FairPoint Communications 2002 Annual Report Download - page 454

accounts and any related gain or loss is reflected in the Statements of
Operations.
Network engineering costs incurred during the construction phase of the
Partnership's network and real estate properties under development are
capitalized as part of property, plant and equipment and recorded as
construction in progress until the projects are completed and placed into
service.
FCC LICENSES - The Federal Communications Commission ("FCC") issues
licenses that authorize cellular carriers to provide service in specific
cellular geographic service areas. The FCC grants licenses for terms of up
to ten years. In 1993 the FCC adopted specific standards to apply to
cellular renewals, concluding it will reward a license renewal to a
cellular licensee that meets certain standards of past performance.
Historically, the FCC has granted license renewals routinely. The current
term of the Partnership's FCC licenses expire on January 27, 2008 and
January 29, 2008 for the Poughkeepsie and Orange County FCC licenses,
respectively. Both of the Partnership's licenses are recorded on the books
of the general partner. The general partner believes it will be able to
meet all requirements necessary to secure renewal of the Partnership's
cellular licenses.
VALUATION OF ASSETS - Long-lived assets are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable. When such events occur, the undiscounted
expected future cash flows are compared to the carrying amount of the
asset. If the comparison indicates that there is an impairment, the amount
of the impairment is typically calculated using discounted expected future
cash flows. The discount rate applied to these cash flows is based on the
Partnership's weighted average cost of capital.
CONCENTRATIONS - To the extent the Partnership's customer receivables
become delinquent, collection activities commence. The general partner
accounts for 88.2% and 74.1% of the accounts receivable balance at
December 31, 2002, and 2001 respectively. The Partnership maintains an
allowance for losses based on the expected collectibility of accounts
receivable.
The general partner relies on local and long-distance telephone companies,
some of whom are related parties, and other companies to provide certain
communication services. Although management believes alternative
telecommunications facilities could be found in a timely manner, any
disruption of these services could potentially have an adverse impact on
the Partnership's operating results.
Although the general partner attempts to maintain multiple vendors for
equipment, which are important components of its operations, they are
currently acquired from only a few sources. Certain of these products are
in turn utilized by the Partnership and are important components of the
Partnership's operations. If the suppliers are unable to meet the general
partner's needs as it builds out its network infrastructure and sells
service and equipment, delays and increased costs in the expansion of the
Partnership's network infrastructure or losses of potential customers
could result, which would adversely affect operating results.
FINANCIAL INSTRUMENTS - The Partnership's trade receivables and payables
are short-term in nature, and accordingly, their carrying value
approximates fair value.
INCOME TAXES - The Partnership is not a taxable entity for Federal and
state income tax purposes. Any taxable income or loss is apportioned to
the partners based on their respective partnership interests and is
reported by them individually.
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