US Cellular 2014 Annual Report Download - page 52

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United States Cellular Corporation
Notes to Consolidated Financial Statements (Continued)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND RECENT ACCOUNTING
PRONOUNCEMENTS (Continued)
Equipment Installment Plans
Equipment revenue under equipment installment plan contracts is recognized at the time the device is
delivered to the end-user customer for the selling price of the device, net of any deferred imputed
interest or trade-in right, if applicable. Imputed interest is reflected as a reduction to the receivable
balance and recognized over the duration of the plan as a component of Interest and dividend income.
See Note 3—Equipment Installment Plans for additional information.
Incentives
Discounts and incentives 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.
U.S. Cellular issues rebates to its agents and end customers. These incentives are recognized as a
reduction to revenue at the time the wireless device sale to the agent or customer occurs, respectively.
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
U.S. Cellular charges its end customers activation fees in connection with the sale of certain services and
equipment. Device activation fees charged at U.S. Cellular agent locations, where U.S. Cellular does not
also sell a wireless device to the customer, are deferred and recognized over the average device life.
Device activation fees charged as a result of device sales at U.S. Cellular company-owned retail stores
are recognized at the time the device is delivered to the customer.
Amounts Collected from Customers and Remitted to Governmental Authorities—Gross vs. Net
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 $97.0 million,
$114.7 million and $135.7 million for 2014, 2013 and 2012, respectively.
Eligible Telecommunications Carrier (‘‘ETC’’) Revenues
Telecommunications companies may be designated by states, or in some cases by the FCC, as an ETC
to receive support payments from the Universal Service Fund if they provide specified services in ‘‘high
cost’’ areas. 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.
Advertising Costs
U.S. Cellular expenses advertising costs as incurred. Advertising costs totaled $204.9 million,
$199.9 million and $227.0 million in 2014, 2013 and 2012, respectively.
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