FairPoint Communications 2005 Annual Report Download - page 73

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(q) Earnings Per Share
Earnings per share has been computed in accordance with SFAS No. 128, Basic earnings per share is computed by dividing net
income (loss) less dividends accrued on Series A preferred shares subject to mandatory redemption and plus discounts on the redemption of such shares by
the weighted average number of common shares outstanding for the period. Except when the effect would be anti-dilutive, the diluted earnings per share
calculation includes the impact of restricted units, restricted stock and shares that could be issued under outstanding stock options.
The number of potential common shares excluded from the calculation of diluted net loss per share, prior to the application of the treasury stock method,
is as follows (in thousands):

  
Contingent stock options 833 833 833
Shares excluded as effect would be anti-dilutive:
Stock options 241 356 416
Restricted stock 471 — —
Restricted units 34 26 27
1,579 1,215 1,276
(r) Discontinued Operations
In 2005, the Company has separately disclosed the operating, investing and financing portions of the cash flows attributable to its discontinued
operations, which in prior periods were reported on a combined basis as a single amount.
(s) New Accounting Pronouncements
In December 2004, the FASB issued SFAS No. 123(R). This new standard requires companies to adopt the fair value methodology of valuing stock-
based compensation and recognize that valuation in the financial statements from the date of grant. The adoption of SFAS No. 123(R)’s fair value method is
not expected to have an adverse impact on our income from operations. However, had we adopted SFAS No. 123(R) in prior periods, the impact of that
standard would have approximated the impact of SFAS No. 123 as disclosed above. SFAS No. 123(R) also requires the benefits of tax deductions in excess of
recognized compensation cost to be reported as a financing cash flow, rather than as an operating cash flow as required under current literature. We expect to
adopt the provisions of SFAS No. 123(R) using the prospective application method, for awards granted prior to becoming a public company and valued using
the minimum value method, and using the modified prospective application method for awards granted subsequent to becoming a public company. The
Company will adopt SFAS No. 123(R) effective January 1, 2006, with no restatement of any prior periods.
In March 2005, the FASB issued FIN 47, “Accounting for Conditional Asset Retirement Obligations,” an interpretation of FASB No. 143. FIN 47
clarifies that the term conditional asset retirement obligation as used in FASB No. 143 refers to a legal obligation to perform an asset retirement activity in
which the timing or method of settlement are conditional on a future event that may or may not be within the control of the entity. FIN 47 also clarifies when an
entity would have sufficient information to reasonably estimate the fair value of an asset retirement obligation. FIN 47 is effective for the year ended
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