Sprint - Nextel 2010 Annual Report Download - page 68

The offset to the pension liability is recorded in equity as a component of "Accumulated other comprehensive loss,"
net of tax, including the 2010 and 2009 adjustments of $139 million and $140 million, respectively. The change in the net
liability of the plan in 2010 was affected primarily by a decrease in the discount rate, from 6.75% to 6.0%, used to estimate the
projected benefit obligation. We intend to make future cash contributions to the pension plan in an amount necessary to meet
minimum funding requirements according to applicable benefit plan regulations.
Under our defined contribution plan, participants may contribute a portion of their eligible pay to the plan through
payroll withholdings. The Company matched 100% of participants' contributions up to 5% of their eligible compensation in
2008 and 4% of their eligible compensation from January 1, 2009 to March 6, 2009. These fixed matching contributions
totaled $32 million and $119 million in 2009 and 2008, respectively. Effective for compensation paid after March 6, 2009
through 2010, the amount of matching contribution is discretionary as determined by the Board of Directors of the Company,
based upon a formula related to the profitability of the Company. If such profitability level is attained, the Company could
match a percentage of the participant's contributions up to a maximum percentage of their eligible compensation as determined
by the Board. For the remainder of 2009, we matched 100% of the participants' contributions up to 1.13% of their eligible
compensation in cash, totaling $20 million and for 2010, the amount of the discretionary match was 0.7%, or $9 million.
Revenue Recognition
Operating revenues primarily consist of wireless service revenues, revenues generated from device and accessory
sales, revenues from wholesale operators and third party affiliates (Affiliates), as well as long distance voice, data and Internet
revenues. Service revenues consist of fixed monthly recurring charges, variable usage charges such as roaming, data, text
messaging, and premium service usage and miscellaneous fees, such as activation, upgrade, late payment, reconnection and
early termination fees and certain regulatory related fees. We recognize service revenues as services are rendered and
equipment revenue when title passes to the dealer or end-user subscriber. We recognize revenue for access charges and other
services charged at fixed amounts ratably over the service period, net of credits and adjustments for service discounts, billing
disputes and fraud or unauthorized usage. We recognize excess wireless usage and long distance revenue at contractual rates
per minute as minutes are used. Additionally, we recognize excess wireless data usage based on kilobytes and one-time use
charges, such as for the use of premium services, when rendered. As a result of the cutoff times of our multiple billing cycles
each month, we are required to estimate the amount of subscriber revenues earned but not billed from the end of each billing
cycle to the end of each reporting period. These estimates are based primarily on rate plans in effect and our historical usage
and billing patterns. Regulatory fees and costs are recorded gross. The largest component of the regulatory fees is universal
service fund, which represented about 2% of net operating revenues in 2010, 2009 and 2008.
The accounting estimates related to the recognition of revenue in the results of operations require us to make
assumptions about future billing adjustments for disputes with subscribers, unauthorized usage, future returns and mail-in
rebates on device sales.
Dealer Commissions
Cash consideration given by us to a dealer or end-user subscriber is presumed to be a reduction of revenue unless we
receive, or will receive, an identifiable benefit in exchange for the consideration, and the fair value of such benefit can be
reasonably estimated, in which case the consideration will be recorded as a selling expense. We compensate our dealers using
specific compensation programs related to the sale of our devices and our subscriber service contracts, or both. When a
commission is earned by a dealer solely due to a selling activity relating to wireless service, the cost is recorded as a selling
expense. When a commission is earned by a dealer due to the dealer selling one of our devices, the cost is recorded as a
reduction to equipment revenue.
Advertising Costs
We recognize advertising expense when incurred as selling, general and administrative expense. Advertising
expenses totaled $1.4 billion for the year ended December 31, 2010, and $1.5 billion for each of the years ended December 31,
2009 and 2008.
Table of Contents SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
F-11