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News Bytes - August 5, 2016
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MTA News Bytes


August 5, 2016

In This Issue

Meetings and Events

MTA Updates

Action Items

>> Now Available! MTA Fall Conference Sponsorship Opportunities

>> FCC Announces Final Version of A-CAM, Support Amounts for RoR Carriers

>> Video Peer Group Opportunity

Peer Group Bulletin

>> Upcoming MTA Peer Group Events

>> MTA Peer Group 2016 Investment Opportunities

Informational items

>> Minnesota Border to Border Broadband Development Grant

>>The New Lease Accounting Standards – What Your Company Needs to Know

Safety Corner

>> Safety Bytes

MTA Staff

MTA President/CEO:
Brent Christensen
Team Leader:

Jacquie Durant
Event Planners:
Julie Cygan
Carissa Wolf
Member Services:
Jeanne DeMartino
Website/Newsletter:
Anna Wrisky
Administrative Assistant:
Anne Christensen


Stay up-to-date on daily happenings at the MTA offices by following us on Facebook. From peer group meetings to annual conferences and everything in between, get the scoop on what’s happening at our offices!

 

 

 

Meetings and Events


Peer Group Investment Opportunities Open for 2016. View Details

September 21-23, 2016: 2016 Telco Marketing Peer Group Conference

September 21-23, 2016: MTA Office Managers & Human Resources Fall Conference

October 13-14, 2016: MTA Fall Conference

November 2-3, 2016: Administrative Assistant Peer Group 2016 Fall Conference

March 27-29, 2017: MTA Annual Convention & Trade Show

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MTA Updates

ACTION ITEMS:

Now Available! MTA Fall Conference Sponsorship Opportunities

October 13-14, 2016 | Minneapolis Marriott Northwest
7025 Northland Drive North, Brooklyn Park, MN 55428

Maximize your company's exposure to the MTA membership at the 2016 Fall Conference. The conference will be held on Thursday, October 13 and Friday, October 14 at the Minneapolis Marriott Northwest.

MTA members will come to Minneapolis from all over the state to learn more about the important issues facing our industry — and this is your opportunity to get your company’s message in front of them.

>> View complete Sponsorship details and register online.

Lodging Information

Minneapolis Marriott Northwest
7025 Northland Dr N
Brooklyn Park, MN 55428

$142.00 single/double per night
Reservation cut off is September 21, 2016
Book your reservation by calling 1-877-303-1681 or 763-536-8300.

Questions?

If you have any questions about the sponsorship information, please contact Julie Cygan at juliec@mnta.org.


FCC Announces Final Version of A-CAM, Support Amounts for RoR Carriers

From NECA’s Washington Watch

The Wireline Competition Bureau issued a Public Notice on August 3, 2016, announcing it released the final version of the Alternative Connect America Cost Model and announced the offers of model-based Connect America support to rate-of-return carriers. Carriers have 90 days, until November 1, 2016, to indicate on a state-by-state basis whether they elect to receive model-based support. The Bureau said the model results and offer amounts released are predicated upon a monthly funding cap per location of $200, and after receiving the acceptances it will determine whether the model support and transition payments, if any, of electing carriers exceed the overall 10-year budget for the model path set by the Commission. The Bureau said if a carrier fails to submit any final election letter by the deadline, it will be deemed to have declined model-based support. Carriers should submit their election letters at ConnectAmerica@fcc.gov.


Video Peer Group Opportunity

Here’s your chance to learn more about the video side of our industry. Stay abreast of current industry technology and policy trends by joining the MTA Video Peer Group. The Peer Group meets periodically and serves as an information conduit to MTA members. Our first meeting is scheduled at the MTA Offices, 1000 Westgate Drive, West Conference Room, St. Paul, MN for August 16, 2016 at 10am. If interested, please send an email to david.pawlowski@parkregion.com.

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Peer Group Bulletin
All MTA members are welcome to join a Peer Group

Upoming Peer Group Events

2016 Telco Marketing Peer Group Conference

Date: September 21-23, 2016

Location: Cambria Suites
825 E Beaton Dr
West Fargo, North Dakota

MTA Office Managers & Human Resources Fall Conference

Date: September 21-23, 2016

Location: Holiday Inn
8511 Hudson Blvd
Lake Elmo, Minnesota

Administrative Assistant Peer Group 2016 Fall Conference

Date: November 2-3, 2016

Location: Garden Valley Telephone Company
201 Ross Avenue
Erskine, Minnesota


MTA Peer Group 2016 Investment Opportunities Open!

