XML 79 R18.htm IDEA: XBRL DOCUMENT

Sale of Equipment Installment Receivables

9 Months Ended

Sep. 30, 2019

Finance Receivables Disclosure[Text Block]

NOTE 9. SALES OF RECEIVABLES

We have agreements with various third-party financial institutions pertaining to the sales of certain types of our accounts receivable. The most significant of these programs are discussed in detail below and generally consist of (1) receivables arising from equipment installment plans, which are sold for cash and a deferred purchase price, and (2) receivables related to our WarnerMedia business. Under these programs, we transfer receivables to purchasers in exchange for cash and additional consideration upon settlement of the receivables, where applicable. Under the terms of our agreements for these programs, we continue to bill and collect the payments from our customers on behalf of the financial institutions.

The sales of receivables did not have a material impact on our consolidated statements of income or to “Total Assets” reported on our consolidated balance sheets. We reflect cash receipts on sold receivables as cash flows from operations in our consolidated statements of cash flows. Cash receipts on the deferred purchase price are classified as cash flows from investing activities.

Our equipment installment and WarnerMedia programs are discussed in detail below. A summary of the receivables and accounts being serviced is as follows:

		September 30, 2019				December 31, 2018
		Equipment				Equipment
		Installment		WarnerMedia		Installment		WarnerMedia
Gross receivables:		$	4,425	$	3,147	$	5,994	$	-
Balance sheet classification
Accounts receivable
Notes receivable			2,528		-		3,457		-
Trade receivables			460		2,626		438		-
Other Assets
Noncurrent notes and trade receivables			1,437		521		2,099		-

Outstanding portfolio of receivables derecognized from our consolidated balance sheets			9,405		3,456		9,065		-
Cash proceeds received, net of remittances¹			6,920		3,456		6,508		-
¹	Represents amounts to which financial institutions remain entitled, excluding the deferred purchase price.

Equipment Installment Receivables

We offer our customers the option to purchase certain wireless devices in installments over a specified period of time and, in many cases, once certain conditions are met, they may be eligible to trade in the original equipment for a new device and have the remaining unpaid balance paid or settled.

We maintain a program under which we transfer a portion of these receivables in exchange for cash and additional consideration upon settlement of the receivables, referred to as the deferred purchase price. In the event a customer trades in a device prior to the end of the installment contract period, we agree to make a payment to the financial institutions equal to any outstanding remaining installment receivable balance. Accordingly, we record a guarantee obligation for this estimated amount at the time the receivables are transferred.

The following table sets forth a summary of equipment installment receivables sold during the three and nine months ended September 30, 2019 and 2018:

		Three months ended				Nine months ended
		September 30,				September 30,
		2019		2018		2019		2018
Gross receivables sold		$	2,098	$	2,161	$	7,043	$	7,077
Net receivables sold¹			2,014		2,064		6,693		6,670
Cash proceeds received			1,700		1,752		5,895		5,679
Deferred purchase price recorded			352		335		922		1,161
Guarantee obligation recorded			67		75		261		270
¹	Receivables net of allowance, imputed interest and equipment trade-in right guarantees.

The deferred purchase price and guarantee obligation are initially recorded at estimated fair value and subsequently carried at the lower of cost or net realizable value. The estimation of their fair values is based on remaining installment payments expected to be collected and the expected timing and value of device trade-ins. The estimated value of the device trade-ins considers prices offered to us by independent third parties that contemplate changes in value after the launch of a device model. The fair value measurements used for the deferred purchase price and the guarantee obligation are considered Level 3 under the Fair Value Measurement and Disclosure framework (see Note 7).

The following table shows the previously transferred equipment installment receivables, which we repurchased in exchange for the associated deferred purchase price during the three and nine months ended September 30, 2019 and 2018:

		Three months ended				Nine months ended
		September 30,				September 30,
		2019		2018		2019		2018
Fair value of repurchased receivables		$	268	$	-	$	926	$	1,481
Carrying value of deferred purchase price			259		-		891		1,393
Gain (loss) on repurchases¹		$	9	$	-	$	35	$	88
¹	These gains (losses) are included in “Selling, general and administrative” in the consolidated statements of income.

At September 30, 2019 and December 31, 2018, our deferred purchase price receivable was $2,300 and $2,370, respectively, of which $1,605 and $1,448 are included in “Other current assets” on our consolidated balance sheets, with the remainder in “Other Assets.” The guarantee obligation at September 30, 2019 and December 31, 2018 was $427 and $439, respectively, of which $152 and $196 are included in “Accounts payable and accrued liabilities” on our consolidated balance sheets, with the remainder in “Other noncurrent liabilities.” Our maximum exposure to loss as a result of selling these equipment installment receivables is limited to the total amount of our deferred purchase price and guarantee obligation.

WarnerMedia Receivables

In March 2019, we entered into a revolving agreement to transfer $1,400 of certain receivables from our WarnerMedia business to various financial institutions on a recurring basis in exchange for cash equal to the gross receivables transferred. As customers pay their balances, we transfer additional receivables into the program, resulting in our gross receivables sold exceeding net cash flow impacts (e.g., collect and reinvest). In June 2019, we expanded the program another $2,600 for a total maximum outstanding amount of $4,000, of which approximately $3,456 is outstanding at September 30, 2019. The transferred receivables are fully guaranteed by our subsidiary, which holds additional receivables in the amount of $,3147 that are pledged as collateral under this agreement. The transfers are recorded at fair value of the proceeds received and obligations assumed less derecognized receivables. Our maximum exposure to loss related to selling these receivables is limited to the amount outstanding.

The following table sets forth a summary of WarnerMedia receivables sold during the three and nine months ended September 30, 2019 and 2018:

		Three months ended				Nine months ended
		September 30,				September 30,
		2019		2018		2019		2018
Gross receivables sold/cash proceeds received¹		$	2,873	$	-	$	8,725	$	-
Collections reinvested under revolving agreement			2,873		-		5,000		-
Collections not reinvested			269		-		269		-
Net cash proceeds received (remitted)		$	(269)	$	-	$	3,456	$	-

Net receivables sold²		$	2,864	$	-	$	8,361	$	-
Obligations recorded			39		-		475		-
¹	Includes initial sale of receivables of $0 for the three months ended and $3,725 for the nine months ended September 30, 2019.
²	Receivables net of allowance, return and incentive reserves and imputed interest