AT&T Wireless 2011 Annual Report Download - page 64

62 AT&T Inc.
Notes to Consolidated Financial Statements
Dollars in millions except per share amounts
basis of assets and liabilities is based on amounts that meet
the recognition threshold and are measured in accordance
with current standards. 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.
Certain reclassifications have been made to prior periods to
conform with current reporting. On the consolidated balance
sheet, income taxes receivable has been reclassified from
“Accrued taxes” to “Other current assets.”
Cash and Cash Equivalents Cash and cash equivalents
include all highly-liquid investments with original maturities of
three months or less. The carrying amounts approximate fair
value. At December 31, 2011, we held $1,182 in cash and
$2,003 in money market funds and other cash equivalents.
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/bytes of data processed),
period of time (e.g., monthly service fees) or other established
fee schedules. Our wireless service revenues are billed either
in advance, arrears or are prepaid.
We record an estimated revenue reduction for future
adjustments to customer accounts, other than bad debt
expense, at the time revenue is recognized based on historical
experience. Service revenues also include billings to our
customers for various regulatory fees imposed on us by
governmental authorities. Cash incentives given to customers
are recorded as a reduction of revenue. When required as part
of providing service, revenues and associated expenses related
to nonrefundable, upfront service activation and setup fees are
deferred and recognized over the associated service contract
period or customer life. Associated expenses are deferred only
to the extent of such deferred revenue. For contracts that
involve the bundling of services, revenue is allocated to the
services based on their relative selling price, subject to the
requirement that revenue recognized is limited to the amounts
already received from the customer that are not contingent
upon the delivery of additional products or services to the
customer in the future. We record the sale of equipment to
customers as gross revenue when we are the primary obligor
in the arrangement, when title is passed and when the
products are accepted by customers. For agreements involving
the resale of third-party services in which we are not
considered the primary obligor of the arrangement, we record
the revenue net of the associated costs incurred. For contracts
in which we provide customers with an indefeasible right to
use network capacity, we recognize revenue ratably over the
stated life of the agreement.
We recognize revenues and expenses related to publishing
directories on the amortization method, which recognizes
revenues and expenses ratably over the life of the directory
title, typically 12 months.
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation Throughout this document,
AT&T Inc. is referred to as “AT&T,” “we” or the “Company.”
The consolidated financial statements include the accounts
of the Company and our majority-owned subsidiaries and
affiliates. Our subsidiaries and affiliates operate in the
communications services industry both domestically and
internationally, providing wireless and wireline communications
services and equipment, managed networking, wholesale
services, and advertising solutions.
All significant intercompany transactions are eliminated in the
consolidation process. Investments in partnerships and less
than majority-owned subsidiaries where we have significant
influence are accounted for under the equity method.
Earnings from certain foreign equity investments accounted
for using the equity method are included for periods ended
within up to one month of our year end (see Note 7).
The preparation of financial statements in conformity with
U.S. generally accepted accounting principles (GAAP) requires
management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying
notes, including estimates of probable losses and expenses.
Actual results could differ from those estimates. We have
reclassified certain amounts in prior-period financial statements
to conform to the current period’s presentation. On the
consolidated balance sheets, income taxes receivable has been
reclassified from “Accrued taxes” to “Other current assets.”
New Accounting Standards In June 2011, the Financial
Accounting Standards Board (FASB) issued Accounting
Standards Update (ASU) 2011-05, “Presentation of
Comprehensive Income,” which will no longer allow the
presentation of the components of other comprehensive
income in the consolidated statements of changes in
stockholders’ equity or footnotes for interim reporting.
For reporting periods beginning after December 31, 2011,
ASU 2011-05 requires presentation of other comprehensive
income in combination with, or directly following the
consolidated statements of income. In December 2011,
ASU 2011-05 was amended to delay the proposed identification
of reclassification adjustments in the consolidated statements of
income. We are currently evaluating the allowable disclosure
alternatives under the new guidance.
Employee Separations 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, 2011, we had
severance accruals of $335 and at December 31, 2010, we
had severance accruals of $848. The decline was primarily
due to payments during the year.
Income Taxes 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. The tax