Cover Page	3 Months Ended
Cover Page	Mar. 31, 2020 shares
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2020
Document Transition Report	false
Entity File Number	001-35134
Entity Registrant Name	LEVEL 3 PARENT, LLC
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	47-0210602
Entity Address, Address Line One	1025 Eldorado Blvd.,
Entity Address, City or Town	Broomfield,
Entity Address, State or Province	CO
Entity Address, Postal Zip Code	80021-8869
City Area Code	720
Local Phone Number	888-1000
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding	0
Entity Central Index Key	0000794323
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1

Consolidated Statements of Operations - USD ($)
$ in Millions

3 Months Ended

Mar. 31, 2020

Mar. 31, 2019

OPERATING REVENUE

Operating revenues

^[1]

$ 1,980

$ 1,950

OPERATING EXPENSES

Cost of services and products (exclusive of depreciation and amortization)

^[1]

876

871

Selling, general and administrative

310

328

Operating expenses - affiliates

93

46

Depreciation and amortization

416

390

Goodwill impairment

0

3,708

Total operating expenses

^[1]

1,695

5,343

OPERATING INCOME (LOSS)

285

(3,393)

OTHER (EXPENSE) INCOME

Interest income - affiliate

13

16

Interest expense

(106)

(131)

Other (expense) income, net

(34)

12

Total other expense, net

(127)

(103)

INCOME (LOSS) BEFORE INCOME TAXES

158

(3,496)

Income tax expense

45

89

NET INCOME (LOSS)

113

(3,585)

Non-Affiliate Revenue

OPERATING REVENUE

Operating revenues

^[1]

1,932

1,895

Affiliate Services

OPERATING REVENUE

Operating revenues

$ 48

$ 55

[1]	Reclassifications were made within certain 2019 comparative figures due to the retrospective application of an accounting policy election during the first quarter of 2020. Refer to Note 1 - Background and our Form 8-K filing dated May 7, 2020 for further information.

Consolidated Statements of Comprehensive (Loss) Income - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Statement of Comprehensive Income [Abstract]
NET INCOME (LOSS)	$ 113	$ (3,585)
OTHER COMPREHENSIVE (LOSS) INCOME:
Foreign currency translation adjustments, net of $23 and ($1) tax	(228)	3
Other comprehensive (loss) income, net of tax	(228)	3
COMPREHENSIVE LOSS	$ (115)	$ (3,582)

- Definition

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 (Loss) Income (Parenthetical) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Statement of Comprehensive Income [Abstract]
Foreign currency translation adjustments, tax effect	$ 23	$ (1)

Consolidated Balance Sheets - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
CURRENT ASSETS
Cash and cash equivalents	$ 239	$ 316
Restricted cash - current	3	3
Accounts receivable, less allowance of $17 and $13	737	667
Note receivable - affiliate	1,468	1,590
Other	323	266
Total current assets	2,770	2,842
Property, plant and equipment, net of accumulated depreciation of $2,110 and $1,825	9,923	9,936
GOODWILL AND OTHER ASSETS
Goodwill	7,355	7,415
Operating lease assets	1,061	1,060
Restricted cash	18	19
Other, net	474	492
Total goodwill and other assets	16,039	16,320
TOTAL ASSETS	28,732	29,098
CURRENT LIABILITIES
Current maturities of long-term debt	10	11
Accounts payable	698	654
Accounts payable - affiliates	862	669
Accrued expenses and other liabilities
Salaries and benefits	130	240
Income and other taxes	131	152
Current operating lease liabilities	273	249
Interest	78	85
Other	71	77
Current portion of deferred revenue	316	309
Total current liabilities	2,569	2,446
LONG-TERM DEBT	10,353	10,356
DEFERRED REVENUE AND OTHER LIABILITIES
Deferred revenue	1,338	1,343
Deferred income taxes, net	212	241
Noncurrent operating lease liabilities	846	854
Other	297	313
Total deferred revenue and other liabilities	2,693	2,751
COMMITMENTS AND CONTINGENCIES (Note 8)
MEMBER'S EQUITY
Member's equity	13,524	13,724
Accumulated other comprehensive loss	(407)	(179)
Total member's equity	13,117	13,545
TOTAL LIABILITIES AND MEMBER'S EQUITY	28,732	29,098
Customer Contracts And Relationships
GOODWILL AND OTHER ASSETS
Intangible assets, net	6,657	6,865
Other Intangible Assets
GOODWILL AND OTHER ASSETS
Intangible assets, net	$ 474	$ 469

Consolidated Balance Sheets (Parentheticals) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 17	$ 13
Accumulated depreciation	$ 2,110	$ 1,825

Consolidated Statements of Cash Flows - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
OPERATING ACTIVITIES
Net income (loss)	$ 113	$ (3,585)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization	416	390
Goodwill impairment	0	3,708
Deferred income taxes	38	79
Changes in current assets and liabilities:
Accounts receivable	(80)	4
Accounts payable	22	(48)
Other current assets and liabilities, net	(188)	(161)
Other current assets and liabilities, affiliate	105	119
Changes in other noncurrent assets and liabilities, net	(10)	(23)
Other, net	(21)	0
Net cash provided by operating activities	395	483
INVESTING ACTIVITIES
Capital expenditures	(349)	(285)
Payments of notes receivable - affiliates	122	0
Proceeds from sale of property, plant and equipment and other assets	33	0
Net cash used in investing activities	(194)	(285)
FINANCING ACTIVITIES
Payments of long-term debt	(4)	0
Distributions	(275)	(225)
Other	0	(1)
Net cash used in financing activities	(279)	(226)
Net decrease in cash, cash equivalents, restricted cash and securities	(78)	(28)
Cash, cash equivalents, restricted cash and securities at beginning of period	338	272
Cash, cash equivalents, restricted cash and securities at end of period	260	244
Supplemental cash flow information
Income taxes paid, net	5	7
Interest paid	115	139
Cash, cash equivalents, restricted cash and securities:
Total	$ 260	$ 244

Consolidated Statements of Cash Flows (parentheticals) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Statement of Cash Flows [Abstract]
Capitalized interest	$ 6	$ 1

Consolidated Statements of Member's Equity - USD ($) $ in Millions	Total	AOCI Attributable to Parent	Member Units
MEMBER'S EQUITY
TOTAL MEMBER'S EQUITY		$ (171)
Balance at beginning of period at Dec. 31, 2018		(171)	$ 18,048
MEMBER'S EQUITY
Net income (loss)	$ (3,585)		(3,585)
Distributions			(225)
Other comprehensive (loss) income	3	3
Balance at end of period at Mar. 31, 2019		(168)	14,199
MEMBER'S EQUITY
TOTAL MEMBER'S EQUITY	14,031	(168)
TOTAL MEMBER'S EQUITY	13,545	(179)
Balance at beginning of period at Dec. 31, 2019		(179)	13,724
MEMBER'S EQUITY
Net income (loss)	113		113
Distributions			(318)
Other			8
Other comprehensive (loss) income	(228)	(228)
Balance at end of period at Mar. 31, 2020		(407)	$ 13,524
MEMBER'S EQUITY
TOTAL MEMBER'S EQUITY	$ 13,117	$ (407)

- Definition

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

+ References + Details

Consolidated Statements of Member's Equity (Parenthetical) $ in Millions	Jan. 01, 2018 USD ($)
Member Units \| Accounting Standards Update 2014-09
Cumulative effect of new accounting, tax	$ 3

