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Basis of Presentation | 9 Months Ended
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Sep. 30, 2014
Disclosure Text Block |
Basis of Presentation | 1. Basis of Presentation The accounting policies of Telephone and Data Systems, Inc. (“TDS”) conform to accounting principles generally accepted in the United States of America (“GAAP”) as set forth in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”). The consolidated financial statements include the accounts of TDS and subsidiaries in which it has a controlling financial interest, including TDS' 84%-own ed wireless telephone subsidiary, United States Cellular Corporation (“U.S. Cellular”) and TDS' wholly-owned subsidiary, TDS Telecommunications Corporati on (“TDS Telecom”). In addition, the consolidated financial statements include certain entities in which TDS has a variable interest that require consolidation under GAAP. All material intercompany accounts and tran sactions have been eliminated. The consolidated financial statements included herein have been prepared by TDS, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, TDS believes that the disclosures included herein are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in TDS' Annual Report on Form 10-K (“Form 10-K”) for the year ended December 31, 2013. TDS' business segments reflected in this Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2014 are U.S. Cellular, TDS Telecom's Wireline, Cable and Hosted and Managed Services (“HMS”) operations, and the Non-Reportable Segment which includes TDS' m ajority-owned printing and distribution company, Suttle-Straus, I nc. (“Suttle-Straus”) and TDS' wholly-owned subsidiary, A iradigm Communications, Inc. (“Air adigm”). All of TDS' segments operate only in the United States, except for HMS, which includes an insignificant foreign operation. See Note 11 — Business Segment Information for summary financial information on each business segment. T he accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring items, unless otherwise disclosed) necessary for a fair statement of the financial position as of September 30, 2014 and December 31, 2013, and the results of operations and changes in comprehensive income for the three and nine months ended September 30, 2014 and 2013 and cash flows and changes in equity for the nine months ended September 30, 2014 and 2013. These results are not necessarily indicative of the results to be expected for the full year. Recently Issued Accounting Pronouncements On April 10, 201 4, the FASB issued Accounting Standards Update 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (“ASU 2014-08”). ASU 2014-08 changes the requirements and disclosures for reporting discontinued operations. TDS is required to adopt the provisions of ASU 2014-08 effective January 1, 2015, but early adoption is permitted. TDS adopt ed the provisions of ASU 2014-08 upon its issuance. The adoption of ASU 2014-08 did not have a significant impact on TDS' financial position or results of operations. On May 28, 2014, the FASB issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (“ASU 2014-09”). ASU 2014-09 outlines a single comprehensive model to use in accounting for revenue arising from contracts with customers. TDS is required to adopt the provisions of ASU 2014-09 effective January 1, 201 7. Early adoption is prohibited. TDS is evaluating what e ffect s the adoption of ASU 201 4-09 will have on TDS' financial position and results of operation s. On August 27, 2014, the FASB issued Accounting Standards Update 2014-15, Disclosure of Uncertainties about an Entity's Ability to Continue as a Going Concern (“ASU 2014-15”). ASU 2014-15 requires management to perform interim and annual assessments of an entity's ability to continue as a going concern within one year of the date financial statements are issued and provides guidance on determining when and how to disclose going concern uncertainties in financial statements. TDS is required to adopt the provisions of ASU 2014-15 effective January 1, 201 7, but early adoption is permitted. The adoption of ASU 2014-15 is not expected to impact TDS' financial position or results of operations. Equipment Installment Plans U.S. Cellular offers customers the optio n to purchase certain devices under installment contracts over a period of up to 24 months. Equipment revenue under these 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 guarantee liability, if applicable. For certain installment plan s, after a specified period of time, the customer may have the right to upgrad e to a new device and have the remaining unpaid installment contract balance waived, subject to certain condit ions, including trading in the original device in good working condition and signing a new equipment installment contract. U.S. Cellular values this trade-in right as a guarantee liability. The guarantee liability is initially measu red at fair value and is determined based on assumptions including the probability and timing of the customer upgrading to a new device, the customer's estimated remaining installment contract balance at the time of trade-in and the fair value of the device being traded-in at the time o f trade-in. As of September 30, 2014, the short-term guarantee liability and imputed interest liability related to equipment installment plans o f $42.2 million is recorded in Customer deposits and deferred revenues in the Consolidated Balance Sheet and t he long-term imputed interest liability related to equipment installment plans of $2.4 million is recorded in Other deferred liabilities and credits in the Consolidated Balance Sheet. As of September 30, 2014, unbilled short-term equipment installment plan receivables of $68.6 millio n are included in Accounts r eceivable – c ustomer s and agent s in the Consolidated Balance Sheet and unbilled long-term equipment ins tallment plan receivables of $60.0 million are included in Other assets and deferred charges in the Consolidated Balance Sheet. U.S. Cellular equipment installment plans do not provide for explicit interest charges. F or equipment installment plans with a dura tion of twelve months or less, U.S. Cellular does not impute interest. F or equipment installment plans with a duratio n of greater than twelve months, U.S. Cellular imputes interest and recognizes such interest income over the duration of the plan as a component of I nterest and dividend income. Reclassifications Certain prior year amounts have been re classified to conform to the 2014 financial statement presentation. These reclassifications did not affect consolidated net income attributable to TDS shareholders, cash flows, assets, liabilities or equity for the years presented. In 2014, TDS began presenting separately Equipment and product sales and Cost of equipment and products. As a result of recent HMS acquisitions, these amounts are now more significant to TDS and, accordingly, are shown as separate captions under Operating revenues and Operating expenses, respectively, on the Consolidated Statement of Operations. Amounts in 2013 have been reclassified to conform to the 2014 presentation. T he separate presentation of Equipment and product sales and Cost of equipment and products had no other impact on the TDS financial statements. Amounts Collected from Customers and Remitted to Governmental Authorities If a tax is assessed upon the customer and TDS merely acts as an agent in collecting the tax on behalf of the imposing governmental authority, then amounts collected from customers and remitted to governmental authorities are recorded on a net basis within a tax liability account in the Consolidated Balance Sheet. 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 $27.4 million and $86.5 million for the three and nine months ended September 30, 2014, respectively, and $31.6 million and $99.0 million for the three and nine months ended September 30, 2013, respectively.

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