Notes to Consolidated Financial Statements U.S. Cellular is subject to asset retirement obligations associated primar- ily with its cell sites, retail sites and office locations. Legal obligations include obligations to remediate leased land on which U.S. Cellular’s  cell sites and switching offices are located. U.S. Cellular is also required to return leased retail store premises and office space to their pre- existing conditions. U.S. Cellular determined that it had an obligation to remove long-lived assets in its cell sites, retail sites and office locations as described by SFAS No. 143, and has recorded a liability and related asset retirement obligation accretion expense. The change in asset retirement obligation during 2003 was as follows: Effective January 1, 2003, U.S. Cellular adopted SFAS No. 143 “Accounting for Asset Retirement Obligations,” and recorded the initial liability for legal obligations associated with an asset retirement. The cumulative effect of the implementation of this accounting standard on periods prior to 2003 was recorded in the first quarter of 2003, decreasing net income by $14.3 million, net of taxes of $9.7 million and minority interest of $0.5 million, or $0.17 per basic and diluted share. The following pro forma amounts show the effect of the retroactive application of the change in accounting principle for the adoption of SFAS No. 143: Revenues from wireless operations primarily consist of charges for access, airtime, roaming and value added services provided for U.S. Cellular’s retail customers; charges to carriers whose customers use  U.S. Cellular’s systems when roaming; charges for long-distance calls made on U.S. Cellular’s systems; end user equipment sales; and sales  of accessories. Revenues are recognized as services are rendered. Unbilled revenues, resulting from wireless service provided from the billing cycle date to the end of each month and from other wireless carriers’ customers using U.S. Cellular’s systems for the last half of  each month, are estimated and recorded. Equipment sales represent a separate earnings process. Revenues  from equipment and accessory sales are recognized upon delivery to  the customer. In order to provide better control over handset quality, U.S. Cellular began selling handsets to agents beginning in the second quarter of 2002 at a price approximately equal to cost. In most cases, the agents receive rebates from U.S. Cellular at the time the agents sign up new customers or retain current customers. U.S. Cellular accounts for the sale of equipment to agents in accordance with Emerging Issues Task Force (“EITF”) Statement 01-09, “Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor’s Products).” This standard requires that equipment sales revenue be reduced by the anticipated rebates to be paid to the agents at the time the agent purchases the handsets rather than at the time the agent signs up a new customer or retains a current customer. Activation fees charged with the sale of service only are deferred  and recognized over the average customer service period. Effective January 1, 2002, U.S. Cellular adopted EITF Statement 00-21 “Accounting for Multiple Element Arrangements.” Under this pronounce- ment, activation fees charged with the sale of equipment and service  are allocated to the equipment and service based upon the relative fair values of each item. Due to the subsidy provided on customer handsets, this generally results in the recognition of the activation fee as additional handset revenue at the time of sale. Upon the initial adoption of Staff Accounting Bulletin (“SAB”) No. 101, “Revenue Recognition” in 2000, Effective January 1, 2002, U.S. Cellular adopted SFAS No. 142 and deter- mined that wireless licenses have indefinite lives. Upon initial adoption, U.S. Cellular reviewed its investment in licenses and determined there was an impairment loss on certain licenses. The cumulative effect of  the initial impairment upon the adoption of SFAS No. 142 reduced net income in 2002 by $12.7 million, net of taxes of $8.2 million, or  $(0.14) per diluted share. Effective January 1, 2002, U.S. Cellular changed its method of accounting for commissions expenses related to customer activations and began deferring expense recognition of a portion of commissions expenses in the amount of deferred activation fees revenue. U.S. Cellular believes this change is a preferable method of accounting for such costs primar- ily due to the fact that the new method of accounting provides for better matching of revenue from customer activations to direct incre- mental costs associated with these activations within each reporting 49 Cumulative Effect of Accounting Changes Revenue Recognition Year Ended December 31, 2003 2002 2001 (as restated) (as restated) (Dollars in thousands, except per share amounts) Actual Net income (loss) $42,660 $(26,945) $173,876 Basic earnings (loss) per share $0 . 5 0 $( 0.31) $ 2.02 Diluted earnings (loss) per share $0 . 4 9 $( 0.31) $ 1.99 Pro forma Net income (loss) $57,006 $(30,047) $171,481 Basic earnings (loss) per share $0 . 6 7 $( 0.34) $ 1.99 Diluted earnings (loss) per share $0 . 6 $( 0.34) $ 1.97 December 31, January 1, 2002 2001 2001 (Dollars in thousands) Pro forma - Balance Sheet data Asset retirement obligation $54,438 $45,246 $36,806 (Dollars in thousands) Beginning balance - January 1, 2003 $54,438 Additional liabilities accrued 5,641 Accretion expense 4,422 Ending balance - December 31, 2003 $64,501 had U.S. Cellular deferred activation fees associated with the sales of equipment and service at the time of activation, with subsequent recog- nition over the expected customer service period, the financial results for all periods presented would not have been materially different from those originally reported. The effect of adopting EITF 00-21 did not have a material impact on any of the periods as originally reported. During December 2003, the SEC issued SAB 104, “Revenue Recognition,” which revised and rescinded portions of SAB 101. The issuance of SAB 104 did not impact U.S. Cellular’s revenue recognition policies.