FairPoint Communications 2004 Annual Report Download - page 58

In May 2003, the FASB issued SFAS No. 150, 
. SFAS No. 150 establishes standards for how an issuer classifies and measures certain financial instruments with
characteristics of both liabilities and equity. SFAS No. 150 applies specifically to a number of financial instruments that companies have
historically presented within their financial statements either as equity or between the liabilities section and the equity section, rather than as
liabilities. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise is effective at the
beginning of the first interim period beginning after June 15, 2003, except for mandatorily redeemable financial instruments of a non-public
entity, in which case this statement shall be effective for fiscal periods beginning after December 15, 2003. For purposes of adoption of SFAS
No. 150, we met the definition of a nonpublic entity. As described in note 8 to our consolidated financial statements contained elsewhere in
this Annual Report, we adopted SFAS No. 150 early, as of July 1, 2003.
In March 2004, the EITF reached a consensus on the remaining portions of EITF 03-01, 
 with an effective date of June 15, 2004. EITF 03-01 provides new disclosure
requirements for other-than-temporary impairments on debt and equity investments, including cost method investments. Investors are
required to disclose quantitative information about: (i) the aggregate amount of unrealized losses, and (ii) the aggregate related fair values of
investments with unrealized losses, segregated into time periods during which the investment has been in an unrealized loss position of
less than 12 months and greater than 12 months. In addition, investors are required to disclose the qualitative information that supports their
conclusion that the impairments noted in the qualitative disclosure are not other-than temporary. We determined that EITF 03-01 did not have
a material impact on the financial statements and has enhanced its disclosures as required by this consensus.
In December 2004, the FASB issued SFAS No. 123(R). This new standard requires companies to adopt the fair value methodology of
valuing stock-based compensation and recognizing that valuation in the financial statements from the date of grant. Accordingly, the adoption
of SFAS No. 123(R)'s fair value method will have a significant impact on the Company's result of operations, although it will have no impact
on the Company's overall financial position. The impact of adoption of SFAS No. 123(R) cannot be predicted at this time because it will
partially depend on levels of share-based payments granted in the future. However, had the Company adopted SFAS No. 123(R) in prior
periods, the impact of that standard would have approximated the impact of SFAS No. 123 as shown in the Stock-based Compensation table
(see Note 1(o)). SFAS No. 123(R) also requires the benefits of tax deductions in excess of recognized compensation cost to be reported as a
financing cash flow, rather than as an operating cash flow as required under current literature. We expect to adopt the provisions of SFAS
No. 123(R) on a modified prospective application method effective July 1, 2005, with no restatement of any prior periods. SFAS No. 123(R) is
effective for us as of the beginning of the first interim reporting period that begins after June 15, 2005.

We do not believe inflation has a significant effect on our operations.

Any of the following risks could materially and adversely affect our business, consolidated financial condition, results of operations or
liquidity. The risks described below are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we
currently deem to be immaterial may also materially and adversely affect our business operations.
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