| Business Description and Accounting Policies [Text Block] | NOTE 1 – BUSINESS DESCRIPTION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Business Nuvera is a diversified communications company headquartered in New Ulm, Minnesota with more than 118 years of experience in the communications business. Our principal line of business is the operation of seven communications companies. Our businesses consist of connecting customers to our state-of-the-art, advanced fiber communications network, providing managed services, switched service and dedicated private lines, connecting customers to long distance service providers and providing many other services associated with our Company. We also provide IPTV, CATV, Internet access services, including high-speed broadband access, and long-distance service. We also install and maintain communications systems to the areas in and around our service territories in southern Minnesota and northern Iowa. Basis of Presentation and Principles of Consolidation Our accounting policies conform to GAAP and rules and regulations of the SEC and, where applicable, conform to the accounting principles as prescribed by federal and state telephone utility regulatory authorities. We presently give accounting recognition to the actions of regulators where appropriate in preparing general purpose financial statements for most public utilities. In general, the type of regulation covered by this statement permits rates (prices) for some services to be set at levels intended to recover the estimated costs of providing regulated services or products, including the cost of capital (interest costs and a provision for earnings on stockholders’ investments). Our consolidated financial statements report the financial condition and results of operations for Nuvera and its subsidiaries in one business segment: the Communications Segment. Inter-company transactions have been eliminated from the consolidated financial statements. Classification of Costs and Expenses Cost of services (excluding depreciation and amortization expense) includes all costs related to the delivery of communication services and products. These operating costs include all costs of performing services and providing related products including engineering, network monitoring and transportation costs. Selling, general and administrative expenses include direct and indirect selling expenses, customer service, billing and collections, advertising and all other general and administrative costs associated with our operations. Use of Estimates The preparation of our consolidated financial statements in conformity with GAAP requires our management to make estimates and judgements that affect the reported amounts of assets, liabilities, revenue and expenses, and the related disclosure of contingent assets and liabilities at the date of the financial statements and during the reporting period. The estimates and judgements used in the accompanying consolidated financial statements are based on our management’s evaluation of the relevant facts and circumstances as of the date of the financial statements. Actual results may differ from those estimates and assumptions. Revenue Recognition See Note 2 – “Revenue Recognition” for a discussion of our revenue recognition policies. Accounts Receivables and Allowance for Credit Losses As of December 31, 2023, and 2022 our consolidated AR totaled $3,411,892 and $3,725,422, net of the AFCLs. We believe our receivables as of December 31, 2023, and 2022 are recorded at their fair value. AR consists primarily of amounts due to the Company from normal business activities. We maintain an AFCLs based on our historical loss experience, current conditions and forecasted changes including but not limited to changes related to the economy, our industry and business. Uncollectible accounts are written-off (removed from AR and charged against the AFCLs) when internal collection efforts have been unsuccessful. Subsequently, if payment is received from the customer, the recovery is credited to the AFCLs. As of December 31, 2023, and 2022, the fair value of our net AR approximated their carrying values; therefore, no fair value adjustment for fresh start accounting was required. Our AFCLs increased during the year ended December 31, 2023, compared to 2022. Allowance for Credit Losses AR are recorded at amortized cost less an AFCLs that are not expected to be recovered. The gross amount of AR is recorded net of the corresponding AFCLs in the consolidated balance sheets. We maintain AFCLs resulting from the expected failure or inability of our customers to make their required payments. We recognize the AFCLs based on management’s expectation of the asset’s collectability. The allowance is based on multiple factors including historical experience with bad debts, the credit quality of the customer base, the aging of such receivable and current macroeconomic conditions, as well as management’s expectation of conditions in the future, as applicable. Our AFCLs is recorded on a monthly basis based on the aging of our overall AR. Our AR collection policy includes internal collection efforts after an AR balance is 30 days due with service being suspended after approximately 40 days and terminated upon 60 days past due. The following table summarizes the activity in the AFCLS for the years ended December 31, 2023, and 2022: Year Ended December 31 2023 2022 Balance at beginning of year $ 140,000 $ 80,000 Provision charged to expense 175,559 206,398 Write-offs, less recoveries (165,559) (146,398) Balance at end of year $ 150,000 $ 140,000 Inventories Inventory includes parts, materials and supplies stored in our warehouses to support basic levels of service and maintenance as well as scheduled capital projects and equipment awaiting configuration for customers. Inventory also includes (i) parts and equipment shipped directly from vendors to customer locations while in transit and (ii) parts and equipment returned from customers that are returned to vendors for credit. Our inventory value as of December 31, 2023, and 2022 was $34,438,857 and $23,617,800. We value inventory using the lower of cost or net realizable value. Like our AFCLs, we make estimates related to the valuation of inventory. As of December 31, 2023, and 2022, we had no inventory reserve. We adjust our inventory carrying value for estimated obsolescence or unmarketable inventory to the net realizable value based upon assumptions about future demand and market conditions. As market and other conditions change, we may establish additional inventory reserves at a time when the facts that