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Revenue Recognition (Tables) | 9 Months Ended
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Sep. 30, 2018
Revenue from Contract with Customer [Abstract] |
Adoption impact of ASU 2014-09 and ASU 2017-15 on financial statements | Consolidated Balance Sheet
As of September 30, 2018 | Results under prior accounting standards |  | Adjustment |  | As reported
(Dollars in millions) |  |  |  |  |  |
Accounts receivable |  |  |  |  |  |  |  |
Customers and agents, less allowances | $ | 871 |  |  | $ | 59 |  |  | $ | 930 |
Prepaid expenses | 118 |  |  | (16 | ) |  | 102 |
Other current assets | 26 |  |  | 4 |  |  | 30 |
Total current assets | 2,340 |  |  | 47 |  |  | 2,387 |
Licenses | 2,197 |  |  | 1 |  |  | 2,198 |
Investments in unconsolidated entities | 485 |  |  | 15 |  |  | 500 |
Other assets and deferred charges | 421 |  |  | 173 |  |  | 594 |
Total assets | 9,483 |  |  | 236 |  |  | 9,719 |
Customer deposits and deferred revenues | 194 |  |  | (12 | ) |  | 182 |
Accrued taxes | 58 |  |  | (3 | ) |  | 55 |
Other current liabilities | 90 |  |  | 3 |  |  | 93 |
Total current liabilities | 863 |  |  | (11 | ) |  | 852 |
Deferred income tax liability, net | 586 |  |  | 56 |  |  | 642 |
Other deferred liabilities and credits | 530 |  |  | 12 |  |  | 542 |
Retained earnings | 2,533 |  |  | 150 |  |  | 2,683 |
Total TDS shareholders' equity | 4,392 |  |  | 150 |  |  | 4,542 |
Noncontrolling interests | 680 |  |  | 28 |  |  | 708 |
Total equity | 5,072 |  |  | 178 |  |  | 5,250 |
Total liabilities and equity | $ | 9,483 |  |  | $ | 236 |  |  | $ | 9,719 |
The line items impacted by the adoption of ASU 2014-09 and ASU 2017-05 in the Consolidated Statement of Operations and the Consolidated Balance Sheet are presented below. Consolidated Statement of Operations
Three Months Ended September 30, 2018 | Results under prior accounting standards |  | Adjustment |  | As reported
(Dollars and shares in millions, except per share amounts) |  |  |  |  |
Operating revenues |  |  |  |  |
Service | $ | 1,045 |  |  | $ | (28 | ) |  | $ | 1,017 |
Equipment and product sales | 261 |  |  | 19 |  |  | 280 |
Total operating revenues | 1,306 |  |  | (9 | ) |  | 1,297 |
Cost of equipment and products | 294 |  |  | (3 | ) |  | 291 |
Selling, general, and administrative | 422 |  |  | (1 | ) |  | 421 |
Total operating expenses | 1,250 |  |  | (4 | ) |  | 1,246 |
Operating income (loss) | 56 |  |  | (5 | ) |  | 51 |
Income (loss) before income taxes | 63 |  |  | (5 | ) |  | 58 |
Income tax expense (benefit) | 6 |  |  | (1 | ) |  | 5 |
Net income (loss) | 56 |  |  | (3 | ) |  | 53 |
Less: Net income (loss) attributable to noncontrolling interests, net of tax | 8 |  |  | (1 | ) |  | 7 |
Net income (loss) attributable to TDS shareholders | 49 |  |  | (3 | ) |  | 46 |
Net income (loss) available to TDS common shareholders | 49 |  |  | (3 | ) |  | 46 |
Basic earnings (loss) per share available to TDS common shareholders | $ | 0.44 |  |  | $ | (0.03 | ) |  | $ | 0.41 |
Diluted earnings (loss) per share available to TDS common shareholders | $ | 0.43 |  |  | $ | (0.02 | ) |  | $ | 0.41 |
Numbers may not foot due to rounding
Nine Months Ended September 30, 2018 | Results under prior accounting standards |  | Adjustment |  | As reported
(Dollars and shares in millions, except per share amounts) |  |  |  |  |
Operating revenues |  |  |  |  |
Service | $ | 3,075 |  |  | $ | (87 | ) |  | $ | 2,988 |
Equipment and product sales | 728 |  |  | 61 |  |  | 789 |
Total operating revenues | 3,803 |  |  | (26 | ) |  | 3,777 |
Cost of equipment and products | 812 |  |  | (8 | ) |  | 804 |
Selling, general and administrative | 1,229 |  |  | 3 |  |  | 1,232 |
(Gain) loss on license sales and exchanges, net | (17 | ) |  | (1 | ) |  | (18 | )
Total operating expenses | 3,591 |  |  | (6 | ) |  | 3,585 |
Operating income (loss) | 212 |  |  | (20 | ) |  | 192 |
Income (loss) before income taxes | 223 |  |  | (20 | ) |  | 203 |
Income tax expense (benefit) | 53 |  |  | (5 | ) |  | 48 |
Net income (loss) | 170 |  |  | (15 | ) |  | 155 |
Less: Net income (loss) attributable to noncontrolling interests, net of tax | 38 |  |  | (2 | ) |  | 36 |
Net income (loss) attributable to TDS shareholders | 131 |  |  | (12 | ) |  | 119 |
Net income (loss) available to TDS common shareholders | 131 |  |  | (12 | ) |  | 119 |
Basic earnings (loss) per share available to TDS common shareholders | $ | 1.17 |  |  | $ | (0.11 | ) |  | $ | 1.06 |
Diluted earnings (loss) per share available to TDS common shareholders | $ | 1.15 |  |  | $ | (0.11 | ) |  | $ | 1.04 |
Numbers may not foot due to rounding
Schedule of Multiple-deliverable Arrangements | The following is a description of principal activities from which TDS generates its revenues.
