Sprint - Nextel 2014 Annual Report Download - page 108

Table of Contents
Index to Consolidated Financial Statements
SPRINT CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
F-25
Note 6. Property, Plant and Equipment
Property, plant and equipment consists primarily of network equipment and other long-lived assets used to provide
service to our subscribers. As a result of the modernization of our network and shut-down of the Nextel platform, estimated
useful lives of related equipment were shortened, causing incremental depreciation charges during this period of
implementation. The incremental effect of accelerated depreciation expense totaled approximately $800 million and $360
million for the Predecessor 191-day period ended July 10, 2013 and unaudited three month-period March 31, 2013,
respectively, and $2.1 billion for the Predecessor year ended December 31, 2012, of which the majority related to shortened
useful lives of Nextel platform assets for all periods.
The following table presents the components of property, plant and equipment, and the related accumulated
depreciation:
March 31,
2015 2014
(in millions)
Land $ 266 $ 265
Network equipment, site costs and related software 18,990 14,902
Buildings and improvements 754 745
Non-network internal use software, office equipment, leased devices and other 2,979 866
Construction in progress 2,090 1,970
Less: accumulated depreciation (5,358) (2,449)
Property, plant and equipment, net $ 19,721 $ 16,299
Network equipment, site costs and related software includes switching equipment, cell site towers, site
development costs, radio frequency equipment, network software, digital fiber optic cable, transport facilities and
transmission-related equipment. Buildings and improvements principally consists of owned general office facilities, retail
stores and leasehold improvements. Non-network internal use software, office equipment, leased devices and other primarily
consists of furniture, information technology systems, equipment and vehicles, and leased devices. Construction in progress,
which is not depreciated until placed in service, primarily includes materials, transmission and related equipment, labor,
engineering, site development costs, interest and other costs relating to the construction and development of our network.
Non-cash accruals included in property, plant and equipment totaled $1.5 billion, $2.0 billion and $2.4 billion for the
Successor year ended March 31, 2015, three-months ended March 31, 2014 and year ended December 31, 2013.
In September 2014, Sprint introduced a leasing program, whereby qualified subscribers can lease a device for a
contractual period of time. At the end of the lease term, the subscriber has the option to turn in their device, continue leasing
their device, or purchase the device. As of March 31, 2015, substantially all of our device leases were classified as operating
leases. At lease inception, the devices leased through Sprint's direct channels are reclassified from inventory to property, plant
and equipment. For those devices leased through indirect channels, Sprint will purchase the device to be leased from the
retailer at lease inception. The devices are then depreciated using the straight-line method to their estimated residual value at
the end of the lease term.
The following table presents leased devices and the related accumulated depreciation:
March 31,
2015 2014
(in millions)
Leased devices $ 1,974 $ —
Less: accumulated depreciation (197) —
Leased devices, net $ 1,777 $ —
During the year ended March 31, 2015 there were non-cash additions to leased devices of approximately $1.4
billion along with a corresponding decrease in "Device and accessory inventory" of approximately $1.2 billion and a
corresponding increase in "Accounts payable" of approximately $182 million for devices purchased from indirect dealers that
were leased to our subscribers.