US Cellular 2013 Annual Report Download - page 33

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United States Cellular Corporation
Management’s Discussion and Analysis of Financial Condition and Results of Operations
in determining the provision for income taxes, deferred income tax assets and liabilities and any
valuation allowance that is established for deferred income tax assets.
U.S. Cellular recognizes the tax benefit from an uncertain tax position only if it is more likely than not that
the tax position will be sustained on examination by the taxing authorities, based on the technical merits
of the position. The tax benefits recognized in the financial statements from such a position are
measured based on the largest benefit that has a greater than 50% likelihood of being realized upon
ultimate resolution.
See Note 3—Income Taxes in the Notes to Consolidated Financial Statements for details regarding U.S.
Cellular’s income tax provision, deferred income taxes and liabilities, valuation allowances and
unrecognized tax benefits, including information regarding estimates that impact income taxes.
Loyalty Reward Program
See the Revenue Recognition section of Note 1—Summary of Significant Accounting Policies and Recent
Accounting Pronouncements in the Notes to Consolidated Financial Statements for a description of this
program and the related accounting.
U.S. Cellular follows the deferred revenue method of accounting for its loyalty reward program. Under
this method, revenue allocated to loyalty reward points is deferred. Revenue is recognized at the time of
customer redemption or when such points have been depleted via an account maintenance charge. U.S.
Cellular periodically reviews and revises the redemption and depletion rates as appropriate based on
history and related future expectations. As of December 31, 2013, U.S. Cellular estimated loyalty reward
points breakage based on actuarial estimates and recorded a $7.4 million change in estimate, which
reduced Customer deposits and deferred revenues in the Consolidated Balance Sheet and increased
Total operating revenues in the Consolidated Statement of Operations.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Note 17—Related Parties and Note 18—Certain Relationships and Related Transactions in the Notes
to Consolidated Financial Statements.
Possible related party transaction
U.S. Cellular is currently considering a possible purchase of FCC spectrum licenses from TDS. U.S.
Cellular’s spectrum requirements and the relative value of the FCC licenses are being reviewed. U.S.
Cellular formed a special committee comprised entirely of independent and disinterested directors with
the exclusive power to consider, negotiate and, if appropriate, approve a transaction with TDS. The U.S.
Cellular special committee has engaged independent financial advisors and legal counsel. There is no
assurance as to whether a transaction will be consummated.
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