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## Notes to Consolidated Financial Statements 

An intangible asset that is not subject to amortization shall be tested for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test shall consist of a comparison of the fair value of an intangible asset with its carrying amount. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss shall be recognized in an amount equal to that excess. 

SFAS No. 142 also defines the accounting for goodwill. Goodwill will be tested for impairment annually. Impairment is the condition that exists when the carrying amount of goodwill exceeds its implied fair value. If the carrying amount of goodwill exceeds the implied fair value of that goodwill, an impairment loss shall be recognized in an amount equal to that excess. 

The Company will adopt SFAS No. 142 on January 1, 2002, and will no longer amortize cellular license costs, telephone franchise and other costs in excess of the underlying book value of subsidiaries, or goodwill for equity method investments. Cellular license costs, telephone franchise and other costs, and equity method goodwill totaled $1,334.5 million, $348.7 million, and $76.8 million, respectively, at December 31, 2001, and amortization for the year ended December 31, 2001, totaled $37.6 million, $6.2 million, and $1.3 million, respectively. 

In addition, pursuant to SFAS No. 142, the Company is assessing its recorded balances of Cellular license costs and telephone franchise and other costs for potential impairment. As allowed under the standard, the Company expects to complete its impairment assessment in the first quarter of 2002. Any required impairment charge would be recorded as a cumulative effect of accounting change as of January 1, 2002. The Company does not currently expect to record an impairment charge upon the completion of the initial impairment review. However, there can be no assurance that at the time the review is completed a material impairment charge will not be recorded. 

SFAS No. 143, “Accounting for Asset Retirement Obligations” was issued in June 2001, and will become effective for the Company beginning January 1, 2003. SFAS No. 143 requires entities to record the fair value of a liability for legal obligations associated with an asset retirement in the period in which the obligation is incurred. When the liability is initially recorded, the entity capitalizes the cost by increasing the carrying amount of the related long-lived asset. Over time, the liability is accreted to its present value each period, and the capitalized cost is depreciated over the useful life of the related asset. The Company is currently reviewing the requirements of this new standard and has not yet determined the impact, if any, on the Company's financial position or results of operations. 

SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” was issued in October 2001, and became effective for the Company beginning January 1, 2002. SFAS No. 144 requires entities to measure long-lived assets at the lower of carrying amount or fair value less cost to sell, whether reported in continuing operations or in discontinued operations. SFAS No. 144 also revises standards for the reporting of discontinued operations. This statement broadens the presentation of discontinued operations to include a component of an entity (rather than a segment of a business). A component of an entity comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. The Company is currently reviewing the requirements of this new standard, but does not expect implementation to have a material impact on its financial position or results of operations. 

The Financial Accounting Standards Board issued an exposure draft on November 15, 2001, “Rescission of FASB Statements No. 4, 44, and 64 and Technical Corrections.” This proposed Statement would rescind Statement 4 and Statement 64, an amendment of Statement 4, thereby eliminating the requirements that gains and losses from extinguishment of debt be aggregated and, if material, classified as an extraordinary item, net of related income tax effect. The provisions of this Statement related to the rescission of Statement 4 shall be applied as of the beginning of the fiscal year in which this Statement is issued. The Board expects to issue the final Statement in the first quarter of 2002. When adopted, the Company would no longer report gains and losses on the retirement of long-term debt as an extraordinary item. 

## 2 Income Taxes 

Income tax provisions charged to net income from continuing operations are summarized as follows. 

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## Notes to Consolidated Financial Statements 

A reconciliation of the Company’s expected income tax expense (benefit) from continuing operations computed at the statutory rate to reported income tax expense (benefit) from continuing operations, and the statutory federal income tax rate to the Company’s effective income tax rate for continuing operations, is as follows. 

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Income from continuing operations for each of the three years ended December 31, 2001, includes gains and losses from marketable securities and other investments. The effective income tax rate excluding such gains and losses was 44.4%, 40.4%, and 44.3% for the years ended December 31, 2001, 2000, and 1999, respectively. 

Income tax provisions charged to net income are summarized as follows. 

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The Company’s current net deferred tax assets totaled $3.6 million and $3.4 million as of December 31, 2001 and 2000, respectively. The net current deferred tax asset primarily represents the deferred tax effects of the allowance for doubtful accounts on customer receivables. 

The temporary differences that gave rise to the noncurrent deferred tax assets and liabilities are as follows. 

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TDS and certain subsidiaries had $494.6 million of state net operating loss carryforward (generating a $41.1 million deferred tax asset) at December 31, 2001, expiring between 2002 and 2021, which is available to offset future taxable income primarily of the individual subsidiaries which generated the loss. In addition, certain subsidiaries which are not included in the federal consolidated income tax return, but file separate tax returns, had a federal net operating loss carryforward (generating a $5.4 million deferred tax asset) available to offset future taxable income which expires between 2003 and 2021. A valuation allowance was established for the state and federal operating loss carryforwards since it is more likely than not that a portion will expire before such carryforwards can be utilized. 

The financial reporting basis of the marketable equity securities was greater than the tax basis at December 31, 2001, generating a $1,137.5 million deferred tax liability. 

## 3 Discontinued Operations 

In September 1999, the Board of Directors of TDS approved a plan of merger between Aerial Communications, Inc. (“Aerial”), its then over 80%-owned personal communications services company, and VoiceStream Wireless Corporation (“VoiceStream”). The merger closed on May 4, 2000. As a result of the merger, Aerial shareholders received 0.455 VoiceStream common shares for each share of Aerial stock they owned. TDS 

