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 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 included in Verizon Communications Inc.'s (Verizon or the Company) Annual Report on Form 10-K for the year ended December 31, 2018 of Verizon Communications Inc. (Verizon or the Company).2019. 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

Certain amounts have been reclassified certain prior period amounts to conform to the current period presentation.period’s presentation

There were a total of approximately 2 million outstanding dilutive securities, primarily consisting of restricted stock units, included in the computation of diluted earnings per common share for both the three months ended March 31, 2019. There were a total of approximately 3 million outstanding dilutive securities, primarily consisting of restricted stock units, included in the computation of diluted earnings per common share for the three months ended2020 and March 31, 2018.2019.

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

Subsequent to January 1, 2020, accounts receivable are recorded at amortized cost less an allowance for expected credit losses that are not expected to be recovered. The gross amount of accounts receivable and corresponding allowance for credit losses are presented separately in the condensed consolidated balance sheets. We maintain allowances for credit losses resulting from the expected failure or inability of our customers to make required payments. We recognize the allowance for expected credit losses at inception and reassess quarterly based on management’s expectation of the acquisition cost of businesses overasset’s collectability. The allowance is based on multiple factors including historical experience with bad debts, the fair valuecredit quality of the identifiable net assets acquired. Impairment testing for goodwill is performed annuallycustomer base, the aging of such receivables and current macroeconomic conditions as well as management’s expectations of conditions in the fourth quarter or more frequentlyfuture, if impairment indicators are present. In November 2018, we announced a strategic reorganization of our business which resulted in certain changes to our operating segments and reporting units. We transitioned to the new segment reporting structure effective April 1, 2019, in connection with which we are reassigning goodwill to each of our new reporting units.

We pool our Wireless, Wirelinedevice payment plan agreement receivables based on the credit quality indicators and Connect reporting units at March 31, 2019, immediately beforeshared risk characteristics of "new customers" and "existing customers". New customers are defined as customers who have been with Verizon for less than 210 days if they are classified as a Consumer segment customer, or less than 12 months if they are classified as a Business segment customer. Existing customers are defined as customers who have been with Verizon for more than 210 days if they are in Consumer, or more than 12 months if they are in Business. We record an allowance to reduce the receivables to the amount that is expected to be collectible. For device payment plan agreement receivables, we record bad debt expense based on a default and loss calculation using our strategic reorganization became effective. Our impairment assessments indicated thatproprietary loss model. The expected loss rate is determined based on customer credit scores and other qualitative factors as noted above. The loss rate is assigned individually on a customer by customer basis and the fair valuecustom credit scores are then aggregated by vintage and used in our proprietary loss model to calculate the weighted average loss rate used for eachdetermining the allowance balance.

We monitor the collectability of our Wireless,wireless service receivables as one overall pool. Wireline service receivables are disaggregated and Connect reporting units exceeded their respective carrying value and therefore, did not result in a goodwill impairment. Our Media reporting unit was not impactedpooled by the strategic reorganizationfollowing customer groups: consumer, small and there were no indicatorsmedium business, global enterprise and wholesale. For wireless service receivables and wireline consumer and small and medium business receivables, the allowance is calculated based on a 12 month rolling average write-off balance multiplied by the average life cycle of impairment duringan account from billing to write-off. The risk of loss is assessed over the quarter ended March 31, 2019.contractual life of the receivables and we adjust the historical loss amounts for current and future conditions based on management’s qualitative considerations. For global enterprise and wholesale wireline receivables, the allowance is based on historical write-off experience and individual customer credit risk, if applicable. We consider multiple factors in determining the allowance as discussed above.

The following Accounting Standard Updates (ASUs) were issued by the Financial Accounting Standards Board (FASB), and have been recently adopted by Verizon.

We earn revenue from contracts with customers, primarily through the provision of telecommunications and other services and through the sale of wireless equipment.

We have 2 reportable segments that we operate and manage ouras strategic business in two reportable segments, Wirelessunits - Consumer and Wireline.Business. Revenue is disaggregated by products and services within Consumer, and customer groups respectively, which we view as the relevant categorization of revenues for these businesses.(Global Enterprise, Small and Medium Business, Public Sector and Other, and Wholesale) within Business. See Note 1110 for additional information on revenue by segment.

We also earn revenues that are not accounted for under Topic 606, from leasing arrangements (such as 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

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

Wireless customer contractsContracts for wireless services are generally either month-to-month and cancellable at any time (typically under a device payment plan) or contain terms ranging from greater than one month to up to two years (typically under a fixed-term plan). Additionally, customers may incur charges based on usage or may purchase additional optional services purchased in conjunction with entering into a contract whichthat 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.contracts that are not accounted for as month-to-month contracts.

Our wirelessConsumer group customers also include other companies who utilize Verizon's network totraditional wholesale resellers that purchase and resell wireless service under their own brands to their respective end customers. Reseller arrangements generally include a stated contract term, which typically extendextends longer than two years. These arrangements generallyyears and, in some cases, include an annuala periodic minimum revenue commitment over the contract term of the contract for which revenues will be recognized in future periods.

At March 31, 2019, the transaction price relating to Wireline unsatisfied performance obligations expected to be recognizedAdditionally, there are certain contracts with Business customers for the remainder of 2019, 2020wireline and thereafter was $5.9 billion, $4.0 billion and $1.1 billion, respectively.

The timing of revenue recognition may differ from the time of billing to our customers. Receivables presented in our condensed consolidated balance sheetsheets represent an unconditional right to consideration. Contract balances represent amounts from an arrangement when either Verizon has performed, by transferring goods or services to the customer in advance of receiving all or partial consideration for such goods and services from the customer, or the customer has made payment to Verizon in advance of obtaining control of the goods and/or services promised to the customer in the contract.

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 servicesservice and equipment 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.customer when the performance obligation related to the transfer of control of the equipment is satisfied. The contract asset is reclassified asto 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 sheetsheets as Prepaid expenses and other and Other assets. We assess our contract assetsrecognize the allowance for impairmentexpected credit losses at inception and reassess quarterly based on a quarterly basis and will recognize an impairment charge tomanagement’s expectation of the extent their carrying amount is not recoverable.asset’s collectability.    

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 sheetsheets as Other current liabilities and Other liabilities.

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

The following table presents information about contract balances:

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

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 and external 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 andcosts that would not have been incurred absent the customer contract.contract and are expected to be recoverable. 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 costsCosts to obtain wireless contracts are amortized over both of our Consumer and Business customers' estimated device upgrade cycles, as such costs are typically incurred each time a customer upgrades. Wireline costsCosts to obtain wireline contracts are amortized as expense over the estimated customer relationship period for our Consumer Markets customers. Incremental costs to obtain wireline contracts for our Enterprise Solutions, Partner SolutionsBusiness customers are insignificant. Costs to obtain contracts are recorded in Selling, general and Business Markets are insignificant.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.obligations and recorded in Cost of services. These costs principally relate to direct costs that enhance our Wirelinewireline business resources, such as 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.

The balances of Deferreddeferred contract costs included in our condensed consolidated balance sheetsheets were as follows:

For the three months ended March 31, 20192020 and 2018,2019, we recognized expense of $615$778 million and $405$615 million, respectively, associated with the amortization of Deferreddeferred contract costs, primarily within Selling, general and administrative expense in our condensed consolidated statements of income.

We assess our Deferreddeferred 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, less the expected costs related directly to providing those goods and services that have not yet been recognized as expenses. There have been no0 impairment charges recognized for the three months ended March 31, 20192020 or March 31, 2018.2019.

During the three months ended March 31, 2019,2020, we entered into and completed various other wireless license transactionsacquisitions for an insignificant amountcash consideration of cash consideration.approximately $146 million.

