Windstream 2008 Annual Report Download - page 132

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2. Summary of Significant Accounting Policies and Changes, Continued:
repairs are expensed as incurred. Depreciation expense amounted to $440.8 million in 2008, $454.7 million in
2007 and $422.3 million in 2006.
Net property, plant and equipment consists of the following at December 31:
(Millions) Depreciable Lives 2008 2007
Land $ 24.2 $ 24.7
Building and improvements 5-40 years 433.9 435.4
Central office equipment 4-25 years 3,834.0 3,667.8
Outside communications plant 7-40 years 4,614.8 4,445.8
Furniture, vehicles and other equipment 3-23 years 450.6 459.0
Construction in progress 113.4 175.2
9,470.9 9,207.9
Less accumulated depreciation (5,573.8) (5,177.6)
Net property, plant and equipment $ 3,897.1 $ 4,030.3
The Company’s regulated operations use a group composite depreciation method. Under this method, when plant
is retired, the original cost, net of salvage value, is charged against accumulated depreciation and no gain or loss is
recognized on the disposition of the plant. For the Company’s non-regulated operations, when depreciable plant is
retired or otherwise disposed of, the related cost and accumulated depreciation are deducted from the plant
accounts, with the corresponding gain or loss reflected in operating results.
The Company capitalizes interest in connection with the acquisition or construction of plant assets. Capitalized
interest is included in the cost of the asset with a corresponding reduction in interest expense. Capitalized interest
amounted to $1.9 million in 2008, $3.7 million in 2007 and $2.7 million in 2006.
Asset Retirement Obligations – Windstream recognizes asset retirement obligations in accordance with SFAS
No. 143, “Accounting for Assets Retirement Obligations” and the Financial Accounting Standards Board
(“FASB”) Interpretation No. 47, “Accounting for Conditional Asset Retirement Obligations” (“FIN 47”), which
requires recognition of a liability for the fair value of an asset retirement obligation if the amount can be
reasonably estimated. Windstream’s asset retirement obligations include legal obligations to remediate the
asbestos in certain buildings if the Company were to abandon, sell or otherwise dispose of the buildings and to
dispose of its chemically-treated telephone poles at the time they are removed from service. These asset retirement
obligations, totaling $44.6 million and $45.2 million for the years ended December 31, 2008 and 2007,
respectively, are included in other long term liabilities in the accompanying consolidated balance sheets.
There was no significant activity related to the liabilities associated with the Company’s asset retirement
obligations during 2008. The following is a summary of activity related to the asset retirement obligations through
December 31:
(Millions) 2007
Beginning balance $ 47.9
Assumed from acquisition 1.4
Revisions in expected cash flows (8.9) (a)
Accretion expense 3.2
Liabilities settled (1.0)
Liabilities incurred 2.6
Ending balance $ 45.2
(a) Reflects contract changes resulting from the negotiation of new contract terms with several underlying
service providers.
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