Sprint - Nextel 2012 Annual Report Download - page 132

Table of Contents
SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
international equities;
15% to fixed income investments; 10% to real estate investments; and 10% to other investments including hedge funds. Actual
allocations are allowed to deviate from target allocation percentages by plus or minus 5%. As of January 1, 2013, the target allocation percentage
assigned to each asset class was revised as follows:
41% to U.S. equities; 18% to international equities; 21% to fixed income investments; 10% to real
estate investments; and
10% to other investments including hedge funds. The long - term expected rate of return on investments for funding purposes
for 2013 is 7.75% .
Investments of the pension plan are measured at fair value on a recurring basis which is determined using quoted market prices or
estimated fair values. As of December 31, 2012 , 54% of the investment portfolio was valued at quoted prices in active markets for identical assets; 28%
was valued using quoted prices for similar assets in active or inactive markets, or other observable inputs; and
18% was valued using unobservable
inputs that are supported by little or no market activity.
Under our defined contribution plan, participants may contribute a portion of their eligible pay to the plan through payroll withholdings.
For 2012 and 2011, the Company matched 50% of participants' contributions up to 2% of their eligible compensation for a total of $30 million and $31
million , respectively, in fixed matching contributions. The Company also made discretionary matching contributions, as determined by the Board of
Directors of the Company, equal to 100% of participants' contributions up to 3.95% of eligible compensation, or $60 million , and 1.2% of eligible
compensation, or
$20 million , in 2012 and 2011, respectively, based upon the attainment of certain profitability levels. For 2010, the amount of matching
contribution was discretionary only, as determined by the Board of Directors of the Company based upon a formula related to the profitability of the
Company, resulting in a match equal to
100% of the participant's contributions up to 0.7% of their eligible compensation, totaling $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 and miscellaneous fees such as activation fees, directory assistance, roaming, equipment
protection, late payment and early termination charges, and certain regulatory related fees, net of service credits. We recognize service revenues as
services are rendered and equipment revenue when title and risk of loss passes to the indirect dealer or end
- use customer, assuming all other revenue
recognition criteria are met. Incentives to retain and acquire subscribers, such as new devices at discounted prices, are recorded as a reduction to
equipment revenue upon activation of the device with a service contract. 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 voice 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
2012, 2011 and 2010.
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
- use customer 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
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