FairPoint Communications 2006 Annual Report Download - page 65

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applicability of SFAS No. 71 based on the developments in their current regulatory and competitive environments.
(c) Use of Estimates
The Company’s management has made a number of estimates and assumptions relating to the reporting of assets and liabilities, the reported amounts of
revenues and expenses, and the disclosure of contingent assets and liabilities to prepare these consolidated financial statements in conformity with accounting
principles generally accepted in the United States of America. Actual results could differ from those estimates.
(d) Revenue Recognition
Revenues are recognized as services are rendered and are primarily derived from the usage of the Company’s networks and facilities or under revenue-
sharing arrangements with other communications carriers. Revenues are primarily derived from: access, pooling, local calling services, Universal Service
Fund receipts, long distance services, Internet and data services, and other miscellaneous services. Local access charges are billed to local end users under
tariffs approved by each state’s public utilities commission. Access revenues are derived for the intrastate jurisdiction by billing access charges to
interexchange carriers and to regional Bell operating companies. These charges are billed based on toll or access tariffs approved by the local state’s public
utilities commission. Access charges for the interstate jurisdiction are billed in accordance with tariffs filed by the National Exchange Carrier Association
(NECA) or by the individual company and approved by the Federal Communications Commission.
Revenues are determined on a bill-and-keep basis or a pooling basis. If on a bill-and-keep basis, the Company bills the charges to either the access
provider or the end user and keeps the revenue. If the Company participates in a pooling environment (interstate or intrastate), the toll or access billed is
contributed to a revenue pool. The revenue is then distributed to individual companies based on their company-specific revenue requirement. This distribution
is based on individual state public utilities commissions (intrastate) or the Federal 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.
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