FairPoint Communications 2013 Annual Report Download - page 68

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66
FAIRPOINT COMMUNICATIONS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Except as otherwise required by the context, references in notes to the consolidated financial statements to:
• "FairPoint Communications" refers to FairPoint Communications, Inc., excluding its subsidiaries.
• "FairPoint" or the "Company" refer to the combined business of FairPoint Communications, Inc. and all of its
subsidiaries after giving effect to the merger on March 31, 2008 with Northern New England Spinco Inc. ("Spinco"), a
subsidiary of Verizon Communications Inc. ("Verizon"), which transaction is referred to herein as the "Merger".
• "Northern New England operations" refers to the local exchange business acquired from Verizon and certain of its
subsidiaries after giving effect to the Merger.
• "Telecom Group" refers to FairPoint, exclusive of our acquired Northern New England operations.
• "Predecessor Company" refers to the Company during all periods as of and preceding the Effective Date (as defined
hereinafter).
(1) Organization and Principles of Consolidation
Organization
FairPoint is a leading provider of advanced communications services to business, wholesale and residential customers within
its service territories. FairPoint offers its customers a suite of advanced data services such as Ethernet, high capacity data transport
and other IP-based services over an extensive, next-generation fiber network with more than 16,000 miles of fiber optic cable in
addition to Internet access, high-speed data ("HSD") and local and long distance voice services. As of December 31, 2013,
FairPoint's service territory spanned 17 states where it is the incumbent communications provider, primarily serving rural
communities and small urban markets. Many of its local exchange carriers ("LECs") have served their respective communities
for more than 80 years. As of December 31, 2013, the Company operated with approximately 1.2 million access line equivalents
in service, including approximately 330,000 broadband subscribers.
Principles of Consolidation
The consolidated financial statements include all majority-owned subsidiaries of the Company. Partially owned equity
affiliates are accounted for under the cost method or equity method when the Company demonstrates significant influence, but
does not have a controlling financial interest. Intercompany accounts and transactions have been eliminated.
(2) Significant Accounting Policies
(a) Presentation and Use of Estimates
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States ("U.S. GAAP"), which require management to make estimates and assumptions that affect reported
amounts and disclosures. Actual results could differ from those estimates. The consolidated financial statements reflect all
adjustments that, in the opinion of management, are necessary for a fair presentation of results of operations and financial condition
for the interim periods shown, including normal recurring accruals and other items.
The Company has reclassified its long-term workers compensation accrual from “Accrued post-retirement healthcare
obligations” to “Other long-term liabilities” and certain accrued employee costs from "Accounts payable" to "Other accrued
liabilities" in the December 31, 2012 consolidated balance sheet to be consistent with current period presentation. The Company
has reclassified certain computer and customer service expenses from "Selling, general and administrative expense, excluding
depreciation and amortization" to "Cost of services and sales, excluding depreciation and amortization" for the year ended December
31, 2012, the 341 days ended December 31, 2011 and the 24 days ended January 24, 2011 to be consistent with current period
presentation.
Examples of significant estimates include the allowance for doubtful accounts, revenue reserves, the depreciation of property,
plant and equipment, valuation of intangible assets, qualified pension and post-retirement healthcare plan assumptions, stock-
based compensation and income taxes.