UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)
☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the transition period from              to

Commission file number: 1-8606

Verizon Communications Inc.

(Exact name of registrant as specified in its charter)

Delaware	23-2259884
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1095 Avenue of the Americas		10036
New York,	New York
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (212) 395-1000

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
Common Stock, par value $0.10	VZ	New York Stock Exchange
Common Stock, par value $0.10	VZ	The Nasdaq Global Select Market
1.625% Notes due 2024	VZ 24B	New York Stock Exchange
4.073% Notes due 2024	VZ 24C	New York Stock Exchange
0.875% Notes due 2025	VZ 25	New York Stock Exchange
3.25% Notes due 2026	VZ 26	New York Stock Exchange
1.375% Notes due 2026	VZ 26B	New York Stock Exchange
0.875% Notes due 2027	VZ 27E	New York Stock Exchange
1.375% Notes due 2028	VZ 28	New York Stock Exchange
1.125% Notes due 2028	VZ 28A	New York Stock Exchange
2.350% Fixed Rate Notes due 2028	VZ 28C	New York Stock Exchange
1.875% Notes due 2029	VZ 29B	New York Stock Exchange
0.375% Notes due 2029	VZ 29D	New York Stock Exchange
1.250% Notes due 2030	VZ 30	New York Stock Exchange
1.875% Notes due 2030	VZ 30A	New York Stock Exchange
4.250% Notes due 2030	VZ 30D	New York Stock Exchange
2.625% Notes due 2031	VZ 31	New York Stock Exchange
2.500% Notes due 2031	VZ 31A	New York Stock Exchange
3.000% Fixed Rate Notes due 2031	VZ 31D	New York Stock Exchange
0.875% Notes due 2032	VZ 32	New York Stock Exchange
0.750% Notes due 2032	VZ 32A	New York Stock Exchange
1.300% Notes due 2033	VZ 33B	New York Stock Exchange

Securities registered pursuant to Section 12(b) of the Act (continued):

Title of Each Class	Trading Symbol(s)	Name of Each Exchange on Which Registered
4.75% Notes due 2034	VZ 34	New York Stock Exchange
4.750% Notes due 2034	VZ 34C	New York Stock Exchange
3.125% Notes due 2035	VZ 35	New York Stock Exchange
1.125% Notes due 2035	VZ 35A	New York Stock Exchange
3.375% Notes due 2036	VZ 36A	New York Stock Exchange
2.875% Notes due 2038	VZ 38B	New York Stock Exchange
1.875% Notes due 2038	VZ 38C	New York Stock Exchange
1.500% Notes due 2039	VZ 39C	New York Stock Exchange
3.50% Fixed Rate Notes due 2039	VZ 39D	New York Stock Exchange
1.850% Notes due 2040	VZ 40	New York Stock Exchange
3.850% Fixed Rate Notes due 2041	VZ 41C	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   ☒  Yes   ☐  No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   ☒  Yes   ☐  No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.
	Large accelerated filer	☒	Accelerated filer	☐
	Non-accelerated filer	☐	Smaller reporting company	☐
			Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   ☐  Yes   ☒  No

At June 30, 2023, 4,204,039,985 shares of the registrant’s common stock were outstanding, after deducting 87,393,661 shares held in treasury.

TABLE OF CONTENTS

Item No.		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Statements of Income	4
	Three and six months ended June 30, 2023 and 2022
	Condensed Consolidated Statements of Comprehensive Income	5
	Three and six months ended June 30, 2023 and 2022
	Condensed Consolidated Balance Sheets	6
	At June 30, 2023 and December 31, 2022
	Condensed Consolidated Statements of Cash Flows	7
	Six months ended June 30, 2023 and 2022
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	54
Item 4.	Controls and Procedures	55
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 6.	Exhibits	56
Signature		57
Certifications

Part I - Financial Information

Item 1. Financial Statements (Unaudited)

Condensed Consolidated Statements of Income

Verizon Communications Inc. and Subsidiaries

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(dollars in millions, except per share amounts) (unaudited)	2023		2022		2023		2022
Operating Revenues
Service revenues and other	$	27,319	$	27,115	$	54,471	$	54,333
Wireless equipment revenues	5,277		6,674		11,037		13,010
Total Operating Revenues	32,596		33,789		65,508		67,343
Operating Expenses
Cost of services (exclusive of items shown below)	6,986		6,932		14,064		14,159
Cost of wireless equipment	5,778		7,488		12,204		14,611
Selling, general and administrative expense	8,253		7,496		15,759		14,668
Depreciation and amortization expense	4,359		4,321		8,677		8,557
Total Operating Expenses	25,376		26,237		50,704		51,995
Operating Income	7,220		7,552		14,804		15,348
Equity in earnings (losses) of unconsolidated businesses	(33)		41		(24)		38
Other income (expense), net	210		49		324		(875)
Interest expense	(1,285)		(785)		(2,492)		(1,571)
Income Before Provision For Income Taxes	6,112		6,857		12,612		12,940
Provision for income taxes	(1,346)		(1,542)		(2,828)		(2,914)
Net Income	$	4,766	$	5,315	$	9,784	$	10,026
Net income attributable to noncontrolling interests	$	118	$	116	$	227	$	247
Net income attributable to Verizon	4,648		5,199		9,557		9,779
Net Income	$	4,766	$	5,315	$	9,784	$	10,026
Basic Earnings Per Common Share
Net income attributable to Verizon	$	1.10	$	1.24	$	2.27	$	2.33
Weighted-average shares outstanding (in millions)	4,208		4,201		4,207		4,201
Diluted Earnings Per Common Share
Net income attributable to Verizon	$	1.10	$	1.24	$	2.27	$	2.33
Weighted-average shares outstanding (in millions)	4,213		4,202		4,212		4,202

