What changed in this filing

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

2024-02-22 compared with 2023-02-23 · 587 added, 557 removed, 1818 unchanged (39% of the section changed)

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We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed, including the relevance and reliability of evidence obtained.

Goodwill impairment of North America Business reporting unit

Goodwill impairments for the North America Business and Mass Markets reporting units

As discussed in Note 3 to the consolidated financial statements, the goodwill balance at December 31, 2023 was $2.0 billion.

The Company assesses goodwill for impairment at least annually, or more frequently, if events or circumstances indicate the carrying value of a reporting unit likely exceeds its fair value.

On the annual goodwill impairment assessment date, the Company estimated the fair value of its reporting units by considering both a discounted cash flow method and a market approach.

The annual impairment test determined the carrying value of the North America Business reporting unit exceeded its estimated fair value.

As a result, the Company recorded a non-cash impairment charge of $3.2 billion to reduce the carrying value of goodwill for the North America Business reporting unit.

We identified the assessment of the Company’s annual impairment testing related to the carrying value of goodwill of the North America Business reporting unit as a critical audit matter.

Subjective auditor judgment was required in evaluating certain assumptions used to estimate the fair value of the reporting unit.

Those assumptions included:

projected cash flows, the discount rate, and the earnings before interest, taxes, depreciation, and amortization ("EBITDA") market multiple.

The evaluation of these assumptions was challenging due to their subjective nature.

Additionally, differences in judgment used to determine these assumptions could have had a significant effect on the reporting unit’s estimated fair value.

Specialized skills and knowledge were required in the assessment of the discount rate and the EBITDA market multiple.

During the second quarter of 2023, the Company determined circumstances related to the sustained decline in the Company's share price indicated it was more likely than not that the carrying value of their reporting units exceeded their fair value.

Also, as of October 31, 2023, the Company performed their annual goodwill impairment test.

For both the second quarter and annual impairment tests, the Company estimated the fair value of its reporting units using a market approach.

The second quarter and annual impairment tests each determined the carrying value of the North America Business and Mass Markets reporting units exceeded their estimated fair value.

As a result, the Company recorded non-cash impairment charges of $7.9 billion and $2.8 billion, respectively, reducing the carrying value of goodwill for the North America Business and Mass Markets reporting units.

We identified the assessment of the Company’s impairment testing of the goodwill of the North America Business and Mass Markets reporting units as a critical audit matter.

Subjective auditor judgment was required in evaluating the earnings before interest, taxes, depreciation, and amortization (“EBITDA”) market multiple assumptions used to estimate the fair value of the reporting units.

The evaluation of these assumptions was challenging as differences in judgment used to determine these assumptions could have had a significant effect on each reporting unit’s estimated fair value.

Specialized skills and knowledge were required in the assessment of the EBITDA market multiple assumptions.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the annual impairment testing of goodwill.

This included controls related to the Company’s development of projected cash flows, and the determination of the discount rate and the EBITDA market multiple.

We performed a sensitivity analysis over the projected cash flow assumptions to assess the impact on the Company’s estimate of the fair value of the North America Business reporting unit.

We assessed the Company’s ability to accurately project cash flows by comparing the Company’s historical projected cash flows to actual results.

We also evaluated the Company’s North America Business reporting unit’s projected cash flows by comparing them to the Company’s underlying business strategies, historic trends, and publicly available industry and analyst reports.

We involved valuation professionals with specialized skills and knowledge, who assisted in:

• evaluating the discount rate by independently developing a discount rate range using publicly available market data for comparable entities

• evaluating the EBITDA market multiple by comparing to EBITDA market multiple range developed using publicly available market data for comparable entities

• performing sensitivity analyses that considered a range of discount rates and a range of EBITDA market multiples.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the goodwill impairment tests.

This included controls related to the Company’s determination of the EBITDA market multiple assumptions.

