Revenue Recognition

3 Months Ended

Mar. 31, 2020

Revenue from Contract with Customer [Abstract]

Reconciliation of Total Revenue to Revenue from Contracts with Customers

The following table provides the amount of revenue that is not subject to ASC 606, but is instead governed by other accounting standards:



	Three Months Ended March 31,
	2020			2019
	(Dollars in millions)
Total revenue ⁽¹⁾	$	5,228		5,427
Adjustments for non-ASC 606 revenue ⁽²⁾	(481		)	(358	)
Total revenue from contracts with customers	$	4,747		5,069

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⁽¹⁾ Reclassifications were made within certain 2019 comparative figures due to the retrospective application of an accounting policy election during the first quarter of 2020. Refer to Note 1 - Background and our Form 8-K filing dated April 30, 2020 for further information.

⁽²⁾ Includes regulatory revenue, lease revenue, sublease rental income and revenue from fiber capacity lease arrangements, none of which are within the scope of ASC 606.

Customer Receivables and Contract Balances

The following table provides balances of customer receivables, contract assets and contract liabilities as of March 31, 2020 and December 31, 2019:



	March 31, 2020		December 31, 2019
	(Dollars in millions)
Customer receivables⁽¹⁾	$	2,110	2,194
Contract assets	125		130
Contract liabilities	943		1,028

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⁽¹⁾Gross customer receivables of $2.2 billion and $2.3 billion, net of allowance for doubtful accounts of $85 million and $94 million, at March 31, 2020 and December 31, 2019, respectively.

Contract liabilities are consideration we have received from our customers or billed in advance of providing goods or services promised in the future. We defer recognizing this consideration as revenue until we have satisfied the related performance obligation to the customer. Contract liabilities include recurring services billed one month in advance and installation and maintenance charges that are deferred and recognized over the actual or expected contract term, which typically ranges from one to five years depending on the service. Contract liabilities are included within deferred revenue in our consolidated balance sheet. During the three months ended March 31, 2020 and March 31, 2019, we recognized $495 million and $490 million, respectively, of revenue that was included in contract liabilities as of January 1, 2020 and January 1, 2019, respectively.

Performance Obligations

As of March 31, 2020, our estimated revenue expected to be recognized in the future related to performance obligations associated with customer contracts that are unsatisfied (or partially satisfied) is approximately $5.7 billion. We expect to recognize approximately 90% of this revenue through 2022, with the balance recognized thereafter.

We do not disclose the value of unsatisfied performance obligations for contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed (for example, uncommitted usage or non-recurring charges associated with professional or technical services to be completed), or contracts that are classified as leasing arrangements that are not subject to ASC 606.

Contract Costs

The following table provides changes in our contract acquisition costs and fulfillment costs:



	Three Months Ended March 31, 2020					Three Months Ended March 31, 2019
	Acquisition Costs			Fulfillment Costs		Acquisition Costs		Fulfillment Costs
	(Dollars in millions)
Beginning of period balance	$	326		221		322		187
Costs incurred	49			36		57		34
Amortization	(55		)	(37	)	(50	)	(23	)
End of period balance	$	320		220		329		198

Acquisition costs include commission fees paid to employees as a result of obtaining contracts. Fulfillment costs include third party and internal costs associated with the provision, installation and activation of telecommunications services to customers, including labor and materials consumed for these activities.

Deferred acquisition and fulfillment costs are amortized based on the transfer of services on a straight-line basis over the average customer life of 30 months for consumer customers and 12 to 60 months for business customers and amortized fulfillment costs are included in cost of services and products and amortized acquisition costs are included in selling, general and administrative expenses in our consolidated statements of operations. The amount of these deferred costs that are anticipated to be amortized in the next twelve months are included in other current assets on our consolidated balance sheets. The amount of deferred costs expected to be amortized beyond the next twelve months is included in other non-current assets on our consolidated balance sheets. Deferred acquisition and fulfillment costs are assessed for impairment on an annual basis.