REVENUE RECOGNITION AND RECEIVABLES

12 Months Ended

Dec. 31, 2020

REVENUE RECOGNITION AND RECEIVABLES

REVENUE RECOGNITION AND RECEIVABLES

3. REVENUE RECOGNITION AND RECEIVABLES

Impact of adoption

The Company adopted ASC 606 on January 1, 2018 using the modified retrospective method. The Company elected the practical expedient to apply the new guidance only to contracts that were not substantially complete at the adoption date. The cumulative effect of adopting ASC 606 resulted in a contract asset of $1.6 million, of which $1.2 million was recorded in prepayments and other current assets and $0.4 million was recorded in other assets, a contract liability of $0.2 million recorded in advance payments and deposits, contract acquisition costs of $1.5 million of which $0.9 million was recorded in prepayments and other current assets and $0.6 million was recorded in other assets, and a deferred tax liability of $0.3 million with the offset of $1.5 million recorded to retained earnings and $1.1 million recorded to minority interest.

Contract Assets and Liabilities

The Company recognizes contract assets and liabilities on its balance sheet. Contract assets represent unbilled amounts typically resulting from retail wireless contracts with both a multiyear service period and a promotional discount. In these contracts the revenue recognized exceeds the amount billed to the customer. The current portion of the contract asset is recorded in prepayments and other current assets and the noncurrent portion is included in other assets on the Company’s balance sheets.

Contract liabilities consist of advance payments and billings in excess of revenue recognized. Retail revenue for postpaid customers is generally billed one month in advance and recognized over the period that the corresponding service is rendered to customers. To the extent the service is not provided by the reporting date the amount is recognized as a contract liability. Prepaid service, including mobile voice and data services, sold to customers is recorded as deferred revenue prior to the commencement of services. Contract liabilities are recorded in advanced payments and deposits on the Company’s balance sheets.

In July 2019 and August 2020, the Company entered into the FirstNet Agreement and a First Amendment to the FirstNet Agreement , respectively, in connection with the FirstNet Transaction. The FirstNet Transaction includes construction and service performance obligations. The Company allocated the transaction price of the FirstNet Agreement to each performance obligation based on the relative standalone selling price of each performance obligation in the contract. The standalone selling price is the estimated price the Company would charge for the good or service in a separate transaction with similar customers in similar circumstances.

The Company has certain wholesale roaming agreements that contain stand ready performance obligations and management allocates transaction value to performance obligations based on the standalone selling price. The standalone selling price is the estimated price the Company would charge for the good or service with similar customers in similar circumstances. Management determined the performance obligations were obligations to make the service continuously available and will recognize revenue evenly over the service period.

Contract assets and liabilities consisted of the following (amounts in thousands):

	December 31, 2020		December 31, 2019			$ Change	% Change
Contract asset – current	$	2,478	$	2,413	$	65	3	%
Contract asset – noncurrent		910		905		5	1	%
Contract liability – current		(18,544)		(15,044)		(3,500)	(23)	%
Contract liability – noncurrent		(2,193)		(5,450)		3,257	60	%
Net contract liability	$	(17,349)	$	(17,176)	$	(173)	(1)	%

The contract asset-current is included in prepayments and other current assets, the contract asset-noncurrent is included in other assets, the contract liability-current is included in advance payments and deposits, and the contract liability-noncurrent is included in other liabilities on the Company’s balance sheet. The increase in the Company’s net

contract liability was due to the timing of customer prepayments and contract billings, and the FirstNet Transaction. During the year ended December 31, 2020, the Company recognized revenue of $16.9 million related to its December 31, 2019 contract liability and amortized $2.3 million of the December 31, 2019 contract asset into revenue. The Company did not recognize any revenue in the years ended December 31, 2020 and 2019 related to performance obligations that were satisfied or partially satisfied in previous periods.

Contract Acquisition Costs

The December 31, 2020 balance sheet includes current contract acquisition costs of $1.9 million in prepayments and other current assets and long term contract acquisition costs of $1.2 million in other assets. The December 31, 2019 balance sheet includes current contract acquisition costs of $1.7 million in prepayments and other current assets and long term contract acquisition costs of $1.1 million in other assets. During the years ended December 31, 2020 and 2019 the Company amortized $2.1 million and $1.8 million, respectively, of contract acquisition cost.

Remaining Performance Obligations

Remaining performance obligations represent the transaction price allocated to unsatisfied performance obligations of certain multiyear retail wireless contracts, which include a promotional discount, and the Company’s construction and service contracts. The transaction price allocated to unsatisfied performance obligations was $299 million and $241 million at December 31, 2020 and December 31, 2019, respectively. The Company expects to satisfy the majority of the remaining performance obligations and recognize the transaction price within 24 months and the remainder thereafter.

The Company has certain retail, wholesale, and renewable energy contracts where transaction price is allocated to remaining performance obligations. However, the Company omits these contracts from the disclosure by applying the right to invoice, one year or less, and wholly unsatisfied performance obligation practical expedients.

Disaggregation

The Company's revenue is presented on a disaggregated basis in Note 15 based on an evaluation of disclosures outside the financial statements, information regularly reviewed by the chief operating decision maker for evaluating the financial performance of operating segments and other information that is used for performance evaluation and resource allocations. This includes revenue from Communication Services and Other revenues. Communication Services is further disaggregated into Mobility, Fixed, Carrier Services, and Other revenue. Other revenue is further disaggregated into Renewable Energy, Managed Services, and Construction revenue. Each of the revenue streams is presented for the Company’s International Telecom and US Telecom segments. This disaggregation of revenue depicts how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

Receivables

At December 31, 2020, the Company had gross accounts receivable of $67.1 million of which $57.5 million was recorded in accounts receivable and $9.6 million was long-term recorded in other assets on the Company’s balance sheet. The Company recorded an allowance for credit loss of $12.1 million. At January 1, 2020, the Company had gross accounts receivable of $48.6 million and an allowance for credit losses of $12.7 million. The Company monitors receivables through the use of historical operating data adjusted for expectation of future performance as appropriate. Activity in the allowance for credit losses is below:

	Year ended December 31, 2020
Balance at January 1, 2020	$	12,724
Current period provision for expected losses		5,010
Write-offs charged against the allowance		(6,351)
Recoveries collected		738
Balance at December 31, 2020	$	12,121

	2020		2019
Retail	$	22,178	$	13,659
Wholesale - current		35,322		34,969
Wholesale - long- term		9,614		—
Accounts receivable		67,114		48,628
Less: allowance for doubtful accounts		(12,121)		(12,724)
Total accounts receivable, net	$	54,993	$	35,904