US Cellular 2008 Annual Report Download - page 143

Fair Value Measurements
Effective January 1, 2008, U.S. Cellular adopted the provisions of SFAS 157 for its financial assets and
liabilities. SFAS 157 defines ‘‘fair value,’’ establishes a framework for measuring fair value in the
application of GAAP, and expands disclosure about fair value measurements.
U.S. Cellular applied the provisions of SFAS 157 in determining the fair value of the following financial
assets and liabilities for disclosure purposes at December 31, 2008:
• Cash and cash equivalents;
• Current portion of long-term debt;
• Long-term debt; and
• Mandatorily redeemable minority interests.
The fair value amounts related to such financial assets and liabilities are disclosed in Note 15—Financial
Instruments and Note 16—Commitments and Contingencies in the Notes to Consolidated Financial
Statements.
Revenue Recognition
Service revenues are recognized as earned and equipment revenues are recognized when title passes to
the agent or end-user customer. U.S. Cellular recognizes revenue for access charges and other services
charged at fixed amounts ratably over the service period, net of credits and adjustments for service
discounts, billing disputes and fraud or unauthorized usage. U.S. Cellular recognizes revenue related to
usage in excess of minutes provided in its rate plans at contractual rates per minute as minutes are
used; revenue related to long distance service is recognized in the same manner. Additionally,
U.S. Cellular recognizes revenue related to data usage based on contractual rates per kilobyte as
kilobytes are used; revenue based on per-use charges, such as for the use of premium services, is
recognized as the charges are incurred. As a result of its multiple billing cycles each month, U.S. Cellular
is required to estimate the amount of subscriber revenues earned but not billed, or billed but not earned,
from the end of each billing cycle to the end of each reporting period. These estimates are based
primarily upon historical billed minutes. U.S. Cellular’s revenue recognition policies are in accordance
with the SEC Staff Accounting Bulletin (‘‘SAB’’) No. 104, Revenue Recognition and FASB Emerging
Issues Task Force Issue No. 00-21, Revenue Arrangements with Multiple Deliverables.
Licenses and Goodwill
As of December 31, 2008, U.S. Cellular reported $1,433.4 million of licenses and $494.3 million of
goodwill, as a result of acquisitions of interests in wireless licenses and businesses. As discussed in
Note 4—Variable Interest Entities in the Notes to Consolidated Financial Statements, licenses include
those won or provisionally won by Carroll Wireless, Barat Wireless, King Street Wireless and Aquinas
Wireless in FCC auctions. Licenses also include rights to the remaining licenses that will be received
when the 2003 AT&T Wireless exchange transaction is fully completed.
See Note 7—Licenses and Goodwill in the Notes to Consolidated Financial Statements for a schedule of
licenses and goodwill activity in 2008 and 2007.
Licenses and goodwill must be reviewed for impairment annually or more frequently if events or changes
in circumstances indicate that any of such assets might be impaired. U.S. Cellular performs the required
annual impairment review on licenses and goodwill during the second quarter of its fiscal year. There can
be no assurance that upon review at a later date material impairment charges will not be required.
The intangible asset impairment test consists of comparing the fair value of the intangible asset to its
carrying amount. If the carrying amount exceeds the fair value, an impairment loss is recognized for the
difference. The goodwill impairment test is a two-step process. The first step compares the fair value of
the reporting unit as identified in accordance with SFAS No. 142, Goodwill and Other Intangible Assets
(‘‘SFAS 142’’) to its carrying value. If the carrying amount exceeds the fair value, the second step of the
test is performed to measure the amount of impairment loss, if any. The second step compares the
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