give rise to a lower value are warranted. We use the average cost method of inventory costing. Property, Plant and Equipment We record impairment losses on long-lived assets used in operations when events and circumstances indicate the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. In assessing the recoverability of long-lived assets, we compare the carrying value to the undiscounted future cash flows the assets are expected to generate. If the total of the undiscounted future cash flows is less than the carrying amount of the assets, we would write down those assets based on the excess of the carrying amount over the fair value of the assets. Fair value is generally determined by calculating the discounted future cash flows expected from those assets. Changes in these estimates could have a material adverse effect on the assessment of long-lived assets, thereby requiring a write-down of the assets. Write-downs of long-lived assets are recorded as impairment charges and are a component of operating expenses. We have reviewed our long-lived assets and concluded that no impairment charge on our long-lived assets is necessary. We use the group life method (mass asset accounting) to depreciate the assets of our communications companies. Communications plant acquired in a given year is grouped into similar categories and depreciated over the remaining estimated useful life of the group. When an asset is retired, both the asset and the accumulated depreciation associated with that asset are removed from the books. Due to rapid changes in technology, selecting the estimated economic life of communications plant and equipment requires a significant amount of judgment. We periodically review data on the expected utilization of new equipment, asset retirement activity and net salvage values to determine adjustments to our depreciation rates. In 2022, we accelerated depreciation on our copper cable networks as we transition to a new FTTP network. Other than this change, we have not made any other significant changes to the lives of these assets in the two-year period ended December 31, 2023. Grant money received from governmental entities for reimbursement of capital expenditures is accounted for as a reduction from the cost of the asset. As the grant was to be used in the Company’s regulated network, the Company accounts for this funding as aid to construction as outlined in the FCC’s Part 32 “Uniform System of Accounts for Telecommunications Companies.” Goodwill and Intangible Assets We amortize our definite-lived intangible assets over their estimated useful lives. Customer relationships are amortized over fourteen to fifteen years, regulatory rights are amortized over fifteen years and trade names are amortized over three to five years. Intangible assets with finite lives are amortized over their respective estimated useful lives. In accordance with GAAP, goodwill and intangible assets with indefinite useful lives are not amortized but tested for impairment at least annually. See Note 5 – “Goodwill and Intangibles” for a more detailed discussion of the intangible assets and goodwill. Our goodwill balance was $40,603,029 and $49,903,029 as of December 31, 2023, and 2022. The reduction in goodwill in 2023 was the result of the HTC impairment recognized in 2023. In the fourth quarter of 2023 and 2022 we completed our annual impairment tests for existing acquired goodwill. This testing resulted in no impairment charges to goodwill for SETC and Scott-Rice as of December 31, 2023. This testing did result in an impairment charge to goodwill for HTC of $9.3 million as of December 31, 2023. Financial Derivative Instruments and Fair Value Measurements We have adopted the rules prescribed under GAAP for our financial assets and liabilities. GAAP includes a fair value hierarchy that is intended to increase consistency and comparability in fair value measurements and related disclosures. The fair value hierarchy is based on inputs to valuation techniques used to measure fair value that is either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources, while unobservable inputs reflect a reporting entity’s pricing based upon its own market assumptions. The fair value hierarchy consists of the following three levels: Level 1: Inputs are quoted prices in active markets for identical assets or liabilities. Level 2: Inputs are quoted prices for similar assets or liabilities in an active market, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs that are derived principally from or corroborated by observable market data. Level 3: Inputs are derived from valuation techniques where one or more significant inputs or value drivers are unobservable. We have used financial derivative instruments to manage our overall cash flow exposure to fluctuations in interest rates. We accounted for derivative instruments in accordance with GAAP that requires derivative instruments to be recorded on the balance sheet at fair value. Changes in the fair value of derivative instruments must be recognized in earnings unless specific hedge accounting criteria are met, in which case, the gains and losses are included in other comprehensive income rather than in earnings. We have entered into IRSAs with our lender, CoBank to manage our cash flow exposure to fluctuations in interest rates. These instruments are designated as cash flow hedges and are effective at mitigating the risk of fluctuations on interest rates in the marketplace. Any gains or losses related to changes in the fair value of these derivatives are accounted for as a component of accumulated other comprehensive gain (loss) for as long as the hedge remains effective. The fair value of our IRSAs is discussed in Note 7 – “Interest Rate Swaps”. The fair value of our swap agreements was determined based on Level 2 inputs. The fair value of our Goodwill is discussed in Note 5 – “Goodwill and Intangibles”. The fair value of our Goodwill was determined based on Level 3 inputs. Other Financial Instruments Other Investments - We conducted an evaluation of our investments in all of our investees in connection with the preparation of our audited financial statements as of December 31, 2023. As of December 31, 2023, we believe the carrying value of our investments is not impaired. Debt – We estimate the fair value of our long-term debt based on the discounted future cash flows we expect to pay using current rates of borrowing for similar types of debt. Fair value of the debt approximates carrying value. Other Financial Instruments - Investments and Other Assets We are a co-investor with other communication companies