FairPoint Communications 2010 Annual Report Download - page 90

Table of Contents
of applicable income taxes. Amounts recognized through accumulated comprehensive income are amortized into current income in accordance with the
Compensation-Retirement Benefits Topic of the ASC. Additionally, a company must determine the fair value of plan assets as of the company’s year end.
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Management views its business of providing video, data and voice communication services to residential and business customers as one business segment
as defined in Segment Reporting Topic of the ASC. The Company consists of retail and wholesale telecommunications services, including voice, high speed
Internet, and other services in 18 states. The Company’s chief operating decision maker assesses operating performance and allocates resources based on the
consolidated results.
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Prior to the adoption of the Business Combinations Topic of the ASC, the Company recognized the acquisition of companies in accordance with SFAS
No. 141, Accounting for Business Combinations (“SFAS 141”). The cost of an acquisition was allocated to the assets acquired and liabilities assumed
based on their fair values as of the close of the acquisition, with amounts exceeding the fair value being recorded as goodwill. All future business combinations
will be recognized in accordance with the Business Combinations Topic of the ASC.
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On January 1, 2010, the Company adopted the accounting standard update (“ASU”) regarding fair value measurements and disclosures, which requires
additional disclosures regarding assets and liabilities measured at fair value. The adoption of this accounting standard update had no impact on the
Company’s consolidated results of operations and financial position.
In October 2009, the FASB issued an ASU regarding revenue recognition for multiple deliverable arrangements. This method allows a vendor to allocate
revenue in an arrangement using its best estimate of selling price if neither vendor specific objective evidence nor third party evidence of selling price exists.
Accordingly, the residual method of revenue allocation will no longer be permissible. This ASU must be adopted no later than the beginning of the first fiscal
year beginning on or after June 15, 2010. It is not yet known what impact this ASU will have on the Company’s financial statements.
Effective 2011, the Company will adopt the ASU regarding when to perform Step 2 of the goodwill impairment test for reporting units with zero or negative
carrying amounts. This ASU modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting
units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining
whether it is more likely than not that a goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating an
impairment may exist. The qualitative factors are consistent with the existing guidance, which requires that goodwill of a reporting unit be tested for
impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its
carrying amount. For public entities, the amendments in this ASU are effective for fiscal year, and interim periods within those years, beginning after
December 15, 2010. Early adoption is not permitted. It is not yet known what impact this ASU will have on the Company’s financial statements.
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On March 31, 2008, FairPoint completed the acquisition of Spinco, pursuant to which Spinco merged with and into FairPoint, with FairPoint continuing
as the surviving corporation for legal purposes. Spinco was a wholly-owned subsidiary of Verizon and prior to the Merger the Verizon Group transferred
certain specified assets and liabilities of the local exchange businesses of Verizon New England in Maine, New Hampshire and Vermont and the customers of
the related voice and Internet service provider businesses in those states to subsidiaries of Spinco. The Merger was accounted for as a “reverse acquisition” of
Legacy FairPoint by Spinco under
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