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Revenue Recognition (Tables)
 9 Months Ended
Sep. 30, 2018
Revenue from Contract with Customer [Abstract]  
Effects of New Accounting Pronouncement
The following tables present our reported results under ASC 606 and a reconciliation to results using the historical accounting method:
 
Three Months Ended September 30, 2018
 
Nine Months Ended September 30, 2018
 
(Dollars in millions)
 
Reported Balances as of September 30, 2018
 
Impact of ASC 606
 
ASC 605
Historical Adjusted Balances
 
Reported Balances as of September 30, 2018
 
Impact of ASC 606
 
ASC 605
Historical Adjusted Balances
Operating revenues
$
2,010

 
(4
)
 
2,006

 
6,149

 
(4
)
 
6,145

Cost of services and products (exclusive of depreciation and amortization)
976

 
—

 
976

 
2,954

 
—

 
2,954

Selling, general and administrative
311

 
12

 
323

 
1,043

 
32

 
1,075

Interest expense
137

 
(7
)
 
130

 
381

 
(7
)
 
374

Income tax expense
38

 
(2
)
 
36

 
184

 
(8
)
 
176

Net income
88

 
(7
)
 
81

 
190

 
(21
)
 
169

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:
 
September 30, 2018
 
(Dollars in millions)
 
Reported Balances as of September 30, 2018
 
Impact of ASC 606
 
ASC 605
Historical Adjusted Balances
Other current assets
$
290

 
(22
)
 
268

Other long-term assets, net
132

 
(22
)
 
110

Deferred revenue
1,469

 
(3
)
 
1,466

Deferred income tax assets, net
274

 
10

 
284

Member's equity
18,312

 
(31
)
 
18,281
Disaggregation of Revenue
The following table provides disaggregation of revenue from contracts with customers based on service offering for the three and nine months ended September 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.
 
Successor
 
Successor
 
Three Months Ended September 30, 2018
 
Nine Months Ended September 30, 2018
 
(Dollars in millions)
 
(Dollars in millions)
 
Total Revenues
 
Adjustments(7)
 
Total Revenue from Contracts with Customers
 
Total Revenues
 
Adjustments(7)
 
Total Revenue from Contracts with Customers
IP & Data Services (1)
$
969

 
—

 
969

 
2,959

 
—

 
2,959

Transport & Infrastructure (2)
664

 
(45
)
 
619

 
2,012

 
(140
)
 
1,872

Voice & Collaboration (3)
349

 
—

 
349

 
1,093

 
—

 
1,093

IT and Managed Services (4)
1

 
—

 
1

 
3

 
—

 
3

Other revenues (5)
1

 
(1
)
 
—

 
4

 
(3
)
 
1

Affiliate revenues (6)
26

 
(26
)
 
—

 
78

 
(78
)
 
—

Total revenues
$
2,010

 
(72
)
 
1,938

 
6,149

 
(221
)
 
5,928

 
 
 
 
 
 
 
 
 
 
 
 
Timing of revenue
 
 
 
 


 
 
 
 
 


Goods transferred at a point in time
 
 
 
 
$
—

 
 
 
 
 
$
—

Services performed over time
 
 
 
 
1,938

 
 
 
 
 
5,928

Total revenue from contracts with customers


 


 
$
1,938

 
 
 
 
 
$
5,928


(1) Includes primarily VPN data network, Ethernet, IP, video and ancillary revenues.
(2) Includes primarily broadband and equipment sales and professional services revenues.
(3) Includes local, long-distance and other ancillary revenues.
(4) Includes IT services and managed services revenues.
(5) Includes sublease rental income.
(6) Includes telecommunications and data services we bill to our affiliates.
(7) Includes sublease rental income and revenue from fiber capacity lease arrangements which are not within the scope of ASC 606.
Our operating revenues for our products and services consisted of the following categories:
 
Successor
 
 
Predecessor
 
Three Months Ended September 30, 2018
 
Nine Months Ended September 30, 2018
 
 
Three Months Ended September 30, 2017
 
Nine Months Ended September 30, 2017
 
(Dollars in millions)
IP and data services
$
969

 
2,959

 
 
988

 
2,947

Transport and infrastructure
664

 
2,012

 
 
677

 
2,042

Voice and collaboration
349

 
1,093

 
 
392

 
1,174

IT and managed services
1

 
3

 
 
—

 
—

Other
1

 
4

 
 
2

 
6

Affiliate
26

 
78

 
 
—

 
—

Total revenues
$
2,010

 
6,149

 
 
2,059

 
6,169
Contract with Customer, Asset and Liability
The following table provides information about revenues recognized for the three and nine months ended September 30, 2018:
 
Three Months Ended September 30, 2018
 
Nine Months Ended September 30, 2018
 
(Dollars in millions)
Revenue recognized in the period from:
 
 
 
Amounts included in contract liability at the beginning of the period (January 1, 2018)
$
22

 
135

Performance obligations satisfied in previous periods
—

 
—

The following table provides balances of customer receivables and contract liabilities as of September 30, 2018 and January 1, 2018:
 
Successor
 
September 30, 2018
 
January 1, 2018
 
(Dollars in millions)
Customer receivables (1)
$
715

 
748

Contract liabilities
413

 
353

(1)
Gross customer receivables of $725 and $751, net of allowance for doubtful accounts of $10 and $3, at September 30, 2018 and January 1, 2018, respectively.
Capitalized Contract Cost
The following table provides changes in our contract acquisition costs and fulfillment costs for the three and nine months ended September 30, 2018:
 
Successor
 
Three Months Ended September 30, 2018
 
Nine Months Ended September 30, 2018
 
(Dollars in millions)
 
Acquisition Costs
 
Fulfillment Costs
 
Acquisition Costs
 
Fulfillment Costs
Beginning of period balance
$
34

 
52

 
13

 
14

Costs incurred
16

 
22

 
42

 
70

Amortization
(5
)
 
(8
)
 
(10
)
 
(18
)
End of period balance
$
45

 
66

 
45

 
66