US Cellular 2008 Annual Report Download - page 169

UNITED STATES CELLULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Upon adoption of SFAS 123(R), U.S. Cellular adopted the ‘‘non-substantive vesting method,’’ which
requires recognition of the expense related to stock options and restricted stock units granted to
retirement-eligible employees over the period of time from the date of grant to the date the award would
vest if the employee chose to retire, which generally accelerates the expense for the awards granted to
these retirement-eligible employees.
Pension Plan
U.S. Cellular participates in a qualified noncontributory defined contribution pension plan sponsored by
TDS; such plan provides pension benefits for the employees of U.S. Cellular and its subsidiaries. Under
this plan, pension benefits and costs are calculated separately for each participant and are funded
currently. Pension costs were $10.3 million, $8.6 million and $7.8 million in 2008, 2007 and 2006,
respectively.
U.S. Cellular also participates in a defined contribution retirement savings plan (‘‘401(k) plan’’),
sponsored by TDS. Total costs incurred from U.S. Cellular’s contributions to the 401(k) plan were
$13.9 million, $10.7 million and $9.1 million in 2008, 2007 and 2006.
Operating Leases
U.S. Cellular is a party to various lease agreements for office space, retail sites, cell sites and equipment
that are accounted for as operating leases. Certain leases have renewal options and/or fixed rental
increases. Renewal options that are reasonably assured of exercise are included in determining the lease
term. U.S. Cellular accounts for certain operating leases that contain rent abatements, lease incentives
and/or fixed rental increases by recognizing lease revenue and expense on a straight-line basis over the
lease term in accordance with SFAS 13 and related pronouncements.
Recent Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board (‘‘FASB’’) issued Statement of Financial
Accounting Standards (‘‘SFAS’’) No. 157, Fair Value Measurements (‘‘SFAS 157’’). SFAS 157 defines fair
value as used in numerous accounting pronouncements, establishes a framework for measuring fair
value in generally accepted accounting principles (‘‘GAAP’’), and expands disclosures related to the use
of fair value measures in financial statements. SFAS 157 does not expand the use of fair value
measurements in financial statements, but standardizes its definition and guidance in GAAP. SFAS 157
emphasizes that fair value is a market-based measurement, not an entity-specific measurement, based
on an exchange transaction in which the entity sells an asset or transfers a liability (exit price). SFAS 157
establishes a fair value hierarchy from observable market data as the highest level to an entity’s own fair
value assumptions about market participant assumptions as the lowest level. In February 2008, the FASB
issued FASB Staff Position (‘‘FSP’’) FAS 157-2, to defer the effective date of SFAS 157 for all nonfinancial
assets and liabilities, except those items recognized or disclosed at fair value on an annual or more
frequently recurring basis, until years beginning after November 15, 2008. U.S. Cellular adopted
SFAS 157 for its financial assets and liabilities effective January 1, 2008 with no material impact on its
financial position or results of operations. In October 2008, the FASB issued FSP FAS 157-3 to clarify
and demonstrate how the fair value of a financial asset is determined when the market for that financial
asset is inactive. As of December 31, 2008, U.S. Cellular did not have any financial assets or liabilities
that required the application of SFAS 157 for purposes of reporting such amounts in its Consolidated
Balance Sheet. U.S. Cellular adopted SFAS 157 for its nonfinancial assets and liabilities effective
January 1, 2009. The provisions of SFAS 157 related to nonfinancial assets and liabilities are applicable
to nonrecurring transactions which makes the impact indeterminable until specific transactions occur.
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