FairPoint Communications 2007 Annual Report Download - page 84

Table of Contents
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
into the existing credit facility and subsequent amendments thereto. Accumulated amortization was $4.5 million and $2.9 million as of
December 31, 2007 and 2006, respectively.
Amortization of debt issue costs was $1.5 million, $1.6 million and $1.9 million at December 31, 2007, 2006 and 2005,
respectively.

Goodwill consists of the difference between the purchase price incurred in acquisitions using the purchase method of accounting and
the fair value of net assets acquired. In accordance with SFAS No. 142, goodwill is no longer
amortized, but instead is assessed for impairment at least annually. During this assessment, management relies on a number of factors,
including operating results, business plans, and anticipated future cash flows.
Other intangible assets recorded by the Company consist of acquired customer relationships. These intangible assets are amortized
over their estimated useful lives which the Company determined to be 15 years.

Long-lived assets, such as property, plant, and equipment and purchased intangibles subject to amortization, are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to estimated undiscounted
future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an
impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset. Assets to be
disposed of are reported at the lower of the carrying amount or fair value less costs to sell and depreciation ceases.

Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.
FairPoint files a consolidated income tax return with its subsidiaries. FairPoint has a tax-sharing agreement in which all subsidiaries
are participants. All intercompany tax transactions and accounts have been eliminated in consolidation.
The Company adopted FASB Interpretation No. (FIN) 48, 
on January 1, 2007. FIN 48 requires applying a “more likely than not” threshold to the recognition and de-
recognition of tax positions. The Company’s unrecognized tax benefits totaled $3.7 million as of January 1, 2007 and $1.0 million as of
December 31, 2007, of which $1.0 million would impact its effective tax rate, if recognized.
As part of the income tax provision process of preparing the Company’s consolidated financial statements, the Company is required
to estimate its income taxes. This process involves estimating current tax expense together with assessing temporary differences resulting
from differing treatment of items for tax and accounting purposes. These differences result in deferred tax assets and liabilities. In
assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the
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