FairPoint Communications 2005 Annual Report Download - page 242

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, 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.
Segments – The Partnership has one reportable business segment and operates domestically only. The Partnership’s products and services are materially
comprised of wireless telecommunications services.
Due to/from General Partner - Due to/from General Partner principally represents the Partnership’s cash position. The General Partner manages all
cash, investing and financing activities of the Partnership. As such, the change in Due from General Partners is reflected as an investing activity in the
Statements of Cash Flows while the change in Due to General Partner is reflected as a financing activity. The Partnership reclassified its 2004 and 2003
Statements of Cash Flows to conform to the 2005 presentation. Additionally, administrative and operating costs incurred by the General Partner on behalf
of the Partnership are charged to the Partnership through this account. Interest expense/income is based on the average monthly outstanding balance in this
account and is calculated by applying Cellco’s average cost of borrowing from Verizon Global Funding, a wholly owned subsidiary of Verizon
Communications. The cost of borrowing was approximately 4.8%, 5.9%, and 5.0% for the years ended December 31, 2005, 2004 and 2003, respectively.
Included in Interest and Other Income, Net is net interest income related to the Due from General Partner balance of $782, $980 and $1,472 for the years
ended December 31, 2005, 2004 and 2003, respectively.
Recently Issued Accounting Pronouncements - In March 2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional Asset
Retirement Obligations – an interpretation of SFAS No. 143.” This interpretation clarifies that the term “conditional asset retirement obligation” refers to a
legal obligation to perform a future asset retirement when uncertainty exists about the timing and/or method of settlement of the obligation. Uncertainty
about the timing and/or method of settlement of a conditional asset retirement obligation should be factored into the measurement of the liability when
sufficient information exists, as defined by the interpretation. An entity is required to recognize a liability for the fair value of the obligation if the fair
value of the liability can be reasonably estimated. The Partnership adopted the interpretation on December 31, 2005. The adoption of this interpretation of
SFAS No. 143 did not have a material impact on the Partnership’s financial statements.
Distributions – The Partnership is required to make distributions to its partners on a quarterly basis based upon the Partnership’s operating results,
cash availability and financing needs as determined by the General Partner at the date of the distribution.
10