See Notes to Condensed Consolidated Financial Statements

4

Condensed Consolidated Statements of Comprehensive Income

Verizon Communications Inc. and Subsidiaries

	Three Months Ended				Six Months Ended
	June 30,				June 30,
(dollars in millions) (unaudited)	2023		2022		2023		2022
Net Income	$	4,766	$	5,315	$	9,784	$	10,026
Other Comprehensive Income (Loss), Net of Tax (Expense) Benefit
Foreign currency translation adjustments, net of tax of $1, $(11), $4 and $(17)	(6)		(136)		20		(165)
Unrealized gain on cash flow hedges, net of tax of $(8), $(19), $(15) and $(91)	25		72		46		279
Unrealized gain (loss) on fair value hedges, net of tax of $(100), $88, $3 and $88	293		(272)		(9)		(272)
Unrealized gain (loss) on marketable securities, net of tax of $0, $2, $(1) and $7	(2)		(6)		2		(24)
Defined benefit pension and postretirement plans, net of tax of $21, $24, $36 and $72	(54)		(72)		(115)		(211)
Other comprehensive income (loss) attributable to Verizon	256		(414)		(56)		(393)
Total Comprehensive Income	$	5,022	$	4,901	$	9,728	$	9,633
Comprehensive income attributable to noncontrolling interests	$	118	$	116	$	227	$	247
Comprehensive income attributable to Verizon	4,904		4,785		9,501		9,386
Total Comprehensive Income	$	5,022	$	4,901	$	9,728	$	9,633

    

See Notes to Condensed Consolidated Financial Statements

5

Condensed Consolidated Balance Sheets

Verizon Communications Inc. and Subsidiaries

	At June 30,		At December 31,
(dollars in millions, except per share amounts) (unaudited)	2023		2022
Assets
Current assets
Cash and cash equivalents	$	4,803	$	2,605
Accounts receivable	24,108		25,332
Less Allowance for credit losses	922		826
Accounts receivable, net	23,186		24,506
Inventories	1,896		2,388
Prepaid expenses and other	7,503		8,358
Total current assets	37,388		37,857
Property, plant and equipment	313,424		307,689
Less Accumulated depreciation	206,154		200,255
Property, plant and equipment, net	107,270		107,434
Investments in unconsolidated businesses	1,015		1,071
Wireless licenses	151,337		149,796
Goodwill	28,647		28,671
Other intangible assets, net	11,097		11,461
Operating lease right-of-use assets	25,345		26,130
Other assets	17,856		17,260
Total assets	$	379,955	$	379,680
Liabilities and Equity
Current liabilities
Debt maturing within one year	$	14,827	$	9,963
Accounts payable and accrued liabilities	20,067		23,977
Current operating lease liabilities	4,211		4,134
Other current liabilities	12,299		12,097
Total current liabilities	51,404		50,171
Long-term debt	137,871		140,676
Employee benefit obligations	12,357		12,974
Deferred income taxes	44,055		43,441
Non-current operating lease liabilities	20,745		21,558
Other liabilities	17,021		18,397
Total long-term liabilities	232,049		237,046
Commitments and Contingencies (Note 12)
Equity
Series preferred stock ($0.10 par value; 250,000,000 shares authorized; none issued)	—		—
Common stock ($0.10 par value; 6,250,000,000 shares authorized in each period; 4,291,433,646 shares issued in each period)	429		429
Additional paid in capital	13,523		13,420
Retained earnings	86,448		82,380
Accumulated other comprehensive loss	(1,921)		(1,865)
Common stock in treasury, at cost (87,393,661 and 91,572,258 shares outstanding)	(3,830)		(4,013)
Deferred compensation – employee stock ownership plans (ESOPs) and other	544		793
Noncontrolling interests	1,309		1,319
Total equity	96,502		92,463
Total liabilities and equity	$	379,955	$	379,680

See Notes to Condensed Consolidated Financial Statements

6

Condensed Consolidated Statements of Cash Flows

Verizon Communications Inc. and Subsidiaries

	Six Months Ended
	June 30,
(dollars in millions) (unaudited)	2023		2022
Cash Flows from Operating Activities
Net Income	$	9,784	$	10,026
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	8,677		8,557
Employee retirement benefits	108		(121)
Deferred income taxes	633		1,514
Provision for expected credit losses	1,061		665
Equity in losses (earnings) of unconsolidated businesses, net of dividends received	49		(18)
Changes in current assets and liabilities, net of effects from acquisition/disposition of businesses	(620)		(1,959)
Other, net	(1,672)		(999)
Net cash provided by operating activities	18,020		17,665
Cash Flows from Investing Activities
Capital expenditures (including capitalized software)	(10,070)		(10,491)
Cash received related to acquisitions of businesses, net	—		247
Acquisitions of wireless licenses	(1,085)		(2,275)
Collateral receipts (payments) related to derivative contracts, net	824		(2,075)
Other, net	131		(62)
Net cash used in investing activities	(10,200)		(14,656)
Cash Flows from Financing Activities
Proceeds from long-term borrowings	1,503		3,617
Proceeds from asset-backed long-term borrowings	3,705		5,053
Net proceeds from (repayments of) short-term commercial paper	(167)		2,560
Repayments of long-term borrowings and finance lease obligations	(2,600)		(7,405)
Repayments of asset-backed long-term borrowings	(2,383)		(2,695)
Dividends paid	(5,487)		(5,378)
Other, net	(157)		411
Net cash used in financing activities	(5,586)		(3,837)
Increase (decrease) in cash, cash equivalents and restricted cash	2,234		(828)
Cash, cash equivalents and restricted cash, beginning of period	4,111		4,161
Cash, cash equivalents and restricted cash, end of period (Note 1)	$	6,345	$	3,333

See Notes to Condensed Consolidated Financial Statements

7

Notes to Condensed Consolidated Financial Statements (Unaudited)

Verizon Communications Inc. and Subsidiaries

Note 1. Basis of Presentation

Verizon Communications Inc. (the Company) is a holding company that, acting through its subsidiaries (together with the Company, collectively, Verizon), is one of the world’s leading providers of communications, technology, information and entertainment products and services to consumers, businesses and government entities. With a presence around the world, we offer data, video and voice services and solutions on our networks and platforms that are designed to meet customers’ demand for mobility, reliable network connectivity, security and control.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) in the United States (U.S.) and based upon Securities and Exchange Commission rules that permit reduced disclosure for interim periods. For a more complete discussion of significant accounting policies and certain other information, you should refer to the financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022. These financial statements reflect all adjustments that are necessary for a fair presentation of results of operations and financial condition for the interim periods shown, including normal recurring accruals and other items. The results for the interim periods are not necessarily indicative of results for the full year.

During the first quarter of 2023, Verizon reorganized the customer groups within its Business segment. See Note 10 for additional information.

Certain amounts have been reclassified to conform to the current period’s presentation.

Earnings Per Common Share

There were a total of approximately 5.6 million and 4.6 million outstanding dilutive securities, primarily consisting of performance stock units and restricted stock units, included in the computation of diluted earnings per common share for the three and six months ended June 30, 2023, respectively. There were a total of approximately 1.4 million and 1.5 million outstanding dilutive securities, primarily consisting of restricted stock units, included in the computation of diluted earnings per common share for the three and six months ended June 30, 2022, respectively.

Cash, Cash Equivalents and Restricted Cash

We consider all highly liquid investments with an original maturity of 90 days or less when purchased to be cash equivalents. Cash equivalents are stated at cost, which approximates quoted market value and includes amounts held in money market funds.

Cash collections on the receivables collateralizing our asset-backed debt securities are required at certain specified times to be placed into segregated accounts. Deposits to the segregated accounts are considered restricted cash and are included in Prepaid expenses and other and Other assets in our condensed consolidated balance sheets.

Cash, cash equivalents and restricted cash are included in the following line items in the condensed consolidated balance sheets:

	At June 30,		At December 31,		Increase / (Decrease)
(dollars in millions)	2023		2022
Cash and cash equivalents	$	4,803	$	2,605	$	2,198
Restricted cash:
Prepaid expenses and other	1,387		1,343		44
Other assets	155		163		(8)
Cash, cash equivalents and restricted cash	$	6,345	$	4,111	$	2,234

Note 2. Revenues and Contract Costs

We earn revenue from contracts with customers, primarily through the provision of telecommunications and other services and through the sale of wireless equipment.

Revenue by Category

We have two reportable segments that we operate and manage as strategic business units, Consumer and Business. Revenue is disaggregated by products and services within Consumer, and customer groups (Enterprise and Public Sector, Business Markets and Other, and Wholesale) within Business. See Note 10 for additional information on revenue by segment, including Corporate and other.

We also earn revenues that are not accounted for under Accounting Standards Update (ASU) 2014-09, "Revenue from Contracts with Customers" (Topic 606) from leasing arrangements (such as those for towers and equipment), captive reinsurance

8

arrangements primarily related to wireless device insurance and the interest when equipment is sold to the customer by an authorized agent under a device payment plan agreement. As allowed by the practical expedient within ASU 2016-02, "Leases" (Topic 842), we have elected to combine the lease and non-lease components for those arrangements of customer premise equipment where we are the lessor as components accounted for under Topic 606. During the three and six months ended June 30, 2023, revenues from arrangements that were not accounted for under Topic 606 were approximately $754 million and $1.5 billion, respectively. During the three and six months ended June 30, 2022, revenues from arrangements that were not accounted for under Topic 606 were approximately $775 million and $1.6 billion, respectively.

Remaining Performance Obligations

When allocating the total contract transaction price to identified performance obligations, a portion of the total transaction price may relate to service performance obligations which were not satisfied or are partially satisfied as of the end of the reporting period. Below we disclose information relating to these unsatisfied performance obligations. We apply the practical expedient available under Topic 606 that provides the option to exclude the expected revenues arising from unsatisfied performance obligations related to contracts that have an original expected duration of one year or less. This situation primarily arises with respect to certain month-to-month service contracts. At June 30, 2023, month-to-month service contracts represented approximately 94% of our wireless postpaid contracts and approximately 94% of our wireline Consumer and Business Markets and Other contracts, compared to June 30, 2022, for which month-to-month service contracts represented approximately 94% of our wireless postpaid contracts and 89% of our wireline Consumer and our Business Markets and Other contracts.

Additionally, certain contracts provide customers the option to purchase additional services. The fees related to these additional services are recognized when the customer exercises the option (typically on a month-to-month basis).

Contracts for wireless services, with or without promotional credits that require maintenance of service, are generally either month-to-month and cancellable at any time, or considered to contain terms ranging from greater than one month to up to thirty-six months (typically under a device payment plan), or contain terms ranging from greater than one month to up to twenty-four months (typically under a fixed-term plan). Additionally, customers may incur charges based on usage or additional optional services purchased in conjunction with entering into a contract that can be cancelled at any time and therefore are not included in the transaction price. The transaction price allocated to service performance obligations, which are not satisfied or are partially satisfied as of the end of the reporting period, are generally related to contracts that are not accounted for as month-to-month contracts.

Our Consumer group customers also include traditional wholesale resellers that purchase and resell wireless service under their own brands to their respective customers. Reseller arrangements generally include a stated contract term, which typically extends longer than two years and, in some cases, include a periodic minimum revenue commitment over the contract term for which revenues will be recognized in future periods.

Consumer customer contracts for wireline services are generally month-to-month; however, they may have a service term of two years or shorter than twelve months. Certain contracts with Business customers for wireline services extend into future periods, contain fixed monthly fees and usage-based fees, and can include annual commitments in each year of the contract or commitments over the entire specified contract term; however, a significant number of contracts for wireline services with our Business customers have a contract term that is twelve months or less.

Additionally, there are certain contracts with Business customers for wireline services that have a contractual minimum fee over the total contract term. We cannot predict the time period when revenue will be recognized related to those contracts; thus, they are excluded from the time bands below. These contracts have varying terms spanning over approximately sixteen years ending in February 2039 and have aggregate contract minimum payments totaling $1.4 billion.

At June 30, 2023, the transaction price related to unsatisfied performance obligations that are expected to be recognized for the remainder of 2023, 2024 and thereafter was $12.4 billion, $19.6 billion and $14.8 billion, respectively. Remaining performance obligation estimates are subject to change and are affected by several factors, including terminations and changes in the timing and scope of contracts, arising from contract modifications.

Accounts Receivable and Contract Balances

The timing of revenue recognition may differ from the time of billing to our customers. Receivables presented in our condensed consolidated balance sheets represent an unconditional right to consideration. Contract balances represent amounts from an arrangement when either Verizon has performed, by transferring goods or services to the customer in advance of receiving all or partial consideration for such goods and services from the customer, or the customer has made payment to Verizon in advance of obtaining control of the goods and/or services promised to the customer in the contract.