MTA’s core purpose is to enhance the success and viability of its telecommunications industry members. You are an important part of helping us fulfill this mission. Here is your opportunity to maximize the impact of your event sponsorships for 2016.

Download the 2016 Peer Group Investment Opportunities for full details

Sponsor a Peer Group: Sign Up Online!

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INFORMATIONAL ITEMS:

Minnesota Border to Border Broadband Development Grant

The Minnesota Department of Employment and Economic Development (DEED), Office of Broadband Development, is soliciting proposals from qualified organizations for Minnesota Border to Border Broadband Development Grants. The grant application period opened on July 22, 2016. The application deadline is 4:00 p.m., Monday, October 3, 2016.

Application Process

The 2016 Broadband Grant Application is now available for download. Please note that in downloading the Microsoft Word version of the Grant Application, some people have encountered some text box and pagination issues. If you observe such errors, you can download a PDF version of the Grant Application. If you use the PDF version of the application, convert the PDF to Word or contact deed.broadband@state.mn.us and we will email a copy of the Word version.

If you have any other questions, you can email the Broadband office at deed.broadband@state.mn.us or look through the Broadband Grant Program FAQs. The FAQs will be updated throughout the grant application process as new questions come in.

The website for Broadband Grant information is located at mn.gov/deed/programs-services/broadband/grant-program.

Notice of Grant Criteria and Scoring Posting

DEED is required by law to post the specific criteria and any quantitative weighting scheme or scoring system that will be used to evaluate or rank applications and award grants for this competitive grant program.

Download the Grant Criteria and Scoring Document.

Contact Information

For questions, call 651-259-7610; or email deed.broadband@state.mn.us.

This notice does not commit the State of Minnesota or DEED to entering into a grant contract with any organization.


The New Lease Accounting Standards – What Your Company Needs to Know

(from Olsen Thielen)

Does your company lease office space, vehicles, mobile towers, or buried fiber? If so, in February 2016 the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU 2016-02), Leases, and it does affect your company.

This ASU provides guidelines on lease accounting that represents the most significant change to lease accounting rules since capital and operating leases were distinguished in FASB 13 forty years ago in 1976. A separate topic was created in the FASB Codification, ASC Topic 842, Leases that will be effective for privately held companies and cooperatives for reporting periods beginning after December 15, 2019 (calendar year 2020). For companies presenting comparative financial statements, the 2019 financial results will be recast to reflect the new standard in the 2020 reporting period.

The primary reason for the change in the standards is designed to bring the statement users the ability to identify all operating lease commitments on the Balance Sheet. Previously, the operating lease commitment disclosures were only disclosed in the financial statement footnotes. The driving force for this change was to move United States GAAP toward International Financial Reporting Standards (IFRS), part of the various convergence initiatives including revenue recognition.

This article focuses on the key changes for a lessee. The effects on lessors are important, but the amount of change from existing practice to the current standard is less impactful for lessors.

Key provisions and highlights include:

  • Definition of lease – Per ASC Topic 842, a lease is “a contract, or part of a contract, that conveys the right to control the use of an identified asset for a period of time in exchange for consideration.” The two major elements of this are the determination of a specific piece of property, plant or equipment and the control over the use of this identified asset for a period of time. Note that the new standard does not apply to intangible asset leasing arrangements such as wireless spectrum.
  • Lease Term – All qualifying leasing arrangements with terms greater than 12 months in duration will be capitalized on the Balance Sheet. For all leases, the company will need to identify the noncancellable portion of the lease term including renewal options. If the lessee is reasonably certain to exercise the options, then the option period should be included in determining the lease term. There is a four-factor test for judging whether the company is reasonably certain to exercise the option.
  • Lease classification – Leases will be separated into two types of leases with different accounting treatment (a GAAP compromise). Note that some companies may have a mixture of both types of leases recorded on their books:
    1. Finance Lease – This type of lease and related criteria is similar to current U.S. GAAP accounting for capital leases.

