FairPoint Communications 2006 Annual Report Download - page 68


 
consisting of a revolving facility in an aggregate principal amount of up to $100.0 million and a term facility in an aggregate principal amount of
$588.5 million. The Company incurred a total of $10.4 million of debt issuance costs associated with entering into the credit facility and subsequent
amendments thereto.
Accumulated amortization of debt issue costs was $2.9 million, $1.4 million and $14.9 million at December 31, 2006, 2005 and 2004, respectively.
(j) Goodwill and Other Intangible Assets
Goodwill consists of the difference between the purchase price incurred in acquisitions using the purchase method of accounting and the fair value of net
assets acquired. In accordance with SFAS No. 142, which the Company adopted effective January 1, 2002, goodwill
is no longer amortized, but instead is assessed for impairment at least annually. During this assessment, management relies on a number of factors, including
operating results, business plans, and anticipated future cash flows.
Other intangible assets recorded by the Company consist of acquired customer relationships. These intangible assets are amortized over their estimated
useful lives which the Company determined to be 15 years.
(k) Impairment of Long-lived Assets
Long-lived assets, such as property, plant, and equipment and purchased intangibles subject to amortization, are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying
amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset
exceeds the fair value of the asset. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell and depreciation
ceases.
(l) Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss
and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which
those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date.
FairPoint files a consolidated income tax return with its subsidiaries. FairPoint has a tax-sharing agreement in which all subsidiaries are participants. All
intercompany tax transactions and accounts have been eliminated in consolidation.
As part of the income tax provision process of preparing the Company’s consolidated financial statements, the Company is required to estimate its
income taxes. This process involves estimating current tax expenses together with assessing temporary differences resulting from differing treatment of items
for tax and accounting purposes. These differences result in deferred tax assets and liabilities. In assessing the
66