v3.24.3
Sales of Certain Receivables
 9 Months Ended
Sep. 30, 2024
Transfers and Servicing [Abstract]  
Sales of Certain Receivables
Note 5 – Sales of Certain Receivables

We regularly enter into transactions to sell certain service accounts receivable and EIP receivables. The transactions, including our continuing involvement with the sold receivables and the respective impacts to our condensed consolidated financial statements, are described below.

Sales of EIP Receivables

Overview of the Transaction

In 2015, we entered into an arrangement to sell certain EIP receivables on a revolving basis (the “EIP Sale Arrangement”), which has been revised and extended from time to time. As of both September 30, 2024, and December 31, 2023, the EIP Sale Arrangement provided funding of $1.3 billion.

In connection with this EIP Sale Arrangement, we formed a wholly owned subsidiary, which qualifies as a bankruptcy remote entity (the “EIP BRE”). We consolidate the EIP BRE under the VIE model.

The following table summarizes the carrying amounts and classification of assets, which consist primarily of the deferred purchase price, included on our Condensed Consolidated Balance Sheets with respect to the EIP BRE:
(in millions)September 30,
2024		December 31,
2023
Other current assets$347 $348 
Other assets99 103 
Sales of Service Accounts Receivable

Overview of the Transaction

In 2014, we entered into an arrangement to sell certain service accounts receivable on a revolving basis (the “Service Receivable Sale Arrangement”), which has been revised and extended from time to time. On February 27, 2024, we extended the scheduled expiration date of the Service Receivable Sale Arrangement to February 25, 2025. As of both September 30, 2024, and December 31, 2023, the Service Receivable Sale Arrangement provided funding of $775 million.

In connection with the Service Receivable Sale Arrangement, we formed a wholly owned subsidiary, which qualifies as a bankruptcy remote entity, to sell service accounts receivable (the “Service BRE”). We consolidate the Service BRE under the VIE model.

The following table summarizes the carrying amounts and classification of assets, which consist primarily of the deferred purchase price, and liabilities included on our Condensed Consolidated Balance Sheets with respect to the Service BRE:
(in millions)September 30,
2024		December 31,
2023
Other current assets$182 $209 
Other current liabilities421 373 

Sales of Receivables

The following table summarizes the impact of the sale of certain service accounts receivable and EIP receivables on our Condensed Consolidated Balance Sheets:
(in millions)September 30,
2024		December 31,
2023
Derecognized net service accounts receivable and EIP receivables$2,284 $2,388 
Other current assets529 557 
of which, deferred purchase price527 555 
Other long-term assets99 103 
of which, deferred purchase price99 103 
Other current liabilities421 373 
Net cash proceeds since inception1,495 1,583 
Of which:
Change in net cash proceeds during the year-to-date period(88)(114)
Net cash proceeds funded by reinvested collections1,583 1,697 

At inception, we elected to measure the deferred purchase price at fair value with changes in fair value included in Selling, general and administrative expenses on our Condensed Consolidated Statements of Comprehensive Income. The fair value of the deferred purchase price is determined based on a discounted cash flow model which uses primarily Level 3 inputs, including estimated customer default rates and credit worthiness, dilutions and recoveries. As of September 30, 2024, and December 31, 2023, our deferred purchase price related to the sales of service accounts receivable and EIP receivables was $626 million and $658 million, respectively.

We recognized losses from sales of receivables, including changes in fair value of the deferred purchase price, of $23 million and $46 million for the three months ended September 30, 2024 and 2023, respectively, and $69 million and $135 million for the nine months ended September 30, 2024 and 2023, respectively, in Selling, general and administrative expenses on our Condensed Consolidated Statements of Comprehensive Income.

Subsequent to September 30, 2024, on October 22, 2024, we executed an amendment to the EIP Sale Arrangement and an amendment to the Service Receivable Sale Arrangement (together, the “Pledge Amendments”). Currently, the credit enhancement feature of each of the EIP Sale Arrangement and the Service Receivable Sale Arrangement consists of additional receivables sold in excess of the funding commitments and such additional receivables are represented by a deferred purchase price for each arrangement, consisting of a receivable from the purchasers that entitles us to certain collections on the receivables.
Pursuant to the Pledge Amendments, effective on November 1, 2024, the credit enhancement feature of each arrangement will instead consist of such additional receivables pledged to the purchasers instead of sold. Following the effective date of the Pledge Amendments, all cash proceeds associated with the sale of such receivables, a portion of which is currently recognized as Proceeds related to beneficial interests in securitization transactions within Net cash used in investing activities on our Condensed Consolidated Statements of Cash Flows, will be recognized as operating cash flows. In addition, the Pledge Amendment for the EIP Sale Arrangement also extends the scheduled expiry date of such arrangement to November 18, 2025.

Continuing Involvement

Pursuant to the sale arrangements described above, we have continuing involvement with the service accounts receivables and EIP receivables we sell as we service the receivables, are required to repurchase certain receivables, including ineligible receivables, aged receivables and receivables where a write-off is imminent, and may be responsible for absorbing credit losses through reduced collections on our deferred purchase price assets. We continue to service the customers and their related receivables, including facilitating customer payment collection, in exchange for a monthly servicing fee. As the receivables are sold on a revolving basis, the customer payment collections on sold receivables may be reinvested in new receivable sales. At the direction of the purchasers of the sold receivables, we apply the same policies and procedures while servicing the sold receivables as we apply to our owned receivables, and we continue to maintain normal relationships with our customers.