Discontinued
Operations
Discontinued operations represent the results of operations
of Verizon Information Services Canada Inc. for all
years presented in the consolidated statements of income
and Grupo Iusacell, S.A. de C.V. (Iusacell) prior to
the sale of Iusacell in July 2003. During 2004, we announced
our decision to sell Verizon Information Services Canada
Inc. and, in accordance with SFAS No. 144 “Accounting
for the Impairment or Disposal of Long-Lived Assets,”
we have classified the results of operations of Verizon
Information Services Canada as discontinued operations.
The sale closed in the fourth quarter of 2004 and resulted
in a pretax gain of $1,017 million ($516 million after-tax,
or $.18 per diluted share). In connection with the decision
to sell our interest in Iusacell and a comparison of
expected net sale proceeds to the net book value of
our investment in Iusacell (including the foreign currency
translation balance), we recorded a pretax loss of $957
million ($931 million after-tax, or $.33 per diluted
share) in the second quarter of 2003. Losses reported
by Iusacell in 2002 were primarily driven by its declining
revenue base and the impact of fluctuations of the Mexican
peso on Iusacell’s U.S. dollar-denominated debt.
Cumulative Effect of Accounting Change
Directory Accounting Change
During 2003, we changed our method for recognizing revenues
and expenses in our directory business from the publication-date
method to the amortization method. The publication-date
method recognizes revenues and direct expenses when
directories are published. Under the amortization method,
revenues and direct expenses, primarily printing and
distribution costs, are recognized over the life of
the directory, which is usually 12 months. This accounting
change affected the timing of the recognition of revenues
and expenses. As required by generally accepted accounting
principles, the directory accounting change was recorded
effective January 1, 2003. The cumulative effect of
the accounting change was a one-time charge of $2,697
million ($1,647 million after-tax, or $.58 per diluted
share).
Impact of SFAS No. 143
We adopted the provisions of SFAS No. 143 on January
1, 2003. SFAS No. 143 requires that companies recognize
the fair value of a liability for asset retirement obligations
in the period in which the obligations are incurred
and capitalize that amount as part of the book value
of the long-lived asset. We determined that Verizon
does not have a material legal obligation to remove
long-lived assets as described by this statement. However,
prior to the adoption of SFAS No. 143, we included estimated
removal costs in our group depreciation models. Consequently,
in connection with the initial adoption of SFAS No.
143 we reversed accrued costs of removal in excess of
salvage from our accumulated depreciation accounts for
these assets. The adjustment was recorded as a cumulative
effect of an accounting change, resulting in the recognition
of a gain of $3,499 million ($2,150 million after-tax,
or $.76 per diluted share).
Impact of SFAS No. 142
We adopted the provisions of SFAS No. 142, “Goodwill
and Other Intangible Assets,” on January 1, 2002.
SFAS No. 142 no longer permits the amortization of goodwill
and indefinite-lived intangible assets. Instead, these
assets must be reviewed annually (or more frequently
under various conditions) for impairment in accordance
with this statement. Results for the year ended December
31, 2002 include the initial impact of adoption charge
recorded as a cumulative effect of an accounting change
of $496 million after-tax ($.18 per diluted share).
In accordance with SFAS No. 142, starting January 1,
2002, we no longer amortize goodwill, acquired workforce
intangible assets and wireless licenses which we determined
have an indefinite life. |