Contract assets primarily relate to our rights to consideration for goods or services provided to customers but for which we do not have an unconditional right at the reporting date. Under a fixed-term plan, total contract revenue is allocated between wireless service and equipment revenues. In conjunction with these arrangements, a contract asset is created, which represents the difference between the amount of equipment revenue recognized upon sale and the amount of consideration received from the customer when the performance obligation related to the transfer of control of the equipment is satisfied. The contract asset is

9

reclassified to accounts receivable as wireless services are provided and billed. We have the right to bill the customer as service is provided over time, which results in our right to the payment being unconditional. The contract asset balances are presented in our condensed consolidated balance sheets as Prepaid expenses and other and Other assets. We recognize the allowance for credit losses at inception and reassess quarterly based on management’s expectation of the asset’s collectability.

Contract liabilities arise when we bill our customers and receive consideration in advance of providing the goods or services promised in the contract. We typically bill service one month in advance, which is the primary component of the contract liability balance. Contract liabilities are recognized as revenue when services are provided to the customer. The contract liability balances are presented in our condensed consolidated balance sheets as Other current liabilities and Other liabilities.

The following table presents information about receivables from contracts with customers:

	At June 30,		At January 1,		At June 30,		At January 1,
(dollars in millions)	2023		2023		2022		2022
Receivables(1)	$	10,573	$	11,274	$	10,620	$	10,758
Device payment plan agreement receivables(2)	16,878		16,648		14,439		12,888

(1)Balances do not include receivables related to the following contracts: leasing arrangements (such as those for towers and equipment), captive reinsurance arrangements primarily related to wireless device insurance and the interest when equipment is sold to the customer by an authorized agent under a device payment plan agreement.

(2)Included in device payment plan agreement receivables presented in Note 6. Receivables derived from the sale of equipment on a device payment plan through an authorized agent are excluded.

The following table presents information about contract balances:

	At June 30,		At January 1,		At June 30,		At January 1,
(dollars in millions)	2023		2023		2022		2022
Contract asset	$	774	$	863	$	880	$	934
Contract liability(1)	8,468		8,234		7,706		7,229

(1) Revenue recognized related to contract liabilities existing at January 1, 2023 were $258 million and $4.6 billion for the three and six months ended June 30, 2023, respectively. Revenue recognized related to contract liabilities existing at January 1, 2022 were $365 million and $4.7 billion for the three and six months ended June 30, 2022, respectively.

The balances of contract assets and contract liabilities recorded in our condensed consolidated balance sheets were as follows:

	At June 30,		At December 31,
(dollars in millions)	2023		2022
Assets
Prepaid expenses and other	$	542	$	656
Other assets	232		207
Total	$	774	$	863
Liabilities
Other current liabilities	$	6,699	$	6,583
Other liabilities	1,769		1,651
Total	$	8,468	$	8,234

Contract Costs

Topic 606 requires the recognition of an asset for incremental costs to obtain a customer contract, which are then amortized to expense over the respective periods of expected benefit. We recognize an asset for incremental commission expenses paid to internal and external sales personnel and agents in conjunction with obtaining customer contracts. We only defer these costs when we have determined the commissions are incremental costs that would not have been incurred absent the customer contract and are expected to be recoverable. Costs to obtain a contract are amortized and recorded ratably as commission expense over the period representing the transfer of goods or services to which the assets relate. Costs to obtain wireless contracts are amortized over both of our Consumer and Business customers' estimated upgrade cycles, as such costs are typically incurred each time a customer upgrades. Costs to obtain wireline contracts are amortized as expense over the estimated customer relationship period for our Consumer customers. Incremental costs to obtain wireline contracts for our Business customers are insignificant. Costs to obtain contracts are recorded in Selling, general and administrative expense.

We also defer costs incurred to fulfill contracts that: (1) relate directly to the contract; (2) are expected to generate resources that will be used to satisfy our performance obligation under the contract; and (3) are expected to be recovered through revenue generated under the contract. Contract fulfillment costs are expensed as we satisfy our performance obligations and recorded in Cost of services. These costs principally relate to direct costs that enhance our wireline business resources, such as costs incurred to install circuits.

10

We determine the amortization periods for our costs incurred to obtain or fulfill a customer contract at a portfolio level due to the similarities within these customer contract portfolios.

Other costs, such as general costs or costs related to past performance obligations, are expensed as incurred.

Collectively, costs to obtain a contract and costs to fulfill a contract are referred to as deferred contract costs, and amortized over a one-to-seven year period. Deferred contract costs are classified as current or non-current within Prepaid expenses and other and Other assets, respectively.

The balances of deferred contract costs included in our condensed consolidated balance sheets were as follows:

	At June 30,		At December 31,
(dollars in millions)	2023		2022
Assets
Prepaid expenses and other	$	2,629	$	2,629
Other assets	2,436		2,475
Total	$	5,065	$	5,104

For the three and six months ended June 30, 2023, we recognized expense of $791 million and $1.6 billion, respectively, associated with the amortization of deferred contract costs, primarily within Selling, general and administrative expense in our condensed consolidated statements of income. For the three and six months ended June 30, 2022, we recognized expense of $735 million and $1.5 billion, respectively, associated with the amortization of deferred contract costs, primarily within Selling, general and administrative expense in our condensed consolidated statements of income.

We assess our deferred contract costs for impairment on a quarterly basis. We recognize an impairment charge to the extent the carrying amount of a deferred cost exceeds the remaining amount of consideration we expect to receive in exchange for the goods and services related to the cost, less the expected costs related directly to providing those goods and services that have not yet been recognized as expenses. There have been no impairment charges recognized for the three and six months ended June 30, 2023 or June 30, 2022.

Note 3. Acquisitions and Divestitures

Spectrum License Transactions

In February 2021, the Federal Communications Commission (FCC) concluded Auction 107 for C-Band wireless spectrum. In accordance with the rules applicable to the auction, Verizon is required to make payments for our allocable share of clearing costs incurred by, and incentive payments due to, the incumbent license holders associated with the auction, which are estimated to be $7.6 billion. During the six months ended June 30, 2023 and June 30, 2022, we made payments of $114 million and $1.4 billion, respectively, for obligations related to clearing costs and accelerated clearing incentives. In June 2023, we incurred costs of approximately $365 million for obligations related to accelerated clearing incentives, which were accrued for as of June 30, 2023. The majority of the remaining obligations related to clearing costs and incentive payments of approximately $4.2 billion, which is inclusive of the $365 million, are expected to be due by the end of the year. We expect to continue to make payments of approximately $4.6 billion for these obligations through 2024. These payments are dependent on the incumbent license holders' accelerated clearing of the spectrum for Verizon’s use and, therefore, the final timing and amounts could differ based on the incumbent holders’ execution of their clearing process. In accordance with the FCC order, the clearing must be completed by December 2025. The carrying value of the wireless spectrum won in Auction 107 consists of all payments required to participate and purchase licenses in the auction, including Verizon’s allocable share of clearing costs incurred by, and incentive payments due to, the incumbent license holders associated with the auction that we are obligated to pay in order to acquire the licenses, as well as capitalized interest to the extent qualifying activities have occurred.

