S » Topics » Asset Retirement Obligations

This excerpt taken from the S 8-K filed Sep 18, 2006.

Asset Retirement Obligations

In accordance with SFAS No. 143, Accounting for Asset Retirement Obligations, we record an asset retirement obligation and an associated asset retirement cost when we have a legal obligation in connection with the retirement of tangible long-lived assets.

Adoption of SFAS No. 143 on January 1, 2003, affected the cost of removal historically recorded by the Local segment. Consistent with regulatory requirements and industry practice, our Local segment historically accrued costs of removal in its depreciation reserves. These costs of removal do not meet the SFAS No. 143 definition of an asset retirement obligation. Upon adoption of SFAS No. 143, we recorded a reduction in our historical depreciation reserves of approximately $420 million to remove the accumulated excess cost of removal, resulting in a cumulative effect of change in accounting principle credit, net of tax, in the accompanying consolidated statements of operations of $258 million.

Financial Accounting Standards Board, or FASB, Interpretation No. 47, or FIN 47, Accounting for Conditional Asset Retirement Obligations was issued in 2005, interpreting the application of SFAS No. 143. FIN 47 requires the recognition of a liability for legal obligations to perform an asset retirement activity in which the timing and (or) method of the settlement are conditional on a future event. We adopted FIN 47 in the fourth quarter 2005 resulting in the recognition of asset retirement obligations primarily related to our discontinued operations for environmental remediation requirements and contractual obligations for which estimated settlement dates can be determined. The asset retirement obligations are comprised primarily of decommissioning of leased building spaces, cell sites and removal and environmental cleanup of fuel storage tanks used in standby power supply systems. Upon adoption in the fourth quarter 2005, an asset retirement obligation of $33 million, a related asset of $6 million and a cumulative adjustment due to change in accounting principle, net of tax, of $16 million were recorded.

This excerpt taken from the S 10-K filed Mar 31, 2006.

Asset Retirement Obligations

In accordance with SFAS No. 143, Accounting for Asset Retirement Obligations, we record an asset retirement obligation and an associated asset retirement cost when we have a legal obligation in connection with the retirement of tangible long-lived assets.

Adoption of SFAS No. 143 on January 1, 2003, affected the cost of removal historically recorded by the Local segment. Consistent with regulatory requirements and industry practice, our Local segment historically accrued costs of removal in its depreciation reserves. These costs of removal do not meet the SFAS No. 143 definition of an asset retirement obligation. Upon adoption of SFAS No. 143, we recorded a reduction in our historical depreciation reserves of approximately $420 million to remove the accumulated excess cost of removal, resulting in a cumulative effect of change in accounting principle credit, net of tax, in the accompanying consolidated statements of operations of $258 million.

 

F-17


SPRINT NEXTEL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Financial Accounting Standards Board, or FASB, Interpretation No. 47, or FIN 47, Accounting for Conditional Asset Retirement Obligations was issued in 2005, interpreting the application of SFAS No. 143. FIN 47 requires the recognition of a liability for legal obligations to perform an asset retirement activity in which the timing and (or) method of the settlement are conditional on a future event. We adopted FIN 47 in the fourth quarter 2005 resulting in the recognition of asset retirement obligations in our Local segment for environmental remediation requirements and contractual obligations for which estimated settlement dates can be determined. The asset retirement obligations are comprised of removal and disposal of the asbestos in company buildings, removal and environmental cleanup of fuel storage tanks used in standby power supply systems and decommissioning of leased building spaces. An asset retirement obligation exists, but will not be recognized, in situations where Local has been granted easements and rights-of-way by municipalities and private landowners to route its cable facilities. Most cable facilities are buried; however, some metallic and fiber cable are above-ground on company-owned poles. Local also contracts with other utilities to connect cable and wire to their poles. An estimated settlement date for these obligations is indeterminate. Upon adoption in the fourth quarter 2005, an asset retirement obligation of $33 million, a related asset of $6 million and a cumulative adjustment due to change in accounting principle, net of tax, of $16 million were recorded.

This excerpt taken from the S 10-K filed Mar 7, 2006.