Services and products | Nature, timing of satisfaction of performance obligations, and significant payment terms
Wireless services | Wireless service includes voice, messaging and data services. Revenue is recognized in Service revenues as wireless service is provided to the customer. Wireless services generally are billed and paid in advance on a monthly basis.
Wireless devices and accessories | U.S. Cellular offers a comprehensive range of wireless devices such as handsets, modems, mobile hotspots, home phones and tablets for use by its customers, as well as accessories. U.S. Cellular also sells wireless devices to agents and other third-party distributors for resale. U.S. Cellular frequently discounts wireless devices sold to new and current customers. U.S. Cellular also offers customers the option to purchase certain devices under installment contracts over a specified time period. For certain equipment installment plans, after a specified period of time, the customer may have the right to upgrade to a new device. Such upgrades require the customer to enter into an equipment installment contract for the new device, and transfer the existing device to U.S. Cellular. U.S. Cellular recognizes revenue in Equipment and product sales revenues when control of the device or accessory is transferred to the customer, which is generally upon delivery.
Wireless roaming | U.S. Cellular receives roaming revenues when other wireless carriers’ customers use U.S. Cellular’s wireless systems. U.S. Cellular recognizes revenue in Service revenues when the roaming service is provided to the other carrier’s customer.
Wireless Eligible Telecommunications Carrier (ETC) Revenues | Telecommunications companies may be designated by states, or in some cases by the FCC, as an ETC to receive support payments from the Universal Service Fund if they provide specified services in “high cost” areas. ETC revenues recognized in the reporting period represent the amounts which U.S. Cellular is entitled to receive for such period, as determined and approved in connection with U.S. Cellular’s designation as an ETC in various states.
Wireless tower rents | U.S. Cellular receives tower rental revenues when another carrier leases tower space on a U.S. Cellular owned tower. U.S. Cellular recognizes revenue in Service revenues in the period during which the services are provided.
Activation fees | TDS charges its end customers activation fees in connection with the sale of certain services and equipment. Activation fees charged by TDS Telecom in conjunction with a service offering are deferred and recognized over the average customer’s service period. These fees charged at U.S. Cellular are deferred and recognized over the period benefitted.
Wireline services | Wireline services include broadband, video and voice services. Revenue is recognized in Service revenues as service is provided to the customer. Wireline services are generally billed and paid in advance on a monthly basis.
Wireline wholesale revenues | Wholesale revenues include network access services primarily to interexchange and wireless carriers for carrying data and voice traffic on TDS Telecom’s network, special access services and state and federal support payments, including A-CAM. Wholesale revenues are recorded as the related service is provided.
Cable services | Cable services include broadband, video and voice services. Revenue is recognized in Service revenues as service is provided to the customer. Cable services are generally billed and paid in advance on a monthly basis.
IT hardware sales | TDS recognizes equipment revenue when it no longer has any requirements to perform, when title has passed and when the products are accepted by the customer.
Hosted and managed services | HMS Service revenues consist of cloud and hosting solutions, managed services, Enterprise Resource Planning (ERP) application management, colocation services, and IT hardware related maintenance and professional services. Revenues related to these services are recognized as services are provided.
Disaggregation of Revenues | In the following table, revenue is disaggregated by type of service and timing of revenue recognition. Service revenues are recognized over time and Equipment sales are point in time.
|  |  | TDS Telecom |  |  |  |
Three Months Ended September 30, 2018 | U.S. Cellular |  | Wireline |  | Cable |  | TDS Telecom Total |  | Corporate, Eliminations and Other |  | Total
(Dollars in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenues from contracts with customers: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Type of service: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retail service | $ | 659 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 659 |
Inbound roaming | 50 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 50 |
Residential | — |  |  | 81 |  |  | 47 |  |  | 128 |  |  | — |  |  | 128 |
Commercial | — |  |  | 46 |  |  | 10 |  |  | 56 |  |  | — |  |  | 56 |
Wholesale | — |  |  | 50 |  |  | — |  |  | 50 |  |  | — |  |  | 50 |
Other service | 34 |  |  | — |  |  | — |  |  | — |  |  | 18 |  |  | 52 |
Service revenues from contracts with customers | 743 |  |  | 176 |  |  | 58 |  |  | 233 |  |  | 18 |  |  | 995 |
Equipment and product sales | 242 |  |  | — |  |  | — |  |  | — |  |  | 38 |  |  | 280 |
Total revenues from contracts with customers 1 | $ | 985 |  |  | $ | 176 |  |  | $ | 58 |  |  | $ | 234 |  |  | $ | 56 |  |  | $ | 1,275 |
Numbers may not foot due to rounding.
