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Intangible Assets | 9 Months Ended
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Sep. 30, 2017
Goodwill and Intangible Assets Disclosure [Abstract] |
Intangible Assets | Note 6 Intangible Assets Activity related to Licenses and Goodwill for the nine months ended September 30, 2017, is presented below. There were no changes to Franchise rights during the nine months ended September 30, 2017. Prior to 2009, TDS accounted for U.S. Cellular’s share repurchases as step acquisitions, allocating a portion of the share repurchase value to TDS’ Licenses and Goodwill. Further, a goodwill impairment loss on the U.S. Cellular reporting unit was recognized in 2003 at TDS but not at U.S. Cellular. Consequently, U.S. Cellular’s Licenses and Goodwill on a stand-alone basis do not equal the TDS consolidated Licenses and Goodwill related to U.S. Cellular.
Licenses
(Dollars in millions) |  |
Balance December 31, 2016 | $ | 1,895
| Acquisitions |  | 331
| Transferred to Assets held for sale |  | (5)
| Exchanges - Licenses received |  | 18
| Exchanges - Licenses surrendered |  | (5)
Balance September 30, 2017 | $ | 2,234
Goodwill |  |  |  |  |  |  |  |  |  |  |  |  |  |
| U.S. Cellular |  | Wireline |  | Cable |  | HMS |  | Total
(Dollars in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Balance December 31, 2016 | $ | 227 |  | $ | 409 |  | $ | 95 |  | $ | 35 |  | $ | 766
| Acquisitions |  | – |  |  | – |  |  | 4 |  |  | – |  |  | 4
| Loss on impairment |  | (227) |  |  | – |  |  | – |  |  | (35) |  |  | (262)
Balance September 30, 2017 | $ | – |  | $ | 409 |  | $ | 99 |  | $ | – |  | $ | 508
Accumulated impairment losses in prior periods were $334 million for U.S. Cellular, $29 million for Wireline, $84 million for HMS, and $4 million for Corporate and Other. Goodwill Interim Impairment Assessment U.S. Cellular U.S. Cellular operates in an intensely competitive wireless industry environment and has experienced declining service revenues in recent periods. Based on recent 2017 developments, including wireless expansion plans announced by other companies and the results of the FCC’s forward auction of 600 MHz spectrum licenses and other FCC actions, U.S. Cellular anticipates increased competition for customers in its primary operating markets from new and existing market participants over the long term. In addition, the widening adoption of unlimited data plans and other data pricing constructs across the industry, including U.S. Cellular’s introduction of unlimited plans earlier in 2017, may limit the industry’s ability to monetize future growth in data usage. These factors when assessed and considered as part of its annual planning process conducted in the third quarter of each year caused management to revise its long-range financial forecast in the third quarter of 2017. Based on the factors noted above, management identified a triggering event and performed a quantitative goodwill impairment test on an interim basis. As permitted by ASU 2017-04, TDS used a one-step quantitative approach that compared the fair value of the U.S. Cellular reporting unit to its carrying value. A discounted cash flow approach was used to value the reporting unit, using value drivers and risks specific to U.S. Cellular and the industry and current economic factors. The cash flow estimates incorporated certain assumptions that market participants would use in their estimates of fair value and may not be indicative of U.S. Cellular specific assumptions. However, the discount rate used in the analysis considers any additional risk a market participant might place on integrating the U.S. Cellular reporting unit into its operations. The most significant assumptions made in this process were the revenue growth rate (shown as a compound annual growth rate in the table below), the terminal revenue growth rate, and the discount rate. The following table represents key assumptions used in estimating the fair value of the U.S. Cellular reporting unit as using the discounted cash flow approach.
Key assumptions |
Revenue growth rate | 0.8%
Terminal revenue growth rate | 2.0%
Discount rate | 9.5%
The results of the interim goodwill impairment test indicated that the carrying value of the U.S. Cellular reporting unit exceeded its fair value. Therefore, TDS recognized a loss on impairment of goodwill of $227 million to reduce the carrying value of goodwill for the U.S. Cellular reporting unit to zero. In connection with the interim goodwill impairment test, conditions existed that indicated U.S. Cellular’s long-lived asset group might not be recoverable. As a result, the company performed an interim long-lived asset recoverability assessment related to the U.S. Cellular asset group and determined that no impairment of the long-lived asset group existed as of the interim assessment date. HMS HMS has continued to experience slower than expected service revenue growth in 2017 due primarily to the competitive nature of the hosted and managed services industry, and the portfolio of services offered by HMS compared to the industry overall. Further, revenue mix has been trending towards a higher proportion of lower margin revenue streams. These factors when assessed and considered as part of its annual planning process caused HMS management to revise its long-range forecast in the third quarter of 2017. Based on the factors noted above, management identified a triggering event and performed a quantitative goodwill impairment test on an interim basis. No other triggering events for indefinite-lived intangible assets or long-lived assets were identified. TDS used a one-step quantitative approach that compared the fair value of the HMS reporting unit to its carrying value. TDS used the discounted cash flow approach and guideline public company method to value the HMS reporting unit. The discounted cash flow approach uses value drivers and considers risks specific to the industry as well as current economic factors. The most significant assumptions made in this process were the revenue growth rate (shown as a compound annual growth rate in the table below), the terminal revenue growth rate and the discount rate. The guideline public company method develops an indication of fair value by calculating average market pricing multiples for selected publicly-traded companies. The developed multiples were applied to applicable financial measures of the HMS reporting unit to determine fair value. The discounted cash flow approach and guideline public company method were weighted to arrive at the total fair value used for impairment testing. The weighting of methods was consistently applied in both 2017 and 2016. The following table represents key assumptions used in estimating the fair value of the HMS reporting unit using the discounted cash flow approach.
Key assumptions |
Revenue growth rate | 3.8%
Terminal revenue growth rate | 2.5%
Discount rate | 10.5%
The results of the interim goodwill impairment test indicated that the carrying value of the HMS reporting unit exceeded its fair value. Therefore, TDS recognized a loss on impairment of goodwill of $35 million to reduce the carrying value of goodwill for the HMS reporting unit to zero.

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- Definition The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 350 -URI http://asc.fasb.org/topic&trid=2144416 + Details
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