Summary Of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2014

Description of Business and Summary Of Significant Accounting Policies [Abstract]

Description of Business

(a)   Description of Business:

Frontier Communications Corporation (Frontier) is a communications company providing services mainly to rural areas and small and medium-sized towns and cities as an incumbent local exchange carrier (ILEC).  Frontier was incorporated in 1935, originally under the name of Citizens Utilities Company and was known as Citizens Communications Company until July 31, 2008.  Frontier and its subsidiaries are referred to as “we,” “us,” “our,” “Frontier,” or the “Company” in this report.

Effective October 24, 2014, Frontier’s scope of operations and balance sheet capitalization changed materially as a result of the completion of the Connecticut Acquisition, as described in Note 3 - Acquisitions. Historical financial data presented for Frontier is not indicative of the future financial position or operating results for Frontier, and includes the results of the Connecticut operations, as defined in Note 3 – Acquisitions, from the date of acquisition on October 24, 2014.

Basis of Presentation and Use of Estimates

(b)  Basis of Presentation and Use of Estimates:

Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Certain reclassifications of amounts previously reported have been made to conform to the current presentation, as described in Note 1(l) – Disaggregation of Network Related Expenses and Selling, General and Administrative Expenses.  All significant intercompany balances and transactions have been eliminated in consolidation.

Frontier had a 33⅓% controlling general partner interest in a partnership entity, the Mohave Cellular Limited Partnership (Mohave).  Mohave’s results of operations and balance sheet were included in our consolidated financial statements through its date of disposal on April 1, 2013.  The minority interest of the limited partners was reflected in the consolidated balance sheet as “Noncontrolling interest in a partnership” and in the consolidated statements of income as “Income attributable to the noncontrolling interest in a partnership.”  On April 1, 2013, the Company sold its partnership interest in Mohave and received proceeds of $18 million.  The Company recognized a gain on sale of approximately $15 million before taxes in 2013.

For our financial statements as of and for the period ended December 31, 2014, we evaluated subsequent events and transactions for potential recognition or disclosure through the date that we filed this annual report on Form 10-K with the Securities and Exchange Commission (SEC).

The preparation of our financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect (i) the reported amounts of assets and liabilities at the date of the financial statements, (ii) the disclosure of contingent assets and liabilities, and (iii) the reported amounts of revenue and expenses during the reporting period. Actual results may differ from those estimates. Estimates and judgments are used when accounting for the allowance for doubtful accounts, asset impairments, indefinite-lived intangibles, depreciation and amortization, income taxes, business combinations, and pension and other postretirement benefits, among others.

Cash Equivalents

(c)   Cash Equivalents:

We consider all highly liquid investments with an original maturity of three months or less to be cash equivalents.

Revenue Recognition

(d)  Revenue Recognition:

Revenue is recognized when services are provided or when products are delivered to customers. Revenue that is billed in advance includes: monthly recurring network access services (including data services), special access services and monthly recurring voice, video and related charges. The unearned portion of these fees is initially deferred as a component of “Advanced billings” on our consolidated balance sheet and recognized as revenue over the period that the services are provided. Revenue that is billed in arrears includes: non-recurring network access services (including data services), switched access services, non-recurring voice and video services. The earned but unbilled portion of these fees is recognized as revenue in our consolidated statements of income and accrued in accounts receivable in the period that the services are provided. Excise taxes are recognized as a liability when billed. Installation fees and their related direct and incremental costs are initially deferred and recognized as revenue and expense over the average term of a customer relationship. We recognize as current period expense the portion of installation costs that exceeds installation fee revenue.

As required by law, the Company collects various taxes from its customers and subsequently remits these taxes to governmental authorities. Substantially all of these taxes are recorded through the consolidated balance sheet and presented on a net basis in our consolidated statements of income. We also collect Universal Service Fund (USF) surcharges from customers (primarily federal USF) that we have recorded on a gross basis in our consolidated statements of income and included within “Revenue” and “Network related expenses” of $125 million, $118 million and $120 million for the years ended December 31, 2014, 2013 and 2012, respectively.

Property, Plant and Equipment

(e)  Property, Plant and Equipment:  

Property, plant and equipment are stated at original cost, including capitalized interest, or fair market value as of the date of acquisition for acquired properties.  Maintenance and repairs are charged to operating expenses as incurred. The gross book value of routine property, plant and equipment retirements is charged against accumulated depreciation.

Goodwill and Other Intangibles

(f)Goodwill and Other Intangibles:

Goodwill represents the excess of purchase price over the fair value of identifiable tangible and intangible net assets acquired. We undertake studies to determine the fair values of assets and liabilities acquired and allocate purchase prices to assets and liabilities, including property, plant and equipment, goodwill and other identifiable intangibles. We annually as of December 31, or more frequently, as circumstances warrant, examine the carrying value of our goodwill and trade name to determine whether there are any impairment losses. We test for goodwill impairment at the “operating segment” level, as that term is defined in U.S. GAAP. In October 2014, and as a result of the completion of the Connecticut Acquisition, the Company reorganized into five regional operating segments. Our operating segments consist of the following regions: Central, East, Mid-Atlantic, National and West. Our regional operating segments are aggregated into one reportable segment. In conjunction with the reorganization of our operating segments, we reassigned goodwill using a relative fair value allocation approach.