Background	3 Months Ended
Background	Mar. 31, 2020
Accounting Policies [Abstract]
Background	Background General We are an international facilities-based communications provider (that is, a provider that owns or leases a substantial portion of the property, plant and equipment necessary to provide our services) of a broad range of integrated communications services. 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. Effective November 1, 2017, we were acquired by CenturyLink in a cash and stock transaction, including the assumption of our debt (the "CenturyLink Merger"). Basis of Presentation Our consolidated balance sheet as of December 31, 2019, which was derived from our audited consolidated financial statements, and our unaudited interim consolidated financial statements provided herein have been prepared in accordance with the instructions for Form 10-Q. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission ("SEC"); however, in our opinion, the disclosures made are adequate to make the information presented not misleading. We believe that these consolidated financial statements include all normal recurring adjustments necessary to fairly present the results for the interim periods. The consolidated results of operations and cash flows for the first three months of the year are not necessarily indicative of the consolidated results of operations and cash flows that might be expected for the entire year. These consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our annual report on Form 10-K for the year ended December 31, 2019. The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries in which we have a controlling interest. Intercompany amounts and transactions with our consolidated subsidiaries have been eliminated. Transactions with our non-consolidated affiliates (CenturyLink and its other subsidiaries, referred to herein as affiliates) have not been eliminated. 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 first quarter of 2020. We reclassified certain prior period amounts to conform to the current period presentation, including the categorization of our revenue and expenses for three months ended March 31, 2020 and 2019. Segments Our operations are integrated into and reported as part 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 SEC. Consequently, we do not provide our discrete financial information to the CODM on a regular basis. As such, we have one reportable segment. Change in Accounting Policy During the first quarter of 2020, we elected to change the presentation for taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, including federal and certain state Universal Service Fund (USF) regulatory fees, to present all such taxes on a net basis in our consolidated statement of operations. Prior to the first quarter of 2020, we assessed whether we were the primary obligor or principal taxpayer for the taxes assessed in each jurisdiction where we do business. The previous policy resulted in presenting such USF fees on a gross basis within operating revenue and cost of services and products, and all other significant taxes on a net basis. This change in accounting policy was applied retrospectively and decreased both operating revenue and cost of services and products by $96 million for both quarters ended March 31, 2020 and March 31, 2019. The change had no impact on operating income (loss) or net income (loss) in the consolidated statements of operations. We changed our policy to present such taxes on the net basis and believe the new policy is preferable because of the historical and potential future regulatory rate changes outside of our control resulting in significant variability in tax and fee revenue that are not indicative of our operating performance. We believe the net presentation provides the most useful and transparent financial information and improves comparability and consistency of financial results. Operating Lease Income We lease various IRUs, office facilities, switching facilities and other network sites to third parties under operating leases. Lease and sublease income are included in operating revenue in the consolidated statements of operations. For the three months ended March 31, 2020, our gross rental income was $176 million, which represents approximately 9% of our operating revenue. For the three months ended March 31, 2019, our gross rental income was $50 million, which represents approximately 3% of our operating revenue. Recently Adopted Accounting Pronouncements During the first quarter of 2020, the SEC made significant changes to its disclosure requirements, Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities, which amended disclosure requirements related to registered debt securities which have been updated and relocated to Rule 13-01 of Regulation S-X. The final rule allows for streamlined disclosure models and permits presentation to be included within Management’s Discussion and Analysis of Financial Condition and Results of Operations. The rules become effective January 4, 2021, with voluntary compliance permitted immediately as elected by the Company. Financial Instruments In June 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments". 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 adopted ASU 2016-13 on January 1, 2020 and recognized a cumulative adjustment to our opening accumulated deficit as of the date of adoption. The impact was a $3 million reduction to member's equity in the consolidated financial statements. Recently Issued Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). ASU 2019-12 removes certain exceptions for investments, intra-period allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes. ASU 2019-12 will become effective for us in the first quarter of fiscal 2021 and early adoption is permitted. We are evaluating the impact the adoption will have on our consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU is intended to help stakeholders during the global market-wide reference rate transition period. Therefore, it will be in effect for a limited time through December 31, 2022. We are evaluating the optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued and the related impact on our consolidated financial statements. Subsequent Event As of the date of this report, $375 million of distributions were made to our parent during 2020, of which $100 million were made in the second quarter in 2020.

Goodwill, Customer Relationships and Other Intangible Assets

3 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill, Customer Relationships and Other Intangible Assets

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



	March 31, 2020		December 31, 2019
	(Dollars in millions)
Goodwill	$	7,355	7,415
Customer relationships, less accumulated amortization of $1,700 and $1,538	$	6,657	6,865
Other intangible assets subject to amortization:
Capitalized software, less accumulated amortization of $179 and $146	$	406	395
Trade names, less accumulated amortization of $63 and $57	68		74
Total other intangible assets, net	$	474	$	469

Our goodwill was derived from CenturyLink's acquisition of us where the purchase price exceeded the fair value of the net assets acquired.

We assess our goodwill for impairment annually, or, under certain circumstances, more frequently, such as when events or changes in circumstances indicate there may be impairment. We are required to write down the value of goodwill only when our assessment determines the carrying value of equity of our reporting unit exceeds its fair value. Our annual impairment assessment date for goodwill is October 31, at which date we assessed goodwill at our reporting unit. In reviewing the criteria for reporting units, we have determined that we are one reporting unit.

Because CenturyLink's low stock price was a trigger for impairment testing, we estimated the fair value of our

operations using only the market approach in the quarter ended March 31, 2019. Applying this approach, we utilized

company comparisons and analyst reports within the telecommunications industry, which have historically

supported a range of fair values of annualized revenue and EBITDA multiples between 2.1x and 4.9x and 4.9x and

9.8x, respectively. We selected a revenue and EBITDA multiple within this range. As of March 31, 2019, based on

our assessments performed as described above, we concluded that the estimated fair value of equity was less than

our carrying value of equity as of the date of our triggering event during the first quarter. As a result, we recorded a

non-cash, non-tax-deductible goodwill impairment charge of $3.7 billion in the quarter ended March 31, 2019.

The market multiples approach that we used in the quarter ended March 31, 2019 incorporated significant

estimates and assumptions related to the forecasted results for the remainder of the year, including revenues,

expenses, and the achievement of certain cost synergies. In developing the market multiple, we also considered

observed trends of our industry participants. Our assessment included many qualitative factors that required

significant judgment. Alternative interpretations of these factors could have resulted in different conclusions

regarding the size of our impairments.

During the first quarter of 2020, we observed a decline in CenturyLink's stock price as a result of events occurring after the end of 2019, including the COVID-19 pandemic. We evaluated whether such events would indicate the fair value of our reporting unit was below its carrying value. We believe these events have impacted the global economy more directly than us, and when considered with other factors, we have concluded it is not more

likely than not that our fair value of our reporting unit was less than its carrying value as of the quarter ended March 31, 2020. In light of the negative impacts of COVID-19 on the global economy, we will continue to evaluate the general economic trends which could have an impact on our assessment of whether it is more likely than not that the fair value of our reporting unit is less than its carrying amount. Future changes could cause our reporting unit fair value to be less than our carrying value, resulting in potential impairments of our goodwill which could have a material effect on our results of operations and financial condition. The extent of the impact, if any, will depend on future developments including actions taken to contain the coronavirus and its long-term impacts on the overall economy.

The following table shows the rollforward of goodwill from December 31, 2019 through March 31, 2020:



	(Dollars in millions)
As of December 31, 2019	$	7,415
Effect of foreign currency exchange rate change and other	(60		)
As of March 31, 2020	$	7,355

Total amortization expense for intangible assets for the three months ended March 31, 2020 and 2019, was $208 million and $193 million, respectively. As of March 31, 2020, the gross carrying amount of goodwill, customer relationships, indefinite-life and other intangible assets was $16.4 billion.

