Verizon Wireless 2014 Annual Report Download - page 49

47
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
components of an entity is required to be reported in discontinued oper-
ations if the disposal represents a strategic shift that has, or will have, a
major eect on an entity’s operations and nancial results. We will adopt
this standard update during the rst quarter of 2015. We are currently
evaluating the impact that this standard update will have on our consoli-
dated nancial statements.
In May 2014, the accounting standard update related to the recogni-
tion of revenue from contracts with customers was issued. This standard
update claries the principles for recognizing revenue and develops a
common revenue standard for U.S. GAAP and International Financial
Reporting Standards. The standard update intends to provide a more
robust framework for addressing revenue issues; improve comparability
of revenue recognition practices across entities, industries, jurisdictions,
and capital markets; and provide more useful information to users of
nancial statements through improved disclosure requirements. Upon
adoption of this standard update, we expect that the allocation and
timing of revenue recognition will be impacted. We expect to adopt this
standard update during the rst quarter of 2017.
There are two adoption methods available for implementation of the
standard update related to the recognition of revenue from contracts
with customers. Under one method, the guidance is applied retro-
spectively to contracts for each reporting period presented, subject to
allowable practical expedients. Under the other method, the guidance
is applied to contracts not completed as of the date of initial applica-
tion, recognizing the cumulative eect of the change as an adjustment
to the beginning balance of retained earnings, and also requires addi-
tional disclosures comparing the results to the previous guidance. We are
currently evaluating these adoption methods and the impact that this
standard update will have on our consolidated nancial statements.
In June 2014, the accounting standard update related to the accounting
for share-based payments when the terms of an award provide that a
performance target could be achieved after the requisite service period
was issued. The standard update resolves the diverse accounting treat-
ment for these share-based payments by requiring that a performance
target that aects vesting and that could be achieved after the requisite
service period be treated as a performance condition. The requisite ser-
vice period ends when the employee can cease rendering service and
still be eligible to vest in the award if the performance target is achieved.
We will adopt this standard update during the rst quarter of 2016. The
adoption of this standard update is not expected to have a signicant
impact on our consolidated nancial statements.
In January 2015, the accounting standard update related to the reporting
of extraordinary and unusual items was issued. This standard update
eliminates the concept of extraordinary items from U.S. GAAP as part of
an initiative to reduce complexity in accounting standards while main-
taining or improving the usefulness of the information provided to the
users of the nancial statements. The presentation and disclosure guid-
ance for items that are unusual in nature or occur infrequently will be
retained and expanded to include items that are both unusual in nature
and infrequent in occurrence. This standard update is eective as of the
rst quarter of 2016; however, earlier adoption is permitted.
NOTE 2
ACQUISITIONS AND DIVESTITURES
Wireless
Wireless Transaction
On September 2, 2013, Verizon entered into a stock purchase agreement
(the Stock Purchase Agreement) with Vodafone Group Plc (Vodafone) and
Vodafone 4 Limited (Seller), pursuant to which Verizon agreed to acquire
Vodafone’s indirect 45% interest in Cellco Partnership d/b/a Verizon
Wireless (the Partnership, and such interest, the Vodafone Interest) for
aggregate consideration of approximately $130 billion.
On February 21, 2014, pursuant to the terms and subject to the conditions
set forth in the Stock Purchase Agreement, Verizon acquired (the Wireless
Transaction) from Seller all of the issued and outstanding capital stock (the
Transferred Shares) of Vodafone Americas Finance 1 Inc., a subsidiary of
Seller (VF1 Inc.), which indirectly through certain subsidiaries (together
with VF1 Inc., the Purchased Entities) owned the Vodafone Interest. In
consideration for the Transferred Shares, upon completion of the Wireless
Transaction, Verizon (i) paid approximately $58.89 billion in cash, (ii) issued
approximately 1.27 billion shares of Verizon’s common stock, par value
$0.10 per share (the Stock Consideration), which was valued at approxi-
mately $61.3 billion at the closing of the Wireless Transaction, (iii) issued
senior unsecured Verizon notes in an aggregate principal amount of
$5.0 billion (the Verizon Notes), (iv) sold Verizon’s indirectly owned 23.1%
interest in Vodafone Omnitel N.V. (Omnitel, and such interest, the Omnitel
Interest), valued at $3.5 billion and (v) provided other consideration,
which included the assumption of preferred stock valued at approxi-
mately $1.7 billion. The total cash paid to Vodafone and the other costs
of the Wireless Transaction, including nancing, legal and bank fees, were
nanced through the incurrence of third-party indebtedness. See Note 8
for additional information.
In accordance with the accounting standard on consolidation, a change
in a parent’s ownership interest while the parent retains a controlling
nancial interest in its subsidiary is accounted for as an equity transaction
and remeasurement of assets and liabilities of previously controlled and
consolidated subsidiaries is not permitted. As a result, we accounted for
the Wireless Transaction by adjusting the carrying amount of the noncon-
trolling interest to reect the change in Verizon’s ownership interest in the
Partnership. Any dierence between the fair value of the consideration
paid and the amount by which the noncontrolling interest is adjusted has
been recognized in equity attributable to Verizon.
Omnitel Transaction
On February 21, 2014, Verizon and Vodafone also consummated the sale
of the Omnitel Interest (the Omnitel Transaction) by a subsidiary of Verizon
to a subsidiary of Vodafone in connection with the Wireless Transaction
pursuant to a separate share purchase agreement. As a result, during
2014, we recognized a pre-tax gain of $1.9 billion on the disposal of the
Omnitel interest in Equity in earnings of unconsolidated businesses on
our consolidated statement of income.
Verizon Notes (Non-Cash Transaction)
The Verizon Notes were issued pursuant to Verizon’s existing indenture.
The Verizon Notes were issued in two separate series, with $2.5 billion
due February 21, 2022 (the eight-year Verizon Notes) and $2.5 billion due
February 21, 2025 (the eleven-year Verizon Notes). The Verizon Notes bear
interest at a oating rate, which will be reset quarterly, with interest payable
quarterly in arrears, beginning May 21, 2014. The eight-year Verizon notes
bear interest at a oating rate equal to three-month London Interbank