FairPoint Communications 2007 Annual Report Download - page 139

ORANGE COUNTY — POUGHKEEPSIE LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS — (Continued)
As discussed above, the FCC licenses under which the Partnership operates are recorded on the books of Cellco. Cellco does not
charge the Partnership for the use of any FCC license recorded on its books (except for the annual cost of $524 related to the spectrum
lease, as discussed in Note 4). However, Cellco believes that under the Partnership agreement it has the right to allocate, based on a
reasonable methodology, any impairment loss recognized by Cellco for all licenses included in Cellco’s national footprint. Accordingly,
the FCC licenses, including the licenses under which the Partnership operates, recorded on the books of Cellco are evaluated for
impairment by Cellco, under the guidance set forth in Statement of Financial Accounting Standards (“SFAS”) No. 142, Goodwill and
Other Intangible Assets.
The FCC licenses are treated as an indefinite life intangible asset on the books of Cellco under the provisions of SFAS No. 142 and
are not amortized, but rather are tested for impairment annually or between annual dates, if events or circumstances warrant. All of the
licenses in Cellco’s nationwide footprint are tested in the aggregate for impairment under SFAS No. 142.
Cellco evaluates its wireless licenses for potential impairment annually, and more frequently if indications of impairment exist.
Cellco tests its licenses on an aggregate basis, in accordance with EITF No. 02-7, Unit of Accounting for Testing Impairment of
Indefinite-Lived Intangible Assets, using a direct value methodology in accordance with SEC Staff Announcement No. D-108, Use of
the Residual Method to Value Acquired Assets other than Goodwill. The direct value approach determines fair value using estimates of
future cash flows associated specifically with the wireless licenses. If the fair value of the aggregated wireless licenses is less than the
aggregated carrying amount of the wireless licenses, an impairment is recognized. Cellco evaluated its wireless licenses for potential
impairment as of December 15, 2007 and December 15, 2006. These evaluations resulted in no impairment of Cellco’s wireless licenses.
Concentrations — To the extent the Partnership’s customer receivables become delinquent, collection activities commence. The
General Partner accounts for 80.2% and 93.6% of the accounts receivable balance at December 31, 2007, and 2006 respectively. The
Partnership maintains an allowance for losses, as necessary, based on the expected collectibility of accounts receivable.
Approximately 98% of the Partnership’s 2007, 2006, and 2005 revenue is affiliate revenue.
Cellco and the Partnership rely on local and long-distance telephone companies, some of whom are related parties, 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 Cellco and the General Partner attempt 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.
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 Partner 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. Additionally, administrative
8