Metro PCS 2010 Annual Report Download - page 113

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MetroPCS Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2010, 2009 and 2008
F-7
• reserves for uncertain tax positions;
• asset retirement obligations;
• determining fair value of FCC licenses; and
• stock-based compensation expense.
Derivative Instruments and Hedging Activities
The Company accounts for its hedging activities under ASC 815 (Topic 815, “Derivatives and Hedging”). The
standard requires the Company to recognize all derivatives on the consolidated balance sheet at fair value. Changes
in the fair value of derivatives are to be recorded each period in earnings or on the accompanying consolidated
balance sheets in accumulated other comprehensive income (loss) depending on the type of hedged transaction and
whether the derivative is designated and effective as part of a hedged transaction. Gains or losses on derivative
instruments reported in accumulated other comprehensive income (loss) must be reclassified to earnings in the
period in which earnings are affected by the underlying hedged transaction and the ineffective portion of all hedges
must be recognized in earnings in the current period. The Company’s use of derivative financial instruments is
discussed in Note 5.
Cash and Cash Equivalents
The Company includes as cash and cash equivalents (i) cash on hand, (ii) cash in bank accounts, (iii) investments
in money market funds, and (iv) U.S. Treasury securities with an original maturity of 90 days or less.
Short-Term Investments
The Company’s short-term investments consist of securities classified as available-for-sale, which are stated at
fair value. The securities include U.S. Treasury securities with an original maturity of over 90 days. Unrealized
gains, net of related income taxes, for available-for-sale securities are reported in accumulated other comprehensive
loss, a component of stockholders’ equity, until realized. The estimated fair values of investments are based on
quoted market prices as of the end of the reporting period (See Note 4).
Inventories
Substantially all of the Company’s inventories are stated at the lower of average cost or market. Inventories
consist mainly of handsets that are available for sale to customers and independent retailers.
Allowance for Uncollectible Accounts Receivable
The Company maintains allowances for uncollectible accounts for estimated losses resulting from the inability of
independent retailers to pay for equipment purchases and for amounts estimated to be uncollectible from other
carriers for intercarrier compensation. The following table summarizes the changes in the Company’s allowance for
uncollectible accounts (in thousands):
2010 2009 2008
Balance at beginning of perio
d
....................................................................................... $ 2,045 $ 4,106 $ 2,908
Additions:
Charged to expense ...................................................................................................... 2 199 8
Direct reduction to revenue and other accounts........................................................... 602 595 1,337
Deductions ...................................................................................................................... (155) (2,855) (147)
Balance at end of perio
d
................................................................................................. $ 2,494 $ 2,045 $ 4,106