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Revenue Recognition (Tables)
 6 Months Ended
Jun. 30, 2018
Revenue from Contract with Customer [Abstract]  
Effect of New Accounting Pronouncements
The following tables present our reported results under ASC 606 and a reconciliation to results using the historical accounting method:
 
Three Months Ended June 30, 2018
 
(Dollars in millions, except per share amounts
and shares in thousands)
 
Reported Balances as of June 30, 2018
 
Impact of ASC 606
 
ASC 605
Historical Adjusted Balances
Operating revenues
$
5,902

 
11

 
$
5,913

Cost of services and products (exclusive of depreciation and amortization)
2,730

 
3

 
2,733

Selling, general and administrative
1,115

 
10

 
1,125

Income tax benefit
(55
)
 
—

 
(55
)
Net income
$
292

 
(2
)
 
$
290

 
 
 
 
 
 
BASIC AND DILUTED EARNINGS PER COMMON SHARE
 
 
 
 
 
BASIC
$
0.27

 
—

 
$
0.27

DILUTED
$
0.27

 
—

 
$
0.27

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
 
 
 
 
 
BASIC
1,064,711

 
—

 
1,064,711

DILUTED
1,068,819

 
—

 
1,068,819

 
Six Months Ended June 30, 2018
 
(Dollars in millions, except per share amounts
and shares in thousands)
 
Reported Balances as of June 30, 2018
 
Impact of ASC 606
 
ASC 605
Historical Adjusted Balances
Operating revenues
$
11,847

 
26

 
$
11,873

Cost of services and products (exclusive of depreciation and amortization)
5,533

 
10

 
5,543

Selling, general and administrative
2,224

 
26

 
2,250

Income tax expense
66

 
(2
)
 
64

Net income
$
407

 
(8
)
 
$
399

 
 
 
 
 
 
BASIC AND DILUTED EARNINGS PER COMMON SHARE
 
 
 
 
 
BASIC
$
0.38

 
—

 
$
0.38

DILUTED
$
0.38

 
—

 
$
0.38

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
 
 

 

BASIC
1,064,663

 
—

 
1,064,663

DILUTED
1,068,414

 
—

 
1,068,414

The following table presents a reconciliation of certain consolidated balance sheet captions under ASC 606 to the balance sheet results using the historical accounting method:
 
As of June 30, 2018
 
(Dollars in millions)
 
Reported Balances as of June 30, 2018
 
Impact of ASC 606
 
ASC 605
Historical Adjusted Balances
Other current assets
$
1,260

 
(125
)
 
$
1,135

Other long-term assets, net
1,123

 
(103
)
 
1,020

Deferred revenue
2,379

 
132

 
2,511

Deferred income taxes, net
2,407

 
(102
)
 
2,305

Other long-term liabilities
2,667

 
49

 
2,716

Retained earnings
1,040

 
(307
)
 
733
Disaggregation of Revenue
The following tables provide disaggregation of revenue from contracts with customers based on service offerings for the three and six ended June 30, 2018, respectively. It also shows the amount of revenue that is not subject to ASC 606, but is instead governed by other accounting standards.
 
Three Months Ended June 30, 2018
 
(Dollars in millions)
 
Total Revenue
 
Adjustments for Non-ASC 606 Revenue (8)
 
Total Revenue from Contracts with Customers
Business segment
 
 
 
 
 
IP & Data Services (1)
$
1,748

 
—

 
$
1,748

Transport & Infrastructure (2)
1,342

 
(80
)
 
1,262

Voice & Collaboration (3)
1,111

 
—

 
1,111

IT & Managed Services (4)
164

 
—

 
164

Total business segment revenues
4,365

 
(80
)
 
4,285

 
 
 
 
 
 
Consumer segment
 
 
 
 
 
Voice & Collaboration (3)
545

 
—

 
545

IP & Data Services (5)
85

 
(7
)
 
78

Transport & Infrastructure (6)
722

 
(53
)
 
669

Total consumer segment revenues
1,352

 
(60
)
 
1,292

 
 
 
 
 
 
Non-segment revenues


 


 


Regulatory revenues (7)
185

 
(185
)
 
—

Total non-segment revenues
185

 
(185
)
 
—

 
 
 
 
 
 
Total revenues
$
5,902

 
(325
)
 
$
5,577

 
 
 
 
 
 
Timing of Revenue
 
 
 
 
 
Goods transferred at a point in time
 
 
 
