USM » Topics » Asset Retirement Obligations

This excerpt taken from the USM ARS filed Apr 15, 2009.

NOTE 12 ASSET RETIREMENT OBLIGATIONS

U.S. Cellular is subject to asset retirement obligations associated with its leased cell sites, switching office sites, retail store sites and office locations. Asset retirement obligations generally include obligations to restore leased land and retail store and office premises to their pre-lease conditions. These obligations are included in Other deferred liabilities and credits in the Consolidated Balance Sheet.

During the third quarters of 2008 and 2007, U.S. Cellular performed its annual review of the assumptions and estimated costs related to its asset retirement obligations. The results of the reviews (identified as

61



UNITED STATES CELLULAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 12 ASSET RETIREMENT OBLIGATIONS (Continued)


"Revisions in estimated cash outflows") and other changes in asset retirement obligations during 2008 and 2007 were as follows:

(Dollars in thousands)
  2008   2007  

Balance, beginning of period

  $ 126,844   $ 127,639  
 

Additional liabilities accrued

    5,310     5,974  
 

Revisions in estimated cash outflows

    8,321     (15,331 )
 

Acquisition of assets

    419     348  
 

Disposition of assets

    (1,224 )   (555 )
 

Accretion expense

    9,312     8,769  
           

Balance, end of period

  $ 148,982   $ 126,844  
           
This excerpt taken from the USM DEF 14A filed Apr 15, 2009.

NOTE 12 ASSET RETIREMENT OBLIGATIONS

U.S. Cellular is subject to asset retirement obligations associated with its leased cell sites, switching office sites, retail store sites and office locations. Asset retirement obligations generally include obligations to restore leased land and retail store and office premises to their pre-lease conditions. These obligations are included in Other deferred liabilities and credits in the Consolidated Balance Sheet.

During the third quarters of 2008 and 2007, U.S. Cellular performed its annual review of the assumptions and estimated costs related to its asset retirement obligations. The results of the reviews (identified as

61



UNITED STATES CELLULAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 12 ASSET RETIREMENT OBLIGATIONS (Continued)


"Revisions in estimated cash outflows") and other changes in asset retirement obligations during 2008 and 2007 were as follows:

(Dollars in thousands)
  2008   2007  

Balance, beginning of period

  $ 126,844   $ 127,639  
 

Additional liabilities accrued

    5,310     5,974  
 

Revisions in estimated cash outflows

    8,321     (15,331 )
 

Acquisition of assets

    419     348  
 

Disposition of assets

    (1,224 )   (555 )
 

Accretion expense

    9,312     8,769  
           

Balance, end of period

  $ 148,982   $ 126,844  
           
These excerpts taken from the USM 10-K filed Feb 26, 2009.

Asset Retirement Obligations

U.S. Cellular is subject to asset retirement obligations associated with its leased cell sites, retail store sites and office locations. Asset retirement obligations generally include obligations to restore leased land, retail store and office premises to their pre-existing condition. The asset retirement obligation is included in Other deferred liabilities and credits in the Consolidated Balance Sheet.

U.S. Cellular accounts for its asset retirement obligations in accordance with SFAS No. 143, Accounting for Asset Retirement Obligations ("SFAS 143") and FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations ("FIN 47"), which require entities to record the fair value of a liability for legal obligations associated with an asset retirement in the period in which the obligations are incurred. At the time the liability is incurred, U.S. Cellular records a liability equal to the net present value of the estimated cost of the asset retirement obligation and increases the carrying amount of the related long-lived asset by an equal amount. Over time, the liability is accreted to its present value, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the obligation, any difference between the cost to retire the asset and the recorded liability (including accretion of discount) is recognized in the Consolidated Statement of Operations as a gain or loss.

The calculation of the asset retirement obligation includes the following estimates; the probability of the need for remediation, the date of and cost estimates for such remediation, the likelihood of lease renewals, and the salvage value of assets. Actual results may differ from these estimates and different assumptions would lead to larger or smaller obligations and related accretion and depreciation until such actual results are known.

See Note 12—Asset Retirement Obligations in the Notes to Consolidated Financial Statements for details regarding U.S. Cellular's asset retirement obligations.

Asset Retirement Obligations

U.S. Cellular accounts for its asset retirement obligations in accordance with SFAS No. 143, Accounting for Asset Retirement Obligations ("SFAS 143") and FASB Interpretation ("FIN") No. 47, Accounting for Conditional Asset Retirement Obligations ("FIN 47"), which require entities to record the fair value of a liability for legal obligations associated with an asset retirement in the period in which the obligations are incurred. At the time the liability is incurred, U.S. Cellular records a liability equal to the net present value of the estimated cost of the asset retirement obligation and increases the carrying amount of the related long-lived asset by an equal amount. Over time, the liability is accreted to its present value, and the

43



UNITED STATES CELLULAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)


capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the obligation, any difference between the cost to retire the asset and the recorded liability (including accretion of discount) is recognized in the Consolidated Statement of Operations as a gain or loss.

NOTE 12 ASSET RETIREMENT OBLIGATIONS

U.S. Cellular is subject to asset retirement obligations associated with its leased cell sites, switching office sites, retail store sites and office locations. Asset retirement obligations generally include obligations to restore leased land and retail store and office premises to their pre-lease conditions. These obligations are included in Other deferred liabilities and credits in the Consolidated Balance Sheet.

During the third quarters of 2008 and 2007, U.S. Cellular performed its annual review of the assumptions and estimated costs related to its asset retirement obligations. The results of the reviews (identified as

61



UNITED STATES CELLULAR CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

NOTE 12 ASSET RETIREMENT OBLIGATIONS (Continued)


"Revisions in estimated cash outflows") and other changes in asset retirement obligations during 2008 and 2007 were as follows:

(Dollars in thousands)
  2008   2007  

Balance, beginning of period

  $ 126,844   $ 127,639  
 

Additional liabilities accrued

    5,310     5,974  
 

Revisions in estimated cash outflows

    8,321     (15,331 )
 

Acquisition of assets

    419     348  
 

Disposition of assets

    (1,224 )   (555 )
 

Accretion expense

    9,312     8,769  
           

Balance, end of period

  $ 148,982   $ 126,844  
           

Asset Retirement Obligations



U.S. Cellular is subject to asset retirement obligations associated with its leased cell sites, retail store sites and office locations. Asset
retirement obligations generally include obligations to restore leased land, retail store and office premises to their pre-existing condition. The asset retirement obligation is included
in Other deferred liabilities and credits in the Consolidated Balance Sheet.



U.S. Cellular
accounts for its asset retirement obligations in accordance with SFAS No. 143,
Accounting for Asset Retirement Obligations
("SFAS 143") and FASB Interpretation No. 47,
Accounting for Conditional Asset Retirement Obligations ("FIN 47"), which require
entities to record the fair value of a liability for legal obligations associated with an asset retirement in the period in which the obligations are incurred. At the time the liability is incurred,
U.S. Cellular records a liability equal to the net present value of the estimated cost of the asset retirement obligation and increases the carrying amount of the related long-lived
asset by an equal amount. Over time, the liability is accreted to its present value, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the
obligation, any difference between the cost to retire the asset and the recorded liability (including accretion of discount) is recognized in the Consolidated Statement of Operations as a gain or
loss.



The
calculation of the asset retirement obligation includes the following estimates; the probability of the need for remediation, the date of and cost estimates for such remediation, the likelihood of
lease renewals, and the salvage value of assets. Actual results may differ from these estimates and different assumptions would lead to larger or smaller obligations and related accretion and
depreciation until such actual results are known.



See
Note 12—Asset Retirement Obligations in the Notes to Consolidated Financial Statements for details regarding U.S. Cellular's asset retirement obligations.



