Windstream 2006 Annual Report Download - page 150

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Accounting Changes, Continued:
The following is a summary of activity related to the liabilities associated with the Company’s asset retirement
obligations through December 31, 2006:
(Millions)
Balance, as December 31, 2005: $ 14.0
Assumed from Valor acquisition 7.2
Establish asset retirement obligation associated with the discontinuance of SFAS No. 71 16.7
Accretion expense 1.2
Liabilities incurred 8.8
Balance, as December 31, 2006: $ 47.9
Change in Segment Presentation – In conjunction with the spin-off from Alltel and merger with Valor, the Company
changed the manner in which senior management assesses the operating performance of, and allocates resources to,
its operating segments. As a result, the Company’s long distance operations were combined with the Company’s other
telecommunications services in the wireline segment. In accordance with the provisions of SFAS No. 131,
“Disclosures about Segments of an Enterprise and Related Information,” all prior period segment information has
been restated to conform to this new financial statement presentation.
4. Goodwill and Other Intangible Assets:
Goodwill represents the excess of cost over the fair value of net identifiable tangible and intangible assets acquired
through various business combinations. The Company has acquired identifiable intangible assets through its
acquisitions of interests in various wireline properties. The cost of acquired entities at the date of the acquisition is
allocated to identifiable assets, and the excess of the total purchase price over the amounts assigned to identifiable
assets is recorded as goodwill. The changes in the carrying amount of goodwill by business segment were as follows:
(Millions) Wireline
Product
Distribution Totals
Balance at December 31, 2005 $1,218.4 $0.3 $1,218.7
Acquisition of Valor (Note 2) 746.3 - 746.3
Balance at December 31, 2006 $1,964.7 $0.3 $1,965.0
During the first quarter of 2006, the Company completed the annual impairment reviews of its goodwill and
indefinite-lived franchise rights as of January 1, 2006, and determined that no write-down in the carrying value of
these assets was required. At December 31, 2006, 2005 and 2004 the carrying value of the indefinite-lived wireline
franchise rights in the state of Kentucky acquired in 2002 was $265.0 million. At December 31, 2006, the carrying
value of the indefinite-lived wireline franchise rights in the Valor properties acquired in 2006 was $600.0 million.
Intangible assets subject to amortization were as follows at December 31:
2006
(Millions)
Gross
Cost
Accumulated
Amortization
Net Carrying
Value
Valor customer lists $ 210.0 $ (19.2) $ 190.8
Other customer lists 67.6 (27.6) 40.0
Cable franchise rights 22.5 (17.9) 4.6
$ 300.1 $ (64.7) $ 235.4
2005
(Millions)
Gross
Cost
Accumulated
Amortization
Net Carrying
Value
Other customer lists $ 67.6 $ (21.0) $ 46.6
Cable franchise rights 22.5 (16.4) 6.1
$ 90.1 $ (37.4) $ 52.7
F-49