Asset Retirement Obligations

In accordance with SFAS No. 143, Accounting for Asset Retirement Obligations, we record an asset retirement obligation and an associated asset retirement cost when we have a legal obligation in connection with the retirement of tangible long-lived assets.

Adoption of SFAS No. 143 on January 1, 2003, affected the cost of removal historically recorded by the Local segment. Consistent with regulatory requirements and industry practice, our Local segment historically accrued costs of removal in its depreciation reserves. These costs of removal do not meet the SFAS No. 143 definition of an asset retirement obligation. Upon adoption of SFAS No. 143, we recorded a reduction in our historical depreciation reserves of approximately $420 million to remove the accumulated excess cost of removal, resulting in a cumulative effect of change in accounting principle credit, net of tax, in the accompanying consolidated statements of operations of $258 million.

 

F-17


SPRINT NEXTEL CORPORATION

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Financial Accounting Standards Board, or FASB, Interpretation No. 47, or FIN 47, Accounting for Conditional Asset Retirement Obligations was issued in 2005, interpreting the application of SFAS No. 143. FIN 47 requires the recognition of a liability for legal obligations to perform an asset retirement activity in which the timing and (or) method of the settlement are conditional on a future event. We adopted FIN 47 in the fourth quarter 2005 resulting in the recognition of asset retirement obligations in our Local segment for environmental remediation requirements and contractual obligations for which estimated settlement dates can be determined. The asset retirement obligations are comprised of removal and disposal of the asbestos in company buildings, removal and environmental cleanup of fuel storage tanks used in standby power supply systems and decommissioning of leased building spaces. An asset retirement obligation exists, but will not be recognized, in situations where Local has been granted easements and rights-of-way by municipalities and private landowners to route its cable facilities. Most cable facilities are buried; however, some metallic and fiber cable are above-ground on company-owned poles. Local also contracts with other utilities to connect cable and wire to their poles. An estimated settlement date for these obligations is indeterminate. Upon adoption in the fourth quarter 2005, an asset retirement obligation of $33 million, a related asset of $6 million and a cumulative adjustment due to change in accounting principle, net of tax, of $16 million were recorded.

This excerpt taken from the S 10-K filed Apr 29, 2005.

6. Asset Retirement Obligations


 

Sprint adopted Statement of Financial Accounting Standard (SFAS) No. 143, Accounting for Asset Retirement Obligations, on January 1, 2003. This standard provides accounting guidance for legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction or development and (or) normal operation of those assets. According to the standard, the fair value of an asset retirement obligation (ARO liability) should be recognized in the period in which (1) a legal obligation to retire a long-lived asset exists and (2) the fair value of the obligation based on retirement cost and settlement date is reasonably estimable. Upon initial recognition of the ARO liability, the related asset retirement cost should be capitalized by increasing the carrying amount of the related long-lived asset.

 

Sprint’s network is primarily located on owned and leased property and utility easements. In Long distance and Local, a majority of the leased property has no requirement for remediation at retirement. The leased property of Wireless has potential remediation requirements. Sprint expects to maintain its property as a necessary component of infrastructure required to maintain operations or FCC licensing. Sprint has recorded the liability and

 

F-22


related accretion expense presently required for the ultimate satisfaction of these requirements, and these amounts are immaterial.

 

Adoption of SFAS No. 143 affected the cost of removal historically recorded by Local. Consistent with regulatory requirements and industry practice, Local historically accrued costs of removal in its depreciation reserves. These costs of removal do not meet the SFAS No. 143 definition of an ARO liability. Upon adoption of SFAS No. 143, Sprint recorded a reduction in its historical depreciation reserves of approximately $420 million to remove the accumulated excess cost of removal, resulting in a cumulative effect of change in accounting principle credit, net of tax, in the Consolidated Statements of Operations of $258 million. The impact of this accounting change on income (loss) from continuing operations was a decrease in Local’s 2003 depreciation expense of approximately $40 million and an increase to 2003 expenses incurred for removal costs of approximately $20 million recognized as incurred over the year.

