FairPoint Communications 2009 Annual Report Download - page 119

Table of Contents
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In connection with the Exchange Offer consummated on July 29, 2009, the Company paid a cash consent fee of $1.6 million in the aggregate to
holders of Old Notes who validly delivered and did not revoke consents in the related consent solicitation prior to a specified early consent deadline,
which amount was equal to $3.75 in cash per $1,000 aggregate principal amount of Old Notes exchanged in the Exchange Offer. Pursuant to the Debt
Topic of the ASC, this consent fee was capitalized and the Company began to amortize these costs over the life of the New Notes using the effective
interest method.
Concurrent with the filing of the Chapter 11 Cases, on October 26, 2009 the Company wrote off all remaining debt issue and offering costs related
to its pre-petition debt in accordance with the Reorganizations Topic of the ASC.
The Company entered into the DIP Credit Agreement on October 27, 2009. The Company incurred $0.9 million of debt issue costs associated with
the DIP Credit Agreement and began to amortize these costs over the nine month life of the DIP Credit Agreement using the effective interest method.
As of December 31, 2009, the Company had capitalized debt issue costs of $0.7 million, net of amortization.
(m) Advertising Costs
Advertising costs are expensed as they are incurred.
(n) Goodwill and Other Intangible Assets
Goodwill consists of the difference between the purchase price incurred in the acquisition of Legacy FairPoint using the purchase method of
accounting and the fair value of net assets acquired. In accordance with the Intangibles-Goodwill and Other Topic of the ASC, 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.
Goodwill impairment is determined using a two-step process. Step one compares the estimated fair value of the Company's single wireline
reporting unit (calculated using both the market approach and the income approach) to its carrying amount, including goodwill. The market approach
compares the fair value of the Company, as measured by its market capitalization, to the carrying amount of the Company, which represents its
shareholders' equity balance. As of December 31, 2009, shareholders' deficit totaled $218.4 million. The income approach compares the fair value of the
Company, as measured by discounted expected future cash flows, to the carrying amount of the Company. If the Company's carrying amount exceeds
its estimated fair value, there is a potential impairment and step two of the analysis must be performed.
Step two compares the implied fair value of the Company's goodwill (i.e., the fair value of the Company less the fair value of the Company's assets
and liabilities, including identifiable intangible assets) to its goodwill carrying amount. If the carrying amount of the Company's goodwill exceeds the
implied fair value of the goodwill, the excess is required to be recorded as an impairment.
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