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Revenue Recognition (Tables)
 9 Months Ended
Sep. 30, 2018
Revenue from Contract with Customer [Abstract]  
Effect of New Accounting Pronouncements
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
 
(Dollars in millions, except per share amounts
and shares in thousands)
 
Reported Balances as of September 30, 2018
 
Impact of ASC 606
 
ASC 605
Historical Adjusted Balances
Operating revenues
$
5,818

 
(14
)
 
$
5,804

Cost of services and products (exclusive of depreciation and amortization)
2,672

 
8

 
2,680

Selling, general and administrative
967

 
16

 
983

Interest expense
557

 
(7
)
 
550

Income tax expense
57

 
(8
)
 
49

Net income
$
272

 
(23
)
 
$
249

 
 
 
 
 
 
BASIC AND DILUTED EARNINGS PER COMMON SHARE
 
 
 
 
 
BASIC
$
0.25

 
(0.02
)
 
0.23

DILUTED
$
0.25

 
(0.02
)
 
0.23

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
 
 
 
 
 
BASIC
1,066,904

 
—

 
1,066,904

DILUTED
1,072,351

 
—

 
1,072,351

 
Nine Months Ended September 30, 2018
 
(Dollars in millions, except per share amounts
and shares in thousands)
 
Reported Balances as of September 30, 2018
 
Impact of ASC 606
 
ASC 605
Historical Adjusted Balances
Operating revenues
$
17,665

 
12

 
$
17,677

Cost of services and products (exclusive of depreciation and amortization)
8,205

 
18

 
8,223

Selling, general and administrative
3,191

 
42

 
3,233

Interest expense
1,638

 
(7
)
 
1,631

Income tax expense
123

 
(11
)
 
112

Net income
$
679

 
(30
)
 
$
649

 
 
 
 
 
 
BASIC AND DILUTED EARNINGS PER COMMON SHARE
 
 
 
 
 
BASIC
$
0.64

 
(0.03
)
 
0.61

DILUTED
$
0.63

 
(0.03
)
 
0.60

WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING
 
 

 

BASIC
1,065,410

 
—

 
1,065,410

DILUTED
1,069,726

 
—

 
1,069,726

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 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
$
1,237

 
(390
)
 
$
847

Other long-term assets, net
1,014

 
(93
)
 
921

Deferred revenue
2,547

 
(101
)
 
2,446

Deferred income taxes, net
2,502

 
(127
)
 
2,375

Other long-term liabilities
1,075

 
122

 
1,197

Retained earnings
777

 
(377
)
 
400
Disaggregation of Revenue
The following tables provide disaggregation of revenue from contracts with customers based on service offerings 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. The adjustment of $43 million noted above was included in the revenue of the consumer segment for the three months ended September 30, 2018; $34 million was recorded to voice and collaboration and $9 million was recorded to transport and infrastructure.
 
Three Months Ended September 30, 2018
 
(Dollars in millions)
 
Total Revenue
 
Adjustments for Non-ASC 606 Revenue (8)
 
Total Revenue from Contracts with Customers
Business segment
 
 
 
 
 
IP & Data Services (1)
$
1,726

 
—

 
$
1,726

Transport & Infrastructure (2)
1,331

 
(71
)
 
1,260

Voice & Collaboration (3)
1,075

 
—

 
1,075

IT & Managed Services (4)
153

 
—

 
153

Total business segment revenues
4,285

 
(71
)
 
4,214

 
 
 
 
 
 
Consumer segment
 
 
 
 
 
IP & Data Services (5)
70

 
(9
)
 
61

Transport & Infrastructure (6)
720

 
(54
)
 
666

Voice & Collaboration (3)
565

 
—

 
565

Total consumer segment revenues
1,355

 
(63
)
 
1,292

 
 
 
 
 
 
Non-segment revenues


 


 


Regulatory revenues (7)
178

 
(178
)
 
—

Total non-segment revenues
178

 
(178
)
 
—

 
 
 
 
 
 
Total revenues
$
5,818

 
$
(312
)
 
$
5,506

 
 
 
 
 
 
Timing of Revenue
 
 
 
 
 
Goods transferred at a point in time
 
 
 
 
$
51

Services performed over time
 
 
 
 
5,455

Total revenues from contracts with customers
 
 
 
 
$
5,506

 
Nine Months Ended September 30, 2018
 
(Dollars in millions)
 
Total Revenue
 
Adjustments for Non-ASC 606 Revenue (8)
 
Total Revenue from Contracts with Customers
Business segment
 
 
 
 
 
IP & Data Services (1)
$
5,212

 
—

 
$
5,212

Transport & Infrastructure (2)
4,021

 
(217
)
 
3,804

Voice & Collaboration (3)
3,324

 
—

 
3,324

IT & Managed Services (4)
476

 
—

 
476

Total business segment revenues
13,033

 
(217
)
 
12,816

 
 
 
 
 
 
Consumer segment
 
 
 
 
 
IP & Data Services (5)
249

 
(25
)
 
224

Transport & Infrastructure (6)
2,171

 
(159
)
 
2,012

Voice & Collaboration (3)
1,666

 
—

 
1,666

Total consumer segment revenues
4,086

 
(184
)
 
3,902

 
 
 
 
 
 
Non-segment revenues
 
 
 
 
 
Regulatory revenues (7)
546

 
(546
)
 
—

Total non-segment revenues
546

 
(546
)
 
—

 
 
 
 
 
 
Total revenues
$
17,665

 
(947
)
 
$
16,718

 
 
 
 
 
 
Timing of Revenue
 
 
 
 
 
Goods transferred at a point in time
 
 
 
 
$
132

Services performed over time
 
 
 
 
16,586

Total revenues from contracts with customers
 
 
 
 
$
16,718


(1
)
Includes primarily VPN data network, Ethernet, IP, video and ancillary revenues.
(2
)
Includes primarily broadband, private line (including business data services), colocation and data centers, wavelength and ancillary revenues.
(3
)
Includes local, long-distance and other ancillary revenues.
(4
)
Includes IT services and managed services revenues.
(5
)
Includes retail video revenues (including our facilities-based video revenues).
(6
)
Includes primarily broadband and equipment sales and professional services revenues.
(7
)
Includes CAF Phase I, CAF Phase 2, federal and state USF support revenue, sublease rental income and failed-sale leaseback income.
(8
)
Includes regulatory revenues, lease revenues, sublease rental income, revenue from fiber capacity lease arrangements and failed sale leaseback income, which are not within the scope of ASC 606.
Contract with Customer, Asset and Liability
The following table provides balances of customer receivables, contract assets and contract liabilities as of September 30, 2018 and January 1, 2018:
 
September 30, 2018
 
January 1, 2018
 
(Dollars in millions)
Customer receivables(1)
$
2,436

 
2,504

Contract liabilities
716

 
623

Contract assets
352

 
255

(1) Gross customer receivables of $2.6 billion and $2.7 billion, net of allowance for doubtful accounts of $153 million and $155 million, 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:
 
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
$
286

 
161

 
268

 
133

Costs incurred
53

 
46

 
152

 
105

Amortization
(44
)
 
(34
)
 
(125
)
 
(65
)
End of period balance
$
295

 
173

 
295

 
173