We estimate that total amortization expense for intangible assets for the years ending December 31, 2020 through 2024 will be as follows:



	(Dollars in millions)
2020 (remaining nine months)	$	628
2021	836
2022	776
2023	747
2024	735

Revenue Recognition

3 Months Ended

Mar. 31, 2020

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Reconciliation of Total Revenue to Revenue from Contracts with Customers

The following table provides the amount of revenue that is not subject to ASC 606, but is instead governed by other accounting standards:



	Three Months Ended March 31,
	2020			2019
	(Dollars in millions)
Total revenue ⁽¹⁾	$	1,980		1,950
Adjustments for non-ASC 606 revenue ⁽²⁾	(225		)	(50	)
Total revenue from contracts with customers	$	1,755		1,900

_____________________________________________________________________

⁽¹⁾ Reclassifications were made within certain 2019 comparative figures due to the retrospective application of an accounting policy election during the first quarter of 2020. Refer to Note 1 - Background and our Form 8-K filing dated May 7, 2020 for further information.

⁽²⁾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, contract assets and contract liabilities as of March 31, 2020 and December 31, 2019:



	March 31, 2020		December 31, 2019
	(Dollars in millions)
Customer receivables ⁽¹⁾	$	731	678
Contract assets	40		32
Contract liabilities	378		423


(1)	Gross customer receivables of $748 million and $691 million, net of allowance for doubtful accounts of $17 million and $13 million, at March 31, 2020 and December 31, 2019, respectively.

Contract liabilities are consideration we have received from our customers or billed in advance of providing goods or services promised in the future. We defer recognizing this consideration as revenue until we have satisfied the related performance obligation to the customer. Contract liabilities include recurring services billed one month in advance and installation and maintenance charges that are deferred and recognized over the actual or expected contract term, which ranges from one to five years depending on the service. Contract liabilities are included within deferred revenue in our consolidated balance sheets. During the three months ended March 31, 2020 and March 31, 2019, we recognized $99 million and $95 million, respectively, of revenue that was included in contract liabilities as of January 1, 2020 and January 1, 2019, respectively.

Performance Obligations

As of March 31, 2020, 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 $3.9 billion. We expect to recognize approximately 89% of this revenue through 2022, with the balance recognized thereafter.

We do not disclose the value of unsatisfied performance obligations for contracts for which we 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:



	Three Months Ended March 31,
	2020					2019
	(Dollars in millions)
	Acquisition Costs			Fulfillment Costs		Acquisition Costs		Fulfillment Costs
Beginning of period balance	$	79		121		64		84
Costs incurred	23			23		18		26
Amortization	(16		)	(22	)	(8	)	(13	)
End of period balance	$	86		122		74		97

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

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

Products and Services Revenue

We categorize our products, services and revenue among the following five categories:


•	IP and Data Services, which include primarily VPN data networks, Ethernet, IP, video (including our facilities-based video services, CDN services and Vyvx broadcast services) and other ancillary services;


•	Transport and Infrastructure, which includes private line (including business data services), wavelength, colocation and data center services, including cloud, hosting and application management solutions, professional services, network security services, dark fiber services and other ancillary services;


•	Voice and Collaboration, which includes primarily TDM voice services, VoIP and other ancillary services;


•	Other, which includes sublease rental income and information technology services and managed services, which may be purchased in conjunction with our other network services; and


•	Affiliate services, which includes telecommunication services that we also provide to our external customers.

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

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



	Three Months Ended March 31,
	2020		2019 ⁽¹⁾
	(Dollars in millions)
IP and Data Services	$	905	923
Transport and Infrastructure	648		630
Voice and Collaboration	353		340
Other	26		2
Affiliate Services	48		55
Total operating revenue	$	1,980	1,950

_____________________________________________________________________

(1)

Reclassifications were made within certain 2019 comparative figures due to the retrospective application of an accounting policy election during the first quarter of 2020, in addition to product reclassification changes. Refer to Note 1 - Background and our Form 8-K filing dated May 7, 2020 for further information.

Credit Losses on Financial Instruments

3 Months Ended

Mar. 31, 2020

Credit Loss [Abstract]

Credit Losses on Financial Instruments

In accordance with ASC 326, "Financial Instruments - Credit Losses" ("ASC 326"), we aggregate financial assets with similar risk characteristics such that expected credit losses reflect the credit quality or deterioration over the life of the asset. We monitor certain risk characteristics within our aggregated financial assets and revise their composition accordingly, to the extent internal and external risk factors change each reporting period. Financial assets that do not share risk characteristics with other financial assets are evaluated separately. Our financial assets measured at amortized costs primarily consist of accounts receivable.

In developing our accounts receivable portfolio, we pooled certain assets with similar credit risk characteristics based on the nature of our customers, their industry, policies used to grant credit terms, and their historical and expected credit loss patterns.

Prior to the adoption of the new credit loss standard, the allowance for doubtful accounts receivable reflected our best estimate of probable losses inherent in our receivable portfolio determined based on historical experience, specific allowances for known troubled accounts, and other currently available evidence.

We implemented the new standard, using a loss rate method to estimate our allowance for credit losses. Our current expected credit loss rate begins with the use of historical loss experience as a percentage of accounts receivable. We measure our historical loss period based on the average days to move accounts receivable to credit loss. When asset specific characteristics and current conditions change from those in the historical period, due to changes in our credit and collections strategy, or credit loss and recovery policies, we perform a qualitative and quantitative assessment to update our current loss rate, which as noted below has increased due to an increase in historic loss experience and weakening economic forecasts. We use regression analysis to develop an expected loss rate using historical experience and economic data over a forecast period. We measure our forecast period based on the average days to collect payment on billed accounts receivable. The historical, current, and expected credit loss rates are combined and applied to period end accounts receivable, which results in our allowance for credit losses.

If there is a deterioration of a customer's financial condition or if future default rates in general, including impacts of COVID-19, differ from those currently anticipated, we may have to adjust the allowance for credit losses, which would affect earnings in the period that adjustments are made.

The assessment of the correlation between historical observed default rates, current conditions, and forecast economic conditions requires judgment. Alternative interpretations of these factors could have resulted in different conclusions regarding the allowance for credit losses. The amount of credit loss is sensitive to changes in circumstances and forecasted economic conditions. Our historical credit loss experience, current conditions, and forecast of economic conditions may also not be representative of the customer’s actual default in the future.

The following table presents the activity of our allowance for credit losses for our accounts receivable portfolio:



(Dollars in millions)
Beginning balance at January 1, 2020⁽¹⁾	$	18
Current Period provision for expected losses	5
Write-offs charged against the allowance	(7		)
Recoveries collected	3
Foreign currency exchange rate change adjustment	(2		)
Ending Balance at March 31, 2020	$	17

______________________________________________________________________


(1)	The beginning balance includes the cumulative effect of the adoption of new credit loss standard

For the three months ended March 31, 2020, our allowance for credit losses for our business accounts receivable portfolio decreased due to a devaluation of foreign currency, partially offset by an increase in historical loss experience and weakening economic forecasts.

- Definition

The entire disclosure for credit loss on financial instrument measured at amortized cost basis, net investment in lease, off-balance sheet credit exposure, and available-for-sale debt security.

+ References + Details

Long-Term Debt

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

Long-term Debt

Long-Term Debt

The following chart reflects our consolidated long-term debt, including finance leases, unamortized discounts and premiums, and unamortized debt issuance costs, but excluding intercompany debt:



	Interest Rates⁽¹⁾	Maturities	March 31, 2020			December 31, 2019
			(Dollars in millions)
Level 3 Financing, Inc.
Senior Secured Debt:⁽²⁾
Senior notes ⁽³⁾	3.400% - 3.875%	2027 - 2029	$	1,500		1,500
Tranche B 2027 Term Loan ⁽⁴⁾	LIBOR + 1.75%	2027	3,111			3,111
Senior Notes and other debt:
Senior notes ⁽³⁾	4.625% - 5.625%	2022 - 2027	5,515			5,515
Finance leases	Various	Various	171			171
Unamortized premiums, net			99			104
Unamortized debt issuance costs			(33		)	(34	)
Total long-term debt			10,363			10,367
Less current maturities			(10		)	(11	)
Long-term debt, excluding current maturities			$	10,353		10,356



(1)	As of March 31, 2020.
(2)	See the remainder of this Note for a description of certain parent and subsidiary guarantees and liens securing this debt.
(3)	As described further below, the notes are fully and unconditionally guaranteed by certain affiliates of Level 3 Financing, Inc., including Level 3 Parent, LLC and Level 3 Communications, LLC.
(4)	The Tranche B 2027 Term Loan had an interest rate of 2.739% as of March 31, 2020 and 3.549% at December 31, 2019.

Aggregate Maturities of Long-Term Debt

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



	(Dollars in millions)
2020 (remaining nine months)	$	8
2021	8
2022	850
2023	1,211
2024	911
2025 and thereafter	7,309
Total long-term debt	$	10,297

Covenants

The 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 its ability to declare or pay dividends, repay certain other indebtedness, create liens, incur additional indebtedness, make investments, engage in transactions with its affiliates including CenturyLink and its other subsidiaries, dispose of assets and merge or consolidate with any other person. Also, in connection with a "change of control" of Level 3 Parent, LLC, or Level 3 Financing, Inc., Level 3 Financing will be required to offer to repurchase or repay certain of its long-term debt at a price of 101% of the principal amount of debt repurchased or repaid, plus accrued and unpaid interest.

Certain of CenturyLink's and our debt instruments contain cross acceleration provisions.

Compliance

At March 31, 2020, we believe we were in compliance with the financial covenants contained in our debt agreements in all material respects.

Additional Information

For additional information on our long-term debt, see Note 6—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, 2019.

Products and Services Revenue

3 Months Ended

Mar. 31, 2020

Revenue from Contract with Customer [Abstract]

Products and Services Revenue

Revenue Recognition

Reconciliation of Total Revenue to Revenue from Contracts with Customers

The following table provides the amount of revenue that is not subject to ASC 606, but is instead governed by other accounting standards:



	Three Months Ended March 31,
	2020			2019
	(Dollars in millions)
Total revenue ⁽¹⁾	$	1,980		1,950
Adjustments for non-ASC 606 revenue ⁽²⁾	(225		)	(50	)
Total revenue from contracts with customers	$	1,755		1,900

_____________________________________________________________________

⁽¹⁾ Reclassifications were made within certain 2019 comparative figures due to the retrospective application of an accounting policy election during the first quarter of 2020. Refer to Note 1 - Background and our Form 8-K filing dated May 7, 2020 for further information.

⁽²⁾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, contract assets and contract liabilities as of March 31, 2020 and December 31, 2019:



	March 31, 2020		December 31, 2019
	(Dollars in millions)
Customer receivables ⁽¹⁾	$	731	678
Contract assets	40		32
Contract liabilities	378		423


(1)	Gross customer receivables of $748 million and $691 million, net of allowance for doubtful accounts of $17 million and $13 million, at March 31, 2020 and December 31, 2019, respectively.

Contract liabilities are consideration we have received from our customers or billed in advance of providing goods or services promised in the future. We defer recognizing this consideration as revenue until we have satisfied the related performance obligation to the customer. Contract liabilities include recurring services billed one month in advance and installation and maintenance charges that are deferred and recognized over the actual or expected contract term, which ranges from one to five years depending on the service. Contract liabilities are included within deferred revenue in our consolidated balance sheets. During the three months ended March 31, 2020 and March 31, 2019, we recognized $99 million and $95 million, respectively, of revenue that was included in contract liabilities as of January 1, 2020 and January 1, 2019, respectively.

Performance Obligations

As of March 31, 2020, 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 $3.9 billion. We expect to recognize approximately 89% of this revenue through 2022, with the balance recognized thereafter.

We do not disclose the value of unsatisfied performance obligations for contracts for which we 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:



	Three Months Ended March 31,
	2020					2019
	(Dollars in millions)
	Acquisition Costs			Fulfillment Costs		Acquisition Costs		Fulfillment Costs
Beginning of period balance	$	79		121		64		84
Costs incurred	23			23		18		26
Amortization	(16		)	(22	)	(8	)	(13	)
End of period balance	$	86		122		74		97

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

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

Products and Services Revenue

We categorize our products, services and revenue among the following five categories:


•	IP and Data Services, which include primarily VPN data networks, Ethernet, IP, video (including our facilities-based video services, CDN services and Vyvx broadcast services) and other ancillary services;


•	Transport and Infrastructure, which includes private line (including business data services), wavelength, colocation and data center services, including cloud, hosting and application management solutions, professional services, network security services, dark fiber services and other ancillary services;


•	Voice and Collaboration, which includes primarily TDM voice services, VoIP and other ancillary services;


•	Other, which includes sublease rental income and information technology services and managed services, which may be purchased in conjunction with our other network services; and


•	Affiliate services, which includes telecommunication services that we also provide to our external customers.

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

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



	Three Months Ended March 31,
	2020		2019 ⁽¹⁾
	(Dollars in millions)
IP and Data Services	$	905	923
Transport and Infrastructure	648		630
Voice and Collaboration	353		340
Other	26		2
Affiliate Services	48		55
Total operating revenue	$	1,980	1,950

_____________________________________________________________________

(1)

Reclassifications were made within certain 2019 comparative figures due to the retrospective application of an accounting policy election during the first quarter of 2020, in addition to product reclassification changes. Refer to Note 1 - Background and our Form 8-K filing dated May 7, 2020 for further information.

Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value of Financial Instruments

Our financial instruments consist of cash and cash equivalents, restricted cash, accounts receivable, note receivable-affiliate, accounts payable, accounts payable-affiliate and long-term debt, excluding finance lease and other obligations. Due to their short-term nature, the carrying amounts of our cash, cash equivalents and restricted cash, accounts receivable, note receivable-affiliate, accounts payable and accounts payable-affiliate approximate their fair values.

The three input levels in the hierarchy of fair value measurements are defined by the Fair Value Measurement and Disclosure framework are generally as follows:



Input Level		Description of Input
Level 1		Observable inputs such as quoted market prices in active markets.
Level 2		Inputs other than quoted prices in active markets that are either directly or indirectly observable.
Level 3		Unobservable inputs in which little or no market data exists.

The following table presents the carrying amounts and estimated fair values of our long-term debt, excluding finance leases, as well as the input level used to determine the fair values indicated below:



		March 31, 2020			December 31, 2019
	Input Level	Carrying Amount		Fair Value	Carrying Amount	Fair Value
		(Dollars in millions)
Liabilities-Long-term debt, excluding finance leases	2	$	10,192	9,810	10,196	10,244

- Definition

The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information.

+ References + Details

Commitments, Contingencies and Other Items	3 Months Ended
Commitments, Contingencies and Other Items	Mar. 31, 2020
Commitments and Contingencies Disclosure [Abstract]
Commitments, Contingencies and Other Items	Commitments, Contingencies and Other Items We are subject to various claims, legal proceedings and other contingent liabilities, including the matters described below, which individually or in the aggregate could materially affect our financial condition, future results of operations or cash flows. As a matter of course, we are prepared to both litigate these matters to judgment as needed, as well as to evaluate and consider reasonable settlement opportunities. Irrespective of its merits, litigation may be both lengthy and disruptive to our operations and could cause significant expenditure and diversion of management attention. We review our litigation accrual liabilities on a quarterly basis, but in accordance with applicable accounting guidelines only establish accrual liabilities when losses are deemed probable and reasonably estimable and only revise previously-established accrual liabilities when warranted by changes in circumstances, in each case based on then-available information. As such, as of any given date we could have exposure to losses under proceedings as to which no liability has been accrued or as to which the accrued liability is inadequate. Amounts accrued for our litigation and non-income tax contingencies at March 31, 2020 aggregated to approximately $60 million and are included in other current liabilities and other liabilities in our consolidated balance sheet as of such date. The establishment of an accrual does not mean that actual funds have been set aside to satisfy a given contingency. Thus, the resolution of a particular contingency for the amount accrued could have no effect on our results of operations but nonetheless could have an adverse effect on our cash flows. Peruvian Tax Litigation In 2005, the Peruvian tax authorities ("SUNAT") issued tax assessments against one of our Peruvian subsidiaries asserting $26 million of additional income tax withholding and value-added taxes ("VAT"), penalties and interest for calendar years 2001 and 2002 on the basis that the Peruvian subsidiary incorrectly documented its importations. After taking into account the developments described below, as well as the accrued interest and foreign exchange effects, we believe the total amount of exposure was $6 million at March 31, 2020. We challenged the assessments via administrative and then judicial review processes. In October 2011, the highest administrative review tribunal (the "Tribunal") decided the central issue underlying the 2002 assessments in SUNAT's favor. We appealed the Tribunal's decision to the first judicial level, which decided the central issue in favor of Level 3. SUNAT and we filed cross-appeals with the court of appeal. In May 2017, the court of appeal issued a decision reversing the first judicial level. In June 2017, we filed an appeal of the decision to the Supreme Court of Justice, the final judicial level. Oral argument was held before the Supreme Court of Justice in October 2018. A decision on this case is pending. In October 2013, the Tribunal decided the central issue underlying the 2001 assessments in SUNAT’s favor. We appealed that decision to the first judicial level in Peru, which decided the central issue in favor of SUNAT. In June 2017, we filed an appeal with the court of appeal. In November 2017, the court of appeals issued a decision affirming the first judicial level and we filed an appeal of the decision to the Supreme Court of Justice. Oral argument was held before the Supreme Court of Justice in June 2019. A decision on this case is pending. Brazilian Tax Claims In December 2004, March 2009, April 2009 and July 2014, the São Paulo state tax authorities issued tax assessments against one of our Brazilian subsidiaries for the Tax on Distribution of Goods and Services (“ICMS”) with respect to revenue from leasing certain assets (in the case of the December 2004, March 2009 and July 2014 assessments) and revenue from the provision of Internet access services (in the case of the April 2009 and July 2014 assessments), by treating such activities as the provision of communications services, to which the ICMS tax applies. In September 2002, July 2009 and May 2012, the Rio de Janeiro state tax authorities issued tax assessments to the same Brazilian subsidiary on similar issues. We have filed objections to these assessments, arguing that the lease of assets and the provision of Internet access are not communication services subject to ICMS. The objections to the September 2002, December 2004 and March 2009 assessments were rejected by the respective state administrative courts, and we have appealed those decisions to the judicial courts. In October 2012 and June 2014, we received favorable rulings from the lower court on the December 2004 and March 2009 assessments regarding equipment leasing, but those rulings are subject to appeal by the state. No ruling has been obtained with respect to the September 2002 assessment. The objections to the April and July 2009 and May 2012 assessments are still pending final administrative decisions. The July 2014 assessment was confirmed during the fourth quarter of 2014 at the first administrative level, and we appealed this decision to the second administrative level. We are vigorously contesting all such assessments in both states and, in particular, view the assessment of ICMS on revenue from equipment leasing to be without merit. These assessments, if upheld, could result in a loss of $37 million up to $42 million at March 31, 2020 in excess of the accruals established for these matters. Qui Tam Action We were notified in late 2017 of a qui tam action pending against Level 3 Communications, Inc. and others in the United States District Court for the Eastern District of Virginia, captioned United States of America ex rel., Stephen Bishop v. Level 3 Communications, Inc. et al. The original qui tam complaint was filed under seal on November 26, 2013, and an amended complaint was filed under seal on June 16, 2014. The court unsealed the complaints on October 26, 2017. The amended complaint alleges that we, principally through two former employees, submitted false claims and made false statements to the government in connection with two government contracts. The relator seeks damages in this lawsuit of approximately $50 million, subject to trebling, plus statutory penalties, pre-and-post judgment interest, and attorney’s fees. The case is currently stayed. We are evaluating our defenses to the claims. At this time, we do not believe it is probable we will incur a material loss. If, contrary to our expectations, the plaintiff prevails in this matter and proves damages at or near $50 million, and is successful in having those damages trebled, the outcome could have a material adverse effect on our results of operations in the period in which a liability is recognized and on our cash flows for the period in which any damages are paid. Several people, including two former Level 3 employees, were indicted in the United States District Court for the Eastern District of Virginia on October 3, 2017, and charged with, among other things, accepting kickbacks from a subcontractor, who was also indicted, for work to be performed under a prime government contract. Of the two former employees, one entered a plea agreement, and the other is deceased. We are fully cooperating in the government’s investigations in this matter. Letters of Credit It is customary for us to use various financial instruments in the normal course of business. These instruments include letters of credit which are conditional commitments issued on our behalf in accordance with specified terms and conditions. As of both March 31, 2020 and December 31, 2019, we had outstanding letters of credit or other similar obligations of approximately $23 million, of which $17 million and $18 million, respectively, are collateralized by cash that is reflected on the consolidated balance sheets as restricted cash and securities. Other Proceedings, Disputes and Contingencies From time to time, we are involved in other proceedings incidental to our business, including patent infringement allegations, administrative hearings of state public utility commissions relating primarily to our rates or services, actions relating to employee claims, various tax issues, environmental law issues, grievance hearings before labor regulatory agencies and miscellaneous third-party tort actions. We are currently defending several patent infringement lawsuits asserted against us by non-practicing entities, many of which are seeking substantial recoveries. These cases have progressed to various stages and one or more may go to trial during 2020 if they are not otherwise resolved. Where applicable, we are seeking full or partial indemnification from our vendors and suppliers. As with all litigation, we are vigorously defending these actions and, as a matter of course, are prepared to litigate these matters to judgment, as well as to evaluate and consider all reasonable settlement opportunities. We are subject to various foreign, federal, state and local environmental protection and health and safety laws. From time to time, we are subject to judicial and administrative proceedings brought by various governmental authorities under these laws. Several such proceedings are currently pending, but none individually is reasonably expected to exceed $100,000 in fines and penalties. The outcome of these other proceedings described under this heading is not predictable. However, based on current circumstances, we do not believe that the ultimate resolution of these other proceedings, after considering available defenses and any insurance coverage or indemnification rights, will have a material adverse effect on us. The matters listed above in this Note do not reflect all of our contingencies. For additional information on our contingencies, see Note 17 - Commitments, Contingencies and Other Items to the financial statements included in Item 8 of Part II of our annual report on Form 10-K for the year ended December 31, 2019. The ultimate outcome of the above-described matters may differ materially from the outcomes anticipated, estimated, projected or implied by us in certain of our statements appearing above in this Note, and proceedings currently viewed as immaterial by us may ultimately materially impact us.

Accumulated Other Comprehensive Loss

3 Months Ended

Mar. 31, 2020

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Accumulated Other Comprehensive Loss

The table below summarizes changes in accumulated other comprehensive loss recorded on our consolidated balance sheets by component for the three months ended March 31, 2020:



	Pension Plans		Foreign Currency Translation Adjustment and Other		Total
	(Dollars in millions)
Balance at December 31, 2019	$	2	(181	)	(179	)
Other comprehensive loss, net of tax	—		(228	)	(228	)
Net other comprehensive loss	—		(228	)	(228	)
Balance at March 31, 2020	$	2	(409	)	(407	)

The table below summarizes changes in accumulated other comprehensive loss recorded on our consolidated balance sheets by component for the three months ended March 31, 2019:



	Pension Plans		Foreign Currency Translation Adjustment and Other		Total
	(Dollars in millions)
Balance at December 31, 2018	$	5	(176	)	(171	)
Other comprehensive loss before reclassifications, net of tax	—		3		3
Net other comprehensive loss	—		3		3
Balance at March 31, 2019	$	5	(173	)	(168	)

Background (Policies)	3 Months Ended
Background (Policies)	Mar. 31, 2020
Accounting Policies [Abstract]
Basis of Presentation	Basis of Presentation Our consolidated balance sheet as of December 31, 2019, which was derived from our audited consolidated financial statements, and our unaudited interim consolidated financial statements provided herein have been prepared in accordance with the instructions for Form 10-Q. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") have been condensed or omitted pursuant to rules and regulations of the Securities and Exchange Commission ("SEC"); however, in our opinion, the disclosures made are adequate to make the information presented not misleading. We believe that these consolidated financial statements include all normal recurring adjustments necessary to fairly present the results for the interim periods. The consolidated results of operations and cash flows for the first three months of the year are not necessarily indicative of the consolidated results of operations and cash flows that might be expected for the entire year. These consolidated financial statements and the accompanying notes should be read in conjunction with the audited consolidated financial statements and the notes thereto included in our annual report on Form 10-K for the year ended December 31, 2019. The accompanying consolidated financial statements include our accounts and the accounts of our subsidiaries in which we have a controlling interest. Intercompany amounts and transactions with our consolidated subsidiaries have been eliminated. Transactions with our non-consolidated affiliates (CenturyLink and its other subsidiaries, referred to herein as affiliates) have not been eliminated. 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 first quarter of 2020. We reclassified certain prior period amounts to conform to the current period presentation, including the categorization of our revenue and expenses for three months ended March 31, 2020 and 2019.
Segments	Segments Our operations are integrated into and reported as part 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 SEC. Consequently, we do not provide our discrete financial information to the CODM on a regular basis. As such, we have one reportable segment.
New Accounting Pronouncements	Recently Adopted Accounting Pronouncements During the first quarter of 2020, the SEC made significant changes to its disclosure requirements, Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities, which amended disclosure requirements related to registered debt securities which have been updated and relocated to Rule 13-01 of Regulation S-X. The final rule allows for streamlined disclosure models and permits presentation to be included within Management’s Discussion and Analysis of Financial Condition and Results of Operations. The rules become effective January 4, 2021, with voluntary compliance permitted immediately as elected by the Company. Financial Instruments In June 2016, the FASB issued ASU 2016-13, "Measurement of Credit Losses on Financial Instruments". 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 adopted ASU 2016-13 on January 1, 2020 and recognized a cumulative adjustment to our opening accumulated deficit as of the date of adoption. The impact was a $3 million reduction to member's equity in the consolidated financial statements. Recently Issued Accounting Pronouncements In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (Topic 740). ASU 2019-12 removes certain exceptions for investments, intra-period allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes. ASU 2019-12 will become effective for us in the first quarter of fiscal 2021 and early adoption is permitted. We are evaluating the impact the adoption will have on our consolidated financial statements. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The ASU is intended to help stakeholders during the global market-wide reference rate transition period. Therefore, it will be in effect for a limited time through December 31, 2022. We are evaluating the optional expedients and exceptions for applying generally accepted accounting principles to contract modifications and hedging relationships, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued and the related impact on our consolidated financial statements.

Goodwill, Customer Relationships and Other Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2020

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of acquisition-related intangible assets

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



	March 31, 2020		December 31, 2019
	(Dollars in millions)
Goodwill	$	7,355	7,415
Customer relationships, less accumulated amortization of $1,700 and $1,538	$	6,657	6,865
Other intangible assets subject to amortization:
Capitalized software, less accumulated amortization of $179 and $146	$	406	395
Trade names, less accumulated amortization of $63 and $57	68		74
Total other intangible assets, net	$	474	$	469

Schedule of estimated amortization expense of finite-lived acquisition-related intangible assets

We estimate that total amortization expense for intangible assets for the years ending December 31, 2020 through 2024 will be as follows:



	(Dollars in millions)
2020 (remaining nine months)	$	628
2021	836
2022	776
2023	747
2024	735

Schedule of Goodwill

The following table shows the rollforward of goodwill from December 31, 2019 through March 31, 2020:



	(Dollars in millions)
As of December 31, 2019	$	7,415
Effect of foreign currency exchange rate change and other	(60		)
As of March 31, 2020	$	7,355

Revenue Recognition (Tables)

3 Months Ended

Mar. 31, 2020

Revenue from Contract with Customer [Abstract]

Revenue from External Customers by Products and Services

The following table provides the amount of revenue that is not subject to ASC 606, but is instead governed by other accounting standards:



	Three Months Ended March 31,
	2020			2019
	(Dollars in millions)
Total revenue ⁽¹⁾	$	1,980		1,950
Adjustments for non-ASC 606 revenue ⁽²⁾	(225		)	(50	)
Total revenue from contracts with customers	$	1,755		1,900

_____________________________________________________________________

⁽¹⁾ Reclassifications were made within certain 2019 comparative figures due to the retrospective application of an accounting policy election during the first quarter of 2020. Refer to Note 1 - Background and our Form 8-K filing dated May 7, 2020 for further information.

⁽²⁾Includes sublease rental income and revenue from fiber capacity lease arrangements which are not within the scope of ASC 606.

Contract with Customer, Asset and Liability

The following table provides balances of customer receivables, contract assets and contract liabilities as of March 31, 2020 and December 31, 2019:



	March 31, 2020		December 31, 2019
	(Dollars in millions)
Customer receivables ⁽¹⁾	$	731	678
Contract assets	40		32
Contract liabilities	378		423

(1)

Gross customer receivables of $748 million and $691 million, net of allowance for doubtful accounts of $17 million and $13 million, at March 31, 2020 and December 31, 2019, respectively.

Capitalized Contract Cost

The following table provides changes in our contract acquisition costs and fulfillment costs:



	Three Months Ended March 31,
	2020					2019
	(Dollars in millions)
	Acquisition Costs			Fulfillment Costs		Acquisition Costs		Fulfillment Costs
Beginning of period balance	$	79		121		64		84
Costs incurred	23			23		18		26
Amortization	(16		)	(22	)	(8	)	(13	)
End of period balance	$	86		122		74		97

Credit Losses on Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2020

Credit Loss [Abstract]

Financing Receivable, Allowance for Credit Loss

The following table presents the activity of our allowance for credit losses for our accounts receivable portfolio:



(Dollars in millions)
Beginning balance at January 1, 2020⁽¹⁾	$	18
Current Period provision for expected losses	5
Write-offs charged against the allowance	(7		)
Recoveries collected	3
Foreign currency exchange rate change adjustment	(2		)
Ending Balance at March 31, 2020	$	17

______________________________________________________________________

(1)

The beginning balance includes the cumulative effect of the adoption of new credit loss standard

Long-Term Debt (Tables)

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

Schedule of long-term debt



	Interest Rates⁽¹⁾	Maturities	March 31, 2020			December 31, 2019
			(Dollars in millions)
Level 3 Financing, Inc.
Senior Secured Debt:⁽²⁾
Senior notes ⁽³⁾	3.400% - 3.875%	2027 - 2029	$	1,500		1,500
Tranche B 2027 Term Loan ⁽⁴⁾	LIBOR + 1.75%	2027	3,111			3,111
Senior Notes and other debt:
Senior notes ⁽³⁾	4.625% - 5.625%	2022 - 2027	5,515			5,515
Finance leases	Various	Various	171			171
Unamortized premiums, net			99			104
Unamortized debt issuance costs			(33		)	(34	)
Total long-term debt			10,363			10,367
Less current maturities			(10		)	(11	)
Long-term debt, excluding current maturities			$	10,353		10,356



(1)	As of March 31, 2020.
(2)	See the remainder of this Note for a description of certain parent and subsidiary guarantees and liens securing this debt.
(3)	As described further below, the notes are fully and unconditionally guaranteed by certain affiliates of Level 3 Financing, Inc., including Level 3 Parent, LLC and Level 3 Communications, LLC.
(4)	The Tranche B 2027 Term Loan had an interest rate of 2.739% as of March 31, 2020 and 3.549% at December 31, 2019.

Schedule of aggregate future contractual maturities of long-term debt and capital leases (excluding discounts)

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



	(Dollars in millions)
2020 (remaining nine months)	$	8
2021	8
2022	850
2023	1,211
2024	911
2025 and thereafter	7,309
Total long-term debt	$	10,297

- Definition

Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02.22)
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
-SubTopic 30
-Section 45
-Paragraph 1A
-URI http://asc.fasb.org/extlink&oid=114775744&loc=d3e28541-108399

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 6
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+ Details

Products and Services Revenue (Tables)

3 Months Ended

Mar. 31, 2020

Revenue from Contract with Customer [Abstract]

Disaggregation of Revenue

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



	Three Months Ended March 31,
	2020		2019 ⁽¹⁾
	(Dollars in millions)
IP and Data Services	$	905	923
Transport and Infrastructure	648		630
Voice and Collaboration	353		340
Other	26		2
Affiliate Services	48		55
Total operating revenue	$	1,980	1,950

_____________________________________________________________________

(1)

Reclassifications were made within certain 2019 comparative figures due to the retrospective application of an accounting policy election during the first quarter of 2020, in addition to product reclassification changes. Refer to Note 1 - Background and our Form 8-K filing dated May 7, 2020 for further information.

Fair Value of Financial Instruments (Tables)

3 Months Ended

Mar. 31, 2020

Fair Value Disclosures [Abstract]

Schedule of fair value of liabilities measured on a recurring basis

The following table presents the carrying amounts and estimated fair values of our long-term debt, excluding finance leases, as well as the input level used to determine the fair values indicated below:



		March 31, 2020			December 31, 2019
	Input Level	Carrying Amount		Fair Value	Carrying Amount	Fair Value
		(Dollars in millions)
Liabilities-Long-term debt, excluding finance leases	2	$	10,192	9,810	10,196	10,244

Accumulated Other Comprehensive Loss (Tables)

3 Months Ended

Mar. 31, 2020

Accumulated Other Comprehensive Income (Loss), Net of Tax [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss)

The table below summarizes changes in accumulated other comprehensive loss recorded on our consolidated balance sheets by component for the three months ended March 31, 2020:



	Pension Plans		Foreign Currency Translation Adjustment and Other		Total
	(Dollars in millions)
Balance at December 31, 2019	$	2	(181	)	(179	)
Other comprehensive loss, net of tax	—		(228	)	(228	)
Net other comprehensive loss	—		(228	)	(228	)
Balance at March 31, 2020	$	2	(409	)	(407	)

The table below summarizes changes in accumulated other comprehensive loss recorded on our consolidated balance sheets by component for the three months ended March 31, 2019:



	Pension Plans		Foreign Currency Translation Adjustment and Other		Total
	(Dollars in millions)
Balance at December 31, 2018	$	5	(176	)	(171	)
Other comprehensive loss before reclassifications, net of tax	—		3		3
Net other comprehensive loss	—		3		3
Balance at March 31, 2019	$	5	(173	)	(168	)

Background (Details)
$ in Millions

1 Months Ended

3 Months Ended

May 08, 2020

USD ($)

Mar. 31, 2020

USD ($)

segment

Mar. 31, 2019

USD ($)

Jan. 01, 2020

USD ($)

New Accounting Pronouncement, Early Adoption [Line Items]

Number of reportable segments | segment

1

Cost of services and products reduction

^[1]

$ (876)

$ (871)

Revenue reduction

^[1]

(1,980)

(1,950)

Rental income

$ 176

$ 50

Percent of operating revenue

9.00%

3.00%

Dividends declared

$ 375

Subsequent Event

New Accounting Pronouncement, Early Adoption [Line Items]

Dividends declared

$ 100

Member Units | Accounting Standards Update 2016-13

New Accounting Pronouncement, Early Adoption [Line Items]

Cumulative effect of new accounting principle in period of adoption

$ 3

Change in Accounting Principle, Universal Service Fund [Member]

New Accounting Pronouncement, Early Adoption [Line Items]

Cost of services and products reduction

96

$ 96

Revenue reduction

$ 96

[1]	Reclassifications were made within certain 2019 comparative figures due to the retrospective application of an accounting policy election during the first quarter of 2020. Refer to Note 1 - Background and our Form 8-K filing dated May 7, 2020 for further information.

Goodwill, Customer Relationships and Other Intangible Assets - Schedule of Goodwill and Other Intangible Assets (Details) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
Finite-Lived Intangible Assets [Line Items]
Goodwill	$ 7,355	$ 7,415
Customer Contracts And Relationships
Finite-Lived Intangible Assets [Line Items]
Intangible assets, net	6,657	6,865
Accumulated amortization	1,700	1,538
Patents and Developed Technology
Finite-Lived Intangible Assets [Line Items]
Intangible assets, net	406	395
Accumulated amortization	179	146
Trade Names
Finite-Lived Intangible Assets [Line Items]
Intangible assets, net	68	74
Accumulated amortization	$ 63	$ 57

Goodwill, Customer Relationships and Other Intangible Assets - Additional Information (Details) $ in Millions	3 Months Ended
	Mar. 31, 2020 USD ($) reporting_unit	Mar. 31, 2019 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Number of reporting units \| reporting_unit	1
Goodwill impairment	$ 0	$ 3,708
Acquired finite-lived intangible asset amortization expense	208	$ 193
Intangible assets, gross, including goodwill	$ 16,400

Goodwill, Customer Relationships and Other Intangible Assets - Goodwill Activity (Details) $ in Millions	3 Months Ended
	Mar. 31, 2020 USD ($)
Goodwill [Roll Forward]
As of December 31, 2019	$ 7,415
Effect of foreign currency exchange rate change and other	(60)
As of March 31, 2020	$ 7,355

Goodwill, Customer Relationships and Other Intangible Assets - Amortization Expense (Details) $ in Millions	Mar. 31, 2020 USD ($)
Estimated amortization expense of finite-lived acquisition-related intangible assets
2020 (remaining nine months)	$ 628
2021	836
2022	776
2023	747
2024	$ 735

Revenue Recognition - Revenue Not Subject to Topic 606 (Details) - USD ($)
$ in Millions

3 Months Ended

Mar. 31, 2020

Mar. 31, 2019

Revenue from Contract with Customer [Abstract]

Total revenue

^[1]

$ 1,980

$ 1,950

Adjustments for non-ASC 606 revenue

(225)

(50)

Total revenue from contracts with customers

$ 1,755

$ 1,900

[1]	Reclassifications were made within certain 2019 comparative figures due to the retrospective application of an accounting policy election during the first quarter of 2020. Refer to Note 1 - Background and our Form 8-K filing dated May 7, 2020 for further information.

Revenue Recognition - Contract Liabilities (Details) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
Revenue from Contract with Customer [Abstract]
Customer receivables	$ 731	$ 678
Contract assets	40	32
Contract liabilities	378	423
Accounts receivable, gross	748	691
Allowance for doubtful accounts receivable	$ 17	$ 13

Revenue Recognition - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Revenue recognized	$ 99	$ 95
Minimum
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Contract term	1 year
Length of customer life	12 months
Maximum
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Contract term	5 years
Length of customer life	60 months

Revenue Recognition - Remaining Performance Obligation (Details) $ in Billions	Mar. 31, 2020 USD ($)
Revenue from Contract with Customer [Abstract]
Remaining performance obligation	$ 3.9
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2020-04-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation, percentage	89.00%
Expected timing of satisfaction, period	2 years 9 months

Revenue Recognition - Capitalized Contract Cost (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Contract Acquisition Costs
Capitalized Contract Cost [Roll Forward]
Beginning of period balance	$ 79	$ 64
Costs incurred	23	18
Amortization	(16)	(8)
End of period balance	86	74
Contract Fulfillment Costs
Capitalized Contract Cost [Roll Forward]
Beginning of period balance	121	84
Costs incurred	23	26
Amortization	(22)	(13)
End of period balance	$ 122	$ 97

Credit Losses on Financial Instruments (Details) $ in Millions	3 Months Ended
	Mar. 31, 2020 USD ($)
Financing Receivable, Allowance for Credit Loss [Roll Forward]
Beginning balance at January 1, 2020	$ 18
Current Period provision for expected losses	5
Write-offs charged against the allowance	(7)
Recoveries collected	3
Foreign currency exchange rate change adjustment	(2)
Ending Balance at March 31, 2020	$ 17

Long-Term Debt - Schedule of Long Term Debt (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Long-term debt
Long-term debt, gross	$ 10,297
Unamortized premiums, net	99	$ 104
Unamortized debt issuance costs	(33)	(34)
Total long-term debt	10,363	10,367
Less current maturities	(10)	(11)
Long-term debt, excluding current maturities	10,353	10,356
Senior Notes \| Senior Notes with Varied Maturity Date
Long-term debt
Long-term debt, gross	$ 1,500	$ 1,500
Senior Notes \| Senior Notes with Varied Maturity Date \| Minimum
Long-term debt
Stated interest rate	4.625%
Senior Notes \| Senior Notes with Varied Maturity Date \| Maximum
Long-term debt
Stated interest rate	6.125%
Senior Notes \| Tranche B 2027 Term Loan
Long-term debt
Effective percentage	2.739%	3.549%
Senior Notes \| Tranche B 2027 Term Loan \| London Interbank Offered Rate (LIBOR)
Long-term debt
Basis spread on variable rate	1.75%
Senior Notes \| 4.625% - 5.625% Senior Notes
Long-term debt
Long-term debt, gross	$ 5,515	$ 5,515
Senior Notes \| 4.625% - 5.625% Senior Notes \| Minimum
Long-term debt
Stated interest rate	4.625%
Senior Notes \| 4.625% - 5.625% Senior Notes \| Maximum
Long-term debt
Stated interest rate	5.625%
Medium-term Notes \| Tranche B 2027 Term Loan
Long-term debt
Long-term debt, gross	$ 3,111	3,111
Finance leases
Long-term debt
Long-term debt, gross	$ 171	$ 171

Long-Term Debt - Debt Maturities (Details) $ in Millions	Mar. 31, 2020 USD ($)
Debt Disclosure [Abstract]
2020 (remaining nine months)	$ 8
2021	8
2022	850
2023	1,211
2024	911
2025 and thereafter	7,309
Total long-term debt	$ 10,297

Long-Term Debt - Additional Information (Details)	3 Months Ended
Long-Term Debt - Additional Information (Details)	Mar. 31, 2020
Debt Disclosure [Abstract]
Redemption price, percentage	101.00%

Products and Services Revenue - Operating Revenues for Products and Services (Details)
$ in Millions

3 Months Ended

Mar. 31, 2020

USD ($)

Commitments, Contingencies and Other Items (Details)	3 Months Ended
Commitments, Contingencies and Other Items (Details)	Mar. 31, 2020 USD ($) Employee contract	Dec. 31, 2019 USD ($)
Loss Contingencies [Line Items]
Estimated litigation liability	$ 60,000,000
Letters of credit outstanding, amount	23,000,000	$ 23,000,000
Collateralized financings	17,000,000	$ 18,000,000
Unfavorable Regulatory Action
Loss Contingencies [Line Items]
Estimate of possible loss	100,000
Peruvian Tax Litigation, Before Interest \| Pending Litigation
Loss Contingencies [Line Items]
Asserted claim	26,000,000
Estimate of possible loss	6,000,000
Brazilian Tax Claims \| Minimum
Loss Contingencies [Line Items]
Estimate of possible loss	37,000,000
Brazilian Tax Claims \| Maximum
Loss Contingencies [Line Items]
Estimate of possible loss	$ 42,000,000
United States of America ex rel., Stephen Bishop v. Level 3 Communications, Inc. et al.
Loss Contingencies [Line Items]
Number of former employees names in lawsuit \| Employee	2
Number of government contracts in question \| contract	2
Damages sought, value	$ 50,000,000
Number of former employees with plea agreements \| Employee	1

Label	Element	Value
Accounting Standards Update 2016-02 [Member] \| Member Units [Member]
Cumulative Effect of New Accounting Principle in Period of Adoption	us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption	$ (39,000,000)

Fair Value of Financial Instruments - Liabilities, Recurring (Details) - Fair Value, Measurements, Recurring - Significant Other Observable Inputs (Level 2) - USD ($) $ in Millions	Mar. 31, 2020	Dec. 31, 2019
Carrying Amount
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Liabilities-Long-term debt, excluding finance leases	$ 10,192	$ 10,196
Fair Value
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis
Liabilities-Long-term debt, excluding finance leases	$ 9,810	$ 10,244

Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance at beginning of period	$ 13,545
Other comprehensive loss, net of tax	(228)	$ 3
Net other comprehensive loss	(228)	3
Balance at end of period	13,117	14,031
Pension Plans
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance at beginning of period	2	5
Other comprehensive loss, net of tax	0	0
Net other comprehensive loss	0	0
Balance at end of period	2	5
Foreign Currency Translation Adjustment and Other
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance at beginning of period	(181)	(176)
Other comprehensive loss, net of tax	(228)	3
Net other comprehensive loss	(228)	3
Balance at end of period	(409)	(173)
AOCI Attributable to Parent
AOCI Attributable to Parent, Net of Tax [Roll Forward]
Balance at beginning of period	(179)	(171)
Balance at end of period	$ (407)	$ (168)