US Cellular 2014 Annual Report Download - page 74

United States Cellular Corporation
Notes to Consolidated Financial Statements (Continued)
NOTE 12 COMMITMENTS AND CONTINGENCIES (Continued)
Legal Proceedings
U.S. Cellular is involved or may be involved from time to time in legal proceedings before the FCC, other
regulatory authorities, and/or various state and federal courts. If U.S. Cellular believes that a loss arising
from such legal proceedings is probable and can be reasonably estimated, an amount is accrued in the
financial statements for the estimated loss. If only a range of loss can be determined, the best estimate
within that range is accrued; if none of the estimates within that range is better than another, the low end
of the range is accrued. The assessment of the expected outcomes of legal proceedings is a highly
subjective process that requires judgments about future events. The legal proceedings are reviewed at
least quarterly to determine the adequacy of accruals and related financial statement disclosures. The
ultimate outcomes of legal proceedings could differ materially from amounts accrued in the financial
statements.
U.S. Cellular has accrued $0.4 million and $0.3 million with respect to legal proceedings and unasserted
claims as of December 31, 2014 and 2013, respectively. U.S. Cellular has not accrued any amount for
legal proceedings if it cannot estimate the amount of the possible loss or range of loss. U.S. Cellular
does not believe that the amount of any contingent loss in excess of the amounts accrued would be
material.
NOTE 13 VARIABLE INTEREST ENTITIES (VIEs)
U.S. Cellular consolidates variable interest entities in which it has a controlling financial interest and is the
primary beneficiary. A controlling financial interest will have both of the following characteristics: (a) the
power to direct the VIE activities that most significantly impact economic performance and (b) the
obligation to absorb the VIE losses and right to receive benefits that are significant to the VIE. U.S.
Cellular reviews these criteria initially at the time it enters into agreements and subsequently when
reconsideration events occur.
Consolidated VIEs
As of December 31, 2014, U.S. Cellular holds a variable interest in and consolidates the following VIEs
under GAAP:
• Advantage Spectrum L.P. (‘‘Advantage Spectrum’’) and Frequency Advantage L.P., the general partner
of Advantage Spectrum;
• Aquinas Wireless L.P. (‘‘Aquinas Wireless’’); and
• King Street Wireless L.P. (‘‘King Street Wireless’’) and King Street Wireless, Inc., the general partner of
King Street Wireless.
The power to direct the activities that most significantly impact the economic performance of Advantage
Spectrum, Aquinas Wireless and King Street Wireless (collectively, the ‘‘limited partnerships’’) is shared.
Specifically, the general partner of these VIEs has the exclusive right to manage, operate and control the
limited partnerships and make all decisions to carry on the business of the partnerships; however, the
general partner of each partnership needs consent of the limited partner, a U.S. Cellular subsidiary, to
sell or lease certain licenses, to make certain large expenditures, admit other partners or liquidate the
limited partnerships. Although the power to direct the activities of the VIEs is shared, U.S. Cellular has a
disproportionate level of exposure to the variability associated with the economic performance of the
VIEs, indicating that U.S. Cellular is the primary beneficiary of the VIEs in accordance with GAAP.
Accordingly, these VIEs are consolidated.
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