FairPoint Communications 2010 Annual Report Download - page 67

Table of Contents
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.
 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.
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.
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.
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, 2010. We have recorded intangible assets related to the acquired companies’ customer relationships and
trade name of $251.3 million as of December 31, 2010. As of December 31, 2010, there was $62.1 million of accumulated amortization recorded. The
customer relationships are being amortized over a weighted average life of approximately 9.7 years. The trade name has an indefinite life and is, therefore, not
amortized. The intangible assets are included in intangible assets on our consolidated balance sheet.
We are required to perform an impairment review of goodwill and non-amortizable intangible assets as required by the Intangibles-Goodwill and Other
Topic of the ASC annually or when impairment indicators are noted. Goodwill impairment is determined using a two-step process. Step one compares the
estimated fair value of our single wireline reporting unit (calculated using the market
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