US Cellular 2010 Annual Report Download - page 53

UNITED STATES CELLULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING
PRONOUNCEMENTS (Continued)
estimate any portion of loyalty reward points that will not be redeemed. As such, 100% of the value of
the loyalty reward points is deferred until redeemed.
The introduction of these new service offerings in conjunction with the adoption of ASU 2009-13 required
U.S. Cellular to defer the recognition of revenue related to amounts billed to customers that are attributed
to loyalty reward points, and therefore impacted the timing of revenue recognition related to such service
offerings. As of December 31, 2010, $7.1 million of revenue was deferred related to loyalty reward points
outstanding as of this date. This amount was recorded in Customer deposits and deferred revenues (a
current liability account) in the Consolidated Balance Sheet, as customers may redeem their reward
points within the current period.
Cash-based discounts and incentives, including discounts to customers who pay their bills through the
use of on-line bill payment methods, are recognized as a reduction of Operating revenues concurrently
with the associated revenue, and are allocated to the various products and services in the bundled
offering based on their respective relative selling price.
In order to provide better control over wireless device quality, U.S. Cellular sells wireless devices to
agents. U.S. Cellular pays rebates to agents at the time an agent activates a new customer or retains an
existing customer in a transaction involving a wireless device. U.S. Cellular accounts for these rebates by
reducing revenues at the time of the wireless device sale to the agent rather than at the time the agent
activates a new customer or retains a current customer. Similarly, U.S. Cellular offers certain wireless
device sales rebates and incentives to its retail customers and records the revenue net of the
corresponding rebate or incentive. The total potential rebates and incentives are reduced by
U.S. Cellular’s estimate of rebates that will not be redeemed by customers based on historical
experience of such redemptions.
Activation fees charged with the sale of service only, where U.S. Cellular does not also sell a wireless
device to the customer, are deferred and recognized over the average customer life. U.S. Cellular defers
recognition of a portion of commission expenses related to these activations in the amount of deferred
activation fee revenues. This method of accounting provides for matching of revenues and direct
incremental costs associated with such activations within each reporting period. GAAP requires that
activation fees charged with the sale of equipment and service to be allocated to the equipment and
service based upon the relative selling prices of each item. This generally results in the recognition of the
activation fee as additional wireless device revenue at the time of sale.
ETC revenues recognized in the reporting period represent the amounts which U.S. Cellular is entitled to
receive for such period, as determined and approved in connection with U.S. Cellular’s designation as an
ETC in various states.
Amounts Collected from Customers and Remitted to Governmental Authorities
U.S. Cellular records amounts collected from customers and remitted to governmental authorities net
within a tax liability account if the tax is assessed upon the customer and U.S. Cellular merely acts as an
agent in collecting the tax on behalf of the imposing governmental authority. If the tax is assessed upon
U.S. Cellular, then amounts collected from customers as recovery of the tax are recorded in Service
revenues and amounts remitted to governmental authorities are recorded in Selling, general and
administrative expenses in the Consolidated Statement of Operations. The amounts recorded gross in
revenues that are billed to customers and remitted to governmental authorities totaled $137.6 million,
$109.1 million and $140.7 million for 2010, 2009 and 2008, respectively.
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