in several partnerships and limited liability companies. These joint ventures make it possible to offer services to customers, including digital video services and fiber transport services that we would have difficulty offering on our own. These joint ventures also make it possible to invest in new technologies with a lower level of financial risk. We use the equity method of accounting for these investments that reflects original cost and recognition of our share of the net income or losses from the respective operations. See Note 16 – “Segment Information” for a listing of our investments. Investments in other companies that are not intended for resale and are not accounted for on the equity method of accounting are valued at fair value where there are readily determinable fair values. Investments in other companies that are not intended for resale and are not accounted for on the equity method of accounting are valued at cost where there are no readily determinable fair values. See Note 12 – “Other Investments” for additional information regarding our investments. Advertising Expense Advertising is expensed as incurred. Advertising expense charged to operations was $1,022,312 and $723,261 in 2023 and 2022. Interest During Construction We include an average cost of debt for the construction of plant in our communications plant accounts. Income Taxes We account for income taxes in accordance with GAAP, which requires an asset and liability approach to financial accounting and reporting for income taxes. Accordingly, deferred tax assets and liabilities arise from the difference between the tax basis of an asset or liability and its reported amount in the financial statements and operating and tax credit carryforwards. Deferred tax assets and liabilities are determined using enacted tax rates expected to apply to taxable income in the periods in which those temporary differences are expected to be recovered or settled. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. We recognize interest and penalties related to income tax matters as income tax expense. Income tax expense or benefit is the tax payable or refundable, respectively, for the period plus or minus the change in deferred tax assets and liabilities during the period. GAAP requires us to recognize the financial statement benefit of a tax position only after determining that the relevant tax authority would more-likely-than-not sustain the position following an audit. For tax positions meeting the more-likely-than-not threshold, the amount recognized in the financial statements is the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate settlement with the relevant tax authority. See Note 8 – “Income Taxes” for additional information regarding income taxes. Collection of Taxes from Customers Sales, excise and other taxes are imposed on most of our sales to nonexempt customers. We collect these taxes from our customers and remit the entire amounts to governmental authorities. Our accounting policies dictate that we exclude these taxes collected and remitted from our revenues and expenses. Credit Risk Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash investments and receivables. We deposit our cash investments in high credit quality financial institutions accounts which, at times, may exceed federally insured limits. We have not experienced any losses in these accounts and do not believe we are exposed to any significant credit risk. Concentrations of credit risk with respect to trade receivables are limited due to our large number of customers. Earnings and Dividends Per Share The basic and diluted net income per share are calculated as follows: Year Ended December 31, 2023 Year Ended December 31, 2022 Basic Diluted Basic Diluted Net Income (Loss) $ (3,214,694) $ (3,214,694) $ 7,196,702 $ 7,196,702 Weighted-average common 5,116,953 5,190,289 5,090,407 5,115,801 Net income (loss) per share $ (0.63) $ (0.62) $ 1.41 $ 1.41 The weighted-average shares outstanding, basic and diluted are calculated as follows: Year Ended December 31, 2023 Year Ended December 31, 2022 Basic Diluted Basic Diluted Weighted-average common 5,116,953 5,116,953 5,090,407 5,090,407 Dilutive RSU's/Options - 73,336 - 25,394 Weighted-average common 5,116,953 5,190,289 5,090,407 5,115,801 Nuvera’s BOD reviews quarterly dividend declarations based on our anticipated earnings, capital requirements and our operating and financial conditions. Recent Accounting Developments Effective January 1, 2022, we adopted Accounting Standards Update (ASU) No. 2021-10 “Disclosures by Business Entities about Government Assistance.” ASU 2021-10 requires disclosure by business entities of the types of government assistance received, the method of accounting for such assistance and the effects of the assistance on its financial statements. The adoption of this guidance did not have a material impact on our related disclosures. In March 2020, the Financial Accounting Standards Board (FASB) issued ASU 2020-04, “Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” ASU 2020-04 provides optional guidance for a limited period to ease the potential burden in accounting for (or recognizing the effects of) reference rate reform on financial reporting. The amendments in ASU 2020-04 provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. During the quarter ended June 30, 2022, we novated a certain hedging relationship to one our IRSAs by changing the reference rated from the London Inter-Bank Offered Rate to a secured overnight financing rate (SOFR). The amendment did not have a material impact on our consolidated financial statements. In June 2016, the FASB issued ASU 2016-13, “Financial Instruments – Credit Losses: Measurement of Credit Losses on Financial Instruments.” ASU 2016-13 requires entities to use a new forward-looking, expected loss model to estimate credit losses. It also requires additional disclosures relating to the credit quality of trade and other receivables, including information relating to management’s estimate of AFCLs. The Company is required to adopt ASU 2016-13 for fiscal periods beginning after December 15, 2022, including interim periods within that fiscal year. Early adoption as of December 15, 2018, was permitted. As of January 1, 2022, the Company adopted ASU 2016-13 and the adoption did not have a significant impact on our consolidated financial statements. We have reviewed all other significant newly issued accounting pronouncements and determined that they are either not applicable to our business or that no material effect is expected on our financial position and results of operations. |