 

The following table illustrates the effect on Sprint’s net income (loss) had Sprint applied SFAS No. 143 in 2002:

 

Years ended December 31,    2003     2002  
     (millions, except
per share amounts)
 

Net income, as reported

   $  1,290     $  610  

Deduct: Cumulative effect of change in accounting principle, net of related tax effects

     (258 )     —    

Add: Historically accrued cost of removal included in depreciation reserves, less cash
removal expenses, net of related tax effects

     —         10  

Adjusted net income

     1,032       620  

Preferred stock dividends paid

     (7 )     (7 )

Adjusted earnings applicable to common stock

   $ 1,025     $ 613  
    


 


Diluted and basic earnings per share

                

Net income, as reported

   $ 0.91     $ 0.43  

Deduct: Cumulative effect of change in accounting principle, net of related tax effects

     (0.18 )     —    

Add: Historically accrued cost of removal included in depreciation reserves, less cash
removal expenses, net of related tax effects

     —         0.01  

Adjusted diluted and basic earnings per share

   $ 0.73     $ 0.44  
    


 


Diluted weighted average shares outstanding

     1,415.3       1,403.8  
    


 


Basic weighted average shares outstanding

     1,415.3       1,400.0  
    


 


 


This excerpt taken from the S 10-K filed Mar 11, 2005.

6. Asset Retirement Obligations


 

Sprint adopted Statement of Financial Accounting Standard (SFAS) No. 143, Accounting for Asset Retirement Obligations, on January 1, 2003. This standard provides accounting guidance for legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction or development and (or) normal operation of those assets. According to the standard, the fair value of an asset retirement obligation (ARO liability) should be recognized in the period in which (1) a legal obligation to retire a long-lived asset exists and (2) the fair value of the obligation based on retirement cost and settlement date is reasonably estimable. Upon initial recognition of the ARO liability, the related asset retirement cost should be capitalized by increasing the carrying amount of the related long-lived asset.

 

Sprint’s network is primarily located on owned and leased property and utility easements. In Long distance and Local, a majority of the leased property has no requirement for remediation at retirement. The leased property of Wireless has potential remediation requirements. Sprint expects to maintain its property as a necessary component of infrastructure required to maintain operations or FCC licensing. Sprint has recorded the liability and

 

F-22


related accretion expense presently required for the ultimate satisfaction of these requirements, and these amounts are immaterial.

 

Adoption of SFAS No. 143 affected the cost of removal historically recorded by Local. Consistent with regulatory requirements and industry practice, Local historically accrued costs of removal in its depreciation reserves. These costs of removal do not meet the SFAS No. 143 definition of an ARO liability. Upon adoption of SFAS No. 143, Sprint recorded a reduction in its historical depreciation reserves of approximately $420 million to remove the accumulated excess cost of removal, resulting in a cumulative effect of change in accounting principle credit, net of tax, in the Consolidated Statements of Operations of $258 million. The impact of this accounting change on income (loss) from continuing operations was a decrease in Local’s 2003 depreciation expense of approximately $40 million and an increase to 2003 expenses incurred for removal costs of approximately $20 million recognized as incurred over the year.

 

The following table illustrates the effect on Sprint’s net income (loss) had Sprint applied SFAS No. 143 in 2002:

 

Years ended December 31,    2003     2002  
     (millions, except
per share amounts)
 

Net income, as reported

   $  1,290     $  610  

Deduct: Cumulative effect of change in accounting principle, net of related tax effects

     (258 )     —    

Add: Historically accrued cost of removal included in depreciation reserves, less cash
removal expenses, net of related tax effects

     —         10  

Adjusted net income

     1,032       620  

Preferred stock dividends paid

     (7 )     (7 )

Adjusted earnings applicable to common stock

   $ 1,025     $ 613  
    


 


Diluted and basic earnings per share

                

Net income, as reported

   $ 0.91     $ 0.43  

Deduct: Cumulative effect of change in accounting principle, net of related tax effects

     (0.18 )     —    

Add: Historically accrued cost of removal included in depreciation reserves, less cash
removal expenses, net of related tax effects

     —         0.01  

Adjusted diluted and basic earnings per share

   $ 0.73     $ 0.44  
    


 


Diluted weighted average shares outstanding

     1,415.3       1,403.8  
    


 


Basic weighted average shares outstanding

     1,415.3       1,400.0  
    


 


 


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