FairPoint Communications 2011 Annual Report Download - page 94

Table of Contents
In connection with the Company’s adoption of fresh start accounting on the Effective Date, property, plant and equipment assets were revalued to their
fair value, generally their appraised value after considering economic obsolescence, and new remaining useful lives were established. Accumulated depreciation
was reset to zero. The appraisals assigned remaining useful lives to each asset ranging from two to twenty-three years. The revalued assets will be depreciated
over these estimated remaining useful lives under the same method utilized for the Predecessor Company assets.
Property additions after the Effective Date are recorded and depreciated in a manner consistent with the Predecessor Company utilizing the estimated
asset lives presented in the following table:



Buildings 45
Central office equipment 5 – 11
Outside communications plant
Copper cable 15 – 18
Fiber cable 25
Poles and conduit 30 – 50
Furniture, vehicles and other 3 – 15
The Company believes that current estimated useful asset lives are reasonable, although they are subject to regular review and analysis. In the evaluation
of asset lives, multiple factors are considered, including, but not limited to, the ongoing network deployment, technology upgrades and enhancements,
planned retirements and the adequacy of reserves.
(j) Long-Lived Assets
Property, plant and equipment and intangible assets subject to amortization are reviewed for impairment as required by the Property, Plant and
Equipment Topic of the ASC and the Intangibles Topic of the ASC. These assets are tested for recoverability whenever events or changes in circumstances
indicate that their carrying amounts may not be recoverable. An impairment charge is recognized for the amount, if any, by which the carrying value of the
asset exceeds its fair value.
As of December 31, 2010, as a result of changes to the Company’s financial projections related to the Chapter 11 Cases, the Company determined that a
possible impairment of long-lived assets was indicated. In accordance with the Property, Plant and Equipment Topic of the ASC, the Company performed
recoverability tests, based on undiscounted projected future cash flows associated with its long-lived assets and determined that long-lived assets were not
impaired at December 31, 2010.
Given the significant sustained decline in the Company’s stock price since the Effective Date which had caused the Company’s market capitalization to
be below its book value, and both the September 30, 2011 impairment of goodwill and impairment of the FairPoint trade name, the Company determined that a
possible impairment of long-lived assets was present as of September 30, 2011. See note 3(n) for further discussion of the September 30, 2011 impairment to
goodwill and the FairPoint trade name. However, the Company concluded that at September 30, 2011 long-lived assets were recoverable based on the fact that
the Company’s gross cash flows are greater than the carrying value.
As of December 31, 2011, the Company performed its routine review of impairment triggering events specified by the Property, Plant and Equipment
Topic of the ASC and concluded that it does not believe a triggering event has occurred.
(k) Computer Software and Interest Costs
The Company capitalizes certain costs incurred in connection with developing or obtaining internal use software which has a useful life in excess of one
year in accordance with the Intangibles-Goodwill and Other Topic of the ASC. Capitalized costs include direct development costs associated with internal use
software, including direct labor costs and external costs of materials and services.
Subsequent additions, modifications or upgrades to internal-use software are capitalized only to the extent that they allow the software to perform a task
it previously did not perform. Software maintenance and training costs are expensed in the period in which they are incurred.
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