1 | These amounts do not include revenues outside the scope of ASU 2014-09; therefore, revenue line items in this table will not agree to amounts presented in the Consolidated Statement of Operations.
|  |  | TDS Telecom |  |  |  |
Nine Months Ended September 30, 2018 | U.S. Cellular |  | Wireline |  | Cable |  | TDS Telecom Total |  | Corporate, Eliminations and Other |  | Total
(Dollars in millions) |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenues from contracts with customers: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Type of service: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retail service | $ | 1,960 |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | — |  |  | $ | 1,960 |
Inbound roaming | 116 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 116 |
Residential | — |  |  | 241 |  |  | 140 |  |  | 381 |  |  | — |  |  | 381 |
Commercial | — |  |  | 140 |  |  | 30 |  |  | 170 |  |  | — |  |  | 170 |
Wholesale | — |  |  | 143 |  |  | — |  |  | 143 |  |  | — |  |  | 143 |
Other service | 99 |  |  | — |  |  | — |  |  | (1 | ) |  | 52 |  |  | 150 |
Service revenues from contracts with customers | 2,175 |  |  | 524 |  |  | 170 |  |  | 693 |  |  | 52 |  |  | 2,920 |
Equipment and product sales | 692 |  |  | 1 |  |  | — |  |  | 1 |  |  | 96 |  |  | 789 |
Total revenues from contracts with customers 1 | $ | 2,867 |  |  | $ | 525 |  |  | $ | 170 |  |  | $ | 694 |  |  | $ | 148 |  |  | $ | 3,709 |
Numbers may not foot due to rounding.
1 | These amounts do not include revenues outside the scope of ASU 2014-09; therefore, revenue line items in this table will not agree to amounts presented in the Consolidated Statement of Operations.
Contract with Customer, Assets and Liabilities | The accounts receivable balance related to amounts billed and not paid on contracts with customers, net of allowances, is shown in the table below. Bad debts expense recognized for the three and nine months ended September 30, 2018, related to receivables was $27 million and $70 million, respectively.
| September 30, 2018
(Dollars in millions) |
Accounts receivable |
Customer and agents | $ | 926 |
Other | 98 |
Total 1 | $ | 1,024 |
1 | These amounts do not include accounts receivable related to revenues outside the scope of ASU 2014-09; therefore, accounts receivable line items presented in this table will not agree to amounts presented in the Consolidated Balance Sheet.
The following table provides a rollforward of contract assets from contracts with customers, which are recorded in Other current assets and Other assets and deferred charges in the Consolidated Balance Sheet.
| Contract Assets
(Dollars in millions) |
Balance at December 31, 2017 | $ | — |
Change in accounting policy | 28 |
Contract additions | 20 |
Terminated contracts | (1 | )
Reclassified to receivables | (35 | )
Balance at September 30, 2018 | $ | 12 |
The following table provides a rollforward of contract liabilities from contracts with customers, which are recorded in Customer deposits and deferred revenues and Other deferred liabilities and credits in the Consolidated Balance Sheet.
| Contract Liabilities
(Dollars in millions) |
Balance at December 31, 2017 | $ | — |
Change in accounting policy - Deferred revenues reclassification 1 | 209 |
Change in accounting policy - Retained earnings impact | (22 | )
Contract additions | 137 |
Revenue recognized | (137 | )
Balance at September 30, 2018 | $ | 187 |
1 | This amount represents TDS' obligation to transfer goods or services to customers for which it had received payment and classified as deferred revenue at December 31, 2017.
Remaining Performance Obligations | The following table includes estimated service revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) at the end of the reporting period. The estimates represent service revenue to be recognized when services are delivered to customers pursuant to service plan contracts. These estimates are based on contracts in place as of September 30, 2018, and may vary from actual results due to future contract modifications. As a practical expedient, revenue related to contracts of less than one year, generally contracts with month-to-month customers, are excluded from these estimates.
| Service Revenue
(Dollars in millions) |
Remainder of 2018 | $ | 211 |
2019 | 220 |
Thereafter | 116 |
Total | $ | 547 |
Contract Cost Assets | Contract cost asset balances, which are recorded in Other assets and deferred charges in the Consolidated Balance Sheet, were as follows:
| September 30, 2018
(Dollars in millions) |
Costs to obtain contracts |  |
Sales commissions | $ | 149 |
Fulfillment costs |
Installation costs | 10 |
Total contract cost assets | $ | 159 |

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