Notes to Consolidated Financial Statements 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 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. 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. 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 The accounting policies of U.S. Cellular conform to accounting principles generally accepted in the United States of America (“GAAP”). The Business Combinations Use of Estimates Reclassifications Principles of Consolidation Effects of 2003 As Originally Accounting  Year Ended or at December 31, 2003 Reported Changes As Restated (Dollars in thousands) Balance Sheet (continued): Net deferred income tax liability Increase in deferred tax liability on restatement to investment in licenses $ 90,677 Tax on 2002 impairment (8,264) Tax on 2003 impairment (19,590) Tax effect of changes to loss on  assets held for sale (9,952) $ 443,033 52,871 $ 495,904 Retained Earnings 2002 cumulative effect impact (12,657) 2003 impact (18,114) 1,187,526 (30,771) 1,156,755 Total Liabilities and Shareholders’ Equity $4,923,647 $ 22,100 $4,945,747 Effects of 2002 As Originally Accounting  Year Ended or at December 31, 2002 Reported Changes As Restated (Dollars in thousands, except per share amounts) Statement of Operations: Income (loss) before cumulative effect of accounting change  $ (18,385) $ — $ (18,385) Cumulative effect of accounting change  4,097 (12,657) (8,560) Net income (loss)  $ (14,288) $ (12,657) $ (26,945) Basic earnings (loss) per share  Continuing Operations $ (0.22) $ — $ (0.22) Cumulative effect of accounting change  0.05 (0.14) (0.09) Net income (loss) $ (0.17) $ (0.14) $ (0.31) Diluted earnings (loss) per share  Continuing Operations $ (0.22) $ — $ (0.22) Cumulative effect of accounting change  0.05 (0.14) (0.09) Net income (loss) $ (0.17) $ (0.14) $ (0.31) Balance Sheet: Investment in licenses Restatement from goodwill $ 138,885 Increase in deferred tax liability on restatement to investment in licenses 90,677 2002 impairment (20,921) $1,038,556 208,641 $1,247,197 Goodwill Restatement to investment in licenses 643,629 (138,885) 504,744 Total Assets $4,699,841 $ 69,756 $4,769,597 Net deferred income tax liability Increase in deferred tax liability on  restatement to investment in licenses $ 90,677 Tax on 2002 impairment (8,264) $ 359,401 82,413 $ 441,814 Retained Earnings 1,126,752 (12,657) 1,114,095 Total Liabilities and Stockholders’ Equity $4,699,841 $ 69,756 $4,769,597 46