TracFone Wireless, Inc.

On November 23, 2021 (the Acquisition Date), we completed the acquisition of TracFone Wireless, Inc. (TracFone), a provider of prepaid and value mobile services in the U.S. Verizon acquired all of TracFone's outstanding stock in exchange for approximately $3.5 billion in cash, net of cash acquired and working capital and other adjustments, 57,596,544 shares of Verizon common stock valued at approximately $3.0 billion, and up to an additional $650 million in future cash contingent consideration related to the achievement of certain performance measures and other commercial arrangements. The fair value of the Verizon common stock was determined on the basis of its closing market price on the Acquisition Date. The estimated fair value of the contingent consideration as of the Acquisition Date was approximately $560 million and represents a Level 3 measurement as defined in ASC 820, Fair Value Measurements and Disclosures. See Note 7 for additional information. The contingent consideration payable is based on the achievement of certain revenue and operational targets, measured over a two-year earn out period. During the six months ended June 30, 2023, Verizon made a payment of $102 million related to the contingent consideration, which is reflected in Cash flows from financing activities in our condensed consolidated statements of cash flows. Contingent consideration payments are expected to continue through 2024.

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During the six months ended June 30, 2022, Verizon received net cash proceeds of $248 million for the final settlement of working capital, which was included in our consideration as of the Acquisition Date.

Note 4. Wireless Licenses, Goodwill, and Other Intangible Assets

Wireless Licenses

The carrying amounts of our Wireless licenses are as follows:

	At June 30,		At December 31,
(dollars in millions)	2023		2022
Wireless licenses	$	151,337	$	149,796

At June 30, 2023 and 2022, approximately $38.4 billion and $49.1 billion, respectively, of wireless licenses were under development for commercial service for which we were capitalizing interest costs. We recorded approximately $905 million and $880 million of capitalized interest on wireless licenses for the six months ended June 30, 2023 and 2022, respectively.

During the six months ended June 30, 2023, we renewed various wireless licenses in accordance with FCC regulations. The average renewal period for these licenses was 11 years.

Goodwill

Changes in the carrying amount of Goodwill are as follows:

(dollars in millions)	Consumer		Business		Other		Total
Balance at January 1, 2023	$	21,142	$	7,502	$	27	$	28,671
Reclassifications, adjustments and other (1)	—		3		(27)		(24)
Balance at June 30, 2023	$	21,142	$	7,505	$	—	$	28,647

(1) Includes goodwill impairment charges of $27 million, related to non-strategic businesses presented within Other, recorded in Selling, general and administrative expense in our condensed consolidated statements of income for the three and six months ended June 30, 2023.

Other Intangible Assets

The following table displays the composition of Other intangible assets, net as well as the respective amortization periods:

	At June 30, 2023						At December 31, 2022
(dollars in millions)	Gross Amount		Accumulated Amortization		Net Amount		Gross Amount		Accumulated Amortization		Net Amount
Customer lists (5 to 13 years)	$	4,335	$	(1,907)	$	2,428	$	4,335	$	(1,646)	$	2,689
Non-network internal-use software (7 years)	24,247		(17,210)		7,037		23,421		(16,397)		7,024
Other (4 to 25 years)	2,839		(1,207)		1,632		2,806		(1,058)		1,748
Total	$	31,421	$	(20,324)	$	11,097	$	30,562	$	(19,101)	$	11,461

The amortization expense for Other intangible assets was as follows: 

	Three Months Ended		Six Months Ended
(dollars in millions)	June 30,		June 30,
2023	$	653	$	1,300
2022	651		1,286

The estimated future amortization expense for Other intangible assets for the remainder of the current year and next 5 years is as follows:

Years	(dollars in millions)
Remainder of 2023	$	1,299
2024	2,398
2025	2,198
2026	1,951
2027	1,392
2028	979

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Note 5. Debt

Significant Debt Transactions

Debt or equity financing may be needed to fund additional investments or development activities or to maintain an appropriate capital structure to ensure our financial flexibility.

The following tables show the significant transactions involving the senior unsecured debt securities of Verizon and its subsidiaries that occurred during the three and six months ended June 30, 2023.

Repayments and Repurchases

(dollars in millions)	Principal Repaid/ Repurchased		Amount Paid (1)
Three Months Ended March 30, 2023
Verizon 3.500% notes and floating rate notes due 2023 (2)	A$	1,050	$	850
Open market repurchases of various Verizon notes	$	260	190
Three Months Ended March 30, 2023 total			1,040
Three Months Ended June 30, 2023
Verizon 0.375% bonds due 2023 (2)	CHF	600	$	633
Open market repurchases of various Verizon notes	$	247	177
Three Months Ended June 30, 2023 total			810
Six Months Ended June 30, 2023 total			$	1,850

(1) Represents amount paid to repay or repurchase, including any accrued interest. In addition, for securities denominated in a currency other than the U.S. dollar, amount paid is shown on a U.S. dollar equivalent basis.

(2) U.S. dollar amount paid represents the amount payable at maturity per the derivatives entered into in connection with the transaction. See Note 7 for additional information on cross currency swap transactions related to the repayment.

Issuances

(dollars in millions)	Principal Amount Issued		Net Proceeds (1)
Three Months Ended June 30, 2023
Verizon 5.050% notes due 2033 (2)	$	1,000	$	994
Three and Six Months Ended June 30, 2023 total	$	1,000	$	994

(1) Net proceeds were net of underwriting discounts and other issuance costs.

(2) An amount equal to the net proceeds from these notes is expected to be used to fund, in whole or in part, certain renewable energy projects, including new and existing investments made by us during the period from January 1, 2023 through the maturity date of the notes.

Short-Term Borrowing and Commercial Paper Program

In March 2023, we entered into and fully drew from a $500 million short-term revolving credit facility. As of June 30, 2023, the $500 million borrowed under the facility remains outstanding.

