UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Registrant’s telephone number, including area code: (212) 395-1000

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) in the United States (U.S.) and based upon Securities and Exchange Commission (SEC) rules that permit reduced disclosure for interim periods. For a more complete discussion of significant accounting policies and certain other information, you should refer to the financial statements for the year ended December 31, 20172018 of Verizon Communications Inc. (Verizon or the Company) included in its Current Report on Form 8-K dated May 1, 2018.. These financial statements reflect all adjustments that are necessary for a fair presentation of results of operations and financial condition for the interim periods shown, including normal recurring accruals and other items. The results for the interim periods are not necessarily indicative of results for the full year. We have reclassified certain prior period amounts to conform to the current period presentation.

There were a total of approximately 42 million outstanding dilutive securities, primarily consisting of restricted stock units, included in the computation of diluted earnings per common share for both the three and nine months ended September 30, 2018.March 31, 2019. There were a total of approximately 53 million outstanding dilutive securities, primarily consisting of restricted stock units, included in the computation of diluted earnings per common share for both the three and nine months ended September 30, 2017.March 31, 2018.

Cash, cash equivalents and restricted cash are included in the following line items on the condensed consolidated balance sheets:

In May 2014, theThe following Accounting Standard Updates (ASUs) were issued by Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2014-09, "Revenue from Contracts with Customers (Topic 606)." This standard update, along with related subsequently issued updates, clarifies the principles for recognizing revenue, and develops a common revenue standard for United States (U.S.) generally accepted accounting principles (GAAP). The standard update also amends current guidance for the recognition of costs to obtain and fulfill contracts with customers such that incremental costs of obtaining and direct costs of fulfilling contracts with customers will be deferred and amortized consistent with the transfer of the related good or service. The standard update intends to provide a more robust framework for addressing revenue issues; improve comparability of revenue recognition practices across entities, industries, jurisdictions, and capital markets; and provide more useful information to users of financial statements through improved disclosure requirements. Wehave been recently adopted this standard update beginning on January 1, 2018 using the modified retrospective method. As this method requires that the cumulative effect of initially applying the standard be recognized at the date of application beginning January 1, 2018, we recorded the pre-tax cumulative effect of $3.9 billion ($2.9 billion net of tax) as an adjustment to the January 1, 2018 opening balance of retained earnings.by Verizon.

The cumulative after-tax effect of the changes made to our condensed consolidated balance sheet for the adoption of Topic 606, ASU 2018-02 and other ASUs842 were as follows:

In February 2016,addition to the FASB issued ASU 2016-02, "Leases (Topic 842)." This standard update intendsincrease to increase transparencythe operating lease liabilities and improve comparability by requiring entities to recognizeright-of-use assets and liabilities on the balance sheet for all leases, with certain exceptions. In addition,derecognition of deferred sale leaseback gains through improved disclosure requirements, the standard update will enable users of financial statements to further understand the amount, timing, and uncertainty of cash flows arising from leases. This standard update allows for a modified retrospective application and is effective as of the first quarter of 2019; however, early adoption is permitted. Entities are allowed to apply the modified retrospective approach (1) retrospectively to each prior reporting period presented in the financial statements with the cumulative-effect adjustment recognized at the beginning of the earliest comparative period presented or (2) retrospectively at the beginning of the period of adoption (January 1, 2019) through a cumulative-effect adjustment. The effective date of this standard is January 1, 2019, at which time Verizon will adopt the standard using the modified retrospective approach with a cumulative-effect adjustment to opening retained earnings, recorded atTopic 842 also resulted in reclassifying the beginningpresentation of prepaid and deferred rent to operating lease right-of-use assets. The operating lease right-of-use assets amount also includes the periodbalance of adoption. Therefore, upon adoption, Verizon will recognizeany prepaid lease payments, unamortized initial direct costs, and measure leases without revising comparative period information or disclosure. The modified retrospective approach includes a numberlease incentives.

We elected the package of optional practical expedients that entities may elect to apply.

We are nearing completionlease network equipment including towers, distributed antenna systems, small cells, real estate, connectivity mediums which include dark fiber, equipment leases, and other various types of determining the scope of impact and data gathering. We are in the process of assessing, staging, designing and building a new system solution to meet the requirements of the new standard. We are also evaluating and implementing changes to our processes and internal controls to meet the standard update’s accounting, reporting and disclosure requirements. Although we have not yet completed our evaluation of the standard update, we expect its adoption to have a significant impactassets for use in our condensed consolidated balance sheet due tooperations under both operating and finance leases. We assess whether an arrangement is a lease or contains a lease at inception. For arrangements considered leases or that contain a lease that is accounted for separately, we determine the recognitionclassification and initial measurement of the right-of-use asset and lease liability for our operating leases. In addition, deferred gains arising from prior period sales-leaseback transactions,at the lease commencement date, which would have been recognized to income over an average period of nine years, will be adjusted through opening retained earnings on January 1, 2019. Lastly, we expect a lower amount of lease costs to qualify as initial direct costs underis the new standard which will result in an immediate recognition of expense instead of recognition of expense over time.

For both operating and finance leases, we recognize a right-of-use asset, which represents our right to use the underlying asset for the lease term, and a lease liability, which represents the present value of expected cash collection. In addition, this standard update requires that certain financial assets be measured at amortized cost reflecting an allowance for estimated credit losses expectedour obligation to occurmake payments arising over the lifelease term. The present value of the assets.lease payments is calculated using the incremental borrowing rate for operating and finance leases. The estimate of credit losses must beincremental borrowing rate is determined using a portfolio approach based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. Management uses the unsecured borrowing rate and risk-adjusts that rate to approximate a collateralized rate, which will be updated on a quarterly basis for measurement of new lease liabilities.

In those circumstances where the Company is the lessee, we have elected to account for non-lease components associated with our leases (e.g., common area maintenance costs) and lease components as a single lease component for substantially all relevant information including historical information, current conditionsof our asset classes. Additionally, in arrangements where we are the lessor, we have customer premise equipment for which we apply the lease and reasonablenon-lease component practical expedient and supportable forecasts that affectaccount for non-lease components (e.g., service revenue) and lease components as combined components under the collectabilityrevenue recognition guidance in ASU 2014-09, "Revenue from Contracts with Customers" (Topic 606) as the service revenues are the predominant components in the arrangements.

Rent expense for operating leases is recognized on a straight-line basis over the term of the amounts. An entity will apply the update through a cumulative effect adjustment to retained earnings aslease and is included in either Cost of the beginning of the first reporting period in which the guidance is effective. A prospective transition approach is required for debt securities for which an other-than-temporary impairment has been recognized before the effective date. This standard update is effective as of the first quarter of 2020; however, early adoption is permitted. We are currently evaluating the impact that this standard update will haveservices or Selling, general and administrative expense in our condensed consolidated financial statements upon adoption.of income, based on the use of the facility on which rent is being paid. Variable rent payments related to both operating and finance leases are expensed in the period incurred. Our variable lease payments consist of payments dependent on various external indicators, including real estate taxes, common area maintenance charges and utility usage.

We earn revenue from contracts with customers, primarily through the provision of telecommunications and other services and through the sale of wireless equipment. We account for these revenues under Topic 606, which we adopted on January 1, 2018, using the modified retrospective approach. We also earn revenues that are not accounted for under Topic 606 from leasing arrangements (such as those for towers and equipment), captive reinsurance arrangements primarily related to wireless device insurance and the interest on equipment financed on a device payment plan agreement when sold to the customer by an authorized agent.

We operate and manage our business in two reportable segments, Wireless and Wireline. Revenue is disaggregated by products and services, and customer groups, respectively, which we view as the relevant categorization of revenues for these businesses. See Note 1011 for additional information on revenue by segment.

Corporate and other includes the results of our Media business, branded Oath,Verizon Media, which operated in 2018 under the "Oath" brand, and our telematics business, branded Verizon Connect.

We also earn revenues, that are not accounted for under Topic 606, from leasing arrangements (such as towers and equipment)towers), captive reinsurance arrangements primarily related to wireless device insurance and the interest on equipment financed on a device payment plan agreement when sold to the

customer by an authorized agent. As allowed by the practical expedient within Topic 842, we have elected to combine the lease and non-lease components for those arrangements of customer premise equipment where we are the lessor as components accounted for under Topic 606. During the three and nine months ended September 30,March 31, 2019 and 2018, revenues from arrangements that were not accounted for under Topic 606 were approximately $1.1 billion$787 million and $3.4$1.2 billion, respectively.

