Windstream 2008 Annual Report Download - page 131

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies and Changes, Continued:
Assets Held For Sale – In accordance with SFAS No. 142, certain assets acquired from CT Communications, Inc.
(“CTC”) totaling $26.6 million were included in acquired assets held for sale in the accompanying consolidated
balance sheet as of December 31, 2007. During 2008, Windstream received net proceeds of $17.3 million, which
approximated the fair value at the date of acquisition, on the sale of the corporate headquarters building, a license
for wireless spectrum, and various investments designated as held for sale. During the third quarter of 2008,
Windstream recognized a non-cash impairment charge of $6.5 million included in selling, general, administrative
and other in the accompanying consolidated statements of income to reduce the carrying value of certain wireless
spectrum licenses designated as held for sale, and not used in operations, to their fair market value in accordance
with SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets”. The fair market value of
these holdings has been reduced to a nominal amount due to an impairment resulting from general market
conditions and limited interest on this bandwidth of spectrum. In addition, during the third quarter of 2008, certain
long term investments totaling $2.3 million, primarily consisting of a minority ownership in a private equity
investment holding company, were no longer being marketed by Windstream and are no longer considered
saleable within one year. Therefore, the Company reclassified these investments from acquired assets held for sale
to other assets in the accompanying consolidated balance sheets at their current fair market value, which required
no valuation adjustment.
The following table summarizes the acquired assets held for sale at December 31, 2007:
(Millions) 2007
Net property, plant and equipment $ 14.0
Other assets 12.6
Acquired assets held for sale $ 26.6
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. In accordance with SFAS
No. 142, “Goodwill and Other Intangible Assets”, goodwill is to be assigned to a company’s reporting units and
tested for impairment at least annually using a consistent measurement date, which for the Company is January 1st
of each year. The impairment test for goodwill requires a two-step approach, which is performed at a reporting
unit level. Step one of the test identifies potential impairments by comparing the fair value of a reporting unit to
its carrying amount. Step two, which is only performed if the fair value of a reporting unit is less than its carrying
value, calculates the impairment loss as the difference between the carrying amount of the reporting unit’s
goodwill and the implied fair value of that goodwill. For purposes of completing the annual impairment reviews,
fair value of the reporting units is determined utilizing a weighted combination of the discounted cash flows of the
reporting units and calculated market values of comparable public companies.
The Company’s indefinite-lived intangible assets consist primarily of wireline franchise rights established through
the acquisition of CTC, Valor and certain properties in the state of Kentucky. The Company determined that the
wireline franchise met the indefinite life criteria outlined in SFAS No. 142 because the Company expects both the
renewal by the granting authorities and the cash flows generated from these intangible assets to continue for the
foreseeable future. SFAS No. 142 also requires intangible assets with indefinite lives to be tested for impairment
on at least an annual basis, or more frequently if events or changes in circumstances indicate that the asset may be
impaired, by comparing the fair value of the assets to their carrying amounts. For purposes of completing the
annual impairment reviews, the fair value of the wireline franchise rights is determined based on the discounted
cash flows of the acquired operations.
Net Property, Plant and Equipment – Property, plant and equipment are stated at original cost. Wireline plant
consists of central office equipment, outside communications plant and furniture, fixtures, vehicles and machinery
and equipment. Other plant consists of central office equipment, office and warehouse facilities and software to
support the business units in the distribution of telecommunications products. The costs of additions, replacements
and substantial improvements, including related labor costs, are capitalized, while the costs of maintenance and
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