AT&T Wireless 2009 Annual Report Download - page 68

Notes to Consolidated Financial Statements (continued)
Dollars in millions except per share amounts
66 AT&T 09 AR
Employee Separations In accordance with GAAP, we
established obligations for expected termination benefits
provided under existing plans to former or inactive
employees after employment but before retirement.
These benefits include severance payments, workers’
compensation, disability, medical continuation coverage,
and other benefits. At December 31, 2009, we had
severance accruals of $676 and at December 31, 2008,
we had severance accruals of $752.
Split-Dollar Life Insurance In 2007, the EITF ratified the
consensus on new guidance related to the accounting for
endorsement split-dollar life insurance arrangements and
collateral assignment split-dollar life insurance arrangements.
The new guidance covers split-dollar life insurance
arrangements (where the company owns and controls the
policy) and provides that an employer should recognize a
liability for future benefits in accordance with GAAP standards
for an employer’s accounting for postretirement benefits
other than pensions. The new guidance became effective for
fiscal years that began after December 15, 2007 (i.e., as of
January 1, 2008, for us), and we recorded additional
postretirement liabilities of $101 and a decrease, net of
taxes, to retained earnings of $63.
Income Taxes We adopted GAAP standards for income
taxes, as amended, as of January 1, 2007. With our adoption
of those amended standards, we provide deferred income
taxes for temporary differences between the carrying amounts
of assets and liabilities for financial reporting purposes and
the computed tax basis of those assets and liabilities (per the
amended standards). Under the amended standards, the tax
basis of assets and liabilities are based on amounts that meet
the recognition threshold and are measured pursuant to the
measurement requirement in those standards. To the extent
allowed by GAAP, we provide valuation allowances against
the deferred tax assets for which the realization is uncertain.
We review these items regularly in light of changes in federal
and state tax laws and changes in our business.
We report, on a net basis, taxes imposed by governmental
authorities on revenue-producing transactions between us and
our customers in our consolidated statements of income.
Cash Equivalents Cash and cash equivalents include all
highly-liquid investments with original maturities of three
months or less, and the carrying amounts approximate fair
value. At December 31, 2009, we held $437 in cash and
$3,365 in money market funds and other cash equivalents.
Investment Securities See Note 9 for disclosures related
to our investment securities, including available-for-sale
securities.
Revenue Recognition Revenues derived from wireless,
local telephone, long-distance, data and video services are
recognized when services are provided. This is based upon
either usage (e.g., minutes of traffic processed), period of time
(e.g., monthly service fees) or other established fee schedules.
Software In October 2009, the FASB issued “Certain
Revenue Arrangements That Include Software Elements”
(ASU 2009-14), which clarifies the guidance for allocating
and measuring revenue, including how to identify software
that is out of the scope. ASU 2009-14 amends accounting
and reporting guidance for revenue arrangements involving
both tangible products and software that is “more than
incidental to the tangible product as a whole.” That type
of software and hardware will be outside of the scope of
software revenue guidance, and the hardware components
will also be outside of the scope of software revenue
guidance and may result in more revenue recognized at the
time of the hardware sale. Additional disclosures will discuss
allocation of revenue to products and services in our sales
arrangements and the significant judgments applied in the
revenue allocation method, including impacts on the timing
and amount of revenue recognition. ASU 2009-14 will be
effective prospectively for revenue arrangements entered
into or materially modified in fiscal years beginning on or
after June 15, 2010 (i.e., the year beginning January 1, 2011,
for us). ASU 2009-14 has the same effective date, including
early adoption provisions, as ASU 2009-13. Companies must
adopt ASU 2009-14 and ASU 2009-13 at the same time.
We are currently evaluating the impact on our financial
position and results of operations.
Valuation and Other Adjustments Included in the
current liabilities reported on our consolidated balance sheets
are acquisition-related accruals established prior to 2009.
The liabilities include accruals for severance, lease termi–
nations and equipment removal costs associated with our
acquisitions of AT&T Corp. (ATTC), BellSouth Corporation
(BellSouth), and Dobson Communications Corporation
(Dobson). Following is a summary of the accruals recorded
at December 31, 2008, cash payments made during 2009,
and the adjustments thereto:
12/31/08 Cash Adjustments 12/31/09
Balance Payments and Accruals Balance
Severance accruals
paid from:
Company funds $140 $(108) $ (26) $ 6
Pension and
postemployment
benefit plans 103 (5) — 98
Lease terminations1 387 (53) (122) 212
Equipment removal
and other
related costs 88 (38) (27) 23
Total $718 $(204) $(175) $339
1 Adjustments and accruals include a $106 reversal of BellSouth lease termination costs,
with an offset to goodwill.