      Accounting Treatment – A lease obligation liability is recorded at lease commencement date by calculating the present value of future lease payments using the lease’s stated interest rate or the company’s incremental borrowing rate. The liability will be reduced by each payment made on the lease.

      A corresponding right to use-asset is recorded on the asset section of the Balance Sheet at lease commencement date. This asset is amortized through the life of the lease term by reducing the right-to-use asset on a monthly basis and recording amortization expense on the Income Statement. Interest expense is accrued each month on the lease obligation using either the stated rate or the company’s incremental borrowing rate.

    2. Operating Lease – The previous operating lease arrangements disclosed in the financial statements will now be captured on the Balance Sheet.
      Accounting Treatment – Similar to the Finance Lease, a lease obligation liability is recorded at lease commencement date by calculating the present value of future lease payments using the lease’s stated interest rate or the company’s incremental borrowing rate. The liability will be reduced by each payment made on the lease.

      A corresponding right-to-use asset is recorded on the asset section of the Balance Sheet at lease commencement date. Unlike a Finance Lease, there will be no explicit Interest and Amortization component presented on the Income Statement. The monthly expense will be captured in your company’s existing general ledger accounts used for existing leasing arrangements as required by Part 32 accounting. The monthly expense will be recognized evenly on a straight line basis over the term of the lease.

Contracts for Fiber or Network Capacity:

Contracts for usage of fiber-optic cable or network capacity may or may not qualify for lease accounting treatment, depending on the facts and circumstances of the contract.

Situation A – A lessee has entered into a dark fiber contract over a 5-year period that contains four specifically identified and dedicated fiber strands that are used and supplier can only substitute fibers for repairs or maintenance purposes and the customer has the decision making ability to light the fibers and decide how much data can be transmitted. In this case, the arrangement will likely qualify as a lease and be accounted for as such.

Situation B – A lessee has entered into a capacity fiber contract over a 5-year period that gives the company the ability to use up to four fibers of capacity; however, supplier can freely switch which fibers are used and supplier lights the fibers and makes the decisions on how much data can be transmitted. In this case, the arrangement will likely not qualify as a lease due to supplier control of the asset and it will be considered a contract and not a lease, and the accounting treatment will be the same as existing practice.

The key distinction in these scenarios is which party has control of the identification and usage of the underlying fiber strands.

Other Considerations: This article has not touched upon other potentially significant items related to the new lease standard such as:

  • Rural Utilities Service and FCC reporting in future years.
  • Cost Study implications from recording additional assets on the books that will be amortized.
  • Income tax considerations relating to operating leases that will be capitalized on the books
  • Greater risk of asset impairment with additional assets recorded on the books.
  • Variable lease payments and non-lease components such as maintenance contracts.
  • Determining the discount rate used to calculate present value of future lease payments.
  • Related party and Inter-company leases on consolidated financial statements.

Impact on your Company:

  • Increased amount of “right to use” assets and lease obligation liabilities for Finance and Operating leases. The Balance Sheet will grow accordingly. Note that the amount of right-to-use assets and lease obligations for both types of leases will need to be disclosed either on the face of the financial statements or in the footnotes.
  • As a result of increased liabilities recorded on the books, the company may have more difficulty in meeting select financial covenants.
  • Key distinction for non-financial measures. As a result of the GAAP compromise, there will be a distinction in calculating EBITDA depending on whether the company has Finance Leases (EBITDA addback due to expense hitting Amortization and Interest expense) or Operating Lease (no EBITDA addback as expense is considered lease expense).
  • The recorded expense will be higher earlier in the term for Finance Leases due to the higher interest component up front for these types of leases.
  • Increased record keeping and monthly journal entries for properly recording these leases and increased effort of maintaining Continuing Property Records.
  • Is it preferable for your company to enter into a long-term arrangement at a favorable rate which will be subject to lease accounting requirements or enter into month-to-month arrangements that contain greater risk for price fluctuations?