Additionally, certain Wireless and Wireline contracts provide customers the option to purchase additional services. The fee related to the additional services is recognized when the customer exercises the option (typically on a month-to-month basis).

Wireless customer contracts are generally either month-to-month and cancellable at any time (typically under a device payment plan) or contain terms greater than one month (typically under a fixed-term plan). Additionally, customers may incur charges based on usage or may purchase additional optional services in conjunction with entering into a contract thatwhich can be cancelled at any time and therefore are not included in the transaction price. When a service contract is longer than one month, the service contract term will generally be two years or less. The transaction price allocated to service performance obligations, which are not satisfied or are partially satisfied as of the end of the reporting period, are generally related to our fixed-term plans. Fixed-term plans only represented 15% of retail postpaid connections at September 30, 2018.

Our wireless customers also include other telecommunications companies who utilize Verizon's network to resell wireless service to their respective end customers. Reseller arrangements occur on a month-to-month basis orgenerally include a stated contract term, which generally extendstypically extend longer than two years. Arrangements with a stated contract termThese arrangements generally include an annual minimum revenue commitment over the term of the contract for which revenues will be recognized in future periods.

At September 30, 2018,March 31, 2019, the transaction price related to Wireless unsatisfied performance obligations expected to be recognized for the remainder of 2018, 2019, 2020 and thereafter was $3.1$8.3 billion, $9.5$6.7 billion and $6.1$2.3 billion, respectively.

Wireline customer contracts are either month-to-month, include a specified term with fixed monthly fees, or contain revenue commitments, and may also contain usage based services. Consumer Markets customers under contract generally have a service term of two years; however, this term may be shorter at one year or month-to-month. Certain Enterprise Solutions, Partner Solutions and Business Markets service contracts with customers extend into future periods, contain fixed monthly fees and usage-based fees, and can include annual commitments per each year of the contract or commitments over the entire specified contract term. A significant number of contracts within these businesses have a contract term that is twelve months or less.

At September 30, 2018,March 31, 2019, the transaction price relating to Wireline unsatisfied performance obligations expected to be recognized for the remainder of 2018, 2019, 2020 and thereafter was $2.4$5.9 billion, $6.9$4.0 billion and $3.1$1.1 billion, respectively.

In certain Enterprise Solutions, Partner Solutions and Business Markets service contracts within Wireline and certain telematics service contracts within Corporate and other, there are customer contracts that have a contractual minimum fee over the total contract term. We cannot predict the time period when revenue will be recognized related to those contracts; thus they are excluded from the time bands discussed above. These contracts have varying terms spanning over fivefour years ending in June 2023January 2024 and have aggregate contract minimum payments totaling $4.0$3.8 billion.

The timing of revenue recognition may differ from the time of billing to our customers. Receivables presented in our condensed consolidated balance sheet represent an unconditional right to consideration. Contract balances represent amounts from an arrangement when either Verizon

Contract assets primarily relate to our rights to consideration for goods or services provided to the customers but for which we do not have an unconditional right at the reporting date. Under a fixed-term plan, the total contract revenue is allocated between wireless services and equipment revenues, as discussed above.revenues. In conjunction with these arrangements, a contract asset is created, which represents the difference between the amount of equipment revenue recognized upon sale and the amount of consideration received from the customer. The contract asset is reclassified as accounts receivable as wireless services are provided and billed. We have the right to bill the customer as service is provided over time, which results in our right to the payment being unconditional. The contract asset balances are presented in our condensed consolidated balance sheet as Prepaid expenses and other and Other assets. We assess our contract assets for impairment on a quarterly basis and will recognize an impairment charge to the extent their carrying amount is not recoverable. For the three and nine months ended September 30, 2018, the impairment charge related to contract assets was insignificant and $0.1 billion, respectively, and is included in Other in the table below.

