Notes to Consolidated Financial Statements continued Deferred Purchase Price During 2017, 2016 and 2015, we collected $0.6 billion, $1.1 billion and an insignificant amount, respectively, which was returned as deferred purchase price and recorded within Cash flows provided by operating activities on our consolidated statements of cash flows. Collections, recorded within Cash flows used in investing activities on our consolidated statements of cash flows were $0.8 billion during 2017 and insignificant during 2016. During 2017, we repurchased all outstanding receivables previously sold to the Purchasers in exchange for the obligation to pay the associated deferred purchase price to the wholly-owned subsidiaries that are bankruptcy remote special purpose entities (Sellers). At December 31, 2017, our deferred purchase price receivable was fully satisfied. At December 31, 2016, our deferred purchase price receivable, which was held by the Sellers, was comprised of $1.2 billion included within Prepaid expenses and other and $0.4 billion included within Other assets in our consolidated balance sheet. The deferred purchase price was initially recorded at fair value, based on the remaining device payment amounts expected to be collected, adjusted, as applicable, for the time value of money and by the timing and estimated value of the device trade-in in connection with upgrades. The estimated value of the device trade-in considered prices expected to be offered to us by independent third parties. This estimate contemplated changes in value after the launch of a device. The fair value measurements were considered to be Level 3 measurements within the fair value hierarchy. The collection of the deferred purchase price was contingent on collections from customers. Variable Interest Entities (VIEs) Under the RPA, the Sellers’ sole business consists of the acquisition of the receivables from Cellco Partnership and certain other affiliates of Verizon and the resale of the receivables to the Purchasers. The assets of the Sellers are not available to be used to satisfy obligations of any Verizon entities other than the Sellers. We determined that the Sellers are VIEs as they lack sufficient equity to finance their activities. Given that we have the power to direct the activities of the Sellers that most significantly impact the Sellers’ economic performance, we are deemed to be the primary beneficiary of the Sellers. As a result, we consolidate the assets and liabilities of the Sellers into our consolidated financial statements. Continuing Involvement At December 31, 2017 and 2016, the total portfolio of device payment plan agreement receivables, including derecognized device payment plan agreement receivables, that we were servicing was $17.8 billion and $16.1 billion, respectively. There were no derecognized device payment plan agreement receivables outstanding at December 31, 2017. The outstanding portfolio of device payment plan agreement receivables derecognized from our consolidated balance sheet, but which we continued to service, was $4.3 billion at December 31, 2016. To date, we have collected and remitted approximately $10.1 billion, net of fees. At December 31, 2017, no amounts remained to be remitted to the Purchasers. Verizon had continuing involvement with the sold receivables as it serviced the receivables. We continued to service the customer and their related receivables on behalf of the Purchasers, including facilitating customer payment collection, in exchange for a monthly servicing fee. While servicing the receivables, the same policies and procedures were applied to the sold receivables that applied to owned receivables, and we continued to maintain normal relationships with our customers. The credit quality of the customers we continued to service was consistent throughout the periods presented. In addition, we had continuing involvement related to the sold receivables as we were responsible for absorbing additional credit losses pursuant to the agreements. Credit losses on receivables sold were $0.1 billion during 2017 and $0.2 billion during 2016. Note 8 Fair Value Measurements and Financial Instruments Recurring Fair Value Measurements The following table presents the balances of assets and liabilities measured at fair value on a recurring basis as of December 31, 2017: (dollars in millions) Level 1(1) Level 2(2) Level 3(3) Total Assets: Other assets: Equity securities $ 74 $ $ $ 74 Fixed income securities 366 366 Interest rate swaps 54 54 Cross currency swaps 450 450 Interest rate caps 6 6 Total $ 74 $ 876 $ $ 950 Liabilities: Other liabilities: Interest rate swaps $ $ 413 $ $ 413 Cross currency swaps 46 46 Total $ $ 459 $ $ 459 78
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