FairPoint Communications 2003 Annual Report Download - page 129

Management uses estimates and assumptions in preparing its financial statements. Those estimates and assumptions affect the reported
amounts of assets, liabilities, revenues and expenses, and the disclosure of contingent assets and liabilities. Actual results may differ from
those estimates.
Property and Equipment
The Partnership's property and equipment is stated at cost, including labor and overheads associated with construction and capitalized
interest.
Depreciation is computed by applying the straight-line method. The estimated service lives for depreciable plant and equipment are: 15
years for buildings; 7 to 15 years for cell site towers; 7 to 10 years for electronic mobile exchange and base site controller equipment; 7 years
for furniture and fixtures; and 5 years for computer equipment.
When depreciable properties are sold, or otherwise disposed of, any resulting gains or losses are included in the determination of
income.
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Long-Lived Assets
The Partnership recognizes impairment losses on long-lived assets used in operations when indicators of impairment are present and
the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount.
Revenue Recognition
The Partnership earns revenue by providing access to the cellular network (access revenue) and for usage of the cellular network
(airtime and toll revenue). Access revenue is billed one month in advance and is recognized when earned. Airtime (including roaming) and
toll revenues are recognized when the services are rendered. Other revenues are recognized when services are performed and include,
primarily, connection revenues. Equipment sales are recognized upon delivery of the equipment to the customer.
The Partnership generates revenue from charges to its customers when they use their cellular phones in other wireless providers'
markets. Until 2002, the Partnership included this revenue on a net basis in cost of services in its statement of operations. Expense
associated with this revenue, charged by third-party wireless providers, is also included in cost of services. The Partnership used this method
because it has passed through to its customers most of the costs related to these revenues. However, the wireless industry and the
Partnership have increasingly been using pricing plans that include flat rate pricing and larger home service areas. Under these types of
plans, amounts charged to the Partnership by other wireless providers may not necessarily be passed through to its customers.
In 2002, the Partnership adopted a policy to include the revenue as retail revenue rather than cost of services on a net basis. Roamer
revenue includes only the revenue from other wireless providers' customers who use the Partnership's network. Retail revenue and cost of
services of $523,315 and $589,604 for 2001 and 2000, respectively, were reclassified to conform to this presentation. This change in
presentation has no impact on operating income, net income, or partners' equity.
Expense Recognition
Pursuant to the Partnership Agreement, expenses included in the Statements of Income represent expenses incurred by the
Partnership, including an allocation of administrative and operations costs from the operating partner.
Income Taxes
The Internal Revenue Code and applicable state statutes provide that income and expenses of a partnership are not separately taxable to
the Partnership, but rather accrue directly to the partners. Accordingly, no provision for federal or state income taxes has been made in the
financial statements
Advertising Costs
Advertising costs are expensed as incurred. Advertising expenses were $203,997, $162,430, and $170,659 in 2002, 2001 and 2000,
respectively.
Cash Equivalents
All highly liquid investments with a maturity of three months or less at the time of purchase are considered cash equivalents. The
carrying value of cash and cash equivalents approximates its fair value due to the short maturity of the investments.
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Reclassifications