Revenue Recognition (Tables)

12 Months Ended

Dec. 31, 2018

Revenue from Contract with Customer [Abstract]

The following tables present our reported results under ASC 606 and a reconciliation to results using the historical accounting method:



	Year Ended December 31, 2018
	Reported Balances		Impact of ASC 606		ASC 605 Historical Adjusted Amount
	(Dollars in millions)
Operating revenue	$	8,493	6		8,499
Cost of services and products (exclusive of depreciation and amortization)	2,767		17		2,784
Selling, general and administrative	799		—		799
Income tax expense	494		(3	)	491
Net income	1,665		(8	)	1,657

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 December 31, 2018
	Reported Balances			Impact of ASC 606		ASC 605 Historical Adjusted Balances
	(Dollars in millions)
Other current assets	$	147		(119	)	28
Other long-term assets, net	96			(54	)	42
Deferred revenue	303			(13	)	290
Deferred income taxes, net	1,098			(53	)	1,045
Other long-term liabilities	547			42		589
Accumulated deficit	(182		)	(149	)	(331	)

Schedule of disaggregated revenue by service offering

The following tables provide disaggregation of revenue from contracts with customers based on service offerings for the year ended December 31, 2018. It also shows the amount of revenue that is not subject to ASC 606, but is instead governed by other accounting standards.



	Year Ended December 31, 2018
	Total Revenue		Adjustments for Non-ASC 606 Revenue ⁽⁷⁾		Total Revenue from Contracts with Customers
	(Dollars in millions)
IP and data services ⁽¹⁾	$	616	—		616
Transport and infrastructure⁽²⁾	2,926		(321	)	2,605
Voice and collaboration ⁽³⁾	1,800		—		1,800
IT and managed services ⁽⁴⁾	6		—		6
Regulatory revenue ⁽⁵⁾	210		(210	)	—
Affiliate revenue⁽⁶⁾	2,935		—		2,935
Total revenue	$	8,493	(531	)	7,962

Timing of revenue
Goods and services transferred at a point in time					$	69
Services performed over time					7,893
Total revenue from contracts with customers					$	7,962



(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 revenue.
(5	)	Includes CAF II and federal and state USF support revenue.
(6	)	Includes telecommunications and data services we bill to our affiliates.
(7	)	Includes regulatory revenue, lease revenue, sublease rental income, which are not within the scope of ASC 606.

Schedule of customer receivables and contract balances

The following table provides balances of customer receivables, contract assets and contract liabilities as of December 31, 2018 and January 1, 2018:



	December 31, 2018		January 1, 2018
	(Dollars in millions)
Customer receivables ⁽¹⁾	$	518	631
Contract liabilities	207		238
Contract assets	64		68


(1)	Gross customer receivables of $554 million and $669 million, net of allowance for doubtful accounts of $36 million and $38 million, at December 31, 2018 and January 1, 2018, respectively.

The following table provides information about revenue recognized for the year ended December 31, 2018:



	(Dollars in millions)
Revenue recognized in the period from:
Amounts included in contract liability at the beginning of the period (January 1, 2018)	$	42
Performance obligations satisfied during 2018	—

Schedule of contract costs

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



	Year Ended December 31, 2018
	Acquisition Costs			Fulfillment Costs
	(Dollars in millions)
Beginning of period balance	$	91		61
Costs incurred	62			27
Amortization	(63		)	(31	)
End of period balance	$	90		57