Sales Of Receivables

9 Months Ended

Sep. 30, 2022

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 consists of receivables arising from equipment installment plans, which are sold for cash and a deferred purchase price. Under this program, we transfer receivables to purchasers in exchange for cash and additional consideration upon settlement of the receivables. Under the terms of our agreement for this program, we continue to service the transferred receivables on behalf of the financial institutions.

For the nine months ended September 30, 2022, cash flows from operating activities included net cash proceeds received from the sales of receivables of approximately $2,180, comprised of equipment installment receivable sales of $8,598, or approximately $1,540 cash received net of remittances paid, and approximately $640 from other programs. For the nine months ended September 30, 2021, net cash proceeds received from the sales of receivables were approximately $940, comprised of equipment installment receivable sales of $7,231, or approximately $940 cash received net of remittances paid.

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.

The following table sets forth a summary of the equipment installment receivables and accounts being serviced:


	September 30, 2022		December 31, 2021


Gross receivables:	$	4,309		$	4,361
Balance sheet classification
Accounts receivable
Notes receivable	1,894			1,846
Trade receivables	693			606
Other Assets
Noncurrent notes and trade receivables	1,722			1,909

Outstanding portfolio of receivables derecognized from our consolidated balance sheets	10,049			9,767
Cash proceeds received, net of remittances1	8,180			6,644
1Represents amounts to which financial institutions remain entitled, excluding the deferred purchase price.

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, 2022 and 2021:


	Three months ended				Nine months ended
	September 30,				September 30,
	2022		2021		2022		2021
Gross receivables sold	$	2,698	$	2,123	$	8,950	$	8,067
Net receivables sold1	2,590		2,069		8,623		7,858
Cash proceeds received	2,664		1,981		8,598		7,231
Deferred purchase price recorded	—		158		245		864
Guarantee obligation recorded	173		94		469		321
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 and 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, 2022 and 2021:


	Three months ended				Nine months ended
	September 30,				September 30,
	2022		2021		2022		2021
Fair value of repurchased receivables	$	1,386	$	471	$	3,314	$	1,094
Carrying value of deferred purchase price	1,395		440		3,335		1,019
Gain (loss) on repurchases1	$	(9)	$	31	$	(21)	$	75
1These gains (losses) are included in “Selling, general and administrative” in the consolidated statements of income.

At September 30, 2022 and December 31, 2021, our deferred purchase price receivable was $1,740 and $3,177, respectively, of which $821 and $2,123 are included in “Prepaid and other current assets” on our consolidated balance sheets, with the remainder in “Other Assets.” The guarantee obligation at September 30, 2022 and December 31, 2021 was $345 and $371, respectively, of which $64 and $101 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.