Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2011

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

(3)

Summary of Significant Accounting Policies

(a)

Accounts Receivable

Accounts receivable consist primarily of amounts due from customers for cable television or advertising services provided by the Partnership, and are net of an allowance for doubtful accounts of $12,950 and $11,050 at December 31, 2011 and 2010, respectively. Receivables are stated at net realizable value and are written-off when the Partnership deems specific customer invoices to be uncollectible.

(b)

Property and Equipment

Property and equipment are recorded at cost. Costs of additions and substantial improvements, which include materials, labor, and other indirect costs associated with the construction of cable transmission and distribution facilities, are capitalized. Indirect costs include employee salaries and benefits, travel, and other costs. These costs are estimated based on historical information and analysis. The Partnership performs evaluations of these estimates as warranted by events or changes in circumstances.

The Partnership capitalizes costs associated with initial customer installations. The costs of disconnecting service or reconnecting service to previously installed locations is expensed in the period incurred. Costs for repairs and maintenance are also charged to operating expense, while equipment replacements, including the replacement of drops, are capitalized.

At the time of retirements, sales or other dispositions of property, the original cost and related accumulated depreciation are removed from the respective accounts, and the gains or losses are included in the statements of operations.

Depreciation of property and equipment is calculated using the straight-line method over the following estimated service lives:


Buildings			20 years
Distribution plant			10 years
Other equipment			5-20 years

The Partnership evaluates the depreciation periods of property and equipment to determine whether events or circumstances warrant revised estimates of useful lives.

In accordance with generally accepted accounting standards for long-lived assets, property and equipment and purchased intangibles subject to amortization, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying amount of an asset group exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. Assets to be disposed of would be separately presented in the balance sheet and reported at the lower of the carrying amount or fair value less costs to sell, and no longer depreciated.

(c)

Intangible Assets

The Partnership does not amortize intangible assets determined to have indefinite lives. The Partnership has determined that its franchise agreements meet the definition of indefinite lived assets due to the history of obtaining franchise renewals, among other considerations. Accordingly, amortization of these assets ceased on December 31, 2001. The Partnership tests these intangibles for impairment annually as of September 30th, or on an interim basis if an event occurs or circumstances change that would indicate that the assets might be impaired.

The Partnership determined that there are no conditions such as obsolescence, regulatory changes, changes in demand, competition, or other factors that would change their indefinite life determination. The Partnership will continue to test these assets for impairment annually, or more frequently as warranted by events or changes in circumstances.

As part of conducting this test as of September 30, 2010, the Partnership determined that the carrying value of the franchise agreements associated with its Toccoa, GA system exceeded such assets fair value. This is primarily the result of a decrease in estimated future cash flows expected to be generated by the system, which is due to, among other factors, the decline in the number of subscribers served by the system since it was acquired in December of 1997. As a result, the Partnership recognized an impairment loss of approximately $615,000 during 2010.

(d)

Self Insurance

The Partnership began self-insuring for aerial and underground plant in 1996. Beginning in 1997, the Partnership began making quarterly contributions into an insurance fund maintained by an affiliate which covers all Northland entities and would defray a portion of any loss should the Partnership be faced with a significant uninsured loss. To the extent the Partnership’s losses exceed the fund’s balance, the Partnership would absorb any such loss. If the Partnership were to sustain a material uninsured loss, such reserves could be insufficient to fully fund such a loss. The cost of replacing such equipment and physical plant could have a material adverse effect on the Partnership, its financial condition and prospects.

Amounts paid to the affiliate, which maintains the fund for the Partnership and its affiliates, are expensed as incurred and are included in the statements of operations. To the extent a loss has been incurred related to risks that are self-insured, the Partnership records an expense for the amount of the loss, net of any amounts to be drawn from the fund. In 2011, 2010, and 2009, the Partnership was required to make contributions and was charged $28,167, $31,379, and $34,659, respectively, by the fund. As of December 31, 2011 and 2010 the fund (related to all Northland entities) had a balance of $877,216, $687,954, respectively. Amounts paid from the fund related to all Northland entities were $101,620, $53,808, and $34,841, in 2011, 2010, and 2009, respectively.

(e)

Revenue Recognition

Cable television and broadband service revenue, including service and maintenance, is recognized in the month service is provided to customers. Advance payments on services to be rendered are recorded as subscriber prepayments. Revenues resulting from the sale of local spot advertising are recognized when the related advertisements or commercials appear before the public. Local spot advertising revenues earned in operations were $159,712, $261,888, and $316,278 in 2011, 2010, and 2009, respectively.

(f)

Marketing Costs

The Partnership expenses marketing costs as they are incurred. Marketing costs attributable to operations were $75,554, $75,683, and $44,506 in 2011, 2010, and 2009, respectively.

(g)

Segment Information

The Partnership manages its business and makes operating decisions at the operating segment level. The Partnership follows general standards of operating segment aggregation, reporting business activities under a single reportable segment, telecommunications services. Additionally, all of its activities take place in the United States of America.

(h)

Concentration of Credit Risk

The Partnership is subject to concentrations of credit risk from cash investments on deposit at various financial institutions that at times exceed insured limits by the Federal Deposit Insurance Corporation. This exposes the Partnership to potential risk of loss in the event the institution becomes insolvent.

(i)

Fair Value of Financial Instruments

We measure certain financial assets and financial liabilities at fair value in three levels, based on the markets in which the assets and liabilities are traded and the reliability of the inputs used to determine fair value. These levels are:

•

Level 1 - inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.

•

Level 2 - quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active.

•

Level 3 - significant inputs are unobservable for the asset or liability.

The following table summarizes the balances of assets and liabilities measured at fair value on a recurring basis at December 31, 2011.


	Total		Level 1		Level 2		Level 3
Cash	$	1,722,723	$	1,722,723	$	—	$	—
Restricted cash	$	450,000	$	450,000	$	—	$	—

In October the Partnership received initial cash payments of $150,000 and $300,000 as part of the execution of purchase and sale agreements for its Sandersville, GA and Toccoa, GA systems, respectively (See “Escrow Proceeds and Potential Sale of Systems”). The initial cash payment shall be used by the Partnership solely to pay expenses that the Partnership will incur to obtain the approval of the Partnership’s limited partners and a third party fairness opinion in preparation for closing. As of December 31, 2011, the initial cash payments are recorded as restricted cash on the Partnership’s balance sheet.

The following table summarizes the balances of assets and liabilities measured at fair value on a recurring basis at December 31, 2010.


	Total		Level 1		Level 2		Level 3
Cash	$	882,786	$	882,786	$	—	$	—

- Definition

The entire disclosure for all significant accounting policies of the reporting entity.

+ References+ Details

NORTHLAND CABLE PROPERTIES SEVEN LIMITED PARTNERSHIP 10-K