FairPoint Communications 2013 Annual Report Download - page 70

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are paid to the Vermont Universal Service Fund ("VUSF"), while the remaining credits assessed in Vermont are paid by the
Company in the form of credits applied to CLEC bills.
Revenue is recognized net of tax collected from customers and remitted to governmental authorities.
Customer arrangements that include both equipment and services are evaluated to determine whether the elements are
separable. If the elements are deemed separable and separate earnings processes exist, the revenue associated with each element
is allocated to each element based on the relative estimated selling price of the separate elements. We have estimated the selling
prices of each element by reference to vendor-specific objective evidence of selling prices when the elements are sold separately.
The revenue associated with each element is then recognized as earned.
Management makes estimated adjustments, as necessary, to revenue or accounts receivable for billing errors, including
certain disputed amounts.
(c) Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash
equivalents.
(d) Accounts Receivable
Accounts receivable are recorded at the invoiced amount and do not bear interest. The allowance for doubtful accounts is
recorded as a contra-asset of accounts receivable and represents the Company's best estimate of probable credit losses in the
Company's existing accounts receivable. The Company establishes an allowance for doubtful accounts based upon factors
surrounding the credit risk of specific customers, historical trends, and other information. Accounts receivable balances are reviewed
on an aged basis and account balances are written off against the allowance after all means of collection have been exhausted and
the potential for recovery is considered remote.
The following is activity in the Company's allowance for doubtful accounts receivable for the years ended December 31,
2013 and 2012, the 341 days ended December 31, 2011 and the 24 days ended January 24, 2011 (in thousands):
Predecessor
Company
Year Ended
December 31,
2013
Year Ended
December 31,
2012
Three Hundred
Forty-One
Days Ended
December 31,
2011
Twenty-Four
Days Ended
January 24, 2011
Balance, beginning of period $ 18,863 $ 11,497 $ — $ 40,608
Provision charged to expense 9,806 7,506 18,344 3,454
Provision charged to other accounts (a) (163) (341) (129) (159)
Amounts written off, net of recoveries (b) (15,364) 211 (6,718) (2,566)
Assets held for sale adjustment — (10) — —
Fresh start accounting adjustment — — — (41,337)
Balance, end of period $ 13,142 $ 18,863 $ 11,497 $ —
(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.
(b) Net recoveries for the year ended December 31, 2012 are primarily due to settlements with wholesale carriers for accounts
receivable previously reserved as uncollectible.
(e) Credit Risk
The financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash
and gross accounts receivable existing at December 31, 2013. The Company places its cash with high-quality financial institutions.
Concentrations of credit risk with respect to accounts receivable are principally related to trade receivables from other interexchange
carriers and are otherwise limited to the Company's large number of customers in several states.
The Company sponsors qualified pension plans for certain employees. Plan assets associated with these qualified pension
plans are held by third party trustees and investments are comprised of debt and equity securities. The fair 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