Windstream 2007 Annual Report Download - page 131

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies and Changes, Continued:
depreciable lives were lengthened to reflect the estimated remaining useful lives of the wireline plant based on the
Company’s expected future network utilization and capital expenditure levels required to provide service to its
customers. The effect of the change on depreciation rates in the operations discussed above resulted in a decrease
in depreciation expense of $17.8 million and an increase in net income of $11.4 million during the year ended
December 31, 2007.
Effective January 1, 2006, the Company prospectively reduced the depreciable rates for its regulated operations in
Pennsylvania to reflect the results of a study completed in January 2006. During April 2006, the Company
completed studies of the depreciable lives of assets held and used in its Alabama and North Carolina operations.
The related depreciable rates were changed effective April 1, 2006. In addition, effective October 1, 2006, the
Company reduced the depreciable rates for its operations in Arkansas and in one of its operating subsidiaries in
Texas to reflect the results of studies for these operations. The depreciable lives were lengthened to reflect the
estimated remaining useful lives of the wireline plant based on the Company’s expected future network utilization
and capital expenditure levels required to provide service to its customers. The effect of these changes in
depreciable lives resulted in a decrease in depreciation expense of $30.1 million and an increase in net income of
$18.6 million during the year ended December 31, 2006.
Effective September 1, 2005 and July 1, 2005, the Company prospectively reduced the depreciable rates for its
regulated operations in Florida, Georgia and South Carolina to reflect the results of studies completed by the
Company in the second quarter of 2005. As a result of these studies, the depreciable lives were lengthened to
reflect the estimated remaining useful lives of the wireline plant based on the Company’s expected future network
utilization and capital expenditure levels required to provide service to its customers. The effects of this change
during the year ended December 31, 2005 resulted in a decrease in depreciation expense of $21.8 million and an
increase in net income of $12.8 million.
Change in Segment Presentation – Effective with the completion of the split off of its directory publishing
business, as discussed below, the Company’s publishing operations have ceased and will no longer be a
component of its other operations. Following the acquisition of CTC in the third quarter of 2007, the Company
began presenting wireless services and products within the Company’s other operations. 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 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.
Discontinuance of the Application of SFAS No. 71 – Historically, the Company’s incumbent local exchange
carrier (“ILEC”) operations, except for certain operations acquired in Kentucky and in Nebraska, followed the
accounting for regulated enterprises prescribed by SFAS No. 71, “Accounting for the Effects of Certain Types of
Regulation”.
This accounting recognizes the economic effects of rate regulation by recording costs and a return on investment
as such amounts are recovered through rates authorized by regulatory authorities. Changes in the dynamics of
Windstream’s business environment, and accordingly in the mix of its customer and revenue base from
rate-of-return to an alternative form of regulation resulting from increased competition, caused the Company to
reassess its criteria for the continued application of SFAS No. 71.
F-45