US Cellular 2011 Annual Report Download - page 45

UNITED STATES CELLULAR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING
PRONOUNCEMENTS (Continued)
Cash and Cash Equivalents
Cash and cash equivalents include cash and short-term, highly liquid investments with original maturities
of three months or less.
Short-Term and Long-Term Investments
As of December 31, 2011 and 2010, U.S. Cellular had $127.0 million and $146.6 million in Short-term
investments and $30.1 million and $46.0 million in Long-term investments, respectively. Short-term and
Long-term investments consist of certificates of deposit (short-term only), U.S. treasuries and corporate
notes, all of which are designated as held-to-maturity investments, and are recorded at amortized cost in
the Consolidated Balance Sheet. The corporate notes are guaranteed by the Federal Deposit Insurance
Corporation. For these investments, U.S. Cellular’s objective is to earn a higher rate of return on funds
that are not anticipated to be required to meet liquidity needs in the near term, while maintaining a low
level of investment risk. See Note 4—Fair Value Measurements for additional details on Short-term and
Long-term investments.
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable primarily consist of amounts owed by customers for wireless services and
equipment sales, by agents for sales of equipment to them 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, 2011, 2010
and 2009 were as follows:
(Dollars in thousands) 2011 2010 2009
Beginning balance ................................ $25,816 $ 26,624 $ 8,372
Additions, net of recoveries ........................ 62,157 76,292 107,991
Deductions .................................... (64,436) (77,100) (89,739)
Ending balance .................................. $23,537 $ 25,816 $ 26,624
Inventory
Inventory primarily consists of wireless devices stated at the lower of cost or market, with cost
determined using the first-in, first-out method and market determined by replacement costs or estimated
net realizable value.
Fair Value Measurements
Under the provisions of GAAP, fair value is a market-based measurement and not an entity-specific
measurement, based on an exchange transaction in which the entity sells an asset or transfers a liability
(exit price). The provisions also establish a fair value hierarchy that contains three levels for inputs used
in fair value measurements. Level 1 inputs include quoted market prices for identical assets or liabilities
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