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Sale of Equipment Installment Receivables
6 Months Ended
Jun. 30, 2014
Changes In Other Assets [Abstract]  
Finance Receivables [Text Block]

NOTE 8. SALE OF EQUIPMENT INSTALLMENT RECEIVABLES

We offer our customers the option to purchase certain wireless devices in installments over a period of up to 24 months, with the right to trade in the original equipment for a new device and have the remaining unpaid balance satisfied. As of June 30, 2014, gross equipment installment receivables of $2,427 were included on our consolidated balance sheets.

 

On June 27, 2014, we entered into uncommitted agreements pertaining to the sale of equipment installment receivables and related security with Citibank, N.A. and various other relationship banks as purchasers (collectively, the Purchasers) with a funding amount not expected to exceed $2,000 at any given time. Under the agreement, we may transfer the receivables to the Purchasers for cash and additional consideration upon settlement of the receivables. Under the terms of the arrangement, we continue to bill and collect on behalf of our customers for the receivables sold.

 

On June 27, 2014, we sold to the Purchasers equipment installment receivables totaling $1,637 (or $1,391 net of allowance, imputed interest and trade-in right guarantees) and received cash proceeds of $819 and will collect the remaining balance over the remaining term of the equipment installment contracts. We have recorded a deferred purchase price of $565 that assumes customers elect to trade-in their device and agree to a new contract with AT&T; however, if customers choose not to trade-in, we expect to receive the remaining installments. The deferred purchase price was recorded at estimated fair value, which was based on remaining installment payments expected to be collected, adjusted by the expected timing and value of the device trade-ins. The value of the device trade-ins considers estimated prices offered to us by independent, third parties that contemplate changes in value after the launch of a device. Our maximum exposure to loss as a result of selling these is limited to the amount of our deferred purchase price at any point in time.

 

This transaction did not have a material impact in our consolidated statements of income or to “Total Assets” reported on our consolidated balance sheet. We will reflect the cash flows related to the arrangement as operating activities in our consolidated statements of cash flows because the cash received from the Purchasers upon both the sale of the receivables and the collection of the deferred purchase price is not subject to significant interest rate risk.