We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the EBITDA market multiple assumptions by:

• comparing to EBITDA market multiple ranges developed using publicly available market data for comparable entities

• performing sensitivity analyses that considered a range of EBITDA market multiples.

We have served as the Company’s auditor since 1977.

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Selling, general and administrative 3,198 3,078 2,895

Gain on sale of businesses ( 773 ) — —

Net loss (gain) on sale of businesses 121 ( 113 ) —

Loss on disposal groups held for sale — 40 —

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Total operating expenses 24,141 17,383 15,402

OPERATING INCOME 95 4,285 962

OPERATING (LOSS) INCOME ( 9,584 ) 95 4,285

OTHER EXPENSE

Interest expense ( 1,158 ) ( 1,332 ) ( 1,522 )

Other income (expense), net 246 ( 62 ) ( 76 )

Net gain on early retirement of debt (Note 7)

Other (expense) income, net ( 113 ) 32 ( 70 )

Total other expense, net ( 653 ) ( 1,086 ) ( 1,584 )

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NET (LOSS) INCOME $ ( 10,298 ) ( 1,548 ) 2,033

BASIC AND DILUTED EARNINGS (LOSS) PER COMMON SHARE

BASIC AND DILUTED (LOSS) EARNINGS PER COMMON SHARE

BASIC $ ( 10.48 ) ( 1.54 ) 1.92

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NET (LOSS) INCOME $ ( 10,298 ) ( 1,548 ) 2,033

OTHER COMPREHENSIVE INCOME (LOSS):

OTHER COMPREHENSIVE INCOME:

Items related to employee benefit plans:

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( 59 ) 631 424

Reclassification of net actuarial loss to gain on the sale of business, net of $( 142 ), $ — and $ — tax

Settlement charges recognized in net income (loss), net of $ — , $( 93 ) and $ — tax

Reclassification of net actuarial loss to (loss) gain on the sale of businesses, net of $ — , $( 142 ) and $ — tax

Settlement charges recognized in net (loss) income, net of $ — , $ — and $( 93 ) tax

Change in net prior service cost, net of $ 4 , $( 9 ) and $( 5 ) tax

Reclassification of prior service credit to gain on the sale of business, net of $ 6 , $ — and $ — tax

Curtailment loss, net of $ — , $ — and $( 1 ) tax

Reclassification of prior service credit to (loss) gain on the sale of businesses, net of $ — , $ 6 and $ — tax

Reclassification of realized loss on interest rate swaps to net (loss) income, net of $ — , $( 5 ) and $( 20 ) tax

Unrealized holding loss on interest rate swaps, net of $ — , $ — and $ — tax

— ( 1 ) ( 86 )

Reclassification of realized loss on foreign currency translation to gain on the sale of business, net of $ — , $ — and $ — tax

Reclassification of realized loss on foreign currency translation to (loss) gain on the sale of businesses, net of $ — , $ — and $ — tax

Foreign currency translation adjustment, net of $( 3 ), $ 58 and $ 30 tax

( 1 ) ( 134 ) ( 135 )

Other comprehensive income (loss) 1,059 655 ( 133 )

Other comprehensive income 289 1,059 655

COMPREHENSIVE (LOSS) INCOME $ ( 10,009 ) ( 489 ) 2,688

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Benefit plan obligations, net 2,490 2,391

Deferred revenue 1,969 1,758

Other 2,650 2,611

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Depreciation and amortization 2,985 3,239 4,019

Gain on sale of businesses ( 773 ) — —

Net loss (gain) on sale of businesses 121 ( 113 ) —

Loss on disposal groups held for sale — 40 —

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Provision for uncollectible accounts 100 133 105

Net (gain) loss on early retirement and modification of debt ( 214 ) ( 8 ) 105

Net gain on early retirement and modification of debt ( 618 ) ( 214 ) ( 8 )

Unrealized loss (gain) on investments 97 191 ( 138 )

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Other, net ( 12 ) 3 53

Net cash provided by (used in) investing activities 5,476 ( 2,712 ) ( 3,564 )

