Installment Receivables

Certain subscribers have the option to purchase handsets in installments over a 24-month period. The carrying value of installment receivables approximates fair value because the receivables are recorded at their present value, net of the deferred interest and allowance for credit losses. At the time of sale, we impute the interest on the installment receivable and record it as a reduction to equipment revenue and as a reduction to the face amount of the related receivable. Interest income is recognized over the term of the installment contract as operating revenue. Short-term installment receivables are recorded in "Accounts and notes receivable, net" and long-term installment receivables are recorded in "Other assets" in the consolidated balance sheets.

The following table summarizes the installment receivables:



	Successor
	September 30, 2014			March 31, 2014
	(in millions)
Installment receivables, gross	$	1,494		$	740
Deferred interest	(133		)	(77		)
Installment receivables, net of deferred interest	1,361			663
Allowance for credit losses	(141		)	(47		)
Installment receivables, net	$	1,220		$	616

Classified on the consolidated balance sheets as:
Accounts and notes receivable, net	$	818		$	299
Other assets	402			317
Installment receivables, net	$	1,220		$	616

We categorize our installment receivables as prime and subprime based upon subscriber credit profiles and as unbilled, billed-current and billed-past due based upon the age of the receivable. We use proprietary scoring systems that measure the credit quality of our receivables using several factors, such as credit bureau information, subscriber credit risk scores and service plan characteristics. Payment history is subsequently monitored to further evaluate credit profiles. Prime subscriber receivables are those with lower delinquency risk and subprime subscriber receivables are those with higher delinquency risk. Subscribers within the subprime category may be required to pay a down payment on their equipment purchases. In addition, certain subscribers within the subprime category are required to pay an advance deposit. Installment receivables for which invoices have not yet been generated for the customer are considered unbilled. Installment receivables for which invoices have been generated but which are not past the contractual due date are considered billed - current. Installment receivables for which invoices have been generated and the payment is approximately ten days past the contractual due date are considered billed - past due. Account balances are written-off if collection efforts were unsuccessful and future collection is unlikely based on the length of time from the day accounts become past due.

The balance and aging of installment receivables on a gross basis by credit category were as follows:



	Successor
	September 30, 2014						March 31, 2014
	Prime		Subprime		Total		Prime		Subprime		Total
	(in millions)
Unbilled	$	1,003	$	384	$	1,387	$	466	$	242	$	708
Billed - current	45		22		67		16		9		25
Billed - past due	17		23		40		5		2		7
Installment receivables, gross	$	1,065	$	429	$	1,494	$	487	$	253	$	740

Activity in the deferred interest and allowance for credit losses for the installment receivables for the six-month period ended September 30, 2014 was as follows:



	Successor
	Six Months Ended September 30,			Three Months Ended March 31,
	2014			2014
	(in millions)
Deferred interest and allowance for credit losses, beginning of period	$	124		$	13
Bad debt expense	188			44
Write-offs, net of recoveries	(94		)	—
Change in deferred interest on short-term and long-term installment receivables	56			67
Deferred interest and allowance for credit losses, end of period	$	274		$	124