3. Equipment Installment Plans

TDS offers customers the option to purchase certain devices under an equipment installment contract over a period of up to 24 months. Under certain equipment installment plans, the customer has the right to upgrade to a new device after a specified period of time and have the remaining unpaid equipment installment contract balance waived, subject to certain conditions, including trading in the original device in good working condition and signing a new equipment installment contract. TDS values this trade-in right as a guarantee liability. The guarantee liability is initially measured at fair value and is determined based on assumptions including the probability and timing of the customer upgrading to a new device and the fair value of the device being traded-in at the time of trade-in. As of September 30, 2015 and December 31, 2014, the guarantee liability related to these plans was $91.3 million and $57.5 million, respectively, and is reflected in Customer deposits and deferred revenues in the Consolidated Balance Sheet.

TDS equipment installment plans do not provide for explicit interest charges. For equipment installment plans with a duration of greater than twelve months, TDS imputes interest.

The following table summarizes unbilled equipment installment plan receivables as of September 30, 2015 and December 31, 2014. Such amounts are included in the Consolidated Balance Sheet as Accounts receivable – customers and agents (short-term portion) and Other assets and deferred charges (long-term portion).

(Dollars in thousands)	September 30, 2015		December 31, 2014
Short-term portion of unbilled equipment installment plan receivables, gross	$	245,218	$	127,400
Short-term portion of unbilled deferred interest		(18,504)		(16,365)
Short-term portion of unbilled allowance for credit losses		(9,326)		(3,686)
Short-term portion of unbilled equipment installment plan receivables, net	$	217,388	$	107,349

Long-term portion of unbilled equipment installment plan receivables, gross	$	66,512	$	89,435
Long-term portion of unbilled deferred interest		(819)		(2,791)
Long-term portion of unbilled allowance for credit losses		(4,740)		(6,065)
Long-term portion of unbilled equipment installment plan receivables, net	$	60,953	$	80,579

TDS assesses the collectability of equipment installment plan receivables based on historical payment experience, account aging and other qualitative factors. To mitigate credit risk, TDS requires certain customers who desire to purchase equipment under an installment plan to make a down payment.

TDS recorded out-of-period adjustments during the nine months ended September 30, 2015 due to errors related to equipment installment plan transactions that were attributable to 2014. TDS has determined that these adjustments were not material to the prior quarterly or annual periods, and also were not material to the current period or anticipated full year 2015 results. These equipment installment plan adjustments had the impact of reducing Equipment and product sales revenues by $6.2 million and Income before income taxes by $5.8 million for the nine months ended September 30, 2015. These adjustments were made in the first six months of 2015.