Earthlink 2014 Annual Report Download - page 66

Table of Contents
EARTHLINK HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
EarthLink Holdings Corp. (“EarthLink” or the “Company”),
together with its consolidated subsidiaries, is a leading managed network, security
and cloud services provider to business and residential customers in the United States. The Company operates two
reportable segments, Business
Services and Consumer Services. The Company’
s Business Services segment provides a broad range of data, voice and managed services to
retail and wholesale business customers. The Company’s Consumer Services segment provides nationwide Internet access and related value-
added services to residential customers. The Company operates an extensive network including more than 29,000 route fiber miles, 90
metro
fiber rings and enterprise-class data centers that provide data and voice IP service coverage across more than 90 percent
of the United States. For
further information concerning the Company’s reportable segments, see Note 18, “Segment Information.”
2. Summary of Significant Accounting Policies
Basis of Consolidation
The consolidated financial statements of EarthLink include the accounts of its wholly-
owned subsidiaries. All significant intercompany
transactions have been eliminated.
Discontinued Operations
The operating results of the Company's telecom systems business acquired as part of ITC^DeltaCom, Inc. ("ITC^DeltaCom") have been
separately presented as discontinued operations for all periods presented. See Note 6, "Discontinued Operations," for further discussion.
Reclassifications
Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation.
Use of Estimates
The preparation of financial statements in conformity with U.S. generally accepted accounting principles ("GAAP") requires management to
make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent
assets and liabilities in the consolidated financial statements and accompanying footnotes. Actual results could differ from those estimates. On an
ongoing basis, the Company evaluates its estimates, including, but not limited to, those related to the allowance for doubtful accounts; the useful
lives of intangible assets and property and equipment; the use, recoverability, and/or realizability of certain assets, including deferred tax assets;
the fair values of assets acquired and liabilities assumed in acquisitions of businesses, including acquired intangible assets; facility exit and
restructuring liabilities; revenue reserves for billings to other carriers; expected results of disputed vendor charges for cost of services; stock-
based compensation expense; unrecognized tax benefits; and contingent liabilities. The Company bases its estimates on historical experience and
on various other assumptions that are believed to be reasonable.
Business Combinations
The Company accounts for business combinations by recognizing all of the assets acquired and liabilities assumed at the acquisition date fair
value. Goodwill as of the acquisition date is measured as the excess of consideration transferred and the net of the acquisition date fair values of
the assets acquired and the liabilities assumed. While the Company uses its best estimates and assumptions as a part of the purchase price
allocation process to accurately value assets acquired and liabilities assumed at the acquisition date, the Company's estimates are inherently
uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the
Company records adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of
the measurement period, any subsequent adjustments are recorded to the Company's Consolidated Statements of Comprehensive Income (Loss).
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