During the six months ended June 30, 2023, we issued $8.4 billion in commercial paper and we repaid $8.5 billion of commercial paper. As of June 30, 2023, we had no commercial paper outstanding. These transactions are reflected within Cash flows from financing activities in our condensed consolidated statements of cash flows.

Asset-Backed Debt

As of June 30, 2023, the carrying value of our asset-backed debt was $21.3 billion. Our asset-backed debt includes Asset-Backed Notes (ABS Notes) issued to third-party investors (Investors) and loans (ABS Financing Facilities) received from banks and their conduit facilities (collectively, the Banks). Our consolidated asset-backed debt bankruptcy remote legal entities (each, an ABS Entity, or collectively, the ABS Entities) issue the debt or are otherwise party to the transaction documentation in connection with our asset-backed debt transactions. Under the terms of our asset-backed debt, Cellco Partnership (Cellco), a wholly-owned subsidiary of the Company, and certain other Company affiliates (collectively, the Originators) transfer device payment plan agreement receivables and certain other receivables (collectively referred to as certain receivables) to one of the ABS Entities, which in turn transfers such receivables to another ABS Entity that issues the debt. Verizon entities retain the equity interests and residual interests, as applicable, in the ABS Entities, which represent the rights to all funds not needed to make required payments on the asset-backed debt and other related payments and expenses.

Our asset-backed debt is secured by the transferred receivables and future collections on such receivables. These receivables transferred to the ABS Entities and related assets, consisting primarily of restricted cash, will only be available for payment of asset-backed debt and expenses related thereto, payments to the Originators in respect of additional transfers of certain

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receivables, and other obligations arising from our asset-backed debt transactions, and will not be available to pay other obligations or claims of Verizon’s creditors until the associated asset-backed debt and other obligations are satisfied. The Investors or Banks, as applicable, which hold our asset-backed debt have legal recourse to the assets securing the debt, but do not have any recourse to Verizon with respect to the payment of principal and interest on the debt. Under a parent support agreement, the Company has agreed to guarantee certain of the payment obligations of Cellco and the Originators to the ABS Entities.

Cash collections on the receivables collateralizing our asset-backed debt securities are required at certain specified times to be placed into segregated accounts. Deposits to the segregated accounts are considered restricted cash and are included in Prepaid expenses and other and Other assets in our condensed consolidated balance sheets.

Proceeds from our asset-backed debt transactions are reflected in Cash flows from financing activities in our condensed consolidated statements of cash flows. The asset-backed debt issued is included in Debt maturing within one year and Long-term debt in our condensed consolidated balance sheets.

ABS Notes

During the six months ended June 30, 2023, we completed the following ABS Notes transactions:

(dollars in millions)	Interest Rates %	Expected Weighted-average Life to Maturity (in years)	Principal Amount Issued
January 2023
Series 2023-1
A Senior class notes	4.490	2.98	$	891
B Junior class notes	4.740	2.98	—
C Junior class notes	4.980	2.98	41
January 2023 total			932
April 2023
Series 2023-2
A Senior class notes	4.890	1.99	891
B Junior class notes	5.130	1.99	—
C Junior class notes	5.380	1.99	41
Series 2023-3
A Senior class notes	4.730	4.99	268
B Junior class notes	4.970	4.99	—
C Junior class notes	5.220	4.99	12
April 2023 total			1,212
June 2023
Series 2023-4
A-1a Senior fixed rate class notes	5.160	2.97	538
A-1b Senior floating rate class notes	Compounded SOFR + 0.850	2.97	175
B Junior class notes	5.400	2.97	—
C Junior class notes	5.650	2.97	33
June 2023 total			746
Total			$	2,890

Under the terms of each series of ABS Notes outstanding as of June 30, 2023, there is a revolving period of up to 18 months, two years, three years, or five years, as applicable, during which we may transfer additional receivables to the ABS Entity. During the six months ended June 30, 2023, we made aggregate principal repayments of $1.7 billion on ABS Notes that have entered the amortization period, including payments in connection with any note redemptions.

In July 2023, in connection with an anticipated redemption of ABS Notes, we made a principal payment, in whole, for $900 million.

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ABS Financing Facilities

Under the two loan agreements outstanding in connection with the ABS Financing Facility originally entered into in December 2021 and previously renewed in 2022 (2021 ABS Financing Facility), we borrowed an additional $325 million in March 2023 and prepaid an aggregate of $700 million in April 2023. The aggregate outstanding balance under the 2021 ABS Financing Facility was $7.6 billion as of June 30, 2023.

In March 2023, we borrowed an additional $500 million under the loan agreement outstanding in connection with the ABS Financing Facility that we originally entered into in 2022 (2022 ABS Financing Facility). The aggregate outstanding balance under the 2022 ABS Financing Facility was $2.5 billion as of June 30, 2023.

Variable Interest Entities (VIEs)

The ABS Entities meet the definition of a VIE for which we have determined that we are the primary beneficiary as we have both the power to direct the activities of the entity that most significantly impact the entity’s performance and the obligation to absorb losses or the right to receive benefits of the entity. Therefore, the assets, liabilities and activities of the ABS Entities are consolidated in our financial results and are included in amounts presented on the face of our condensed consolidated balance sheets.

The assets and liabilities related to our asset-backed debt arrangements included in our condensed consolidated balance sheets were as follows:

	At June 30,		At December 31,
(dollars in millions)	2023		2022
Assets
Accounts receivable, net	$	14,143	$	13,906
Prepaid expenses and other	1,469		1,409
Other assets	11,468		9,894
Liabilities
Accounts payable and accrued liabilities	24		22
Debt maturing within one year	9,593		6,809
Long-term debt	11,749		13,199

See Note 6 for additional information on certain receivables used to secure asset-backed debt.

Long-Term Credit Facilities

				At June 30, 2023
(dollars in millions)	Maturities	Facility Capacity		Unused Capacity		Principal Amount Outstanding
Verizon revolving credit facility (1)	2026	$	9,500	$	9,455	$	—
Various export credit facilities (2)	2024 - 2031	11,000		486		6,720
Total		$	20,500	$	9,941	$	6,720

(1) The revolving credit facility does not require us to comply with financial covenants or maintain specified credit ratings, and it permits us to borrow even if our business has incurred a material adverse change. The revolving credit facility provides for the issuance of letters of credit. As of June 30, 2023, there have been no drawings against the $9.5 billion revolving credit facility since its inception.

