

	Successor
	Reported Balances as of December 31, 2018		Impact of ASC 606		ASC 605 Historical Adjusted Balances
	(Dollars in millions)
Operating revenue	$	8,220	(5	)	8,215
Cost of services and products (exclusive of depreciation and amortization)	3,937		—		3,937
Selling, general and administrative	1,354		52		1,406
Interest expense	509		(9	)	500
Income tax expense	196		(12	)	184
Net income	341		(36	)	305

The following tabled provide disaggregation of revenue from contracts with customers based on service offering for the years ended December 31, 2019 and 2018. It also shows the amount of revenue that is not subject to ASC 606, but is instead governed by other accounting standards.



	Year Ended December 31, 2019
	Total Revenue		Adjustments for Non-ASC 606 Revenue⁽⁶⁾		Total Revenue from Contracts with Customers
	(Dollars in millions)
IP and Data Services ⁽¹⁾	$	3,888	—		3,888
Transport and Infrastructure ⁽²⁾	2,662		(704	)	1,958
Voice and Collaboration ⁽³⁾	1,443		—		1,443
Other Revenue ⁽⁴⁾	12		(9	)	3
Affiliate Revenue ⁽⁵⁾	180		(180	)	—
Total Revenue	$	8,185	(893	)	7,292

Timing of revenue
Goods transferred at a point in time					$	—
Services performed over time					7,292
Total revenue from contracts with customers					$	7,292



	Year Ended December 31, 2018
	(Dollars in millions)
	Total Revenue		Adjustments for Non-ASC 606 Revenue⁽⁶⁾		Total Revenue from Contracts with Customers
IP and Data Services ⁽¹⁾	$	3,945	—		3,945
Transport and Infrastructure ⁽²⁾	2,701		(189	)	2,512
Voice and Collaboration ⁽³⁾	1,464		—		1,464
Other Revenue ⁽⁴⁾	3		(3	)	—
Affiliate Revenue ⁽⁵⁾	107		(107	)	—
Total Revenue	$	8,220	(299	)	7,921

Timing of revenue
Goods transferred at a point in time					$	—
Services performed over time					7,921
Total revenue from contracts with customers					$	7,921



(1)	Includes primarily VPN data network, IP, Ethernet, video and ancillary revenue.
(2)	Includes primarily wavelength, colocation and data center services, dark fiber, private line and professional services revenue.
(3)	Includes voice, Voice Over IP ("VoIP"), Collaboration.
(4)	Includes sublease rental income and IT services and managed services revenue.
(5)	Includes telecommunications and data services we bill to our affiliates.
(6)	Includes sublease rental income and revenue from fiber capacity lease arrangements which are not within the scope of ASC 606.

The following table provides balances of customer receivables, contract assets and contract liabilities as of December 31, 2019 and December 31, 2018:



	December 31, 2019		December 31, 2018
	(Dollars in millions)
Customer receivables ⁽¹⁾	$	678	712
Contract assets	32		19
Contract liabilities	423		393

_______________________________________________________________________________



(1)	Gross customer receivables of $691 million and $723 million, net of allowance for doubtful accounts of $13 million and $11 million, at December 31, 2019 and December 31, 2018, respectively.

Contract liabilities are consideration we have received from our customers in advance of providing the goods or services promised in the future. We defer recognizing this consideration until we have satisfied the related performance obligation to the customer. Contract liabilities include recurring services billed one month in advance and installation and maintenance charges that are deferred and recognized over the actual or expected contract term, which ranges from one to five years depending on the service. Contract liabilities are included within deferred revenue in our consolidated balance sheets. During the years ended December 31, 2019 and December 31, 2018, we recognized $175 million and $158 million, respectively, of revenue that was included in contract liabilities as of January 1, 2019 and January 1, 2018, respectively.

As of December 31, 2019, our estimated revenue expected to be recognized in the future related to performance obligations associated with customer contracts that are unsatisfied (or partially satisfied) is approximately $3.9 billion. We expect to recognize approximately 91% of this revenue through 2022, with the balance recognized thereafter.

We do not disclose the value of unsatisfied performance obligations for contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed (for example, uncommitted usage or non-recurring charges associated with professional or technical services to be completed), or contracts that are classified as leasing arrangements that are not subject to ASC 606.



	Year Ended December 31, 2019
	Acquisition Costs			Fulfillment Costs
	(Dollars in millions)
Beginning of period balance	$	64		84
Costs incurred	60			103
Amortization	(45		)	(66	)
End of period balance	$	79		121



	Year Ended December 31, 2018
	Acquisition Costs			Fulfillment Costs
	(Dollars in millions)
Beginning of period balance	$	13		14
Costs incurred	68			99
Amortization	(17		)	(29	)
End of period balance	$	64		84

Acquisition costs include commission fees paid to employees as a result of obtaining contracts. Fulfillment costs include third party and internal costs associated with the provision, installation and activation of telecommunications services to customers, including labor and materials consumed for these activities.

Deferred acquisition and fulfillment costs are amortized based on the transfer of services on a straight-line basis over the average expected contract term of 12 to 60 months for our business customers and amortized fulfillment costs are included in cost of services and products and amortized acquisition costs are included in selling, general and administrative expenses in our consolidated statements of operations. The amount of these deferred costs that are anticipated to be amortized in the next twelve months are included in other current assets on our consolidated balance sheets. The amount of deferred costs expected to be amortized beyond twelve months is included in other non-current assets on our consolidated balance sheets. Deferred acquisition and fulfillment costs are assessed for impairment on an annual basis.

Our operating revenue for our products and services consisted of the following categories:



	Successor				Predecessor
	Year Ended December 31, 2019		Year Ended December 31, 2018	Period Ended December 31, 2017	Period Ended October 31, 2017
	(Dollars in millions)
IP and Data Services	$	3,888	3,945	668	3,284
Transport and Infrastructure	2,662		2,701	464	2,272
Voice and Collaboration	1,443		1,464	258	1,308
Other revenue	12		3	1	6
Affiliate revenue	180		107	16	—
Total revenue	$	8,185	8,220	1,407	6,870

We recognize revenue in our consolidated statements of operations for certain USF surcharges and transaction taxes that we bill to our customers. Our consolidated statements of operations also reflect the offsetting expense for the amounts we remit to the government agencies. The USF surcharges are assigned to the products and services categories based on the underlying revenue. We also act as a collection agent for certain other USF and transaction taxes that we are required by government agencies to bill our customers, for which we do not record any revenue or expense because we only act as a pass-through agent.

Successor

Predecessor

Year Ended December 31, 2019

Year Ended December 31, 2018

Period Ended December 31, 2017

Period Ended October 31, 2017

(Dollars in millions)

USF surcharges and transaction taxes

428

415

331

The following tables present total assets as of the years ended December 31, 2019 and December 31, 2018 as well as operating revenue for the years ended December 31, 2019 and December 31, 2018, the successor period ended December 31, 2017 and the predecessor period ended October 31, 2017 by geographic region:



	Total Assets
	December 31,
	2019		2018
	(Dollars in millions)
North America	$	24,144	27,520
Europe, Middle East and Africa	2,842		2,765
Latin America	2,112		2,006
Total	$	29,098	32,291



	Revenue
	Successor				Predecessor
	Year Ended December 31, 2019		Year Ended December 31, 2018	Period Ended December 31, 2017	Period Ended October 31, 2017
	(Dollars in millions)
North America	$	6,719	6,739	1,155	5,651
Europe, Middle East and Africa	719		744	128	607
Latin America	747		737	124	612
Total	$	8,185	8,220	1,407	6,870

Our operations are integrated into and reported as part of the consolidated segment data of CenturyLink. CenturyLink's chief operating decision maker ("CODM") is our CODM, but reviews our financial information on an aggregate basis only in connection with our quarterly and annual reports that we file with the Securities and Exchange Commission. Consequently, we do not provide our discrete financial information to the CODM on a regular basis. As such, we believe we have one reportable segment.

A relatively small number of customers account for a significant percentage of our revenue. Our top ten customers accounted for approximately 16% and 20% of our revenue for the years ended December 31, 2019 and December 31, 2018, respectively, 19% for the successor period ended December 31, 2017 and 18% for the predecessor period ended October 31, 2017, respectively.