Revenue Recognition

12 Months Ended

Dec. 31, 2024

Revenue from Contract with Customer [Abstract]

Revenue Recognition

NOTE 5. REVENUE RECOGNITION

We report our revenues net of sales taxes and record certain regulatory fees, primarily Universal Service Fund (USF) fees, on a net basis. No customer accounted for more than 10% of consolidated revenues in 2024, 2023 or 2022.

Wireless, Advanced Data, Legacy Voice & Data Services and Equipment Revenue

We offer service-only contracts and contracts that bundle equipment used to access the services and/or with other service offerings. Some contracts have fixed terms and others are cancelable on a short-term basis (i.e., month-to-month arrangements).

Examples of service revenues include wireless, fiber and other advanced connectivity, transitional and legacy voice and data. These services represent a series of distinct services that is considered a separate performance obligation. Service revenue is recognized when services are provided, based upon either period of time (e.g., monthly service fees) or usage (e.g., bytes of data processed).

Some of our services require customer premises equipment that, when combined and integrated with AT&T’s specific network infrastructure, facilitates the delivery of service to the customer. In evaluating whether the equipment is a separate performance obligation, we consider the customer’s ability to benefit from the equipment on its own or together with other readily available resources and if so, whether the service and equipment are separately identifiable (i.e., is the service highly dependent on, or highly interrelated with the equipment). When equipment is a separate performance obligation, we record the sale of equipment when title has passed and the products are accepted by the customer. For devices sold through indirect channels (e.g., national retailers), revenue is recognized when the retailer accepts the device, not upon activation.

Our equipment and service revenues are predominantly recognized on a gross basis, as most of our services do not involve a third party and we typically control the equipment that is sold to our customers.

Revenue recognized from fixed-term contracts that bundle services and/or equipment is allocated based on the standalone selling price of all required performance obligations of the contract (i.e., each item included in the bundle). Promotional discounts are attributed to each required component of the arrangement, resulting in recognition over the contract term. Standalone selling prices are determined by assessing prices paid for service-only contracts (e.g., arrangements where customers bring their own devices) and standalone device pricing.

We offer the majority of our customers the option to purchase certain wireless devices in installments over a specified period of time, and, in many cases, they may be eligible to trade in the original equipment for a new device and have the remaining unpaid balance paid or settled. For customers that elect these equipment installment payment programs, at the point of sale, we recognize revenue for the entire amount of revenue allocated to the customer receivable net of fair value of the trade-in right guarantee, when applicable. The difference between the revenue recognized and the consideration received is recorded as a note receivable when the devices are not discounted and our right to consideration is unconditional. When installment sales include promotional discounts that are earned by customers over the contract term (e.g., “buy one get one free” or equipment discounts with trade-in of a device), notes receivable are recognized net of discounts and the difference between revenue recognized and consideration received is recorded as a contract asset to be amortized over the contract term.

Less commonly, we offer certain customers highly discounted devices when they enter into a minimum service agreement term. For these contracts, we recognize equipment revenue at the point of sale based on a standalone selling price allocation. The difference between the revenue recognized and the cash received is recorded as a contract asset that will amortize over the contract term.

Our contracts allow for customers to frequently modify their arrangement, without incurring penalties in many cases. When a contract is modified, we evaluate the change in scope or price of the contract to determine if the modification should be treated as a new contract or if it should be considered a change of the existing contract. We generally do not have significant impacts from contract modifications.

Revenues from transactions between us and our customers are recorded net of revenue-based regulatory fees and taxes. Cash incentives given to customers are recorded as a reduction of revenue. Nonrefundable, upfront service activation and setup fees associated with service arrangements are deferred and recognized over the associated service contract period or customer relationship life.

Revenue Categories

The following tables set forth reported revenue by category and by business unit:

For the year ended December 31, 2024
	Communications
	Mobility		Business Wireline		Consumer Wireline		Latin America		Corporate & Other		Total
Wireless service	$	65,373	$	—	$	—	$	2,668	$	—	$	68,041
Business service	—		18,064		—		—		—		18,064
Broadband	—		—		11,212		—		—		11,212
Legacy voice and data	—		—		1,265		—		253		1,518
Other	—		—		1,101		—		199		1,300
Total Service	65,373		18,064		13,578		2,668		452		100,135
Equipment	19,882		755		—		1,564		—		22,201
Total	$	85,255	$	18,819	$	13,578	$	4,232	$	452	$	122,336

