America Online 2015 Annual Report Download - page 36

• Our current and deferred income taxes, and associated valuation
allowances, are impacted by events and transactions arising in
the normal course of business as well as in connection with the
adoption of new accounting standards, changes in tax laws and
rates, acquisitions and dispositions of businesses and non- recurring
items. As a global commercial enterprise, our income tax rate and
the classification of income taxes can be affected by many factors,
including estimates of the timing and realization of deferred income
tax assets and the timing and amount of income tax payments. We
account for tax benefits taken or expected to be taken in our tax
returns in accordance with the accounting standard relating to the
uncertainty in income taxes, which requires the use of a two-step
approach for recognizing and measuring tax benefits taken or
expected to be taken in a tax return. We review and adjust our
liability for unrecognized tax benefits based on our best judgment
given the facts, circumstances, and information available at each
reporting date. To the extent that the final outcome of these tax
positions is different than the amounts recorded, such differences
may impact income tax expense and actual tax payments. We
recognize any interest and penalties accrued related to unrecog-
nized tax benefits in income tax expense. Actual tax payments may
materially differ from estimated liabilities as a result of changes in
tax laws as well as unanticipated transactions impacting related
income tax balances.
• Our Plant, property and equipment balance represents a signif-
icant component of our consolidated assets. We record Plant,
property and equipment at cost. We depreciate Plant, property and
equipment on a straight-line basis over the estimated useful life of
the assets. We expect that a one-year increase in estimated useful
lives of our Plant, property and equipment would result in a decrease
to our 2015 depreciation expense of $2.8billion and that a one-year
decrease would result in an increase of approximately $7.2billion in
our 2015 depreciation expense.
• We maintain allowances for uncollectible accounts receivable,
including our device installment plan receivables, for estimated
losses resulting from the failure or inability of our customers to make
required payments. Our allowance for uncollectible accounts receiv-
able is based on management’s assessment of the collectability
of specific customer accounts and includes consideration of the
credit worthiness and financial condition of those customers. We
record an allowance to reduce the receivables to the amount that is
reasonably believed to be collectible. We also record an allowance
for all other receivables based on multiple factors including historical
experience with bad debts, the general economic environment
and the aging of such receivables. If there is a deterioration of
customers’ financial condition or if future actual default rates on
receivables in general differ from those currently anticipated, we
may have to adjust our allowance for doubtful accounts, which
would affect earnings in the period the adjustments are made.
Recently Issued Accounting Standards
See Note1 to the consolidated financial statements for a discussion
of recently issued accounting standard updates not yet adopted as of
December31, 2015.
Acquisitions and Divestitures
Wireless
Wireless Transaction
On February21, 2014, we completed the Wireless Transaction for
aggregate consideration of approximately $130billion. The con-
sideration paid was primarily comprised of cash of approximately
$58.89billion, Verizon common stock with a value of approximately
$61.3billion and other consideration.
Omnitel Transaction
On February21, 2014, Verizon and Vodafone also consummated the
sale of the Omnitel Interest (the Omnitel Transaction) by a subsidiary
of Verizon to a subsidiary of Vodafone in connection with the Wireless
Transaction pursuant to a separate share purchase agreement. As a
result, during 2014, we recognized a pre-tax gain of $1.9billion on the
disposal of the Omnitel interest.
See Note2 to the consolidated financial statements for additional
information regarding the Wireless Transaction.
Spectrum License Transactions
In January 2015, the FCC completed an auction of 65 MHz of
spectrum in the AWS-3 band. We participated in the auction and were
the high bidder on 181 spectrum licenses, for which we paid cash
of approximately $10.4billion. The FCC granted us these spectrum
licenses in April 2015.
From time to time, we enter into agreements to buy, sell or exchange
spectrum licenses. We believe these spectrum license transactions
have allowed us to continue to enhance the reliability of our network
while also resulting in a more efficient use of spectrum. See Note2 to
the consolidated financial statements for additional details regarding
our spectrum license transactions.
Tower Monetization Transaction
During March 2015, we completed a transaction with American Tower
pursuant to which American Tower acquired the exclusive right to
lease, acquire or otherwise operate and manage many of our wireless
towers for an upfront payment of $5.1billion, which also included
payment for the sale of 162 towers. See Note2 to the consolidated
financial statements for additional information.
Wireline
During July 2014, Verizon sold a non- strategic Wireline business for
cash consideration that was not significant. See Note2 to the consoli-
dated financial statements for additional information.
Access Line Sale
On February5, 2015, we announced that we have entered into a
definitive agreement with Frontier pursuant to which Verizon will sell
its local exchange business and related landline activities in California,
Florida and Texas, including Fios Internet and video customers,
switched and special access lines and high-speed Internet service and
long distance voice accounts in these three states for approximately
$10.5billion (approximately $7.5billion net of income taxes), subject
to certain adjustments and including the assumption of $0.6billion
of indebtedness from Verizon by Frontier. We expect this transaction
to close at the end of the first quarter of 2016. See Note2 to the
consolidated financial statements for additional information.
34 Verizon Communications Inc. and Subsidiaries
Management’s Discussion and Analysis ofFinancialCondition and Results of Operations continued