America Online 2015 Annual Report Download - page 46

When we bundle equipment with maintenance and monitoring
services, we recognize equipment revenue when the equipment is
installed in accordance with contractual specifications and ready
for the customer’s use. The maintenance and monitoring services
are recognized monthly over the term of the contract as we provide
the services.
Installation- related fees, along with the associated costs up to but not
exceeding these fees, are deferred and amortized over the estimated
customer relationship period.
Other
Advertising revenues are generated through display advertising and
search advertising. Display advertising revenue is generated by the
display of graphical advertisements and other performance-based
advertising. Search advertising revenue is generated when a consumer
clicks on a text-based advertisement on their screen. Agreements for
advertising typically take the forms of impression-based contracts,
time-based contracts or performance-based contracts. Advertising
revenues derived from impression-based contracts, in which we
provide impressions in exchange for a fixed fee, are generally recog-
nized as the impressions are delivered. Advertising revenues derived
from time-based contracts, in which we provide promotions over a
specified time period for a fixed fee, are recognized on a straight-line
basis over the term of the contract, provided that we meet and will
continue to meet our obligations under the contract. Advertising
revenues derived from contracts where we are compensated based
on certain performance criteria are recognized as we complete the
contractually specified performance.
We report taxes imposed by governmental authorities on revenue-
producing transactions between us and our customers on a net basis.
Maintenance and Repairs
We charge the cost of maintenance and repairs, including the cost of
replacing minor items not constituting substantial betterments, princi-
pally to Cost of services as these costs are incurred.
Advertising Costs
Costs for advertising products and services as well as other pro-
motional and sponsorship costs are charged to Selling, general and
administrative expense in the periods in which they are incurred
(see Note15).
Earnings Per Common Share
Basic earnings per common share are based on the weighted- average
number of shares outstanding during the period. Where appropriate,
diluted earnings per common share include the dilutive effect of shares
issuable under our stock-based compensation plans.
There were a total of approximately 8million, 7million and 8million
outstanding dilutive securities, primarily consisting of restricted stock
units, included in the computation of diluted earnings per common
share for the years ended December31, 2015, 2014 and 2013,
respectively. For the year ended December31, 2015, there were no
outstanding options to purchase shares that would have been anti-
dilutive. Outstanding options to purchase shares that were not included
in the computation of diluted earnings per common share, because to
do so would have been anti- dilutive for the period, were not significant
for the years ended December31, 2014 and 2013, respectively.
On January28, 2014, at a special meeting of our shareholders, we
received shareholder approval to increase our authorized shares of
common stock by 2billion shares to an aggregate of 6.25billion autho-
rized shares of common stock. On February4, 2014, this authorization
became effective. On February21, 2014, we issued approximately
1.27billion shares of common stock upon completing the acquisition of
Vodafone Group Plc’s indirect 45% interest in Cellco Partnership d/b/a
Verizon Wireless. See Note2 for additional information.
Cash and Cash Equivalents
We consider all highly liquid investments with a maturity of 90 days
or less when purchased to be cash equivalents. Cash equivalents are
stated at cost, which approximates quoted market value and include
amounts held in money market funds.
Marketable Securities
We have investments in marketable securities, which are consid-
ered “ available-for-sale” under the provisions of the accounting
standard for certain debt and equity securities, and are included in
the accompanying consolidated balance sheets in Short-term invest-
ments or Other assets. We continually evaluate our investments in
marketable securities for impairment due to declines in market value
considered to be other-than- temporary. That evaluation includes, in
addition to persistent, declining stock prices, general economic and
company- specific evaluations. In the event of a determination that a
decline in market value is other-than- temporary, a charge to earnings
is recorded for the loss, and a new cost basis in the investment is
established.
Allowance for Doubtful Accounts
Accounts receivable are recorded in the consolidated financial
statements at cost net of an allowance for credit losses. 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.
Similar to traditional service revenue accounting treatment, we record
device installment plan bad debt expense based on an estimate of
the percentage of equipment revenue that will not be collected. This
estimate is based on a number of factors including historical write-off
experience, credit quality of the customer base and other factors such
as macroeconomic conditions. Due to the device installment plan
being incorporated in the standard Verizon Wireless bill, the collection
and risk strategies continue to follow historical practices. We monitor
the aging of our accounts with device installment plan receivables and
write off account balances if collection efforts are unsuccessful and
future collection is unlikely.
Inventories
Inventory consists of wireless and wireline equipment held for sale,
which is carried at the lower of cost (determined principally on either
an average cost or first-in, first-out basis) or market.
Plant and Depreciation
We record plant, property and equipment at cost. Plant, property and
equipment are generally depreciated on a straight-line basis.
Leasehold improvements are amortized over the shorter of the
estimated life of the improvement or the remaining term of the related
lease, calculated from the time the asset was placed in service.
When depreciable assets are retired or otherwise disposed of, the
related cost and accumulated depreciation are deducted from the
plant accounts, and any gains or losses on disposition are recognized
in income.
44 Verizon Communications Inc. and Subsidiaries
Notes to Consolidated Financial Statements continued