(2) During the six months ended June 30, 2023 and 2022, we drew down $515 million and $2.0 billion, respectively, from these facilities. Borrowings under certain of these facilities are amortized semi-annually in equal installments up to the applicable maturity dates. Maturities reflect maturity dates of principal amounts outstanding. Any amounts borrowed under these facilities and subsequently repaid cannot be reborrowed.

Non-Cash Transactions

During the six months ended June 30, 2023 and 2022, we financed, primarily through alternative financing arrangements, the purchase of approximately $719 million and $321 million, respectively, of long-lived assets consisting primarily of network equipment. As of June 30, 2023 and December 31, 2022, $2.2 billion and $1.7 billion, respectively, relating to these financing arrangements, including those entered into in prior years and liabilities assumed through acquisitions, remained outstanding. These purchases are non-cash financing activities and therefore are not reflected within Capital expenditures in our condensed consolidated statements of cash flows.

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Net Debt Extinguishment Gains (Losses)

During the three and six months ended June 30, 2023, we recorded debt extinguishment gains of $69 million and $139 million, respectively. During the three months ended June 30, 2022, we recorded debt extinguishment gains of $50 million. During the six months ended June 30, 2022, we recorded net debt extinguishment losses of $1.2 billion. The gains and losses are recorded in Other income (expense), net in our condensed consolidated statements of income. The total gains and losses are reflected within Other, net cash flow from operating activities, and the portion of the gains and losses representing cash payments are reflected within Other, net cash flow from financing activities in our condensed consolidated statements of cash flows.

Guarantees

We guarantee the debentures of our operating telephone company subsidiaries. As of June 30, 2023, $614 million aggregate principal amount of these obligations remained outstanding. Each guarantee will remain in place for the life of the obligation unless terminated pursuant to its terms, including the operating telephone company no longer being a wholly-owned subsidiary of the Company.

Debt Covenants

We and our consolidated subsidiaries are in compliance with all of our restrictive covenants in our debt agreements.

Note 6. Device Payment Plan Agreement and Wireless Service Receivables

The following table presents information about accounts receivable, net of allowances, recorded in our condensed consolidated balance sheet:

	At June 30, 2023
(dollars in millions)	Device payment plan agreement		Wireless service		Other receivables(1)		Total
Accounts receivable	$	12,810	$	5,202	$	6,096	$	24,108
Less Allowance for credit losses	502		188		232		922
Accounts receivable, net of allowance	$	12,308	$	5,014	$	5,864	$	23,186

(1) Other receivables primarily include wireline and other receivables, of which the allowances are individually insignificant.

Included in Other assets and Accounts receivable at June 30, 2023 and December 31, 2022, are net device payment plan agreement receivables and net wireless service receivables of $25.4 billion and $23.6 billion, respectively, which have been transferred to ABS Entities and continue to be reported in our condensed consolidated balance sheets. See Note 5 for additional information. We believe the carrying value of these receivables approximate their fair value using a Level 3 expected cash flow model.

Under the Verizon device payment program, our eligible wireless customers purchase wireless devices under a device payment plan agreement. Customers that activate service on devices purchased under the device payment program pay lower service fees as compared to those under our fixed-term service plans, and their device payment plan charge is included on their wireless monthly bill. We no longer offer Consumer customers new fixed-term, subsidized service plans for devices; however, we continue to offer subsidized plans to our Business customers. We also continue to service existing plans for customers who have not yet purchased and activated devices under the Verizon device payment program.

Wireless Device Payment Plan Agreement Receivables

The following table displays device payment plan agreement receivables, net, recognized in our condensed consolidated balance sheets:

	At June 30,		At December 31,
(dollars in millions)	2023		2022
Device payment plan agreement receivables, gross	$	26,521	$	26,188
Unamortized imputed interest	(579)		(479)
Device payment plan agreement receivables, at amortized cost	25,942		25,709
Allowance (1)	(1,007)		(881)
Device payment plan agreement receivables, net	$	24,935	$	24,828
Classified in our condensed consolidated balance sheets:
Accounts receivable, net	$	12,308	$	12,929
Other assets	12,627		11,899
Device payment plan agreement receivables, net	$	24,935	$	24,828

(1) Includes allowance for both short-term and long-term device payment plan agreement receivables.

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For indirect channel wireless contracts with customers, we impute risk adjusted interest on the device payment plan agreement receivables. We record the imputed interest as a reduction to the related accounts receivable. The associated interest income, which is included within Service revenues and other in our condensed consolidated statements of income, is recognized over the financed device payment term.

Promotions

In connection with certain device payment plan agreements, we may offer a promotion to allow our customers to upgrade to a new device after paying down a certain specified portion of the required device payment plan agreement amount as well as trading in their device in good working order. When a customer enters into a device payment plan agreement with the right to upgrade to a new device, we account for this trade-in right as a guarantee obligation. We recognize a liability measured at fair value for the customer’s right to trade in the device which is determined by considering several factors, including the weighted-average selling prices obtained in recent resales of similar devices eligible for trade-in. At June 30, 2023 and December 31, 2022, the amount of the guarantee liability was insignificant and $54 million, respectively.

We may offer certain promotions that allow a customer to trade in their owned device in connection with the purchase of a new device. Under these types of promotions, the customer receives a credit for the value of the trade-in device. At June 30, 2023 and December 31, 2022, the amount of trade-in liability was $449 million and $562 million, respectively.

In addition, we may provide the customer with additional future billing credits that will be applied against the customer’s monthly bill as long as service is maintained. These future billing credits are accounted for as consideration payable to a customer and are included in the determination of total transaction price, resulting in a contract liability.

Device payment plan agreement receivables, net, does not reflect the trade-in liability, additional future credits or the guarantee liability.

Origination of Device Payment Plan Agreements

When originating device payment plan agreements, we use internal and external data sources to create a credit risk score to measure the credit quality of a customer and to determine eligibility for the device payment program. Verizon’s experience has been that the payment attributes of longer tenured customers are highly predictive for estimating their reliability to make future payments. Customers with longer tenures tend to exhibit similar risk characteristics to other customers with longer tenures, and receivables due from customers with longer tenures tend to perform better than receivables from customers that have not previously been Verizon customers. As a result of this experience, we make initial lending decisions based upon whether the customers are "established customers" or "short-tenured customers." If a Consumer customer has been a customer for 45 days or more, or if a Business customer has been a customer for 12 months or more, the customer is considered an "established customer." For established customers, the credit decision and ongoing credit monitoring processes rely on a combination of internal and external data sources. If a Consumer customer has been a customer less than 45 days, or a Business customer has been a customer for less than 12 months, the customer is considered a "short-tenured customer." For short-tenured customers, the credit decision and credit monitoring processes rely more heavily on external data sources.

