FairPoint Communications 2002 Annual Report Download - page 464

8
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 award a license renewal to a cellular
licensee that meets certain standards of past performance. Historically,
the FCC has granted license renewals routinely. The current terms of the
Partnership's FCC license expire on January 27, 2008 and January 29, 2008
for the Poughkeepsie and Orange County FCC licenses, respectively. The
Partnership's licenses are recorded on the books of Cellco. 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
The Partnership follows the provision of the Financial Accounting
Standards Board ("FASB") Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of." 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.
FINANCIAL INSTRUMENTS
The Partnership's cash, 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.
CONCENTRATIONS
To the extent the Partnership's customer receivables become delinquent,
collection activities commence. The managing general partner accounts for
93% of the accounts receivable balance at December 31, 2000. The
Partnership maintains an allowance for losses based on the expected
collectibility of accounts receivable.
The managing partner relies on local and long-distance telephone companies
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 managing partner attempts to maintain multiple vendors for
each required product, its network assets, which are important components
of its operations, 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 managing 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.