 
$
42

Services performed over time
 
 
 
 
5,535

Total revenues from contracts with customers
 
 
 
 
$
5,577

(1
)
Includes primarily VPN data network, Ethernet, IP, video and ancillary revenues.
(2
)
Includes primarily broadband, private line (including business data services), colocation and data centers, wavelength and ancillary revenues.
(3
)
Includes local, long-distance and other ancillary revenues.
(4
)
Includes IT services and managed services revenues.
(5
)
Includes retail video revenues (including our facilities-based video revenues).
(6
)
Includes primarily broadband, private line (including business data services), colocation and data centers, wavelength, equipment sales and professional and ancillary revenues.
(7
)
Includes CAF Phase I, CAF Phase 2, federal and state USF support revenue, sublease rental income and failed-sale leaseback income.
(8
)
Includes regulatory revenues, lease revenues, sublease rental income, revenue from fiber capacity lease arrangements and failed sale leaseback income, which are not within the scope of ASC 606.

 
Six Months Ended June 30, 2018
 
(Dollars in millions)
 
Total Revenue
 
Adjustments for Non-ASC 606 Revenue (8)
 
Total Revenue from Contracts with Customers
Business segment
 
 
 
 
 
IP & Data Services (1)
$
3,485

 
—

 
$
3,485

Transport & Infrastructure (2)
2,691

 
(147
)
 
2,544

Voice & Collaboration (3)
2,247

 
—

 
2,247

IT & Managed Services (4)
325

 
—

 
325

Total business segment revenues
8,748

 
(147
)
 
8,601

 
 
 
 
 
 
Consumer segment
 
 
 
 
 
Voice & Collaboration (3)
1,101

 
—

 
1,101

IP & Data Services (5)
179

 
(16
)
 
163

Transport & Infrastructure (6)
1,451

 
(105
)
 
1,346

Total consumer segment revenues
2,731

 
(121
)
 
2,610

 
 
 
 
 
 
Non-segment revenues
 
 
 
 
 
Regulatory revenues (7)
368

 
(368
)
 
—

Total non-segment revenues
368

 
(368
)
 
—

 
 
 
 
 
 
Total revenues
$
11,847

 
(636
)
 
$
11,211

 
 
 
 
 
 
Timing of Revenue
 
 
 
 
 
Goods transferred at a point in time
 
 
 
 
$
81

Services performed over time
 
 
 
 
11,130

Total revenues from contracts with customers
 
 
 
 
$
11,211

(1
)
Includes primarily VPN data network, Ethernet, IP, video and ancillary revenues.
(2
)
Includes primarily broadband, private line (including business data services), colocation and data centers, wavelength and ancillary revenues.
(3
)
Includes local, long-distance and other ancillary revenues.
(4
)
Includes IT services and managed services revenues.
(5
)
Includes retail video revenues (including our facilities-based video revenues).
(6
)
Includes primarily broadband, private line (including business data services), colocation and data centers, wavelength, equipment sales and professional and ancillary revenues.
(7
)
Includes CAF Phase I, CAF Phase 2, federal and state USF support revenue, sublease rental income and failed-sale leaseback income.
(8
)
Includes regulatory revenues, lease revenues, sublease rental income, revenue from fiber capacity lease arrangements and failed sale leaseback income, which are not within the scope of ASC 606.
Contract with Customer, Asset and Liability
The following table provides balances of customer receivables, contract assets and contract liabilities as of June 30, 2018 and January 1, 2018:
 
June 30, 2018
 
January 1, 2018
 
(Dollars in millions)
Customer receivables(1)
$
2,414

 
2,504

Contract liabilities
553

 
623

Contract assets
158

 
255

(1) Gross customer receivables of $2.6 billion and $2.7 billion, net of allowance for doubtful accounts of $160 million and $155 million, at June 30, 2018 and January 1, 2018, respectively.
Capitalized Contract Cost
The following table provides changes in our contract acquisition costs and fulfillment costs:
 
Three Months Ended June 30, 2018
 
Six Months Ended June 30, 2018
 
(Dollars in millions)
 
Acquisition Costs
 
Fulfillment Costs
 
Acquisition Costs
 
Fulfillment Costs
Beginning of period balance
$
280

 
105

 
268

 
88

Costs incurred
47

 
29

 
99

 
59

Amortization
(41
)
 
(18
)
 
(81
)
 
(31
)
End of period balance
$
286

 
116

 
286

 
116