Action Items for Your Company:

  • 2016 and 2017: Gather and inventory all relevant contract information (contracts, term, payments, etc.) and begin identifying which lease contracts will remain when the leasing standard becomes effective. Review your fiber, tower, and capacity contracts to determine if they qualify for a lease or whether they are a non-lease contract. Conduct a preliminary discussion with your CPA to begin game planning the successful implementation of the standard.
  • 2017 and 2018: Contact your CPA as considered necessary to begin preparing calculations of the lease obligation liability and the “right to use” asset for each of your leasing arrangements. Consider conducting a “before and after” simulation, whereby the company will compare its 2016 or 2017 GAAP financial statements to a hypothetical version based on the new lease accounting standards.
  • 2017 and 2018: Contact your lender to discuss the new lease accounting requirements with them. Loan covenants based on financial ratios may need to be revised depending on the significance of your leasing arrangements. You may find that the bankers are aware of this change, but might not be up to speed on how this change will impact the modeling of financial covenants in place.

Final Takeaway:
With enough planning and foresight, the implementation of the new standard can be a fairly routine matter for companies with a few leasing arrangements present. The information included above serves as a summary of the key changes, but does not address the specific facts and circumstances of your company’s current and future lease/contract structure. We will provide additional resources as more industry-specific guidance and regulations are issued on this significant change in the coming years.

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Safety Corner

Safety Bytes

Wild Parsnip: The After Burn

As I have been making onsite visits to our Member Companies this summer, it is becoming quite obvious that more employees are coming across Wild Parsnip in their work. A few years ago when we talked about this invasive and toxic weed, few employees even heard about it.

Warning — Avoid skin contact with the toxic sap of the plant tissue by wearing gloves, long sleeves and long pants. The juice of wild parsnip in contact with skin in the presence of sunlight can cause a rash, blistering and discoloration of the skin (phytophotodermatitis).

Image Credit: University of Minnesota | Extension

According to the Minnesota Department of Agriculture (MDA), wild parsnip is a biennial/perennial herb that can grow up to 6 feet in height with a typical range of 3-5 feet tall. After spring emergence, seedlings spend their first years of growth as rosettes, followed by a “bolting” stage where the branching stem elongates and produces flowers. Wild parsnip leaves are alternate on the stem and consist of 5-15 sharply toothed oval leaflets. Flowering occurs from May-June, with five-petaled yellow flowers form from flat-topped umbels (shaped like upside-down umbrellas) at the end of the plant stem.

Flat seeds are produced in the umbels following the blooming period and can remain dormant in the soil for as long as five years. Native to Eurasia, wild parsnip grows in different soil types and moistures and prefers sunny areas — for example, along ditches.  Oh great... right where our pedestals and cabinets are.

Jeff Ulmen came across this link from WCCO Television, to a news broadcast on an Annandale woman who came in contact with Wild Parsnip while gardening. It shows what Wild Parsnip looks like and the dermatitis that it causes.

If you get a parsnip burn, relieving the symptoms comes first. The affected area can be covered with a cool, wet cloth. If blisters are present, try to keep them from rupturing for as long as possible. The skin of a blister is "nature's bandage," as one doctor put it, and it keeps the skin below protected, moist and clean while healing occurs. When blisters pop, try to leave the skin "bandage" in place. To avoid infection, keep the area clean and apply an antibiotic cream.

With that in mind, here are a few points when/if you encounter Wild Parsnip:

  1. Everyone can get it. Unlike poison ivy, you don't need to be sensitized by a prior exposure. Wild parsnip causes a non-allergic dermatitis that can occur with the right combination of plant juice and sunlight.
  2. You can touch and brush against the plant — carefully — without harm. Parsnip is only dangerous when the juice gets on skin from broken leaves or stems. Fair-skinned people, however, may be extra-sensitive to tiny amounts of juice. Do not brush parsnip off your skin, which can smear the juice; try to blow if off or shake it off.
  3. Wild parsnip's "burn" is usually less irritating than poison ivy's "itch." Generally, wild parsnip causes a modest burning pain for a day or two, and then the worst is over. The itch and discomfort from poison ivy, in contrast, can drive people crazy for a long time.

So as we’re looking out for Poison Ivy this summer, we need to remember to keep an eye out for Wild Parsnip, too.

Take Care
Dan Berg M.S.
Senior Safety Consultant

The Minnesota Extension Office has additional information on Wild Parsnip. http://www.extension.umn.edu/agriculture/horse/pasture/wild-parsnip/

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