During the three months ended March 31, 2019,2020, we completed various other acquisitions for an insignificant amountamounts of cash consideration.

The carrying amountamounts of Wireless licenses are as follows:

At March 31, 2020 and 2019, and 2018, approximately $7.2$3.5 billion and $13.6$7.2 billion, respectively, of wireless licenses were under development for commercial service for which we were capitalizing interest costs. We recorded approximately $88$64 million and $124$88 million of capitalized interest on wireless licenses for the three months ended March 31, 2020 and 2019, and 2018, respectively.

The average remaining renewal period forof our wireless licenses portfolio was 4.44.5 years as of March 31, 2019.2020.

The following table displays the composition of Other intangible assets, net:net as well as the respective amortization period:

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:

In April 2019,2020, we notified investors of our intention to redeem in May 2019redeemed, in whole, $831 million aggregate principal amount of 2.625% Notes due 2020on the maturity date thereof, subsidiary preferred stock for approximately $1.7 billion, plus accrued and $736 million aggregate principal amount of 3.500% Notes due 2021.unpaid dividends.

In July 2018, we entered into a short termbilateral short-term uncommitted bank credit facility with the ability to borrow up to $700 million. During the three months ended March 31, 2019,2020, we drew $600$700 million fromunder the facility.

As of March 31, 2020, we had no0 commercial paper outstanding. In April 2020, we issued $3.5 billion in commercial paper, $2.5 billion of which has a maturity date during the three months ended June 30, 2020 and $1.0 billion of which has a maturity date during the three months ended September 30, 2020.

During the three months ended March 31, 2019,2020, we completed the following ABS Notes transactions:

Under the terms of each series of ABS Notes, there is a two yeartwo-year revolving period during which we may transfer additional receivables to the ABS Entity. The two year revolving period of the ABS Notes we issued in July 2016 and November 2016 ended in July 2018 and November 2018 respectively, and we began to repay principal on the 2016-1 Class A senior ABS Notes and the 2016-2 Class A senior ABS Notes in August 2018 and December 2018, respectively. During the three months ended March 31, 2019,2020, we made aggregate principal repayments of $559 million.$979 million on ABS Notes that have entered the amortization period.

In May 2018,2019, we amended and restated an ABS financing facility originally entered into a device payment plan agreement financing facilityin 2016 with a number of financial institutions (2018(the 2019 ABS Financing Facility). Under the terms of the 20182019 ABS Financing Facility, which is an uncommitted facility, the financial institutions mademake advances under asset-backed loans backed by device payment plan agreement receivables of both consumer and business customers for proceeds of $540 million. Thecustomers. One loan agreement was entered into in connection with the 20182019 ABS Financing FacilityFacility. The 2019 loan agreement has a final maturity date in December 2021May 2023 and bears interest at a floating rate.rates. There is a one year revolving period beginning fromuntil May 2018 during2020, which we may transfer additional receivables tobe extended with the ABS Entity. Subject to certain conditions, we may also remove receivables fromapproval of the ABS Entity.financial institutions. Under the 2019 loan agreement, we have the right to prepay all or a portion of the advances at any time without penalty, but in certain cases, with breakage costs. If we choose to prepay, the amount prepaid shall be available for further drawdowns until May 2019, except in certain circumstances. As of March 31, 2019, the 2018 ABS Financing Facility is fully drawn and the outstanding borrowing under the 2018 ABS Financing Facility was $540 million.

we prepaid $1.3 billion of the three months endedloan under the 2019 loan agreement. In March 31,2020, we borrowed an additional $1.3 billion under the 2019 we made an aggregate of $253 million in repayments.loan agreement. The aggregate outstanding borrowingsbalance under the two loans were $671 million2019 ABS Financing Facility was $3.3 billion as of March 31, 2019.2020.

