
inherently unpredictable and could result in liabilities that are higher than currently predicted.
Regulatory audits
. The Company is subject to regulatory audits in the ordinary course of business with respect to various matters,
including audits by the Universal Service Administrative Company on universal service fund assessments and payments. These audits can cover
periods for several years prior to the date the audit is undertaken and could result in the imposition of liabilities, interest and penalties if the
Company's positions are not accepted by the auditing entity. The Company's financial statements contain reserves for certain of such potential
liabilities. During the second quarter of 2012, the Company recorded an $8.3 million
charge as cost of revenue to increase its reserves for
regulatory audits, primarily an audit that was conducted by the Universal Service Administrative Company on previous ITC^DeltaCom
Universal Service Fund assessments and payments, because the amount became probable and estimable during the period. During the third
quarter of 2013, the Company recorded a $7.2 million
favorable adjustment to its reserves for regulatory audits due to final interpretation and
resolution of certain regulatory audits, primarily the audit that was conducted by the Universal Service Administrative Company.
Patents
. From time to time, the Company receives notices of infringement of patent rights from parties claiming to own patents related
to certain of the Company's services and products. Certain of these claims are made by patent holding companies that are not operating
companies. The alleging parties generally seek royalty payments for prior use as well as future royalty streams. Most of these matters are in
preliminary stages. The Company intends to vigorously defend its position with respect to these matters.
Billing disputes
. The Company is periodically involved in disputes related to its billings to other carriers for access to its network. The
Company does not recognize revenue related to such matters until the period that it is reasonably assured of the collection of these claims. In the
event that a claim is made related to revenues previously recognized, the Company assesses the validity of the claim and adjusts the amount of
revenue being recognized to the extent that the claim adjustment is considered probable and estimable.
93
2017
3,804
2018
2,323
Thereafter
7,069
Total
$
106,960