US Cellular 2015 Annual Report Download - page 79

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Under the proportional model, U.S. Cellular allocated a portion of the estimated future breakage to each redemption and
recorded revenue proportionally.
In the fourth quarter of 2013, U.S. Cellular issued loyalty reward points with a value of $43.5 million as a loyalty bonus in
recognition of the inconvenience experienced by customers during U.S. Cellular’s billing system conversion in 2013. The
value of the loyalty bonus reduced Service revenues in the Consolidated Statement of Operations in 2013.
Equipment Installment Plans
U.S. Cellular 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 that are deemed cash are recognized as a reduction of Operating revenues concurrently with
the associated revenue.
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 customer occurs. 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
TDS charges its end customers activation fees in connection with the sale of certain services and equipment. Activation
fees charged by TDS Telecom in conjunction with a service offering are deferred and recognized over the average
customer’s service period. Device activation fees charged at U.S. Cellular agent locations in connection with subsidized
device sales are deferred and recognized over a period that corresponds with the length of the customer’s service
contract. Device activation fees charged at U.S. Cellular company-owned retail stores in connection with subsidized
device sales are recognized at the time the device is delivered to the customer. Device activation fees charged at both
agent locations and U.S. Cellular company-owned retail stores in connection with equipment installment plan device
transactions are deferred and recognized over a period that corresponds with the equipment upgrade eligibility date
based on the contract terms.
Amounts Collected from Customers and Remitted to Governmental Authorities – Gross vs. Net
TDS 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 TDS merely acts as an agent in collecting the tax on behalf of the
imposing governmental authority. If the tax is assessed upon TDS, 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 $95.3 million, $113.5 million and
$131.0 million for 2015, 2014 and 2013, respectively.
Wholesale Revenues
TDS Telecom earns wholesale revenues in its Wireline segment as a result of its participation in revenue pools with other
telephone companies for interstate revenue and for certain intrastate revenue. Such pools are funded by long distance
revenue and/or access charges within state jurisdictions and by access charges in the interstate jurisdiction. Wholesale
revenues earned through the various pooling processes are recorded based on estimates following the National
Exchange Carrier Association’s rules as approved by the FCC.
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.
71
TELEPHONE AND DATA SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS