Document and Entity Information Document - shares	6 Months Ended
Document and Entity Information Document - shares	Jun. 30, 2018	Aug. 09, 2018
Document and Entity Information
Entity Registrant Name	LEVEL 3 PARENT, LLC
Entity Central Index Key	0000794323
Document Type	10-Q
Document Period End Date	Jun. 30, 2018
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		0
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	Q2

Consolidated Statements of Operations - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
OPERATING REVENUES
Operating revenues	$ 2,052		$ 4,139
OPERATING EXPENSES
Cost of services and products (exclusive of depreciation and amortization)	980		1,978
Selling, general and administrative	388		732
Operating expenses - affiliates	55		108
Depreciation and amortization	433		864
Total operating expenses	1,856		3,682
OPERATING INCOME	196		457
OTHER INCOME (EXPENSE)
Interest income	0		1
Interest income - affiliate	16		32
Interest expense	(124)		(244)
Loss on modification and extinguishment of debt	0		0
Other (expense) income, net	(4)		2
Total other expense, net	(112)		(209)
INCOME BEFORE INCOME TAX EXPENSE	84		248
Income tax expense	(44)		(146)
NET INCOME	40		102
Predecessor
OPERATING REVENUES
Operating revenues		$ 2,062		$ 4,110
OPERATING EXPENSES
Cost of services and products (exclusive of depreciation and amortization)		1,035		2,086
Selling, general and administrative		367		731
Operating expenses - affiliates		0		0
Depreciation and amortization		307		603
Total operating expenses		1,709		3,420
OPERATING INCOME		353		690
OTHER INCOME (EXPENSE)
Interest income		3		5
Interest income - affiliate		0		0
Interest expense		(131)		(265)
Loss on modification and extinguishment of debt		0		(44)
Other (expense) income, net		(2)		2
Total other expense, net		(130)		(302)
INCOME BEFORE INCOME TAX EXPENSE		223		388
Income tax expense		(69)		(139)
NET INCOME		154		249
Non-Affiliate Revenue
OPERATING REVENUES
Operating revenues	2,025		4,087
Non-Affiliate Revenue \| Predecessor
OPERATING REVENUES
Operating revenues		2,062		4,110
Affiliate Revenues
OPERATING REVENUES
Operating revenues	$ 27		$ 52
Affiliate Revenues \| Predecessor
OPERATING REVENUES
Operating revenues		$ 0		$ 0

Consolidated Statements of Comprehensive Income (Loss) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017	Jun. 30, 2018	Jun. 30, 2017
NET INCOME	$ 40		$ 102
OTHER COMPREHENSIVE (LOSS) INCOME
Foreign currency translation adjustments, net of $44, $30, ($29) and ($37) tax	(235)		(163)
Defined benefit pension plan adjustments, net of $0, $0, $0 and $0 tax	0		0
Other comprehensive (loss) income, net of tax	(235)		(163)
COMPREHENSIVE (LOSS) INCOME	$ (195)		$ (61)
Predecessor
NET INCOME		$ 154		$ 249
OTHER COMPREHENSIVE (LOSS) INCOME
Foreign currency translation adjustments, net of $44, $30, ($29) and ($37) tax		42		62
Defined benefit pension plan adjustments, net of $0, $0, $0 and $0 tax		(1)		0
Other comprehensive (loss) income, net of tax		41		62
COMPREHENSIVE (LOSS) INCOME		$ 195		$ 311

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Consolidated Statements of Comprehensive Income (Loss) (Parenthetical) - USD ($) $ in Millions	3 Months Ended	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2018
Foreign currency translation adjustments, tax effect	$ 44	$ 30
Defined benefit pension plan adjustments, tax effect	0	0
Predecessor
Foreign currency translation adjustments, tax effect	(29)	(37)
Defined benefit pension plan adjustments, tax effect	$ 0	$ 0

Consolidated Balance Sheets - USD ($) $ in Millions	Jun. 30, 2018	Dec. 31, 2017
CURRENT ASSETS
Cash and cash equivalents	$ 282	$ 297
Restricted cash and securities	5	5
Assets held for sale	15	140
Accounts receivable, less allowance of $9 and $3	744	748
Accounts receivable - affiliate	4	13
Note receivable - affiliate	1,825	1,825
Other	201	117
Total current assets	3,076	3,145
Property, plant and equipment, net of accumulated depreciation of $609 and $143	9,396	9,412
Restricted cash and securities	25	29
GOODWILL AND OTHER ASSETS
Goodwill	11,078	10,837
Deferred tax assets	483	426
Other, net	108	63
Total goodwill and other assets	20,055	20,549
TOTAL ASSETS	32,552	33,135
CURRENT LIABILITIES
Current maturities of long-term debt	13	8
Accounts payable	581	695
Accounts payable - affiliate	106	41
Accrued expenses and other liabilities
Income and other taxes	81	100
Salaries and benefits	199	136
Interest	94	109
Current portion of deferred revenue	285	260
Other	45	57
Total current liabilities	1,404	1,406
LONG-TERM DEBT	10,857	10,882
DEFERRED REVENUE AND OTHER LIABILITIES
Deferred revenue	1,138	1,099
Deferred income taxes	202	212
Other	341	264
Total deferred revenue and other liabilities	1,681	1,575
COMMITMENTS AND CONTINGENCIES (Note 9)
MEMBER'S EQUITY
Member's equity	18,749	19,254
Accumulated other comprehensive (loss) income	(139)	18
Total member's equity	18,610	19,272
TOTAL LIABILITIES AND MEMBER'S EQUITY	32,552	33,135
Customer Contracts And Relationships
GOODWILL AND OTHER ASSETS
Intangible assets, net	7,990	8,845
Other Intangible Assets
GOODWILL AND OTHER ASSETS
Intangible assets, net	$ 396	$ 378

Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Millions	Jun. 30, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 9	$ 3
Accumulated depreciation	$ 609	$ 143

Consolidated Statements of Cash Flows - USD ($) $ in Millions	6 Months Ended
	Jun. 30, 2018	Jun. 30, 2017
Cash Flows from Operating Activities:
NET INCOME	$ 102
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	864
Deferred income taxes	140
Share-based compensation	57
Loss on modification and extinguishment of debt	0
Net long-term debt issuance costs and premium amortization	(22)
Accrued interest on long-term debt, net	(15)
Other, net	6
Changes in current assets and liabilities:
Accounts receivable	(5)
Accounts payable	(100)
Deferred revenue	27
Other assets and liabilities	(53)
Other assets and liabilities, affiliate	17
Net cash provided by operating activities	1,018
INVESTING ACTIVITIES
Capital expenditures	(546)
Proceeds from sale of property, plant and equipment and other assets	119
Purchase of marketable securities	0
Net cash used in investing activities	(427)
FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt	0
Payments of long-term debt	(3)
Distributions	(605)
Net cash used in financing activities	(608)
Effect of exchange rates on cash, cash equivalents and restricted cash and securities	(2)
Net decrease in cash, cash equivalents and restricted cash and securities	(19)
Cash, cash equivalents and restricted cash and securities at beginning of period	331
Cash, cash equivalents and restricted cash and securities at end of period	312
Supplemental cash flow information
Interest paid	270
Income taxes paid, net	$ 19
Predecessor
Cash Flows from Operating Activities:
NET INCOME		$ 249
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		603
Deferred income taxes		119
Share-based compensation		87
Loss on modification and extinguishment of debt		44
Net long-term debt issuance costs and premium amortization		9
Accrued interest on long-term debt, net		(32)
Other, net		(7)
Changes in current assets and liabilities:
Accounts receivable		16
Accounts payable		(17)
Deferred revenue		50
Other assets and liabilities		(21)
Other assets and liabilities, affiliate		0
Net cash provided by operating activities		1,100
INVESTING ACTIVITIES
Capital expenditures		(696)
Proceeds from sale of property, plant and equipment and other assets		0
Purchase of marketable securities		(1,127)
Net cash used in investing activities		(1,823)
FINANCING ACTIVITIES
Net proceeds from issuance of long-term debt		4,569
Payments of long-term debt		(4,615)
Distributions		0
Net cash used in financing activities		(46)
Effect of exchange rates on cash, cash equivalents and restricted cash and securities		2
Net decrease in cash, cash equivalents and restricted cash and securities		(767)
Cash, cash equivalents and restricted cash and securities at beginning of period		1,857
Cash, cash equivalents and restricted cash and securities at end of period		1,090
Supplemental cash flow information
Interest paid		282
Income taxes paid, net		$ 32

Consolidated Statements of Member's/Stockholders' Equity - USD ($) $ in Millions	Total	Common Stock	Additional Paid-in Capital	AOCI Attributable to Parent	Accumulated Deficit	Member Units	AOCI Attributable to Parent
MEMBER'S EQUITY
Cumulative effect of new accounting principle in period of adoption \| Predecessor \| Accounting Standards Update 2014-09						$ 0
Cumulative effect of new accounting principle in period of adoption \| Predecessor \| Accounting Standards Update 2018-02						0	$ 0
Balance at beginning of period (Predecessor) at Dec. 31, 2016						0	(387)
MEMBER'S EQUITY
Net income \| Predecessor	$ 249				$ 249	0
Other comprehensive (loss) income \| Predecessor	62						62
Purchase price accounting adjustments \| Predecessor						0
Distributions to CenturyLink \| Predecessor						0
Balance at end of period (Predecessor) at Jun. 30, 2017						0	(325)
Balance at beginning of period (Predecessor) at Dec. 31, 2016		$ 4	$ 19,800		(8,500)
Balance at beginning of period at Dec. 31, 2016				$ (387)
STOCKHOLDERS' EQUITY
Common stock issued under employee stock benefit plans and other \| Predecessor			19
Share-based compensation \| Predecessor			68
Balance at end of period (Predecessor) at Jun. 30, 2017	11,315	4	19,887		(8,251)
Balance at end of period at Jun. 30, 2017				(325)
MEMBER'S EQUITY
Cumulative effect of new accounting principle in period of adoption \| Accounting Standards Update 2014-09					9	9
Cumulative effect of new accounting principle in period of adoption \| Accounting Standards Update 2018-02						(6)	6
Balance at beginning of period at Dec. 31, 2017						19,254	18
MEMBER'S EQUITY
Net income	102				0	102
Other comprehensive (loss) income	(163)						(163)
Purchase price accounting adjustments						(5)
Distributions to CenturyLink						(605)
Balance at end of period at Jun. 30, 2018						$ 18,749	$ (139)
Balance at beginning of period at Dec. 31, 2017	19,272	0	0	18	0
STOCKHOLDERS' EQUITY
Common stock issued under employee stock benefit plans and other			0
Share-based compensation			0
Balance at end of period at Jun. 30, 2018	$ 18,610	$ 0	$ 0	$ (139)	$ 0

Background

6 Months Ended

Jun. 30, 2018

Accounting Policies [Abstract]

Background

(1) Background

General

We are an international facilities-based communications company engaged in providing of a broad array of integrated communications services to our business customers. We created our communications network by constructing our own assets and through a combination of purchasing other companies and purchasing or leasing facilities from others. We designed our network to provide communications services that employ and take advantage of rapidly improving underlying optical, Internet Protocol, computing and storage technologies.

On October 31, 2016, we entered into an agreement and plan of merger (the "Merger Agreement") with CenturyLink, Inc., a Louisiana corporation ("CenturyLink"), Wildcat Merger Sub 1 LLC, a Delaware limited liability company and an indirect wholly owned subsidiary of CenturyLink ("Merger Sub 1"), and WWG Merger Sub LLC, a Delaware limited liability company and an indirect wholly owned subsidiary of CenturyLink ("Merger Sub 2"), pursuant to which, effective November 1, 2017, we were acquired by CenturyLink in a cash and stock transaction, including the assumption of our debt (the "CenturyLink Merger"). See Note 2 - CenturyLink Merger.

Basis of Presentation

On November 1, 2017, we became a wholly owned subsidiary of CenturyLink. On the date of the acquisition, our assets and liabilities were recognized at CenturyLink's preliminary estimates of fair value. This revaluation has been reflected in our financial statements and, therefore, has resulted in a new basis of accounting for the successor period beginning on November 1, 2017. This new basis of accounting means that our financial statements for the successor periods are not comparable to our previously reported financial statements, including the predecessor period financial statements in this report.

The consolidated financial statements include our accounts and the accounts of our subsidiaries in which we have a controlling interest. All significant intercompany accounts and transactions have been eliminated. Transactions with our non-consolidated affiliates (CenturyLink and its other subsidiaries, referred to herein as affiliates) have not been eliminated. As part of our consolidation policy, we consider our controlled subsidiaries, investments in businesses in which we are not the primary beneficiary or do not have effective control but have the ability to significantly influence operating and financial policies, and variable interests resulting from economic arrangements that give us rights to economic risks or rewards of a legal entity. We do not have variable interests in a variable interest entity where we are required to consolidate the entity as the primary beneficiary. Due to exchange restrictions and other conditions, effective at the end of the third quarter of 2015, we deconsolidated our Venezuelan subsidiary and began accounting for our investment in our Venezuelan subsidiary using the cost method of accounting. The factors that led to our conclusions at the end of the third quarter of 2015 continued to exist through the second quarter of 2018.

In conjunction with our acquisition on November 1, 2017, we changed the definitions we use to classify expenses as cost of services and products and selling, general and administrative, and as a result, we reclassified previously reported amounts to conform to the current period presentation. We revised our definitions so that our expense classifications are more consistent with the expense classifications used by our new ultimate parent company, CenturyLink. These revisions resulted in the reclassification of $47 million from depreciation and amortization to cost of services and products for the predecessor six months ended June 30, 2017. Although we continued as a surviving corporation and legal entity after the acquisition, the accompanying consolidated statements of operations, comprehensive income, member's/stockholders' equity and cash flows are presented for two periods: predecessor and successor, which relates to the period preceding the acquisition and the period succeeding the acquisition. Our current definitions are as follows:

•

Cost of services and products (exclusive of depreciation and amortization) are expenses incurred in providing products and services to our customers. These expenses include: employee-related expenses directly attributable to operating and maintaining our network (such as salaries, wages, benefits and professional fees); facilities expenses (which are third-party telecommunications expenses we incur for using other carriers' networks to provide services to our customers); rents and utilities expenses; costs for universal service funds ("USF") (which are federal and state funds that are established to promote the availability of telecommunications services to all consumers at reasonable and affordable rates, among other things, and to which we are often required to contribute); taxes (such as property and other taxes); and other expenses directly related to our network.

•

Selling, general and administrative expenses are expenses incurred in selling products and services to our customers, corporate overhead and other operating expenses. These expenses include: employee-related expenses (such as salaries, wages, internal commissions, benefits and professional fees) directly attributable to selling products or services and employee-related expenses for administrative functions; marketing and advertising; taxes (such as state and local franchise taxes and sales and use taxes) and fees; external commissions; bad debt expense; and other selling, general and administrative expenses.

Segments

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 have one reportable segment.

Income Taxes

As of June 30, 2018, we had not completed our accounting for the tax effects of the Tax Cuts and Jobs Act (the "Act"). which was signed into law and in late December 2017. In order to complete our accounting for the impact of the Act, we continue to obtain, analyze and interpret additional guidance as such guidance becomes available from the U.S. Treasury Department, the Internal Revenue Service (“IRS”), state taxing jurisdictions, the Financial Accounting Standards Board ("FASB"), and other standard-setting and regulatory bodies. New guidance or interpretations may materially impact our provision for income taxes in future periods.

Additional information that is needed to complete the analysis but is currently unavailable includes, but is not limited to, the amount of earnings of foreign subsidiaries, the final determination of certain net deferred tax assets subject to remeasurement due to purchase accounting adjustments and other matters and the tax treatment of such provisions of the Act by various state tax authorities. We have provisionally recognized the tax impacts related to the re-measurement of deferred tax assets and liabilities. The ultimate impact may differ from our current provisional estimate due to additional analysis, changes in interpretations and assumptions we have made, additional regulatory guidance that may be issued, and actions we may take as a result of the Act. The change from our current provisional estimates will be reflected in our future statements of operations and could be material. We expect to complete the accounting in the fourth quarter of 2018.

The Act reduced the U.S. corporate income tax rate from a maximum of 35% to 21% for all C corporations, effective January 1, 2018, introduced further limitations on the deductibility of interest expense, made certain changes to capital expenditures and various other items, and imposed a one-time repatriation tax on certain earnings of certain foreign subsidiaries. In addition, the Tax Act introduces additional base-broadening measures, including Global Intangible Low-Taxed Income (“GILTI”) and the Base-Erosion Anti-Abuse Tax (“BEAT”). As a result of the reduction in the U.S. corporate income tax rate from 35% to 21%, we provisionally re-measured our net deferred tax assets at December 31, 2017 and recognized a tax expense of approximately $195 million in our consolidated statement of operations for the year ended December 31, 2017. During the first six months of 2018, we increased the tax expense from tax reform by $76 million due to changes in certain purchase accounting adjustments related to CenturyLink’s acquisition of us.

During the second quarter of 2018, we continued to evaluate and analyze the tax impacts of the Act. While we have not finalized our analysis, we do not expect the provisions of the Act, exclusive of the rate reduction, to materially impact us in 2018. However, we cannot provide any assurance that, upon completion of our analysis, the impact will not be material or that there will not be material tax impacts in future years. Accordingly, we have not made any additional adjustments related to the Act in our financial statements.

Because of our net operating loss carryforwards, we do not expect to experience a further material immediate reduction in the amount of cash income taxes paid by us. However, we anticipate that the provisions of the Act may reduce our cash income taxes in future years.

Recently Adopted Accounting Pronouncements

In the first quarter or 2018, we adopted Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers”, ASU 2016-16, “Intra-Entity Transfers of Assets Other Than Inventory” and ASU 2018-02, “Income Statement-Reporting Comprehensive Income: Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”.

Each of these is described further below.

Revenue Recognition

On May 28, 2014, the FASB issued ASU 2014-09 which replaces virtually all existing generally accepted accounting principles on revenue recognition and replaces them with a principles-based approach for determining revenue recognition using a new five step model. The core principle of ASU 2014-09 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. ASU 2014-09 also includes new accounting principles related to the deferral and amortization of contract acquisition and fulfillment costs.

We adopted the new revenue recognition standard under the modified retrospective transition method. On January 1, 2018, we recorded a cumulative catch-up adjustment that increased our retained earnings by $9 million, net of $3 million of income taxes.

Under ASU 2014-09, we are now deferring (i.e. capitalizing) incremental contract acquisition and fulfillment costs and are recognizing (i.e. amortizing) such costs over either the initial contract (plus and anticipated renewal contracts to which the costs relate) or the average customer life. Our deferred contract acquisition and fulfillment costs for our customers have average amortization periods of approximately 12 months to 60 months and are monitored every period to reflect any significant change in assumptions.

We have material obligations to our customers in our indefeasible right of use arrangements, including certain long-term prepaid customer capacity arrangements. The majority of our indefeasible right of use arrangements are accounted for as operating leases.

See Note 4 - Revenue Recognition for additional information.

Comprehensive Income

ASU 2018-02 provides an option to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act (or portion thereof) is recorded. If an entity elects to reclassify the income tax effects of the Tax Cuts and Jobs Act, the amount of that reclassification shall include the effect of the change in the U.S. federal corporate income tax rate on the gross deferred tax amounts and related valuation allowances, if any, at the date of enactment of the Tax Cuts and Jobs Act related to items remaining in accumulated other comprehensive income. The effect of the change in the U.S. federal corporate income tax rate on gross valuation allowances that were originally charged to income from continuing operations shall not be included. ASU 2018-02 is effective January 1, 2019, but early adoption is permitted and should be applied either in the period of adoption or retrospectively to each period (or periods) in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act is recognized. We early adopted ASU 2018-02 in the first quarter of 2018 and applied it in the period of adoption. The adoption of ASU 2018-02 resulted in a $6 million decrease to member's equity and increase to accumulated other comprehensive income. See Note 11 - Accumulated Other Comprehensive Loss for additional information.

Income Taxes

On October 24, 2016, FASB issued ASU 2016-16, “Intra-Entity Transfers of Assets Other Than Inventory” ("ASU 2016-16"). ASU 2016-16 eliminates the current prohibition on the recognition of the income tax effects on the transfer of assets among our subsidiaries. After adoption of this ASU, the income tax effects associated with these asset transfers, except for the transfer of inventory, will be recognized in the period the asset is transferred versus the current deferral and recognition upon either the sale of the asset to a third party or over the remaining useful life of the asset. We adopted ASU 2016-16 on January 1, 2018. The adoption of ASU 2016-16 did not have a material impact to our consolidated financial statements.

Recently Issued Accounting Pronouncements

Goodwill Impairment

On January 26, 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment” (“ASU 2017-04”). ASU 2017-04 simplifies the impairment testing for goodwill by changing the measurement for goodwill impairment. Under current rules, we are required to compute the implied fair value of goodwill to measure the impairment amount if the carrying value of a reporting unit exceeds its fair value. Under ASU 2017-04, the goodwill impairment charge will equal the excess of the reporting unit carrying value above its fair value, limited to the amount of goodwill assigned to the reporting unit.

We are required to adopt the provisions of ASU 2017-04 for any goodwill impairment tests, including our required annual test, occurring after January 1, 2020, but have the option to early adopt for any impairment test that we are required to perform. We have not determined if we will elect to early adopt the provisions of ASU 2017-04. The provisions of ASU 2017-04 would not have affected our last goodwill impairment assessment, but no assurance can be provided that the simplified testing methodology will not affect our goodwill impairment assessment in the future.

Financial Instruments

On June 16, 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13"). The primary impact of ASU 2016-13 for us is a change in the model for the recognition of credit losses related to our financial instruments from an incurred loss model, which recognized credit losses only if it was probable that a loss had been incurred, to an expected loss model, which requires our management team to estimate the total credit losses expected on the portfolio of financial instruments. We are currently reviewing the requirements of the standard and evaluating the impact on our consolidated financial statements.

We are required to adopt the provisions of ASU 2016-13 effective January 1, 2020 but could elect to early adopt the provisions as of January 1, 2019. We expect to recognize the impacts of adopting ASU 2016-13 through a cumulative adjustment to retained earnings as of the date of adoption. As of the date of this report, we have not yet determined the date we will adopt ASU 2016-13.

Leases

On February 25, 2016, the FASB issued ASU 2016-02, “Leases” (“ASU 2016-02”). The core principle of ASU 2016-02 will require lessees to present right-of-use assets and lease liabilities on their balance sheets for operating leases, which are currently not reflected on their balance sheets.

ASU 2016-02 is effective for annual and interim periods beginning January 1, 2019. Early adoption of ASU 2016-02 is permitted. Upon adoption of ASU 2016-02, we are required to recognize and measure leases at the beginning of the earliest period presented in our consolidated financial statements using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that we may elect to apply.

On January 25, 2018, the FASB issued ASU 2018-01, “Leases: Land Easement Practical Expedient for Transition to ASU 2016-02". ASU 2018-01permits the election of an optional transition practical expedient to not evaluate land easements that exist or expired before the entity’s adoption of ASC 2016-02 and that were not previously accounted for as leases. We plan to adopt ASU 2018-01 at the same time we adopt ASU 2016-02.

On July 30, 2018, the FASB issued ASU 2018-11, "Leases: Targeted Improvements". ("ASU 2018-11") provides entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies the new leases standard at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. We have not yet determined whether we will use the newly permitted adoption method.

We are in the process of implementing a new lease administrative and accounting system. We plan to adopt the standard when it becomes effective for us beginning January 1, 2019 and the adoption of the standard will result in the recognition of right of use assets and lease liabilities that have not previously been recorded. Although we believe it is premature as of the date of this report to provide any estimate of the impact of adopting ASU 2016-02, we do expect that it will have a material impact on our consolidated financial statements.

CenturyLink Merger

6 Months Ended

Jun. 30, 2018

Business Combinations [Abstract]

CenturyLink Merger

(2) CenturyLink Merger

On November 1, 2017, CenturyLink acquired us through successive merger transactions, including a merger of Level 3 with and into a merger subsidiary, which survived such merger as CenturyLink's indirect wholly-owned subsidiary under the name of Level 3 Parent, LLC.

As of June 30, 2018, the preliminary estimated amount of aggregate consideration was $19.628 billion.

The U.S. Department of Justice approved the acquisition subject to conditions of a consent decree on October 2, 2017, which requires the combined company to divest (i) certain Level 3 metro network assets in the markets located in Albuquerque, New Mexico; Boise, Idaho; and Tucson, Arizona and (ii) 24 strands of dark fiber connecting 30 specified city-pairs across the United States in the form of an indefeasible right of use agreement.

On January 22, 2018, we entered into an agreement to sell certain intangible assets for $68 million. During the second quarter of 2018, we sold network assets in Boise, Idaho and Albuquerque, New Mexico that we were required to divest as a condition of the merger. The proceeds from these sales were included in the proceeds from sale of property, plant and equipment in our consolidated statements of cash flows. No gain or loss was recognized with these transactions. All of the metro network assets were classified as assets held for sale on our consolidated balance sheet as of December 31, 2017. The Tucson, Arizona assets continue to be classified as assets held for sale on our consolidated balance sheet as of June 30, 2018.

Our results of operations have been included in the consolidated results of operations of CenturyLink beginning November 1, 2017. CenturyLink recognized our assets and liabilities based on CenturyLink’s preliminary estimates of the fair value of the acquired tangible and intangible assets and assumed liabilities of us as of November 1, 2017, the consummation date of the acquisition, with the excess aggregate consideration recorded as goodwill. The final determination of the allocation of the aggregate consideration paid by CenturyLink in the combination will be based on the fair value of such assets and liabilities as of the acquisition date with any excess aggregate consideration to be recorded as goodwill. The estimation of such fair values and the estimation of lives of depreciable tangible assets and amortizable intangible assets require significant judgment. CenturyLink is reviewing its valuation analysis and calculations of the estimates of the fair value of our assets acquired and liabilities assumed, along with the related allocation to goodwill. CenturyLink expects to complete the final fair value determinations prior to the anniversary date of the acquisition. CenturyLink’s final fair value determinations may be different than those reflected in our consolidated financial statements at June 30, 2018. The recognition of assets and liabilities at fair value are reflected in our financial statements and result in a new basis of accounting for the “successor period” beginning on November 1, 2017. This new basis of accounting means that our financial statements for the successor periods will not be comparable to our previously reported financial statements, including the financial statements in this report.

Based solely on CenturyLink’s preliminary estimates through June 30, 2018, the aggregate consideration exceeds the aggregate estimated fair value of the acquired assets and assumed liabilities by $11.143 billion, which we have recognized as goodwill. The goodwill is attributable to strategic benefits, including enhanced financial and operational scale, market diversification and leveraged combined networks that CenturyLink expects to realize. None of the goodwill associated with this acquisition is deductible for income tax purposes.

As of June 30, 2018, the following is our updated assignment of the preliminary estimated aggregate consideration:



	Adjusted November 1, 2017 Balance as of December 31, 2017			Purchase Price Adjustments⁽³⁾		Adjusted November 1, 2017 Balance as of June 30, 2018
	(Dollars in millions)
Cash, accounts receivable and other current assets ⁽¹⁾	$	3,317		(14	)	3,303
Property, plant and equipment	9,311			113		9,424
Identifiable intangible assets ⁽²⁾
Customer relationships	8,964			(476	)	8,488
Other	391			(13	)	378
Other noncurrent assets	782			184		966
Current liabilities, excluding current maturities of long-term debt	(1,461		)	(20	)	(1,481	)
Current maturities of long-term debt	(7		)	—		(7	)
Long-term debt	(10,888		)	—		(10,888	)
Deferred revenue and other liabilities	(1,613		)	(85	)	(1,698	)
Goodwill	10,837			306		11,143
Total estimated aggregate consideration	$	19,633		(5	)	19,628

(1) Includes a preliminary estimated fair value of $861 million for accounts receivable, which had a gross contractual value of $884 million on November 1, 2017. The $23 million difference between the gross contractual value and the preliminary estimated fair value assigned represents our best estimate as of November 1, 2017 of contractual cash flows that will not be collected.

(2) The preliminary estimate of the weighted-average amortization period for the acquired intangible assets is approximately 12.0 years.

(3) All purchase price adjustments occurred during the six months ended June 30, 2018.

Acquisition-Related Expenses

We have incurred acquisition-related expenses related to our activities surrounding the CenturyLink Merger. The table below summarizes our acquisition-related expenses, which consist of integration-related expenses, including severance and retention compensation expenses, and transaction-related expenses:



	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)
Transaction-related expenses	$	—	—	2	5
Integration-related expenses	59		77	20	38
Total acquisition-related expenses	$	59	77	22	43

Goodwill, Customer Relationships and Other Intangible Assets

6 Months Ended

Jun. 30, 2018

Acquired Intangible Assets Disclosure [Abstract]

Goodwill, Customer Relationships and Other Intangible Assets

(3) Goodwill, Customer Relationships and Other Intangible Assets

Goodwill, customer relationships and other intangible assets consisted of the following:



	June 30, 2018		December 31, 2017
	(Dollars in millions)
Goodwill	$	11,078	10,837
Customer relationships, less accumulated amortization of $477 and $126	$	7,990	8,845
Other intangible assets subject to amortization:
Trade names, less accumulated amortization of $17 and $4	113		126
Developed technology, less accumulated amortization of $37 and $9	283		252
Total other intangible assets, net	$	396	378

Our goodwill balance at December 31, 2017 includes $16 million of goodwill that was allocated to us from CenturyLink associated with differences in the deferred state income taxes that CenturyLink expects to realize due to its consolidation of our results of operations into its state tax returns.

Total amortization expense for intangible assets for the successor three and six months ended June 30, 2018 was $202 million and $396 million, respectively, and the predecessor three and six months ended June 30, 2017 was $52 million and $97 million, respectively. As of the successor date of June 30, 2018, the gross carrying amount of goodwill, customer relationships, indefinite-life and other intangible assets was $20 billion.

We estimate that total amortization expense for intangible assets for the successor years ending December 31, 2018 through 2022 will be as follows:



	(Dollars in millions)
2018 (remaining six months)	$	402
2019	805
2020	805
2021	805
2022	792

The following table shows the rollforward of goodwill from December 31, 2017 through June 30, 2018:



	(Dollars in millions)
As of December 31, 2017	$	10,837
Purchase accounting and other adjustments	306
Effect of foreign currency rate change	(65		)
As of June 30, 2018	$	11,078

Revenue Recognition

6 Months Ended

Jun. 30, 2018

Revenue from Contract with Customer [Abstract]

Revenue Recognition

(4) Revenue Recognition

We earn most of our consolidated revenue from contracts with customers, primarily through the provision of telecommunications and other services. Revenue from contracts with customers is accounted for under Accounting Standards Codification ("ASC") 606, which we adopted on January 1, 2018 using the modified retrospective approach. We also earn revenues from leasing arrangements (primarily fiber capacity agreements) and governmental subsidy payments, neither of which are accounted for under ASC 606.

Under ASC 606, revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods or services. Revenue is recognized based on the following five-step model:


•	Identification of the contract with a customer;


•	Identification of the performance obligations in the contract;


•	Determination of the transaction price;


•	Allocation of the transaction price to the performance obligations in the contract; and,


•	Recognition of revenue when, or as, we satisfy a performance obligation.

We provide an array of communications services, including local voice, broadband, private line (including special access), network access, Ethernet, information technology, video and other ancillary services. We provide these services to a wide range of businesses, including global/international, enterprise, wholesale, government, small and medium business customers. Certain contracts also include the sale of equipment, which is not significant to our business.

For access services, we generally bill fixed monthly charges one month in advance to customers and recognize revenue as service is provided over the contract term in alignment with the customer's receipt of service. For usage, installation and other ancillary services, we generally bill in arrears and recognize revenue as usage or delivery occurs. In most cases, the amount invoiced for our service offerings constitutes the price that would be billed on a standalone basis.

Under ASC 606, we recognize revenue for services when we provide the applicable service or when control is transferred. Recognition of certain payments received in advance of services being provided is deferred until the service is provided. These advance payments include certain activation and certain installation charges. If the activation and installation charges are separate performance obligations, we recognize them as revenue over the actual or expected contract term using historical experience, which ranges from one year to seven years depending on the service.

Promotional or performance-based incentive payments are estimated at contract inception (and updated on a periodic basis as needed) and accounted for as variable consideration. In certain cases, customers may be permitted to modify their contracts without incurring a penalty. We evaluate the change in scope or price to identify whether the modification should be treated as a separate contract, whether the modification is a termination of the existing contract and creation of a new contract, or if it is a change to the existing contract. The impact of contract modifications is not significant to our results.

Customer contracts are evaluated to determine whether the performance obligations are separable. If the performance obligations are deemed separable and separate earnings processes exist, the total transaction price that we expect to receive with the customer is allocated to each performance obligation based on its relative standalone selling price. The standalone selling price is the price we sell to similar customers. The revenue associated with each performance obligation is then recognized as earned. The portion of any advance payment allocated to the service based upon its relative selling price is recognized ratably over the contract term.

We periodically sell optical capacity on our network. These transactions are structured as indefeasible rights of use, commonly referred to as IRUs, which are the exclusive right to use a specified amount of capacity or fiber for a specified term, typically 10 - 20 years. In most cases, we account for the cash consideration received on transfers of optical capacity and fiber assets and on all of the other elements deliverable under an IRU as non-ASC 606 lease revenue which we recognize ratably over the term of the agreement. We do not recognize revenue on any contemporaneous exchanges of our optical capacity assets for other optical capacity assets.

In connection with offering products and services provided to the end user by third-party vendors, we review the relationship between us, the vendor and the end user to assess whether revenue should be reported on a gross or net basis. In assessing whether revenue should be reported on a gross or net basis, we consider whether we act as a principal in the transaction and control the goods and services used to fulfill the performance obligations associated with the transaction.

We have service level commitments pursuant to contracts with certain of our customers. To the extent that such service levels are not achieved or are otherwise disputed due to performance or service issues or other service interruptions or conditions, we will estimate the amount of credits to be issued and record a reduction to revenues in the period that the service level commitment was not met.

Customer payments are made based on billing schedules included in our customer contracts, which is typically on a monthly basis. For certain products or services and customer types, payment is required before products or services are provided.

Comparative Results

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

Disaggregated Revenue by Service Offering

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.

Customer Receivables and Contract Balances

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.

Contract liabilities are consideration we have received from our customers in advance of providing the goods or services promised in the contract. We defer 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 seven years depending on the service. Contract liabilities are included within deferred revenue in our consolidated balance sheet.

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	—		—	—

Performance Obligations

A performance obligation is a promise in a contract with a customer to transfer a good or service to the customer. We recognize revenue for services when we satisfy our performance obligation as services are provided.

As of June 30, 2018, our estimated revenue expected to be recognized in the future related to performance obligations associated with customer contracts (including affiliates) that are unsatisfied (or partially satisfied) is approximately $6.5 billion. We expect to recognize approximately 51% of this revenue through 2019, with the balance recognized thereafter.

We do not disclose the amount of unsatisfied performance obligations for contracts under which we are contractually entitled to bill pre-determined amounts for future services (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.

Contract Costs

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

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. Acquisition and fulfillment costs are amortized based on the transfer of services to which the assets relate which typically range from 12 months to 60 months and are included in cost of services and products and selling, general and administrative expenses in our consolidated statement of operations. A portion of these costs are amortized on a portfolio basis using an average expected contract term of 30 months. The amount of these capitalized costs that are anticipated to be amortized in the next twelve months are included in other current assets on our consolidated balance sheets. We recognize incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets is less than one year. Deferred acquisition and fulfillment costs are assessed for impairment on a quarterly basis.

Products and Services Revenues

We are an integrated communications company engaged primarily in providing an array of communications services, including local voice, broadband, private line (including business data services), Ethernet, network access, information technology and other ancillary services. We strive to maintain our customer relationships by, among other things, bundling our service offerings to provide our customers with a complete offering of integrated communications services.

We categorize our products, services and revenues among the following six categories:


•	IP and data services, which include primarily VPN data networks, Ethernet, IP and other ancillary services;


•	Transport and infrastructure, which include broadband, private line (including business data services) and other ancillary services;


•	Voice and collaboration, which includes primarily local voice, including wholesale voice, and other ancillary services;


•	IT and managed services, which include information technology services and managed services, which may be purchased in conjunction with our other network services;


•	Other, which includes sublease rental income; and


•	Affiliates services, we provide to our affiliates, telecommunication services that we also provide to external customers. In addition, we provide to our affiliates computer system development and support services, network support and technical services.

From time to time, we may change the categorization of our products and services.

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

Long-Term Debt

6 Months Ended

Jun. 30, 2018

Debt Disclosure [Abstract]

Long-term Debt

(5) Long-Term Debt

The following table summarizes our long-term debt:



	Interest Rates	Maturities	June 30, 2018			December 31, 2017
			(Dollars in millions)
Level 3 Parent, LLC
Senior notes ⁽¹⁾	5.750%	2022	$	600		600
Subsidiaries
Level 3 Financing, Inc.
Senior notes ⁽²⁾	5.125% - 6.125%	2021 - 2026	5,315			5,315
Term loan ⁽³⁾	LIBOR + 2.25%	2024	4,611			4,611
Capital leases	Various	Various	174			179
Total long-term debt, excluding unamortized premiums			10,700			10,705
Unamortized premiums, net			170			185
Total long-term debt			10,870			10,890
Less current maturities			(13		)	(8	)
Long-term debt, excluding current maturities			$	10,857		10,882

(1) The notes are not guaranteed by any of Level 3 Parent, LLC's subsidiaries.

(2) The notes are fully and unconditionally guaranteed on an unsubordinated unsecured basis by Level 3 Parent, LLC and Level 3 Communications, LLC.

(3) The Tranche B 2024 Term Loan is a secured obligation and is guaranteed by Level 3 Parent, LLC and certain other subsidiaries. The Tranche B 2024 Term Loan had an interest rate of 4.334% as of June 30, 2018 and 3.557% as of December 31, 2017. The interest rate on the Tranche B 2024 Term Loan is set with a minimum London Interbank Offered Rate ("LIBOR ") of zero percent.

Long-Term Debt Maturities

Set forth below is the aggregate principal amount of our long-term debt and capital leases (excluding unamortized premiums) maturing during the following years:



	(Dollars in millions)
2018 (remaining six months)	$	7
2019	8
2020	10
2021	651
2022	1,726
2023 and thereafter	8,298
Total long-term debt	$	10,700

Covenants

The senior notes of Level 3 Parent, LLC and term loan and senior notes of Level 3 Financing, Inc. contain extensive affirmative and negative covenants. Such covenants include, among other things and subject to certain significant exceptions, restrictions on their ability to declare or pay dividends, repay certain other indebtedness, create liens, incur additional indebtedness, make investments, engage in transactions with their affiliates including CenturyLink and its other subsidiaries, dispose of assets and merge or consolidate with any other person. Also, Level 3 Parent, LLC, as well as Level 3 Financing, Inc., will be required to offer to purchase certain of its long-term debt securities under certain circumstances in connection with a "change of control" of Level 3 Parent, LLC.

Certain of CenturyLink's and our debt instruments contain cross acceleration provisions. When present, these provisions could have a wider impact on liquidity than might otherwise arise from a default or acceleration of a single debt instrument.

Compliance

At June 30, 2018, we believe we were in compliance with the provisions and financial covenants contained in our respective material debt agreements.

For additional information on our long-term debt, see Note 4—Long-Term Debt to our consolidated financial statements in Item 8 of Part II of our annual report on Form 10-K for the year ended December 31, 2017.

Severance and Restructuring Costs

6 Months Ended

Jun. 30, 2018

Restructuring and Related Activities [Abstract]

Severance and Restructuring Costs

(6) Severance and Restructuring Costs

Changes in our accrued liabilities for severance expenses and restructuring costs were as follows:



	Successor
	Severance			Restructuring
	(Dollars in millions)
Balance at January 1, 2018	$	5		4
Accrued to expense	12			46
Payments, net	(12		)	(1	)
Balance at June 30, 2018	$	5		49

Products and Services Revenues

6 Months Ended

Jun. 30, 2018

Revenue from Contract with Customer [Abstract]

Products and Services Revenues

(4) Revenue Recognition

We earn most of our consolidated revenue from contracts with customers, primarily through the provision of telecommunications and other services. Revenue from contracts with customers is accounted for under Accounting Standards Codification ("ASC") 606, which we adopted on January 1, 2018 using the modified retrospective approach. We also earn revenues from leasing arrangements (primarily fiber capacity agreements) and governmental subsidy payments, neither of which are accounted for under ASC 606.

Under ASC 606, revenues are recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to receive in exchange for those goods or services. Revenue is recognized based on the following five-step model:


•	Identification of the contract with a customer;


•	Identification of the performance obligations in the contract;


•	Determination of the transaction price;


•	Allocation of the transaction price to the performance obligations in the contract; and,


•	Recognition of revenue when, or as, we satisfy a performance obligation.