FairPoint Communications 2007 Annual Report Download - page 82

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Table of Contents


each minute 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.

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash
equivalents.

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 written 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 (in
thousands):
  
Balance, beginning of period $ 1,815 $ 2,121 $ 1,255
Acquisition adjustments — 212 28
Provision charged to expense 2,733 1,798 3,245
Amounts written off, net of recoveries (2,422) (2,316) (2,407)
Balance, end of period $ 2,126 $ 1,815 $ 2,121

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.

Investments consist of stock in CoBank, ACB (CoBank), 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 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 trading. 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
80