Goodwill is the excess of the purchase price over the fair value of net assets acquired in business combinations accounted for as purchases. The Company evaluates its goodwill for impairment annually on or about October 1 and when events and circumstances warrant such review. Impairment charges, if any, are charged to operating expenses. The recoverability of goodwill is assessed at a reporting unit level, which is the lowest asset group level for which identifiable cash flows are largely independent of the cash flows of other asset groups, and is typically based on projections of discounted cash flows (income approach) and the fair value of comparable telecommunication companies (market approach). The Company has one reporting unit. The projections of future operating cash flow necessary to conduct the impairment review, are based on assumptions, judgments and estimates of growth rates, anticipated future economic, regulatory and political conditions, the assignment of discount rates relative to risk and estimates of a terminal value. The Company believes these assumptions and estimates provide a reasonable basis for its conclusion. The fair value determinations derived in connection with the impairment analysis contains many inputs, noted above, that would be considered Level 3 in the fair value hierarchy.
During the third quarter of 2012, the Company entered into a reorganization under Chapter 11. The Company believes that the filing of voluntary petition under Chapter 11 to be a “triggering event” requiring an assessment of potential impairment of the Company’s goodwill. Upon completion of Step 1 of the impairment assessment, the Company determined that the estimated fair value of the Company’s total assets exceeds their carrying value. The estimated fair value was based on the negotiated value between the Company and the parties to the Plan. The Company corroborated this fair value through the use of discounted projected cash flows and the fair value of comparable telecommunication companies.