The Company amortizes finite-lived intangible assets over their estimated useful lives on the accelerated method of sum of the years digits. We review such intangible assets at least annually as of December 31 to assess whether any potential impairment exists and whether factors exist that would necessitate a change in useful life and a different amortization period. 

Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of

(g)  Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of:  

We review long-lived assets to be held and used, including customer lists, and long-lived assets to be disposed of for impairment whenever events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable. Recoverability of assets to be held and used is measured by comparing the carrying amount of the asset to the future undiscounted net cash flows expected to be generated by the asset. Recoverability of assets held for sale is measured by comparing the carrying amount of the assets to their estimated fair market value. If any assets are considered to be impaired, the impairment is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value.  Also, we periodically reassess the useful lives of our tangible and intangible assets to determine whether any changes are required. 

Investments

(h)  Investments:

Investments in entities that we do not control, but where we have the ability to exercise significant influence over operating and financial policies, are accounted for using the equity method of accounting.

Income Taxes and Deferred Income Taxes

(i)   Income Taxes and Deferred Income Taxes:  

We file a consolidated federal income tax return. We utilize the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred income taxes are recorded for the tax effect of temporary differences between the financial statement basis and the tax basis of assets and liabilities using tax rates expected to be in effect when the temporary differences are expected to reverse.

Stock Plans

(j)   Stock Plans:  

We have various stock-based compensation plans. Awards under these plans are granted to eligible officers, management employees, non-management employees and non-employee directors. Awards may be made in the form of incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units or other stock-based awards, including awards with performance, market and time-vesting conditions. Our general policy is to issue shares from treasury upon the grant of restricted shares, earning of performance shares and the exercise of options.

The compensation cost recognized is based on awards ultimately expected to vest. U.S. GAAP requires forfeitures to be estimated and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates.

Net Income Per Common Share Attributable to Common Shareholders

(k)  Net Income Per Common Share Attributable to Common Shareholders:

Basic net income per common share is computed using the weighted average number of common shares outstanding during the period being reported on, excluding unvested restricted stock awards. The impact of dividends paid on unvested restricted stock awards have been deducted in the determination of basic and diluted net income per common share attributable to common shareholders of Frontier. Except when the effect would be antidilutive, diluted net income per common share reflects the dilutive effect of certain common stock equivalents, as described further in Note 12 – Net Income Per Common Share.

Disaggregation of Network Related Expenses and Selling, General and Administrative Expenses

(l)   Disaggregation of Network Related Expenses and Selling, General and Administrative Expenses:

Historically, the Company has included network related expenses such as facility rent, utilities, maintenance and other costs, each related to the operation of Frontier’s communications network, as well as salaries, wages and related benefits associated with personnel who are responsible for the delivery of services as well as operation and maintenance of its communications network, within the line item "Other operating expenses" in its Consolidated Statements of Income. Effective with the year ended December 31, 2014, these network related expenses are being reported separately as “Network related expenses” in the Consolidated Statements of Income.

Additionally, the Company has historically included selling, general and administrative expenses such as salaries, wages and related benefits and the related costs of corporate and sales personnel, travel, insurance, non-network related rent, advertising and other administrative expenses, within the line item “Other operating expenses” in its Consolidated Statements of Income. Effective with the year ended December 31, 2014, these selling, general and administrative expenses are being reported separately as “Selling, general and administrative expenses” in the Consolidated Statements of Income.

As a result of the above, the Company also revised the Consolidated Statements of Income as follows:

($ in thousands)	As Previously Reported		Adjustment		Revised Reporting
Year ended December 31, 2013
Other operating expenses	$	2,141,068	$	(2,141,068)	$	-
Network related expenses		-		1,083,555		1,083,555
Selling, general and administrative expenses		-		1,057,513		1,057,513
Total operating expenses		3,795,456		-		3,795,456
Year ended December 31, 2012
Other operating expenses	$	2,234,553	$	(2,234,553)	$	-
Network related expenses		-		1,133,692		1,133,692
Selling, general and administrative expenses		-		1,100,861		1,100,861
Total operating expenses		4,024,685		-		4,024,685

The changes outlined above do not affect the Company’s previously reported Consolidated Total Operating Expenses, Operating Income, Net Income or Income per Share in the Consolidated Statements of Income, or any items reported in the Consolidated Balance Sheets, Consolidated Statements of Comprehensive Income (Loss), Cash Flows or Changes in Stockholders’ Equity.