Verizon Wireless 2010 Annual Report Download - page 49

Notes to Consolidated Financial Statements continued
47
Installation related fees, along with the associated costs up to but not
exceeding these fees, are deferred and amortized over the estimated cus-
tomer relationship period.
We report taxes imposed by governmental authorities on revenue-pro-
ducing transactions between us and our customers on a net basis.
Discontinued Operations, Assets Held for Sale, and Sales of
Businesses and Investments
We classify as discontinued operations for all periods presented any com-
ponent of our business that we hold for sale that has operations and
cash flows that are clearly distinguishable operationally and for financial
reporting purposes.
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 and sales as these costs are incurred.
Advertising Costs
Costs for advertising products and services as well as other promotional
and sponsorship costs are charged to Selling, general and administrative
expense in the periods in which they are incurred (see Note 16).
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 3 million stock options and restricted
stock units outstanding to purchase shares included in the computation
of diluted earnings per common share for the year ended December 31,
2010. Dilutive stock options outstanding to purchase shares included in
the computation of diluted earnings per common share for the years
ended December 31, 2009 and 2008 were not significant. 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, including approximately 73 million, 112
million, and 158 million weighted-average shares for the years ended
December 31, 2010, 2009 and 2008, respectively.
We are authorized to issue up to 4.25 billion and 250 million shares of
common stock and Series Preferred Stock, respectively.
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 considered “avail-
able-for-sale” under the provisions of the accounting standard for certain
debt and equity securities. Marketable securities are included in the
accompanying consolidated balance sheets in Short-term investments,
Investments in unconsolidated businesses or Other assets. We continu-
ally 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.
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. Our local telephone
operations’ depreciation expense is principally based on the composite
group remaining life method and straight-line composite rates. This
method provides for the recognition of the cost of the remaining net
investment in local telephone plant, less anticipated net salvage value,
over the remaining asset lives. This method requires the periodic revision
of depreciation rates.
Plant, property and equipment of other wireline and wireless operations
are generally depreciated on a straight-line basis. The asset lives used by
our operations are presented in the following table:
Average Useful Lives (in years)
Buildings 15 – 45
Central office and other network equipment 3 – 15
Outside communications plant
Copper cable 15
Fiber cable (including undersea cable) 11 – 25
Poles, conduit and other 30 – 50
Furniture, vehicles and other 2 – 20
When we replace, retire or otherwise dispose of depreciable plant used
in our local telephone network, we deduct the carrying amount of such
plant from the respective accounts and charge it to accumulated depre-
ciation. When the depreciable assets of our other wireline and wireless
operations 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.
We capitalize and depreciate network software purchased or developed
along with related plant assets. We also capitalize interest associated with
the acquisition or construction of network-related assets. Capitalized
interest is reported as a reduction in interest expense and depreciated as
part of the cost of the network-related assets.
In connection with our ongoing review of the estimated remaining
average useful lives of plant, property and equipment at our local tele-
phone operations, we determined that there were no changes necessary
to average useful lives for 2010. We determined effective January 1, 2009
that the average useful lives of fiber cable (not including undersea cable)
would be increased to 25 years from 20 to 25 years and the average useful
lives of copper cable would be changed to 15 years from 13 to 18 years.
The changes to average useful lives of fiber cable did not have a signifi-
cant impact on depreciation expense. In connection with our ongoing