Sales Of Receivables

9 Months Ended

Sep. 30, 2020

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) revolving service and trade receivables. 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 revolving receivable programs are discussed in detail below. The following table sets forth a summary of the receivables and accounts being serviced:


	September 30, 2020				December 31, 2019
	Equipment				Equipment
	Installment		Revolving		Installment		Revolving
Gross receivables:	$	4,241	$	3,516	$	4,576	$	3,324
Balance sheet classification
Accounts receivable
Notes receivable	2,190		—		2,467		—
Trade receivables	481		3,329		477		2,809
Other Assets
Noncurrent notes and trade receivables	1,570		187		1,632		515

Outstanding portfolio of receivables derecognized from our consolidated balance sheets	8,238		5,100		9,713		4,300
Cash proceeds received, net of remittances1	5,944		5,100		7,211		4,300
1Represents amounts to which financial institutions remain entitled, excluding the deferred purchase price.

Equipment Installment Receivables Program

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 through our bankruptcy-remote subsidiary 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 under this program during the three and nine months ended September 30, 2020 and 2019:


	Three months ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019
Gross receivables sold	$	1,624	$	2,098	$	5,497	$	7,043
Net receivables sold1	1,578		2,014		5,300		6,693
Cash proceeds received	1,387		1,700		4,562		5,895
Deferred purchase price recorded	226		352		811		922
Guarantee obligation recorded	55		67		126		261
1Receivables 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 adjusted for changes in present value of expected cash flows. 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 presents 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, 2020 and 2019:


	Three months ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019
Fair value of repurchased receivables	$	373	$	268	$	946	$	926
Carrying value of deferred purchase price	373		259		931		891
Gain on repurchases1	$	—	$	9	$	15	$	35
1These gains are included in "Selling, general and administrative" in the consolidated statements of income.

At September 30, 2020 and December 31, 2019, our deferred purchase price receivable was $2,163 and $2,336, respectively, of which $1,538 and $1,569 are included in “Other current assets” on our consolidated balance sheets, with the remainder in “Other Assets.” The guarantee obligation at September 30, 2020 and December 31, 2019 was $319 and $384, respectively, of which $234 and $148 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.

Revolving Receivables Program

In 2019, we entered into a one-year revolving agreement to transfer up to $4,300 of certain receivables through our bankruptcy-remote subsidiaries to various financial institutions on a recurring basis in exchange for cash equal to the gross receivables transferred. In the first quarter of 2020, we expanded the program limit to $5,300. In the second quarter of 2020, we extended the agreement by one year. 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). The transferred receivables are fully guaranteed by our bankruptcy-remote subsidiaries, which hold additional receivables in the amount of $3,516 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. The obligation is subsequently adjusted for changes in estimated expected credit losses and interest rates. Our maximum exposure to loss related to these receivables transferred is limited to the amount outstanding.

The fair value measurement used for the obligation is considered Level 3 under the Fair Value Measurement and Disclosure framework (see Note 7).

The following table sets forth a summary of receivables sold:


	Three months ended				Nine months ended
	September 30,				September 30,
	2020		2019		2020		2019
Gross receivables sold/cash proceeds received1	$	3,563	$	2,873	$	11,590	$	8,725
Collections reinvested under revolving agreement	3,563		2,873		10,590		5,000
Collections not reinvested	200		269		200		269
Net cash proceeds received (remitted)	$	(200)	$	(269)	$	800	$	3,456

Net receivables sold2	$	3,553	$	2,864	$	11,510	$	8,361
Obligations recorded (reversed)	58		39		172		475
1There were no initial sales of receivables in either of the three-month periods and $1,000 and $3,725 for the nine months ended September 30, 2020 and 2019, respectively.
2Receivables net of allowance, return and incentive reserves and imputed interest.