Net cash (used in) provided by investing activities ( 1,201 ) 5,476 ( 2,712 )

FINANCING ACTIVITIES

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Payments of long-term debt ( 185 ) ( 8,093 ) ( 3,598 )

Net (payments of) proceeds from revolving line of credit ( 200 ) 50 ( 100 )

Net proceeds from (payments on) revolving line of credit 200 ( 200 ) 50

Dividends paid ( 11 ) ( 780 ) ( 1,087 )

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Supplemental cash flow information:

Income taxes (paid) refunded, net $ ( 76 ) ( 112 ) 28

Income taxes paid, net $ ( 1,303 ) ( 76 ) ( 112 )

Interest paid (net of capitalized interest of $ 111 , $ 66 and $ 53 )

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Purchase of software subscription in exchange for installment debt $ — — 77

Cancellation of senior unsecured notes as part of exchange offers (Note 7)

$ ( 1,554 ) — —

Issuance of senior secured notes as part of exchange offers (Note 7)

Cash, cash equivalents and restricted cash:

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Balance at beginning of period ( 1,099 ) ( 2,158 ) ( 2,813 )

Other comprehensive income (loss) 1,059 655 ( 133 )

Other comprehensive income 289 1,059 655

Balance at end of period ( 810 ) ( 1,099 ) ( 2,158 )

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Net (loss) income ( 10,298 ) ( 1,548 ) 2,033

Cumulative effect of adoption of ASU 2016-13 , Measurement of Credit Losses, net of $( 2 ) tax

Balance at end of period ( 17,907 ) ( 7,609 ) ( 6,061 )

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(1) Background and Summary of Significant Accounting Policies

We are an international facilities-based technology and communications company engaged primarily in providing a broad array of integrated products and services to our business and mass markets customers.

We are a facilities-based technology and communications company that provides a broad array of integrated products and services to our domestic and global business customers and our domestic mass markets customers.

We operate one of the world’s most interconnected networks.

Our platform empowers our customers to swiftly adjust digital programs to meet immediate demands, create efficiencies, accelerate market access and reduce costs, which allows our customers to rapidly evolve their IT programs to address dynamic changes.

Our specific products and services are detailed in Note 4—Revenue Recognition.

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To simplify the overall presentation of our consolidated financial statements, we report immaterial amounts attributable to noncontrolling interests in certain of our subsidiaries as follows:

(i) income attributable to noncontrolling interests in other income (expense), net, (ii) equity attributable to noncontrolling interests in additional paid-in capital and (iii) cash flows attributable to noncontrolling interests in other, net financing activities.

We reclassified certain prior period amounts to conform to the current period presentation, including the recategorization of our Mass Markets revenue by product category in our segment reporting for 2022, 2021 and 2020.

(i) income attributable to noncontrolling interests in other (expense) income, net, (ii) equity attributable to noncontrolling interests in additional paid-in capital and (iii) cash flows attributable to noncontrolling interests in other, net financing activities.

We reclassified certain prior period amounts to conform to the current period presentation, including the recategorization of our Business revenue by product category and sales channel in our segment reporting for 2022 and 2021.

See Note 17—Segment Information for additional information.

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See Note 16—Income Taxes and Note 18—Commitments, Contingencies and Other Items for additional information.

For matters not related to income taxes, if a loss contingency is considered probable and the amount can be reasonably estimated, we recognize an expense for the estimated loss.

For matters not related to income taxes, if a loss is considered probable and the amount can be reasonably estimated, we recognize an expense for the estimated loss.

If we have the potential to recover a portion of the estimated loss from a third party, we make a separate assessment of recoverability and reduce the estimated loss if recovery is also deemed probable.

For matters related to income taxes, if we determine that the impact of an uncertain tax position is more likely than not to be sustained upon audit by the relevant taxing authority, then we recognize a benefit for the largest amount that is more likely than not to be sustained.

