content_image/26165.jpg content_image/26166.jpg
<img src='content_image/26165.jpg'>

<img src='content_image/26166.jpg'>

## Principles of Consolidation 

The accounting policies of U.S. Cellular conform to accounting principles generally accepted in the United States of America (“GAAP”). The 

consolidated financial statements include the accounts of U.S. Cellular, its majority-owned subsidiaries since acquisition, and general partner- controlling financial interest. All material intercompany accounts and transactions have been eliminated. ships in which U.S. Cellular has a majority partnership interest or has a 

## Business Combinations 

U.S. Cellular uses the purchase method of accounting for business combinations. U.S. Cellular includes as investments in subsidiaries the value of the consideration given and all direct and incremental costs relating to acquisitions. All costs relating to unsuccessful negotiations for acquisitions are charged to expense. 

## Use of Estimates 

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect (a) the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and (b) the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. 

## Reclassifications 

Certain amounts reported in prior years have been reclassified to conform to current period presentation. The reclassifications had no impact on previously reported net income and shareholders’ equity. 

Prior to the fourth quarter of 2003, U.S. Cellular separately disclosed marketing and selling expenses and general and administrative expenses in its statements of operations. In the fourth quarter of 2003, U.S. Cellular combined the marketing and selling expense and general administrative expense captions into one caption designated as selling, general and administrative expense. Previously, costs for equipment sold to retain current customers were included in selling, general and administrative expense. Prior to the fourth quarter of 2003 and in part of 2002, these costs were partially offset by equipment sales revenues received from these customers. In part of 2002 and all of 2001, equip- ment sales revenues related to retaining current customers were included in equipment sales revenue. In the fourth quarter of 2003, U.S. Cellular changed its policy for classifying retention costs and has reclassified the equipment sales revenue and cost of equipment sold related to the retention of current customers out of selling, general and administrative expenses and into equipment sales revenues and cost of equipment sold, respectively, for each of the years presented. These reclassifications increased equipment sales revenues by $27.3 million and $13.1 million in 2003 and 2002, respectively, and increased cost of equipment sold by $106.6 million, $57.2 million and $42.7 million in 2003, 2002 and 2001, respectively. Selling, general and administrative expenses were reduced by $79.3 million, $44.1 million and $42.7 million in 2003, 2002, and 2001, respectively, to reflect the amounts reclassified to equipment sales revenues and cost of equipment sold. These reclassifi- cations did not have any impact on income from operations, net income, earnings per share, financial position or cash flows of U.S. Cellular for any of the years presented. 

Statement of Financial Accounting Standards (“SFAS”) No. 145 “Rescission of SFAS No. 4, 44 and 64, Amendment of SFAS No. 13, and 

