Revenue Recognition (Tables)

6 Months Ended

Jun. 30, 2018

Revenue from Contract with Customer [Abstract]

The following tables present our reported results under ASC 606 and a reconciliation to results using the historical accounting method:



	Three Months Ended June 30, 2018					Six Months Ended June 30, 2018
	(Dollars in millions)
	Reported Balances as of June 30, 2018		Impact of ASC 606		ASC 605 Historical Adjusted Balances	Reported Balances as of June 30, 2018	Impact of ASC 606		ASC 605 Historical Adjusted Balances
Operating revenues	$	2,052	—		2,052	4,139	—		4,139
Cost of services and products (exclusive of depreciation and amortization)	980		—		980	1,978	—		1,978
Selling, general and administrative	388		7		395	732	20		752
Income tax expense	44		(2	)	42	146	(5	)	141
Net income	40		(5	)	35	102	(15	)	87

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:



	June 30, 2018
	(Dollars in millions)
	Reported Balances as of June 30, 2018		Impact of ASC 606		ASC 605 Historical Adjusted Balances
Other current assets	$	201	(16	)	185
Deferred income tax assets, net	281		9		290
Other long-term assets, net	108		(18	)	90
Member's equity	18,749		(25	)	18,724

Disaggregation of Revenue

The following table provides disaggregation of revenue from contracts with customers based on service offering for the three and six months ended June 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 June 30, 2018						Six Months Ended June 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 ⁽⁴⁾	$	987	—		987		1,990	—		1,990
Transport & Infrastructure ⁽³⁾	673		(52	)	621		1,348	(94	)	1,254
Voice & Collaboration ⁽¹⁾	363		—		363		744	—		744
IT and Managed Services ⁽²⁾	1		—		1		2	—		2
Other revenues ⁽⁵⁾	1		(1	)	—		3	(3	)	—
Affiliate revenues ⁽⁶⁾	27		(27	)	—		52	(52	)	—
Total revenues	$	2,052	(80	)	1,972		4,139	(149	)	3,990

Timing of revenue
Goods transferred at a point in time					$	—				$	—
Services performed over time					1,972					3,990
Total revenue from contracts with customers					$	1,972				$	3,990

(1) Includes local, long-distance and other ancillary revenues.

(2) Includes IT services and managed services revenues.

(3) Includes primarily broadband, private line (including business data services), colocation and data centers, wavelength and ancillary revenues.

(4) Includes primarily VPN data network, Ethernet, IP, video and ancillary 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 June 30, 2018		Six Months Ended June 30, 2018	Three Months Ended June 30, 2017	Six Months Ended June 30, 2017
	(Dollars in millions)
IP and data services	$	987	1,990	986	1,958
Transport and infrastructure	673		1,348	688	1,366
Voice and collaboration	363		744	386	782
IT and managed services	1		2	—	—
Other	1		3	2	4
Affiliate	27		52	—	—
Total revenues	$	2,052	4,139	2,062	4,110

Contract with Customer, Asset and Liability

The following table provides information about revenues recognized for the three and six months ended June 30, 2018:



	Successor
	Three Months Ended March 31, 2018		Three Months Ended June 30, 2018	Six Months Ended June 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)	$	97	16	113
Performance obligations satisfied in previous periods	—		—	—

The following table provides balances of customer receivables and contract liabilities as of June 30, 2018 and January 1, 2018:



	Successor
	June 30, 2018		January 1, 2018
	(Dollars in millions)
Customer receivables ⁽¹⁾	$	744	748
Contract liabilities	392		353


(1)	Gross customer receivables of $753 and $751, net of allowance for doubtful accounts of $9 and $3, at June 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 six months ended June 30, 2018:



	Successor
	Three Months Ended June 30, 2018					Six Months Ended June 30, 2018
	(Dollars in millions)
	Acquisition Costs			Fulfillment Costs		Acquisition Costs		Fulfillment Costs
Beginning of period balance	$	26		35		13		14
Costs incurred	11			24		26		47
Amortization	(3		)	(7	)	(5	)	(9	)
End of period balance	$	34		52		34		52