No portion of an uncertain tax position will be recognized if the position has less than a 50% likelihood of being sustained.

Interest is recognized on the amount of unrecognized benefit from uncertain tax positions.

For matters related to income taxes, if we determine the impact of an uncertain tax position is more likely than not to be sustained upon audit by the relevant taxing authority, then we recognize a benefit for the largest amount that is more likely than not to be sustained.

We do not recognize any portion of an uncertain tax position if the position has less than a 50% likelihood of being sustained.

We recognize interest on the amount of unrecognized benefit from uncertain tax positions.

For all of these and other matters, actual results could differ materially from our estimates.

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For each period that assets are classified as being held for sale, they are tested for recoverability.

Unless otherwise specified, the amounts and information presented in the notes do not include assets and liabilities that have been classified as held for sale as of December 31, 2022.

See Note 2—Divestitures of the Latin American and ILEC Businesses and Planned Divestiture of the EMEA Business for additional information.

Unless otherwise specified, the amounts and information presented in the notes do not include assets and liabilities that were classified as held for sale as of December 31, 2023 and December 31, 2022.

See Note 2—Divestitures of the Latin American, ILEC and EMEA Businesses for additional information.

Revenue Recognition

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In certain cases, customers may be permitted to modify their contracts.

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.

We evaluate the change in scope or price to identify whether the modification should be treated as a separate contract, as a termination of the existing contract and creation of a new contract, or as a change to the existing contract.

Customer contracts are evaluated to determine whether the performance obligations are separable.

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Advertising Costs

Costs related to advertising are expensed as incurred and included in selling, general and administrative expenses in our consolidated statements of operations.

Costs related to advertising are expensed as incurred and recorded as selling, general and administrative expenses in our consolidated statements of operations.

Our advertising expense was $ 87 million, $ 62 million and $ 56 million for the years ended December 31, 2023, 2022 and 2021, respectively.

In the normal course of our business, we incur costs to hire and retain external legal counsel to advise us on regulatory, litigation and other matters.

In the normal course of our business, we incur costs to hire and retain external legal counsel to advise us on finance, regulatory, litigation and other matters.

Subject to certain exceptions, we expense these costs as the related services are received.

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The provision for income taxes reflects taxes currently payable, tax consequences deferred to future periods and adjustments to our liabilities for uncertain tax positions.

We record deferred income tax assets and liabilities reflecting future tax consequences attributable to tax net operating loss carryforwards ("NOLs"), tax credit carryforwards and differences between the financial statement carrying value of assets and liabilities and the tax basis of those assets and liabilities.

We record deferred income tax assets and liabilities reflecting future tax consequences attributable to tax NOLs, tax credit carryforwards and differences between the financial statement carrying value of assets and liabilities and the tax basis of those assets and liabilities.

Deferred taxes are computed using enacted tax rates expected to apply in the year in which the differences are expected to affect taxable income.

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Under the straight-line group method, assets dedicated to providing telecommunications services (which comprise the majority of our property, plant and equipment) that have similar physical characteristics, use and expected useful lives are pooled for purposes of depreciation and tracking.

The equal life group procedure is used to establish each pool's average remaining useful life.

We use the equal life group procedure to establish each pool's average remaining useful life.

Generally, under the straight-line group method, when an asset is sold or retired in the course of normal business activities, the cost is deducted from property, plant and equipment and charged to accumulated depreciation without recognition of a gain or loss.

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The fair value of the obligation is also capitalized as property, plant and equipment and then amortized over the estimated remaining useful life of the associated asset.

Where the removal obligation is not legally binding, the net cost to remove assets is expensed in the period in which the costs are actually incurred.

Where the removal obligation is not legally binding, we expense the net cost to remove assets in the period in which the costs are actually incurred.

We review long-lived tangible assets for impairment whenever facts and circumstances indicate that the carrying amounts of the assets may not be recoverable.

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Goodwill, Customer Relationships and Other Intangible Assets

Intangible assets arising from business combinations, such as goodwill, customer relationships, capitalized software, trademarks and trade names, are initially recorded at estimated fair value.

We initially record intangible assets arising from business combinations, such as goodwill, customer relationships, capitalized software, trademarks and trade names, at estimated fair value.

We amortize customer relationships primarily over an estimated life of 7 to 14 years, using the straight-line method, depending on the type of customer.

Certain customer relationship intangible assets became fully amortized at the end of the first quarter 2021 using the sum-of-years-digits method, which is no longer used for any of our remaining intangible assets.

Certain customer relationship intangible assets became fully amortized at the end of the first quarter 2021 using the sum-of-years-digits method, which we no longer use for any of our remaining intangible assets.

We amortize capitalized software using the straight-line method primarily over estimated lives ranging up to 7 years.

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Other intangible assets not arising from business combinations are initially recorded at cost.

Where there are no legal, regulatory, contractual or other factors that would reasonably limit the useful life of an intangible asset, we classify the intangible asset as indefinite-lived and such intangible assets are not amortized.

Where there are no legal, regulatory, contractual or other factors that would reasonably limit the useful life of an intangible asset, we classify them as indefinite-lived intangible assets and such intangible assets are not amortized.

Internally used software, whether purchased or developed by us, is capitalized and amortized using the straight-line method over its estimated useful life.

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Our reporting units are not discrete legal entities with discrete full financial statements.

Therefore, the equity carrying value and future cash flows are assessed each time a goodwill impairment assessment is performed on a reporting unit.

Therefore, we assess the equity carrying value and future cash flows each time we perform a goodwill impairment assessment on a reporting unit.

To do so, we assign our assets, liabilities and cash flows to reporting units using allocation methodologies which we believe are reasonable and consistent.

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When we become a party to a derivative instrument and intend to apply hedge accounting, we formally document the hedge relationship and the risk management objective for undertaking the hedge, which includes designating the instrument for financial reporting purposes as a fair value hedge, a cash flow hedge, or a net investment hedge.

As of December 31, 2022, we held no swap agreements since all of our variable-to-fixed interest rate swap agreements in place at the beginning of the year expired during the first half of 2022.

As of December 31, 2023, we were not party to any swap agreements.

All of our variable-to-fixed interest rate swap agreements in place at the beginning of 2022 expired during the first half of 2022.

While we held these agreements, we evaluated the effectiveness as described in Note 15—Derivative Financial Instruments (designated as cash-flow hedges) qualitatively on a quarterly basis.

The change in the fair value of the interest rate swaps was reflected in accumulated other comprehensive loss and subsequently reclassified into earnings in the period the hedged transaction affects earnings, by virtue of qualifying as effective cash flow hedges.

We reflected the change in the fair value of the interest rate swaps in accumulated other comprehensive loss and subsequently reclassified into earnings in the period the hedged transaction affects earnings, by virtue of qualifying as effective cash flow hedges.

For more information see Note 15—Derivative Financial Instruments.

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We recognize the funded status of our defined benefit and post-retirement plans as an asset or a liability on our consolidated balance sheets.

Each year's actuarial gains or losses are a component of our other comprehensive income (loss), which is then included in our accumulated other comprehensive loss.

Each year's actuarial gains or losses are a component of our other comprehensive income (loss), which is then included in our accumulated other comprehensive loss on our consolidated balance sheets.

Pension and post-retirement benefit expenses are recognized over the period in which the employee renders service and becomes eligible to receive benefits.

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dollars at period-end exchange rates, and revenue, expenses and cash flows are translated using average monthly exchange rates.

A significant portion of our non-United States subsidiaries use either the British pound or the Euro, or used, prior to the August 1, 2022 sale of our Latin American business, the Brazilian Real, as their functional currency, each of which experienced significant fluctuations against the U.S.

Prior to the November 1, 2023 sale of our EMEA business and the August 1, 2022 sale of our Latin American business, a significant portion of our non-United States subsidiaries used the British pound, the Euro, or the Brazilian Real, as their functional currency, each of which experienced significant fluctuations against the U.S.

dollar during the years ended December 31, 2023, 2022 and 2021.

We recognize foreign currency translation gains and losses as a component of accumulated other comprehensive loss in stockholders' equity and in our consolidated statements of comprehensive (loss) income in accordance with accounting guidance for foreign currency translation.

Prior to the announcement of our divestitures as discussed in Note 2—Divestitures of the Latin American and ILEC Businesses and Planned Divestiture of the EMEA Business, we considered the majority of our investments in our foreign subsidiaries to be long-term in nature.

Our foreign currency transaction gains (losses), including where transactions with our non-United States subsidiaries are not considered to be long-term in nature, are included within other income (expense), net on our consolidated statements of operations.

See the description of our Assets Held for Sale policy above for more information on assets in foreign subsidiaries to be divested.

We recognize foreign currency translation gains and losses as a component of accumulated other comprehensive loss in stockholders' equity in our consolidated balance sheet and in our consolidated statements of comprehensive (loss) income in accordance with accounting guidance for foreign currency translation.

Prior to the announcement of our divestitures as discussed in Note 2—Divestitures of the Latin American, ILEC and EMEA Businesses, we considered the majority of our investments in our foreign subsidiaries to be long-term in nature.

Our foreign currency transaction gains (losses), including where transactions with our non-United States subsidiaries are not considered to be long-term in nature, are included within other (expense) income, net on our consolidated statements of operations.

As of December 31, 2023, we had 11 million shares authorized for future issuance under our equity incentive plans.

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On November 2, 2022, we announced that our Board had terminated our quarterly cash dividend program.

Under this revised capital allocation policy, the company plans to continue to invest in growth initiatives.

Correction of Immaterial Errors

During 2023, we identified errors in our previously reported consolidated financial statements related to accounts receivable and accounts payable.

The errors are the result of understated revenues from one of our legacy mainframe billing systems and understated network expenses for periods prior to 2021.

We have completed a quantitative and qualitative evaluation of the errors individually and in aggregate, and concluded the errors are immaterial to our previously issued consolidated financial statements.

Notwithstanding this evaluation, we have revised certain line items on our December 31, 2022 consolidated balance sheet for these errors.

The net effect of these adjustments was an increase in accounts receivable and total assets of $ 31 million and an increase of accounts payable and total liabilities of $ 94 million on our December 31, 2022 consolidated balance sheet.

In addition, we recorded an adjustment to increase our January 1, 2021 accumulated deficit by $ 63 million, which represents the cumulative correction of the immaterial errors prior to January 1, 2021.

The errors did not have an impact on our previously issued consolidated statements of operations, comprehensive (loss) income, or cash flows for the years ended December 31, 2022 or 2021, and did not, and are not expected to, have an impact on the economics of the Company's existing or future commercial arrangements.

Recently Adopted Accounting Pronouncements

During 2022, we adopted Accounting Standards Update ("ASU") 2021-10, " Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance ” (“ASU 2021-10”) and ASU 2021-05, “ Leases (Topic 842):

Lessors—Certain Leases with Variable Lease Payments ” (“ASU 2021-05”).

During 2021, we adopted ASU 2020-09, " Debt (Topic 470) Amendments to SEC Paragraphs Pursuant to SEC Release No.

33-10762 " ("ASU 2020-09"), ASU 2020-01, " Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815) " ("ASU 2020-01"), and ASU 2019-12, " Simplifying the Accounting for Income Taxes (Topic 740) " ("ASU 2019-12").

During 2020, we adopted ASU 2016-13, "Measurement of Credit Losses on Financial Instruments" ("ASU 2016-13").

Each of these is described further below.

Supplier Finance Programs

On January 1, 2023, we adopted Accounting Standards Update ("ASU") 2022-04, “Liabilities-Supplier Finance Program (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations” (“ASU 2022-04”).These amendments require that a company that uses a supplier finance program in connection with the purchase of goods or services disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, program activity during the period, changes from period to period and the potential magnitude of program transactions.