Asset Retirement Obligations



U.S. Cellular accounts for its asset retirement obligations in accordance with SFAS No. 143, Accounting for Asset
Retirement Obligations
("SFAS 143") and FASB Interpretation ("FIN") No. 47, Accounting for Conditional Asset Retirement
Obligations
("FIN 47"), which require entities to record the fair value of a liability for legal obligations associated with an asset retirement in the period in which
the obligations are incurred. At the time the liability is incurred, U.S. Cellular records a liability equal to the net present value of the estimated cost of the asset retirement obligation and
increases the carrying amount of the related long-lived asset by an equal amount. Over time, the liability is accreted to its present value, and the



43










UNITED STATES CELLULAR CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)



NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)






capitalized
cost is depreciated over the useful life of the related asset. Upon settlement of the obligation, any difference between the cost to retire the asset and the recorded liability (including
accretion of discount) is recognized in the Consolidated Statement of Operations as a gain or loss.



NOTE 12 ASSET RETIREMENT OBLIGATIONS




U.S. Cellular is subject to asset retirement obligations associated with its leased cell sites, switching office sites, retail store sites and office locations. Asset retirement obligations generally
include obligations to restore leased land and retail store and office premises to their pre-lease conditions. These obligations are included in Other deferred liabilities and credits in
the Consolidated Balance Sheet.



During
the third quarters of 2008 and 2007, U.S. Cellular performed its annual review of the assumptions and estimated costs related to its asset retirement obligations. The results of the reviews
(identified as



61










UNITED STATES CELLULAR CORPORATION



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)




NOTE 12 ASSET RETIREMENT OBLIGATIONS (Continued)






"Revisions
in estimated cash outflows") and other changes in asset retirement obligations during 2008 and 2007 were as follows:




















































































































(Dollars in thousands)



 2008  2007  

Balance, beginning of period

 $126,844 $127,639 
 

Additional liabilities accrued

  5,310  5,974 
 

Revisions in estimated cash outflows

  8,321  (15,331)
 

Acquisition of assets

  419  348 
 

Disposition of assets

  (1,224) (555)
 

Accretion expense

  9,312  8,769 
      

Balance, end of period

 $148,982 $126,844 
      




This excerpt taken from the USM DEF 14A filed Apr 15, 2008.

NOTE 12    ASSET RETIREMENT OBLIGATIONS

        U.S. Cellular is subject to asset retirement obligations associated with its leased cell sites, switching office sites, retail store sites and office locations. Asset retirement obligations generally include obligations to restore leased land and retail store and office premises to their pre-lease conditions.

71


United States Cellular Corporation and Subsidiaries

Notes to Consolidated Financial Statements

NOTE 12    ASSET RETIREMENT OBLIGATIONS (Continued)

        During the third quarters of 2007 and 2006, U.S. Cellular performed its annual review of the assumptions and estimated costs related to its asset retirement obligations. As a result of the reviews, the liabilities were revised as follows:

    In 2007, the liabilities were revised to reflect lower estimated cash outflows as a result of lower estimates of removal and restoration costs, primarily related to cell sites, as determined through quoted market prices obtained from independent contractors.

    In 2006, the liabilities were revised to reflect higher estimated costs for removal of radio and power equipment related to cell sites, and estimated retirement obligations for retail stores were revised to reflect a shift to larger stores and slightly higher estimated costs for removal of fixtures.

        These changes are reflected in "Revisions in estimated cash outflows" below.

        Changes in asset retirement obligations during 2007 and 2006 were as follows:

(Dollars in thousands)
  2007
  2006
 
Beginning balance   $ 127,639   $ 90,224  
  Additional liabilities accrued     5,974     15,697  
  Revision in estimated cash outflows     (15,331 )   13,415  
  Acquisition of assets     348     1,237  
  Disposition of assets     (555 )   (164 )
  Accretion expense     8,769     7,230  
   
 
 
Ending balance   $ 126,844   $ 127,639  
   
 
 
This excerpt taken from the USM ARS filed Apr 15, 2008.