Available external credit data from credit reporting agencies along with internal data are used to create custom credit risk scores for Consumer customers. The custom credit risk score is generated automatically from the applicant’s credit data using proprietary custom credit models. The credit risk score measures the likelihood that the potential customer will become severely delinquent and be disconnected for non-payment. For a small portion of short-tenured customer applications, a traditional credit report is not available from one of the national credit reporting agencies because the potential customer does not have sufficient credit history. In those instances, alternative credit data is used for the risk assessment. For Business customers, we also verify the existence of the business with external data sources.

Based on the custom credit risk score, we assign each customer a credit class, each of which has specified offers of credit. This includes an account level spending limit and a maximum amount of credit allowed per device for Consumer customers or a required down payment percentage for Business customers.

Credit Quality Information

Subsequent to origination, we assess indicators for the quality of our wireless device payment plan agreement portfolio using two models, one for new customers and one for existing customers. The model for new customers pools all Consumer and Business wireless customers based on less than 210 days as "new customers." The model for existing customers pools all Consumer and Business wireless customers based on 210 days or more as "existing customers."

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The following table presents device payment plan agreement receivables, at amortized cost, and gross write-offs recorded, as of and for the six months ended June 30, 2023, by credit quality indicator and year of origination:

	Year of Origination(1)
(dollars in millions)	2023		2022		2021 and prior		Total
Device payment plan agreement receivables, at amortized cost
New customers	$	1,573	$	1,964	$	360	$	3,897
Existing customers	7,087		12,656		2,302		22,045
Total	$	8,660	$	14,620	$	2,662	$	25,942
Gross write-offs
New customers	$	61	$	269	$	42	$	372
Existing customers	3		116		69		188
Total	$	64	$	385	$	111	$	560

(1) Includes accounts that have been suspended at a point in time.

The data presented in the table above was last updated on June 30, 2023.

We assess indicators for the quality of our wireless service receivables portfolio as one overall pool. The following table presents wireless service receivables, at amortized cost, and gross write-offs recorded, as of and for the six months ended June 30, 2023, by year of origination:

	Year of Origination
(dollars in millions)	2023		2022 and prior		Total
Wireless service receivables, at amortized cost	$	5,078	$	124	$	5,202
Gross write-offs	74		150		224

The data presented in the table above was last updated on June 30, 2023.

Allowance for Credit Losses

The credit quality indicators are used in determining the estimated amount and the timing of expected credit losses for the device payment plan agreement and wireless service receivables portfolios.

For device payment plan agreement receivables, we record bad debt expense based on a default and loss calculation using our proprietary loss model. The expected loss rate is determined based on customer credit scores and other qualitative factors as noted above. The loss rate is assigned individually on a customer by customer basis and the custom credit scores are then aggregated by vintage and used in our proprietary loss model to calculate the weighted-average loss rate used for determining the allowance balance.

We monitor the collectability of our wireless service receivables as one overall pool. Wireline service receivables are disaggregated and pooled by the following types of customers and related contracts: consumer, small and medium business, enterprise, public sector and wholesale. For wireless service receivables and wireline consumer and small and medium business receivables, the allowance is calculated based on a 12 month rolling average write-off balance multiplied by the average life-cycle of an account from billing to write-off. The risk of loss is assessed over the contractual life of the receivables and is adjusted based on the historical loss amounts for current and future conditions based on management’s qualitative considerations. For enterprise, public sector and wholesale wireline receivables, the allowance for credit losses is based on historical write-off experience and individual customer credit risk, if applicable.

Activity in the allowance for credit losses by portfolio segment of receivables was as follows:

(dollars in millions)	Device Payment Plan Agreement Receivables(1)		Wireless Service Plan Receivables
Balance at January 1, 2023	$	881	$	143
Current period provision for expected credit losses	669		250
Write-offs charged against the allowance	(560)		(224)
Recoveries collected	17		19
Balance at June 30, 2023	$	1,007	$	188

(1) Includes allowance for both short-term and long-term device payment plan agreement receivables.

We monitor delinquency and write-off experience based on the quality of our device payment plan agreement and wireless service receivables portfolios. The extent of our collection efforts with respect to a particular customer are based on the results of our proprietary custom internal scoring models that analyze the customer’s past performance to predict the likelihood of the customer falling further delinquent. These custom scoring models assess a number of variables, including origination

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characteristics, customer account history and payment patterns. Since our customers’ behaviors may be impacted by general economic conditions, we analyzed whether changes in macroeconomic conditions impact our credit loss experience and have concluded that our credit loss estimates are generally not materially impacted by reasonable and supportable forecasts of future economic conditions. Based on the score derived from these models, accounts are grouped by risk category to determine the collection strategy to be applied to such accounts. For device payment plan agreement receivables and wireless service receivables, we consider an account to be delinquent and in default status if there are unpaid charges remaining on the account on the day after the bill’s due date. The risk class determines the speed and severity of the collections effort including initiatives taken to facilitate customer payment.

The balance and aging of the device payment plan agreement receivables, at amortized cost, were as follows:

	At June 30,
(dollars in millions)	2023
Unbilled	$	24,712
Billed:
Current	1,007
Past due	223
Device payment plan agreement receivables, at amortized cost	$	25,942

Note 7. Fair Value Measurements and Financial Instruments

Recurring Fair Value Measurements

The following table presents the balances of assets and liabilities measured at fair value on a recurring basis as of June 30, 2023:

(dollars in millions)	Level 1(1)		Level 2(2)		Level 3(3)		Total
Assets:
Prepaid expenses and other:
Fixed income securities	$	—	$	41	$	—	$	41
Cross currency swaps	—		4		—		4
Foreign exchange forwards	—		1		—		1
Interest rate caps	—		76		—		76
Other assets:
Fixed income securities	—		269		—		269
Cross currency swaps	—		455		—		455
Interest rate caps	—