The ABS Entities meet the definition of a VIE for which we have determined that we are the primary beneficiary as we have both the power to direct the activities of the entity that most significantly impact the entity’s performance and the obligation to absorb losses or the right to receive benefits of the entity. Therefore, the assets, liabilities and activities of the ABS Entities are consolidated in our financial results and are included in amounts presented on the face of our condensed consolidated balance sheets.

The assets and liabilities related to our asset-backed debt arrangements included in our condensed consolidated balance sheets were as follows:

See Note 76 for additional information on device payment plan agreement receivables used to secure asset-backed debt.

During the three months ended March 31, 20192020 and 2018,2019, we financed, primarily through vendor financing arrangements, the purchase of approximately $115$502 million and $345$115 million, respectively, of long-lived assets consisting primarily of network equipment. At both March 31, 2020 and 2019, and 2018, $1.0$1.5 billion and $1.3$1.0 billion, respectively, relating to these financing arrangements, including those entered into in prior years and liabilities assumed through acquisitions, remained outstanding. These purchases are non-cash financing activities and therefore are not reflected within Capital expenditures in our condensed consolidated statements of cash flows.

We guarantee the debentures of our operating telephone company subsidiaries. As of March 31, 2019, $7962020, $765 million aggregate principal amount of these obligations remained outstanding. Each guarantee will remain in place for the life of the obligation unless terminated pursuant to its terms, including the operating telephone company no longer being a wholly-owned subsidiary of Verizon.

We also guarantee the debt obligations of GTE LLC as successor in interest to GTE Corporation that were issued and outstanding prior to July 1, 2003. As of March 31, 2019, $4232020, $391 million aggregate principal amount of these obligations remained outstanding.

Under the Verizon device payment program, our eligible wireless customers purchase wireless devices under a device payment plan agreement. Customers that activate service on devices purchased under the device payment program pay lower service fees as compared to those under our fixed-term service plans, and their device payment plan charge is included on their wireless monthly bill. As of January 2017, we no longer offer consumersConsumer customers new fixed-term, subsidized service plans for phones; however, we continue to offer subsidized plans to our business customers, and weBusiness customers. We also continue to service existing fixed-term subsidized plans for consumerscustomers who have not yet purchased and activated devices under the Verizon device payment program.

The following table displays device payment plan agreement receivables, net, recognized in our condensed consolidated balance sheets:

Included in our device payment plan agreement receivables net at March 31, 20192020 and December 31, 2018,2019, are net device payment plan agreement receivables of $12.7$14.1 billion and $11.5$14.3 billion, respectively, thatwhich have been transferred to ABS Entities and continue to be reported in our condensed

We may offer certain promotions that allow a customer to trade in their owned device in connection with the purchase of a new device. Under these types of promotions, the customer receives a credit for the value of the trade-in device. In addition, we may provide the customer with additional future credits that will be applied against the customer’s monthly bill as long as service is maintained. We recognize a liability for the trade-in device measured at fair value, for the customer’s right to trade-in the device which is determined by considering several factors, including the weighted-average selling prices obtained in recent resales of similar devices eligible for trade-in. Future credits are recognized when earned by the customer. Device payment plan agreement receivables, net, does not reflect the trade-in device liability. At March 31, 20192020 and December 31, 20182019, the amount of trade-in liability was insignificant$90 million and $64$103 million, respectively.

From time to time, we offer certain marketing promotions that allow our customers to upgrade to a new device after paying down a certain specified portion of the required device payment plan agreement amount as well as trading in their device in good working order. When a customer enters into a device payment plan agreement with the right to upgrade to a new device, we account for this trade-in right as a guarantee obligation.

When originating device payment plan agreements, we use internal and external data sources to create a credit risk score to measure the credit quality of a customer and to determine eligibility for the device payment program. If a customer is either new to Verizon Wireless or has less than 210 days of customer tenure with Verizon Wireless (a new customer), the credit decision process relies more heavily on external data sources. If the customer has 210 days or more of customer tenure with Verizon Wireless (an existing customer), the credit decision process relies on internal data sources. Verizon Wireless’Verizon’s experience has been that the payment attributes of longer tenured customers are highly predictive for estimating their reliability to make future payments. ExternalCustomers with longer tenures tend to exhibit similar risk characteristics to other customers with longer tenures, and receivables due from customers with longer tenures tend to perform better than receivables from customers that have not previously been Verizon customers. As a result of this experience, we make initial lending decisions based upon whether the customers are "established customers" or "short-tenured customers." If a Consumer customer has been a customer for 45 days or more, or if a Business customer has been a customer for 12 months or more, the customer is considered an "established customer." For established customers, the credit decision and ongoing credit monitoring processes rely on a combination of internal and external data sources include obtainingsources. If a Consumer customer has been a customer less than 45 days, or a Business customer has been a customer for less than 12 months, the customer is considered a "short-tenured customer." For short-tenured customers, the credit report from a national consumerdecision and credit reporting agency, if available. Verizon Wireless uses its internalmonitoring processes rely more heavily on external data sources.

Internal data and/or external credit data are obtained from the credit reporting agencies, if available, to create a custom credit risk score.score for Consumer customers. The custom credit risk score is generated automatically (except with respect to a small number of applications where the information needs manual intervention) from the applicant’s credit data using Verizon Wireless’ proprietary custom credit models, which are empirically derived, demonstrably and statistically sound.models. The credit risk score measures the likelihood that the potential customer will become severely delinquent and be disconnected for non-payment. For a small portion of newshort-tenured customer applications, a traditional credit report is not available from one of the national credit reporting agencies because the potential customer does not have sufficient credit history. In those instances, alternatealternative credit data is used for the risk assessment. For Business customers, we also verify the existence of the business with external data sources.

Based on the custom credit risk score, we assign each customer to a credit class, each of which has specified offers of credit including an account level spending limit and either a maximum amount of credit allowed per device or a required down payment percentage. During the fourth quarter of 2018, Verizon Wirelesswe moved all Consumer customers, newshort-tenured and existing,established, from a required down payment percentage, between zero0 and 100%, to a maximum amount of credit per device.

Subsequent to origination, Verizon Wireless monitorswe assess indicators for the quality of our wireless device payment plan agreement portfolio using two models, one for new customers and one for existing customers. The model for new customers pools all Consumer and Business wireless customers based on 210 days and 12 months or less, respectively, as "new customers." The model for existing customers pools all Consumer and Business wireless customers based on 210 days and 12 months or more, respectively, as "existing customers."

We monitor delinquency and write-off experience as key creditbased on the quality indicators for its portfolio of our device payment plan agreementsagreement and fixed-termwireless service plans.receivables portfolios. The extent of our collection efforts with respect to a particular customer are based on the results of our proprietary custom empirically derived internal behavioral scoring models that analyze the customer’s past performance to predict the likelihood of the customer falling further delinquent. These customercustom scoring models assess a number of variables, including origination characteristics, customer account history and payment patterns. Since our customers’ behaviors may be impacted by general economic conditions, we analyzed whether changes in macroeconomic conditions impact our credit loss experience and have concluded that our credit loss estimates are generally not materially impacted by reasonable and supportable forecasts of future economic conditions. Based on the score derived from these models, accounts are grouped by risk category to determine the collection strategy to be applied to such accounts. We continuously monitor collection performance results and the credit quality of ourFor device payment plan agreement receivables, based on a variety of metrics, including aging. Verizon Wireless considerswe consider an account to be delinquent and in default status if there are unpaid charges remaining on the account on the day after the bill’s due date. For wireless service receivables, an account is considered delinquent 34 days after the bill cycle date. The risk class determines the speed and severity of the collections effort including initiatives taken to facilitate customer payment.