FairPoint Communications 2009 Annual Report Download - page 83

Table of Contents
Allowance for Doubtful Accounts. In evaluating the collectability of our accounts receivable, we assess a number of factors, including a specific
customer's or carrier's ability to meet its financial obligations to us, the length of time the receivable has been past due and historical collection
experience. Based on these assessments, we record both specific and general reserves for uncollectible accounts receivable to reduce the related accounts
receivable to the amount we ultimately expect to collect from customers and carriers. If circumstances change or economic conditions worsen such that
our past collection experience is no longer relevant, our estimate of the recoverability of our accounts receivable could be further reduced from the levels
reflected in our accompanying consolidated balance sheet.
Accounting for Pension and Other Post-retirement Benefits. Some of our employees participate in our pension plans and other post-retirement
benefit plans. In the aggregate, the pension plan benefit obligations exceed the fair value of pension plan assets, resulting in expense. Other post-
retirement benefit plans have larger benefit obligations than plan assets, resulting in expense. Significant pension and other post-retirement benefit plan
assumptions, including the discount rate used, the long term rate of return on plan assets, and medical cost trend rates are periodically updated and
impact the amount of benefit plan income, expense, assets and obligations.
Accounting for Income Taxes. Our current and deferred income taxes are affected by events and transactions arising in the normal course of
business, as well as in connection with the adoption of new accounting standards and non-recurring items. Assessment of the appropriate amount and
classification of income taxes is dependent on several factors, including estimates of the timing and realization of deferred income tax assets and the
timing of income tax payments. Actual payments may differ from these estimates as a result of changes in tax laws, as well as unanticipated future
transactions affecting related income tax balances. We account for tax benefits taken or expected to be taken in our tax returns in accordance with the
Income Taxes Topic of the ASC, which requires the use of a two step approach for recognizing and measuring tax benefits taken or expected to be
taken in a tax return and disclosures regarding uncertainties in income tax positions.
Depreciation of Property, Plant and Equipment. We recognize depreciation on property, plant and equipment principally on the composite
group remaining life method and straight-line composite rates over estimated useful lives ranging from three to 50 years. This method provides for the
recognition of the cost of the remaining net investment in telephone plant, less anticipated net salvage value (if any), over the remaining asset lives. This
method requires the periodic revision of depreciation rates. Changes in the estimated useful lives of property, plant and equipment or depreciation
methods could have a material effect on our results of operations.
Valuation of Long-lived Assets, Including Goodwill. We review our long-lived assets, including goodwill, for impairment whenever events or
changes in circumstances indicate that the carrying value may not be recoverable. In addition, we review goodwill and non-amortizable intangible assets
for impairment on an annual basis. Several factors could trigger an impairment review such as:
•significant underperformance relative to expected historical or projected future operating results;
•significant regulatory changes that would impact future operating revenues;
•significant negative industry or economic trends; and
•significant changes in the overall strategy in which we operate our overall business.
Goodwill was $595.1 million at December 31, 2009. We have recorded intangible assets related to the acquired companies' customer relationships
and trade name of $251.7 million as of December 31, 2009. As of December 31, 2009, there was $39.9 million of accumulated amortization recorded.
The customer relationships are being amortized over a weighted average life of approximately 9.7 years. The
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