US Cellular 2009 Annual Report Download - page 48

UNITED STATES CELLULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING
PRONOUNCEMENTS (Continued)
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to
make estimates and assumptions that affect (a) the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and (b) the reported
amounts of revenues and expenses during the reported period. Actual results could differ from those
estimates. Significant estimates are involved in accounting for goodwill and indefinite-lived intangible
assets, depreciation, amortization and accretion, allowance for doubtful accounts, and income taxes.
Cash and Cash Equivalents
Cash and cash equivalents include cash and short-term, highly liquid investments with original maturities
of three months or less.
Outstanding checks totaled $21.0 million and $20.3 million at December 31, 2009 and 2008, respectively,
and are classified as Accounts payable-Trade in the Consolidated Balance Sheet.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable primarily consist of amounts owed by customers pursuant to service contracts and
for equipment sales, by agents for equipment sales and by other wireless carriers whose customers have
used U.S. Cellular’s wireless systems.
The allowance for doubtful accounts is the best estimate of the amount of probable credit losses related
to existing accounts receivable. The allowance is estimated based on historical experience and other
factors that could affect collectability. Accounts receivable balances are reviewed on either an aggregate
or individual basis for collectability depending on the type of receivable. When it is probable that an
account balance will not be collected, the account balance is charged against the allowance for doubtful
accounts. U.S. Cellular does not have any off-balance sheet credit exposure related to its customers.
The changes in the allowance for doubtful accounts during the years ended December 31, 2009, 2008
and 2007 were as follows:
(Dollars in thousands) 2009 2008 2007
Beginning balance ................................ $ 8,372 $ 12,417 $ 13,016
Additions, net of recoveries ........................ 107,991 73,157 66,923
Deductions .................................... (89,739) (77,202) (67,522)
Ending balance .................................. $ 26,624 $ 8,372 $ 12,417
Inventory
Inventory primarily consists of handsets stated at the lower of cost or market, with cost determined using
the first-in, first-out method and market determined by replacement costs.
Fair Value Measurements
Effective January 1, 2008, for financial assets and liabilities measured in the Consolidated Balance Sheet
at fair value on a recurring basis, U.S. Cellular adopted the required provisions under GAAP that define
‘‘fair value’’, establish a framework for measuring fair value in the application of GAAP, and expand
disclosure about fair value measurements. Effective January 1, 2009, U.S. Cellular adopted these same
provisions for nonfinancial assets and liabilities measured in the Consolidated Balance Sheet at fair value
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