US Cellular 2014 Annual Report Download - page 35

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United States Cellular Corporation
Management’s Discussion and Analysis of Financial Condition and Results of Operations
the aforementioned assumptions used to compute the guarantee liability would impact the amount of
revenue recognized under these plans and the timing thereof. For the year ended December 31, 2014,
U.S. Cellular assumed the earliest contractual time of trade-in, or 12 months, for all customers on
installment contracts with trade-in rights.
When a customer exercises the trade-in option, the difference between the outstanding receivable
balance forgiven and the fair value of the used device is recorded as a reduction to the guarantee
liability. If the customer does not exercise the trade-in option at the time he or she is eligible, U.S.
Cellular begins amortizing the liability and records this amortization as additional operating revenue.
Interest
U.S. Cellular equipment installment plans do not provide for explicit interest charges. For equipment
installment plans with a duration of greater than twelve months, U.S. Cellular imputes interest using a
market rate and recognizes such interest income over the duration of the plan as a component of
Interest and dividend income. Changes in the imputed interest rate would impact the amount of revenue
recognized under these plans.
Allowance
U.S. Cellular maintains an allowance for doubtful accounts for estimated losses that result from the failure
of our customers to make payments due under the equipment installment plans. The allowance is
estimated based on historical experience, account aging and other factors that could affect collectability.
When it is probable that an account balance will not be collected, the account balance is charged
against the allowance for doubtful accounts. To the extent that actual loss experience differs significantly
from historical trends, the required allowance amounts could differ from the original estimates.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See Note 18—Related Parties and Note 19—Certain Relationships and Related Transactions in the Notes
to Consolidated Financial Statements.
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