NOTE 12    ASSET RETIREMENT OBLIGATIONS

        U.S. Cellular is subject to asset retirement obligations associated with its leased cell sites, switching office sites, retail store sites and office locations. Asset retirement obligations generally include obligations to restore leased land and retail store and office premises to their pre-lease conditions.

71


United States Cellular Corporation and Subsidiaries

Notes to Consolidated Financial Statements

NOTE 12    ASSET RETIREMENT OBLIGATIONS (Continued)

        During the third quarters of 2007 and 2006, U.S. Cellular performed its annual review of the assumptions and estimated costs related to its asset retirement obligations. As a result of the reviews, the liabilities were revised as follows:

    In 2007, the liabilities were revised to reflect lower estimated cash outflows as a result of lower estimates of removal and restoration costs, primarily related to cell sites, as determined through quoted market prices obtained from independent contractors.

    In 2006, the liabilities were revised to reflect higher estimated costs for removal of radio and power equipment related to cell sites, and estimated retirement obligations for retail stores were revised to reflect a shift to larger stores and slightly higher estimated costs for removal of fixtures.

        These changes are reflected in "Revisions in estimated cash outflows" below.

        Changes in asset retirement obligations during 2007 and 2006 were as follows:

(Dollars in thousands)
  2007
  2006
 
Beginning balance   $ 127,639   $ 90,224  
  Additional liabilities accrued     5,974     15,697  
  Revision in estimated cash outflows     (15,331 )   13,415  
  Acquisition of assets     348     1,237  
  Disposition of assets     (555 )   (164 )
  Accretion expense     8,769     7,230  
   
 
 
Ending balance   $ 126,844   $ 127,639  
   
 
 
These excerpts taken from the USM 10-K filed Feb 29, 2008.

NOTE 12    ASSET RETIREMENT OBLIGATIONS

        U.S. Cellular is subject to asset retirement obligations associated with its leased cell sites, switching office sites, retail store sites and office locations. Asset retirement obligations generally include obligations to restore leased land and retail store and office premises to their pre-lease conditions.

71


United States Cellular Corporation and Subsidiaries

Notes to Consolidated Financial Statements

NOTE 12    ASSET RETIREMENT OBLIGATIONS (Continued)

        During the third quarters of 2007 and 2006, U.S. Cellular performed its annual review of the assumptions and estimated costs related to its asset retirement obligations. As a result of the reviews, the liabilities were revised as follows:

    In 2007, the liabilities were revised to reflect lower estimated cash outflows as a result of lower estimates of removal and restoration costs, primarily related to cell sites, as determined through quoted market prices obtained from independent contractors.

    In 2006, the liabilities were revised to reflect higher estimated costs for removal of radio and power equipment related to cell sites, and estimated retirement obligations for retail stores were revised to reflect a shift to larger stores and slightly higher estimated costs for removal of fixtures.

        These changes are reflected in "Revisions in estimated cash outflows" below.

        Changes in asset retirement obligations during 2007 and 2006 were as follows:

(Dollars in thousands)
  2007
  2006
 
Beginning balance   $ 127,639   $ 90,224  
  Additional liabilities accrued     5,974     15,697  
  Revision in estimated cash outflows     (15,331 )   13,415  
  Acquisition of assets     348     1,237  
  Disposition of assets     (555 )   (164 )
  Accretion expense     8,769     7,230  
   
 
 
Ending balance   $ 126,844   $ 127,639  
   
 
 

NOTE 12    ASSET RETIREMENT OBLIGATIONS



        U.S. Cellular is subject to asset retirement obligations associated with its leased cell sites, switching office sites, retail store sites and office locations.
Asset retirement obligations generally include obligations to restore leased land and retail store and office premises to their pre-lease conditions.



71








United States Cellular Corporation and Subsidiaries



Notes to Consolidated Financial Statements



NOTE 12    ASSET RETIREMENT OBLIGATIONS (Continued)




        During
the third quarters of 2007 and 2006, U.S. Cellular performed its annual review of the assumptions and estimated costs related to its asset retirement obligations. As a result of
the reviews, the liabilities were revised as follows:





    In
    2007, the liabilities were revised to reflect lower estimated cash outflows as a result of lower estimates of removal and restoration costs, primarily related to cell
    sites, as determined through quoted market prices obtained from independent contractors.


    In
    2006, the liabilities were revised to reflect higher estimated costs for removal of radio and power equipment related to cell sites, and estimated retirement obligations
    for retail stores were revised to reflect a shift to larger stores and slightly higher estimated costs for removal of fixtures.



        These
changes are reflected in "Revisions in estimated cash outflows" below.



        Changes
in asset retirement obligations during 2007 and 2006 were as follows:








































































































(Dollars in thousands)
 2007
 2006
 
Beginning balance $127,639 $90,224 
 Additional liabilities accrued  5,974  15,697 
 Revision in estimated cash outflows  (15,331) 13,415 
 Acquisition of assets  348  1,237 
 Disposition of assets  (555) (164)
 Accretion expense  8,769  7,230 
  
 
 
Ending balance $126,844 $127,639 
  
 
 




This excerpt taken from the USM 10-Q filed May 15, 2007.
Asset Retirement Obligations

U.S. Cellular is subject to asset retirement obligations associated primarily with its cell sites, retail sites and office locations. Asset retirement obligations generally include costs to remediate leased land on which U.S. Cellular’s cell sites and switching offices are located. Also, U.S. Cellular generally is required to return leased retail store premises and office space to their pre-existing conditions.

U.S. Cellular accounts for its asset retirement obligations in accordance with SFAS No. 143, Accounting for Asset Retirement Obligations, (“SFAS 143”) and FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations (“FIN 47”), which require entities to record the fair value of a liability for legal obligations associated with an asset retirement in the period in which the obligations are incurred. At the time the liability is incurred, U.S. Cellular records a liability equal to the net present value of the estimated cost of the asset retirement obligation and increases the carrying amount of the related long-lived asset by an equal amount. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the obligations, any difference between the cost to retire an asset and the recorded liability (including accretion of discount) is recognized as a gain or loss in the Consolidated Statement of Operations.

40




The calculation of the asset retirement obligation is a critical accounting estimate for U.S. Cellular because changing the factors used in calculating the obligation could result in larger or smaller estimated obligations that could have a significant impact on U.S. Cellular’s results of operations and financial condition. Such factors include probabilities or likelihood of remediation, cost estimates, lease renewals and salvage values. Actual results may differ materially from estimates under different assumptions or conditions.

See Note 12 – Asset Retirement Obligations for a schedule of asset retirement obligations activity in 2007 and 2006.

This excerpt taken from the USM DEF 14A filed Apr 25, 2007.

NOTE 11 ASSET RETIREMENT OBLIGATIONS

U.S. Cellular is subject to asset retirement obligations associated primarily with its cell sites, retail sites and office locations. Asset retirement obligations generally include obligations to remediate leased land on

69




which U.S. Cellular’s cell sites and switching offices are located. U.S. Cellular is also generally required to return leased retail store premises and office space to their pre-existing conditions.

During the third quarter of 2006, U.S. Cellular reviewed the assumptions related to its asset retirement obligations and, as a result of the review, revised certain of those assumptions. Estimated retirement obligations for cell sites were revised to reflect higher estimated costs for removal of radio and power equipment, and estimated retirement obligations for retail stores were revised to reflect a shift to larger stores and slightly higher estimated costs for removal of fixtures. These changes are reflected in “Revision in estimated cash flows” below.

The change in Asset retirement obligation during 2006 and 2005 was as follows:

(Dollars in thousands)

 

2006

 

2005

 

Beginning balance

 

$

90,224

 

$

72,575

 

Additional liabilities accrued

 

15,697

 

7,920

 

Revision in estimated cash flows

 

13,415

 

 

Acquisition of assets

 

1,237

 

5,461

 

Disposition of assets

 

(164

)

(2,032

)

Accretion expense

 

7,230

 

6,300

 

Ending balance

 

$

127,639

 

$

90,224

 

 

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