FairPoint Communications 2011 Annual Report Download - page 93

Table of Contents
The following is activity in the Company’s allowance for doubtful accounts receivable for the 341 days ended December 31, 2011, the 24 days ended
January 24, 2011 and years ended December 31, 2010 and 2009 (in thousands):
 







 
Balance, beginning of period $ — $40,608 $58,358 $20,340
Provision charged to expense 18,344 3,454 20,525 48,402
Provision charged to other accounts (a) (129) (159) (586) (91)
Amounts written off, net of recoveries (6,718) (2,566) (37,689) (10,293)
Fresh start accounting adjustment — (41,337) — —
Balance, end of period $11,497 $ — $40,608 $58,358
(a) Provision charged to other accounts includes accruals charged to accounts payable for anticipated uncollectible charges on purchase of accounts
receivable from others which were billed by the Company.
(g) Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and trade receivables. The
Company places its cash with high-quality financial institutions. Concentrations of credit risk with respect to trade receivables are principally related to
receivables from other interexchange carriers and are otherwise limited to the Company’s large number of customers in several states.
The Company sponsors pension and post-retirement healthcare plans for certain employees. Plan assets are held by third party trustees. The Company’s
plans hold debt and equity securities for investment purposes. The value of these plan assets is dependent on the financial condition of those entities issuing
the debt and equity securities. A significant decline in the fair value of plan assets could result in additional contributions to the plans by the Company in
order to meet funding requirements under ERISA.
(h) Materials and Supplies
Prior to the Effective Date, materials and supplies included new and reusable supplies and network equipment, which were stated principally at average
original cost, except where specific costs were used in the case of large individual items.
Materials and supplies of the Successor Company consist of finished goods and are stated at the lower of cost or market value. Cost is determined using
either an average original cost or specific identification method of valuation.
(i) Property, Plant and Equipment
Prior to the Effective Date, property, plant and equipment was recorded at cost. Depreciation expense was principally based on the composite group
remaining life method and straight-line composite rates. This method provides for the recognition of the cost of the remaining net investment in telephone plant,
property and equipment less anticipated positive net salvage value, over the remaining asset lives. This method requires the periodic revision of depreciation
rates.
When depreciable telephone plant used in the Company’s wireline network is replaced or retired, the carrying amount of such plant is deducted from the
respective accounts and charged to accumulated depreciation. No gain or loss is recognized on disposition of assets.
Network software purchased or developed in connection with related plant assets is capitalized. The Company also capitalizes interest associated with
the acquisition or construction of network related assets. Capitalized interest is reported as part of the cost of the network related assets and as a reduction in
interest expense. See note 3(k).
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