FairPoint Communications 2011 Annual Report Download - page 63

Table of Contents
At September 30, 2011, given that the significant sustained decline in our stock price since the Effective Date had caused its market capitalization to be
below its book value, we determined that a possible impairment of the FairPoint trade name was indicated and concluded that an interim non-amortizable
intangible asset impairment test on the trade name was necessary. Results of the impairment test required us to record an impairment charge totaling $18.8
million at September 30, 2011. Since this interim impairment test was performed on the last day of the 2011 third fiscal quarter, it effectively serves as our
annual non-amortizable intangible asset impairment test for the fiscal year.
Accounting for Software Development Costs. We capitalize certain costs incurred in connection with developing or obtaining internal use software.
Capitalized costs include direct development costs associated with internal use software, including direct labor costs and external costs of materials and
services. Costs incurred during the preliminary project stage, as well as maintenance and training costs, are expensed as incurred.
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In June 2011, the FASB issued ASU 2011-05 related to the presentation of comprehensive income which eliminates the option to present the components
of other comprehensive income as part of the statement of changes in stockholders’ equity. This ASU requires that all non-owner changes in stockholders’
equity be presented in either a single continuous statement of comprehensive income or in two separate but consecutive statements. This new guidance is to be
applied retrospectively, and is effective for interim and annual periods beginning after December 15, 2011, with early adoption permitted. In December 2011,
the FASB issued ASU 2011-12 which deferred the elective date for amendments to the presentation of reclassification of items out of accumulated other
comprehensive income in ASU 2011-05. We do not expect this amendment to the ASC to have a material impact on our consolidated financial statements.
In May 2011, the FASB issued ASU 2011-04 related to achieving common fair value measurements and disclosure requirements between U.S. GAAP
and International Financial Reporting Standards (“IFRS”). This ASU changes the wording used to describe many of the requirements in U.S. GAAP for
measuring fair value and for disclosing information about fair value measurements to ensure consistency between U.S. GAAP and IFRS. The ASU also
expands the disclosures for fair value measurements that are estimated using significant unobservable (Level 3) inputs. This new guidance is to be applied
prospectively, and is effective for interim and annual periods beginning after December 15, 2011. Early adoption is not permitted. We do not expect the
adoption of this amendment to the ASC to have a material impact on our consolidated financial statements.
On January 1, 2011, we adopted ASU 2010-28 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 previously existing guidance, which required 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. The adoption of this amendment to the ASC did not have a material impact on our consolidated financial statements.
In October 2009, the FASB issued ASU 2009-13 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. The adoption of this amendment to the ASC did not have a material impact on our consolidated financial
statements.
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There are cost of living adjustment clauses in certain of the collective bargaining agreements covering our labor union employees. Considerable
fluctuations in cost of living due to inflation could result in an adverse effect on our operations.
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