FairPoint Communications 2002 Annual Report Download - page 463

revenues, and expenses and disclosure of contingent assets and
liabilities. The estimates and assumptions used in the accompanying
financial statements are based upon management's evaluation of relevant
facts and circumstances as of the date of the financial statements. Actual
results may differ from the estimates and assumptions used in preparing
the accompanying financial statements.
7
REVENUE RECOGNITION
The Partnership earns revenue by providing access to the network (access
revenue) and for usage of the network (airtime/usage revenue), which
includes roaming and cellular long distance revenue. In general, access
revenue is billed one month in advance and is recognized when earned; the
unearned portion is classified in advanced billings. Airtime/usage
revenue, roaming revenue and long distance revenue are recognized when
service is rendered and included in unbilled revenue until billed. The
Partnership's revenue recognition policies are in accordance with the
Securities and Exchange Commission's Staff Accounting Bulletin ("SAB") No.
101, "Revenue Recognition in Financial Statements."
Cellular service revenues resulting from a cellsite agreement are
recognized based upon an allocation of airtime minutes (see Note 4).
OPERATING EXPENSES
Operating expenses include expenses incurred directly by the Partnership,
as well as an allocation of administrative and operating costs incurred by
the managing partner or its affiliates on behalf of the Partnership.
Services performed on behalf of the Partnership are provided by the
employees of Cellco. These employees are not employees of the Partnership;
therefore, operating expenses include direct and allocable charges of
salary and employee benefit costs for the services provided to the
Partnership. The Partnership believes these allocations are reasonable.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment primarily represents costs incurred to
construct and enhance Mobile Telephone Switching Offices (MTSOs) and cell
sites. The cost of property, plant and equipment is depreciated over its
estimated useful life, using the straight-line method of accounting.
Leasehold improvements are amortized over the shorter of their estimated
useful lives or the term of the related lease. Major improvements to
existing plant and equipment are capitalized. Routine maintenance and
repairs that do not extend the life of the plant and equipment are charged
to expense as incurred.
Upon the sale or retirement of property, plant and equipment, the cost and
related accumulated depreciation or amortization is eliminated from the
accounts and any related gain or loss is reflected in the statements of
operations. The Partnership periodically exchanges (trades-in) certain
assets for similar productive assets and generally receives trade-in
allowances from its vendors. The cost of the new asset is generally the
monetary consideration paid plus the net book value of the asset
surrendered. If the trade-in allowance is less than the net book value of
the asset surrendered, a loss is reflected in the statements of
operations.
Interest expense and 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.