FairPoint Communications 2004 Annual Report Download - page 86

(g) Investments
Investments consist of stock in CoBank, ACB (CoBank), Rural Telephone Bank (RTB), the Rural Telephone Finance
Cooperative (RTFC), various cellular companies and partnerships and other minority equity investments, and Non-Qualified
Deferred Compensation Plan assets. The stock in CoBank, RTB, and the RTFC is nonmarketable and stated at cost. For
investments in partnerships, the equity method of accounting is used.
Non-Qualified Deferred Compensation Plan assets are classified as trading. The Company uses fair value reporting for
marketable investments in debt and equity securities classified as either available-for-sale or trading. For available-for-sale
securities, the unrealized holding gains and losses, net of the related tax effect, are excluded from earnings and are reported as
a separate component of comprehensive income until realized or at such time as the Company determines a decline in value
has occurred that is deemed to be other-than-temporary. Unrealized holding gains and losses on trading securities are included
in other income.
To determine if an impairment of an investment exists, the Company monitors and evaluates the financial performance of
the business in which it invests and compares the carrying value of the investee to quoted market prices (if available), or the
fair values of similar investments, which in certain instances, is based on traditional valuation models utilizing multiples of
cash flows. When circumstances indicate that a decline in the fair value of the investment has occurred and the decline is other
than temporary, the Company records the decline in value as a realized impairment loss and a reduction in the cost of the
investment.
The Company currently receives patronage dividends from its investments in businesses organized as cooperatives for
Federal income tax purposes (CoBank and RTFC stock). Patronage dividends represent cash distributions of the cooperative's
earnings and notices of allocations of earnings to the Company. Deferred and uncollected patronage dividends are included as
part of the basis of the investment until collected. The RTB investment pays dividends annually at the discretion of its board of
directors.
(h) Property, Plant, and Equipment
Property, plant, and equipment is carried at cost. Repairs and maintenance are charged to expense as incurred and major
renewals and improvements are capitalized. For traditional telephone companies, the original cost of depreciable property
retired, together with removal cost, less any salvage realized, is charged to accumulated depreciation. For all other companies,
the original cost and accumulated depreciation are removed from the accounts and any gain or loss is included in the results of
operations. Depreciation is determined using the straight-line method for financial reporting purposes.
The Company is in the process of developing an integrated end-user billing platform. The costs to develop such system
have been accounted for in accordance with Statement of Position 98-1, 
 Aggregate capitalized costs (before accumulated amortization) totaled $5.1 million as
of December 31, 2004, of which approximately 84% represents payments for license fees and third-party consultants. The
Company's capitalized billing system costs will be amortized over
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