FairPoint Communications 2006 Annual Report Download - page 66

Download and view the complete annual report

Please find page 66 of the 2006 FairPoint Communications annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 150

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150


 
(e) Accounts Receivable
Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is the Company’s best estimate of
the amount of probable credit losses in the Company’s existing accounts receivable. The Company establishes an allowance for doubtful accounts based upon
factors surrounding the credit risk of specific customers, historical trends, and other information. Receivable balances are reviewed on an aged basis and
account balances are written off against the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.
The following is activity in the Company’s allowance for doubtful accounts receivable for the years ended December 31 (in thousands):
  
Balance, beginning of period $2,121 $1,255 $ 1,028
Acquisition adjustments 212 28 (143)
Provision charged to expense 1,798 3,245 1,718
Amounts written off, net of recoveries (2,316) (2,407)(1,348)
Balance, end of period $1,815 $2,121 $1,255
(f) Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and trade receivables. The
Company places its cash with high-quality financial institutions. Concentrations of credit risk with respect to trade receivables are principally related to
receivables from other interexchange carriers and are otherwise limited to the Company’s large number of customers in several states.
(g) Investments
Investments consist of stock in CoBank, ACB (CoBank), the Rural Telephone Finance Cooperative (RTFC), various cellular companies and
partnerships and other minority equity investments, and Non-Qualified Deferred Compensation Plan assets. The stock in CoBank and the RTFC is
nonmarketable and stated at cost. For investments in partnerships, the equity method of accounting is used.
Non-Qualified Deferred Compensation Plan assets are classified as trading. The Company uses fair value reporting for marketable investments in debt
and equity securities classified as either available-for-sale or trading. For available-for-sale securities, the unrealized holding gains and losses, net of the related
tax effect, are excluded from earnings and are reported as a separate component of comprehensive income until realized or at such time as the Company
determines a decline in value has occurred that is deemed to be other-than-temporary. Unrealized holding gains and losses on trading securities are included in
other income.
To determine if an impairment of an investment exists, the Company monitors and evaluates the financial performance of the business in which it
invests and compares the carrying value of the investee to quoted market prices (if available), or the fair values of similar investments, which in certain
instances, is based on traditional valuation models utilizing multiples of cash flows. When circumstances indicate that a decline in the fair value of the
investment has occurred and the decline is other than temporary, the
64