US Cellular 2015 Annual Report Download - page 102

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Indemnifications
TDS enters into agreements in the normal course of business that provide for indemnification of counterparties. The
terms of the indemnifications vary by agreement. The events or circumstances that would require TDS to perform under
these indemnities are transaction specific; however, these agreements may require TDS to indemnify the counterparty for
costs and losses incurred from litigation or claims arising from the underlying transaction. TDS is unable to estimate the
maximum potential liability for these types of indemnifications as the amounts are dependent on the outcome of future
events, the nature and likelihood of which cannot be determined at this time. Historically, TDS has not made any
significant indemnification payments under such agreements.
Legal Proceedings
TDS 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 TDS 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.
TDS has accrued $0.5 million and $0.4 million with respect to legal proceedings and unasserted claims as of
December 31, 2015 and 2014, respectively. TDS has not accrued any amount for legal proceedings if it cannot estimate
the amount of the possible loss or range of loss. TDS is unable to estimate any contingent loss in excess of the
amounts accrued.
NOTE 14 VARIABLE INTEREST ENTITIES
TDS consolidates variable interest entities (‘‘VIEs’’) 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. TDS reviews these criteria initially at the time it enters into agreements
and subsequently when reconsideration events occur.
Consolidated VIEs
As of December 31, 2015, TDS holds a variable interest in and consolidates the following VIEs under GAAP:
ᔢAdvantage Spectrum and Frequency Advantage L.P., the general partner of Advantage Spectrum;
ᔢAquinas Wireless L.P. (‘‘Aquinas Wireless’’); and
ᔢKing 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 the
consent of the limited partner, a TDS 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, TDS has a disproportionate level of exposure to the variability associated with the economic performance of the
VIEs, indicating that TDS is the primary beneficiary of the VIEs. Accordingly, these VIEs are consolidated.
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TELEPHONE AND DATA SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS