Revenue Recognition

9 Months Ended

Sep. 30, 2020

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Revenue Recognition

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, "Revenue from Contracts with Customers" ("ASC 606"), but is instead governed by other accounting standards:

	Three Months Ended September 30,			Nine Months Ended September 30,
	2020		2019	2020	2019
	(Dollars in millions)
Total revenue	$	5,167	5,350	15,587	16,152
Adjustments for non-ASC 606 revenue (1)	(481)		(355)	(1,443)	(1,069)
Total revenue from contracts with customers	$	4,686	4,995	14,144	15,083

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(1)Includes regulatory revenue and lease revenue not 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 September 30, 2020 and December 31, 2019:

	September 30, 2020		December 31, 2019
	(Dollars in millions)
Customer receivables(1)	$	2,070	2,194
Contract assets	104		130
Contract liabilities	918		1,028

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(1)Reflects gross customer receivables of $2.2 billion and $2.3 billion, net of allowance for doubtful accounts of $140 million and $94 million, at September 30, 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 sheets. During the three and nine months ended September 30, 2020, we recognized $58 million and $612 million, respectively, of revenue that was included in contract liabilities as of January 1, 2020. During the three and nine months ended September 30, 2019, we recognized $47 million and $581 million, respectively, of revenue that was included in contract liabilities as of January 1, 2019.

Performance Obligations

As of September 30, 2020, our estimated revenue expected to be recognized in the future related to performance obligations associated with existing customer contracts that are partially or wholly unsatisfied is approximately $5.4 billion. We expect to recognize approximately 85% of this revenue through 2022, with the balance recognized thereafter.

These amounts exclude (i) 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), and (ii) 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 September 30, 2020			Three Months Ended September 30, 2019
	Acquisition Costs		Fulfillment Costs	Acquisition Costs	Fulfillment Costs
	(Dollars in millions)
Beginning of period balance	$	300	219	321	207
Costs incurred	45		35	48	41
Amortization	(53)		(37)	(50)	(32)
End of period balance	$	292	217	319	216

	Nine Months Ended September 30, 2020			Nine Months Ended September 30, 2019
	Acquisition Costs		Fulfillment Costs	Acquisition Costs	Fulfillment Costs
	(Dollars in millions)
Beginning of period balance	$	326	221	322	187
Costs incurred	130		105	148	119
Amortization	(164)		(109)	(151)	(90)
End of period balance	$	292	217	319	216

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. 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 12 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.