FairPoint Communications 2009 Annual Report Download - page 102

Table of Contents
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


of services and sales and selling, general and administrative expenses were allocated based on the percentage of the Verizon Northern New England
business revenues related to the VLD component to the total VLD revenues applied to operating expenses for total VLD.
 For the balance sheet, receivables were allocated based on applicable operating revenues; other current assets were determined using
applicable billing system data; accounts payable were allocated based on the applicable operating expenses; and other current liabilities, which consisted
of advanced billings, were allocated based on applicable operating revenues. For the statements of operations, operating revenues were determined using
applicable billing system data and average access lines in service; cost of services and sales, selling, general and administrative expenses and interest
expense were allocated based on the percentage of the Verizon Northern New England business revenues related to the VOL component to the total
VOL revenues applied to operating expenses and interest expense for total VOL.
 For the balance sheet, receivables were allocated based on the applicable operating revenues and accounts payable were allocated based on
applicable operating expenses. For the statements of operations, operating revenues were identified using applicable system data; cost of services and
sales and selling, general and administrative expenses were allocated based on the percentage of the Verizon Northern New England business revenues
related to the VSSI component to the total VSSI revenues applied to operating expenses for total VSSI.
Management believes the allocations used to determine selected amounts in the financial statements are appropriate methods to reasonably reflect
the related assets, liabilities, revenues and expenses of the Verizon Northern New England business for periods prior to the Merger.
Financial Reporting in Reorganization
The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern and
contemplate the realization of assets and the satisfaction of liabilities in the normal course of business. The Company's ability to continue as a going
concern is contingent upon its ability to comply with the financial and other covenants contained in the DIP Credit Agreement and, after the Effective
Date, the Exit Facility and the Bankruptcy Court's approval of the Plan, among other things. As a result of the Chapter 11 Cases, the realization of assets
and the satisfaction of liabilities are subject to uncertainty. While operating as debtor-in-possession under the Bankruptcy Code, the Company may sell
or otherwise dispose of or liquidate assets or settle liabilities, subject to the approval of the Bankruptcy Court or as otherwise permitted in the ordinary
course of business (and subject to restrictions contained in the DIP Credit Agreement), in amounts other than those reflected in the accompanying
consolidated financial statements. Further, a plan of reorganization could materially change the amounts and classifications in the historical consolidated
financial statements. The accompanying consolidated financial statements do not include any direct adjustments related to the recoverability and
classification of assets or the amounts and classification of liabilities or any other adjustments that might be necessary should the Company be unable to
continue as a going concern or as a consequence of the Chapter 11 Cases.
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