For the year ended December 31, 2023
	Communications
	Mobility		Business Wireline		Consumer Wireline		Latin America		Corporate & Other		Total
Wireless service	$	63,175	$	—	$	—	$	2,569	$	—	$	65,744
Business service	—		20,274		—		—		—		20,274
Broadband	—		—		10,455		—		—		10,455
Legacy voice and data	—		—		1,508		—		294		1,802
Other	—		—		1,210		—		164		1,374
Total Service	63,175		20,274		13,173		2,569		458		99,649
Equipment	20,807		609		—		1,363		—		22,779
Total	$	83,982	$	20,883	$	13,173	$	3,932	$	458	$	122,428

For the year ended December 31, 2022
	Communications
	Mobility		Business Wireline		Consumer Wireline		Latin America		Corporate & Other		Total
Wireless service	$	60,499	$	—	$	—	$	2,162	$	13	$	62,674
Business service	—		21,891		—		—		—		21,891
Broadband	—		—		9,669		—		—		9,669
Legacy voice and data	—		—		1,746		—		323		2,069
Other	—		—		1,334		—		194		1,528
Total Service	60,499		21,891		12,749		2,162		530		97,831
Equipment	21,281		647		—		982		—		22,910
Total	$	81,780	$	22,538	$	12,749	$	3,144	$	530	$	120,741

Deferred Customer Contract Acquisition and Fulfillment Costs

Costs to acquire and fulfill customer contracts, including commissions on service activations, for our Mobility, Business Wireline and Consumer Wireline services, are deferred and amortized over the contract period or expected customer relationship life, which typically ranges from three years to five years.

During the first quarter of 2022, we updated our analysis of expected economic lives of customer relationships. As of January 1, 2022, we extended the amortization period for deferred acquisition and fulfillment contract costs within Mobility, Business Wireline and Consumer Wireline to better reflect the estimated economic lives of the relationships. These changes in

accounting estimate decreased “Other cost of revenues” approximately $395, or $0.04 per diluted share from continuing operations for the year ended December 31, 2022.

The following table presents the deferred customer contract acquisition and fulfillment costs included on our consolidated balance sheets at December 31:

Consolidated Balance Sheets	2024		2023
Deferred Acquisition Costs
Prepaid and other current assets	$	3,239	$	3,233
Other Assets	4,177		4,077
Total deferred customer contract acquisition costs	$	7,416	$	7,310
Deferred Fulfillment Costs
Prepaid and other current assets	$	2,101	$	2,340
Other Assets	3,289		3,843
Total deferred customer contract fulfillment costs	$	5,390	$	6,183

The following table presents deferred customer contract acquisition and fulfillment cost amortization, which are primarily included in “Selling, general and administrative” and “Other cost of revenues,” respectively, for the years ended December 31:

Consolidated Statements of Income	2024		2023
Deferred acquisition cost amortization	$	3,667	$	3,476
Deferred fulfillment cost amortization	2,525		2,700

Contract Assets and Liabilities

A contract asset is recorded when revenue is recognized in advance of our right to bill and receive consideration. The contract asset will decrease as services are provided and billed. For example, when installment sales include promotional discounts (e.g., trade-in device credits) the difference between revenue recognized and consideration received is recorded as a contract asset to be amortized over the contract term.

Our contract assets primarily relate to our wireless businesses. Promotional equipment sales where we offer handset credits, which are allocated between equipment and service in proportion to their standalone selling prices, when customers commit to a specified service period result in additional contract assets recognized. These contract assets will amortize over the service contract period, resulting in lower future service revenue.

When consideration is received in advance of the delivery of goods or services, a contract liability is recorded. Reductions in the contract liability will be recorded as we satisfy the performance obligations.

The following table presents contract assets and liabilities on our consolidated balance sheets at December 31:

Consolidated Balance Sheets	2024		2023
Contract asset	$	6,855	$	6,518
Current portion in “Prepaid and other current assets”	3,845		3,549
Contract liability	4,272		3,994
Current portion in “Advanced billings and customer deposits”	3,981		3,666

Our beginning of period contract liabilities recorded as customer contract revenue during 2024 was $3,666.

Remaining Performance Obligations

Remaining performance obligations represent services we are required to provide to customers under bundled or discounted arrangements, which are satisfied as services are provided over the contract term. In determining the transaction price allocated,

we do not include non-recurring charges and estimates for usage, nor do we consider arrangements with an original expected duration of less than one year, which are primarily prepaid wireless and residential internet agreements.

Remaining performance obligations associated with business contracts reflect recurring charges billed, adjusted to reflect estimates for sales incentives and revenue adjustments. Performance obligations associated with wireless contracts are estimated using a portfolio approach in which we review all relevant promotional activities, calculating the remaining performance obligation using the average service component for the portfolio and the average device price. As of December 31, 2024, the aggregate amount of the transaction price allocated to remaining performance obligations was $40,914, of which we expect to recognize approximately 85% by the end of 2026, with the balance recognized thereafter.