Contract liabilities arise when we bill our customers and receive consideration in advance of providing the goods or services promised in the contract. We typically bill service one month in advance, which is the primary component of the contract liability balance. Contract liabilities are recognized as revenue when services are provided to the customer. The contract liability balances are presented in our condensed consolidated balance sheet as Other current liabilities and Other liabilities.

The following table presents information about receivables from contracts with customers:

The following table represents significant changes in thepresents information about contract assets balance:balances:

The balance of contract assets and contract liabilities recorded in our condensed consolidated balance sheet were as follows:

As discussed in Note 1, Topic 606 requires the recognition of an asset for incremental costs to obtain a customer contract, which are then amortized to expense, over the respective periods of expected benefit. We recognize an asset for incremental commission expenses paid to internal sales personnel and agents in conjunction with obtaining customer contracts. We only defer these costs when we have determined the commissions are, in fact, incremental and would not have been incurred absent the customer contract. Costs to obtain a contract are amortized and recorded ratably as commission expense over the period representing the transfer of goods or services to which the assets relate. These costs are recorded in Selling, general and administrative expense. Wireless costs to obtain contracts are amortized over our customers' estimated device upgrade cycles, as such costs are typically incurred each time a customer upgrades. Wireline costs to obtain contracts are amortized as expense over the estimated customer relationship period for our Consumer Markets customers. Incremental costs to obtain contracts for our Enterprise Solutions, Partner Solutions and Business Markets are insignificant. These costs are recorded in Selling, general and administrative expense.

We also defer costs incurred to fulfill contracts that: (1) relate directly to the contract; (2) are expected to generate resources that will be used to satisfy our performance obligation under the contract; and (3) are expected to be recovered through revenue generated under the contract. Contract fulfillment costs are expensed to Cost of services as we satisfy our performance obligations, and recorded in Cost of services.obligations. These fulfillment costs principally relate to direct activities to connect a customer tocosts that enhance our networkWireline business resources, such as circuit activation.costs incurred to install circuits.

We determine the amortization periods for our costs incurred to obtain or fulfill a customer contract at a portfolio level due to the similarities within these customer contract portfolios.

Other costs, such as general costs or costs related to past performance obligations, are expensed as incurred.

Collectively, costs to obtain a contract and costs to fulfill a contract are referred to as Deferred contract costs, which were as follows:

Deferred contract costs are classified as current or non-current within Prepaid expenses and other and Other assets, respectively. The balances of Deferred contract costs included in our condensed consolidated balance sheet were as follows:

For the three and nine months ended September 30,March 31, 2019 and 2018, we recognized expense of $0.5 billion$615 million and $1.4 billion,$405 million, respectively, associated with the amortization of Deferred contract costs, primarily within Selling, general and administrative expense in our condensed consolidated statements of income.

We assess our Deferred contract costs for impairment on a quarterly basis. We recognize an impairment charge to the extent the carrying amount of a deferred cost exceeds the remaining amount of consideration we expect to receive in exchange for the goods and services related to the cost,

During the three and nine months ended September 30, 2018,March 31, 2019, we entered into and completed various wireless license transactions for an insignificant amount of cash consideration.

During the ninethree months ended September 30, 2018,March 31, 2019, we completed various other acquisitions for an insignificant amount of cash consideration.

The carrying amount of Wireless licenses are as follows:

At September 30,March 31, 2019 and 2018, and December 31, 2017, approximately $11.1$7.2 billion and $8.8$13.6 billion, respectively, of wireless licenses were under development for commercial service for which we were capitalizing interest costs. We recorded approximately $0.4 billion$88 million and $124 million of capitalized interest on wireless licenses for both the ninethree months ended September 30,March 31, 2019 and 2018, and 2017.respectively.

The average remaining renewal period for our wireless licenses portfolio was 4.84.4 years as of September 30, 2018.March 31, 2019.

Changes in the carrying amount of Goodwill are as follows:

The following table displays the composition of Other intangible assets, net:

The amortization expense for Other intangible assets was as follows: 

The estimated future amortization expense for Other intangible assets for the remainder of the current year and next 5 years is as follows:

The components of net lease cost were as follows:

The Company's maturity analysis of operating and finance lease liabilities as of March Tender31, 2019 were as follows: