FairPoint Communications 2004 Annual Report Download - page 85

Communication Commission's (interstate) approved separation rules and rates of return. Distribution from these pools can
change relative to changes made to expenses, plant investment, or rate of return. Some companies participate in federal and
certain state universal service programs that are pooling in nature but are regulated by rules separate from those described
above. These rules vary by state. Revenues earned through the various pooling arrangements are initially recorded based on
the Company's estimates.
Long distance retail and wholesale services are usage sensitive and are billed in arrears and recognized when earned.
Internet and data services revenues are substantially all recurring revenues and are billed one month in advance and deferred
until earned. The majority of the Company's miscellaneous revenue is provided from billing and collection and directory
services. The Company earns revenue from billing and collecting charges for toll calls on behalf of interexchange carriers. The
interexchange carrier pays a certain rate per each message billed by the Company. The Company recognizes revenue from
billing and collection services when the services are provided. The Company recognizes directory services revenue over the
subscription period of the corresponding directory. Billing and collection is normally billed under contract or tariff supervision.
Directory services are normally billed under contract.
(e) Accounts Receivable
Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is
the Company's best estimate of the amount of probable credit losses in the Company's existing accounts receivable. The
Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers,
historical trends, and other information. Receivable balances are reviewed on an aged basis and account balances are charged
off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
The following is activity in the Company's allowance for doubtful accounts receivable for the years ended December 31
(dollars in thousands):
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





Balance, beginning of period $1,028 1,235 1,355
Acquisition adjustments (143)202 —
Provision charged to expense 1,718 1,028 2,997
Amounts written off, net of recoveries (1,348)(1,437)(3,117)
Balance, end of period $1,255 1,028 1,235
(f) Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash
and trade receivables. The Company places its cash with high-quality financial institutions. Concentrations of credit risk with
respect to trade receivables are principally related to receivables from other interexchange carriers and are otherwise limited to
the Company's large number of customers in several states.
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