Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2018

Revenue from Contract with Customer [Abstract]

Schedule of new accounting pronouncements and changes in accounting principles

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
	Reported as of June 30, 2018		Impact of ASC 606		ASC 605 Historical Adjusted Amount
	(Dollars in millions)
Operating revenues	$	2,101	—		2,101
Cost of services and products (exclusive of depreciation and amortization)	702		7		709
Selling, general and administrative	215		(2	)	213
Income tax expense	81		(1	)	80
Net income	427		(4	)	423



	Six Months Ended June 30, 2018
	Reported as of June 30, 2018		Impact of ASC 606		ASC 605 Historical Adjusted Amount
	(Dollars in millions)
Operating revenues	$	4,231	(9	)	4,222
Cost of services and products (exclusive of depreciation and amortization)	1,409		12		1,421
Selling, general and administrative	430		(2	)	428
Income tax expense	211		(5	)	206
Net income	807		(14	)	793

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
	Reported Balances as of June 30, 2018			Impact of ASC 606		ASC 605 Historical Adjusted Balances
	(Dollars in millions)
Other current assets	$	222		(114	)	$	108
Other long-term assets, net	120			(67	)	53
Deferred revenue	341			14		355
Deferred income taxes, net	1,039			(38	)	1,001
Other long-term liabilities	341			(7	)	334
Accumulated deficit	(353		)	(150	)	(503		)

Disaggregation of revenue

The following tables provide disaggregation of revenue from contracts with customers based on service offerings for the three and six months 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
	Total Revenue		Adjustments for Non-ASC 606 Revenue ⁽⁷⁾		Total Revenue from Contracts with Customers
	(Dollars in millions)
IP and data services⁽¹⁾	$	154	—		154
Transport and infrastructure⁽²⁾	732		(28	)	704
Voice and collaboration ⁽³⁾	453		—		453
IT and managed services ⁽⁴⁾	2		—		2
Regulatory revenue ⁽⁵⁾	52		(52	)	—
Affiliate revenue⁽⁶⁾	708		—		708
Total revenues	$	2,101	(80	)	2,021

Timing of revenue
Goods transferred at a point in time					$	11
Services performed over time					2,010
Total revenues from contracts with customers					$	2,021



(1	)	Includes primarily VPN data networks, Ethernet, IP and other ancillary services
(2	)	Includes primarily broadband, private line (including business data services) and other ancillary services.
(3	)	Includes local voice, including wholesale voice, and other ancillary services.
(4	)	Includes IT services and managed services revenues.
(5	)	Includes CAF Phase I, CAF Phase 2 and federal and state USF support revenue.
(6	)	Includes telecommunications and data services we bill to our affiliates.
(7	)	Includes regulatory revenues, lease revenue, sublease rental income, which are not within the scope of ASC 606.



	Six Months Ended June 30, 2018
	Total Revenue		Adjustments for Non-ASC 606 Revenue ⁽⁷⁾		Total Revenue from Contracts with Customers
	(Dollars in millions)
IP and data services⁽¹⁾	$	305	—		305
Transport and infrastructure⁽²⁾	1,477		(53	)	1,424
Voice and collaboration ⁽³⁾	922		—		922
IT and managed services ⁽⁴⁾	4		—		4
Regulatory revenues ⁽⁵⁾	104		(104	)	—
Affiliate revenues⁽⁶⁾	1,419		—		1,419
Total revenues	$	4,231	(157	)	4,074

Timing of revenue
Goods transferred at a point in time					$	22
Services performed over time					4,052
Total revenues from contracts with customers					$	4,074



(1	)	Includes primarily VPN data networks, Ethernet, IP and other ancillary services
(2	)	Includes primarily broadband, private line (including business data services) and other ancillary services.
(3	)	Includes local voice, including wholesale voice, and other ancillary services.
(4	)	Includes IT services and managed services revenues.
(5	)	Includes CAF Phase I, CAF Phase 2 and federal and state USF support revenue.
(6	)	Includes telecommunications and data services we bill to our affiliates.
(7	)	Includes regulatory revenues, lease revenue, sublease rental income, which are not within the scope of ASC 606.

Our operating revenues for our products and services consisted of the following categories:



	Three Months Ended June 30,			Six Months Ended June 30,
	2018		2017	2018	2017
	(Dollars in millions)
IP and data services	$	154	155	305	314
Transport and infrastructure	732		757	1,477	1,517
Voice and collaboration	453		499	922	1,012
IT and managed services	2		—	4	—
Regulatory revenues	52		53	104	107
Affiliates services	708		669	1,419	1,345
Total operating revenues	$	2,101	2,133	4,231	4,295

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⁾	$	545	631
Contract liabilities	72		78
Contract assets	148		93


(1)	Gross customer receivables of $593 million and $669 million, net of allowance for doubtful accounts of $48 million and $38 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
	Acquisition Costs			Fulfillment Costs		Acquisition Costs		Fulfillment Costs
	(Dollars in millions)
Beginning of period balance	$	91		35		91		37
Costs incurred	14			3		29		6
Amortization	(16		)	(5	)	(31	)	(10	)
End of period balance	$	89		33		89		33