The adoption of ASU 2022-04 did not have a material impact to our consolidated financial statements.

Credit Losses

On January 1, 2023, we adopted ASU 2022-02, “Financial Instruments-Credit Losses (Topic 326):

Troubled Debt Restructurings (“TDR”) and Vintage Disclosures” (“ASU 2022-02”).

The ASU eliminates the TDR recognition and measurement guidance, enhances existing disclosure requirements and introduces new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty.

The adoption of ASU 2022-02 did not have a material impact to our consolidated financial statements.

Government Assistance

On January 1, 2022, we adopted ASU 2021-10.

On January 1, 2022, we adopted ASU 2021-10 "Government Assistance (Topic 832):

Disclosures by Business Entities about Government Assistance” (“ASU 2021-10”) ASU 2021-10.

This ASU requires business entities to disclose information about certain types of government assistance they receive.

Please refer to Note 4—Revenue Recognition for more information.

On January 1, 2022, we adopted ASU 2021-05.

On January 1, 2022, we adopted ASU 2021-05, “Leases (Topic 842):

Lessors—Certain Leases with Variable Lease Payments” (“ASU 2021-05”).

This ASU (i) amends the lease classification requirements for lessors to align them with practice under ASC Topic 840, (ii) provides criteria for lessors to classify and account for a lease with variable lease payments that do not depend on a reference index or a rate as an operating lease;

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The adoption of ASU 2021-05 did not have a material impact to our consolidated financial statements.

On January 1, 2021, we adopted ASU 2020-09.

On January 1, 2021, we adopted ASU 2020-09, "Debt (Topic 470) Amendments to SEC Paragraphs Pursuant to SEC Release No.

33-10762" ("ASU 2020-09") .

This ASU amends and supersedes various SEC guidance to reflect SEC Release No.

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The adoption of ASU 2020-09 did not have a material impact to our consolidated financial statements.

On January 1, 2021, we adopted ASU 2020-01.

On January 1, 2021, we adopted ASU 2020-01, "Investments - Equity Securities (Topic 321), Investments - Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815) - Clarifying the Interactions between Topic 321, Topic 323, and Topic 815)" ("ASU 2020-01") .

This ASU, among other things, clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323, Investments - Equity Method and Joint Ventures, for the purposes of applying the measurement alternative in accordance with Topic 321 immediately before applying or upon discontinuing the equity method.

As of December 31, 2023, we determined there was no application or discontinuation of the equity method during the reporting periods covered in this report.

The adoption of ASU 2020-01 did not have a material impact to our consolidated financial statements.

On January 1, 2021, we adopted ASU 2019-12.

The adoption of ASU 2020-01 did not have an impact to our consolidated financial statements.

On January 1, 2021, we adopted ASU 2019-12, "Simplifying the Accounting for Income Taxes (Topic 740)" ("ASU 2019-12") .

This ASU removes certain exceptions for investments, intra-period allocations and interim calculations, and adds guidance to reduce complexity in accounting for income taxes.

The adoption of ASU 2019-12 did not have a material impact to our consolidated financial statements.

Measurement of Credit Losses on Financial Instruments

We adopted ASU 2016-13 on January 1, 2020 and recognized a cumulative adjustment to our accumulated deficit as of the date of adoption of $ 9 million, net of tax effect of $ 2 million.

Please refer to Note 6—Credit Losses on Financial Instruments for more information.

Recently Issued Accounting Pronouncements

In December 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-09, “Income Taxes (Topic 740):

Improvements to Income Tax Disclosures” (“ASU 2023-09”).

This ASU requires that public business entities must annually “(1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold (if the effect of those reconciling items is equal to or greater than 5 percent of the amount computed by multiplying pretax income or loss by the applicable statutory income tax rate).” ASU 2023-09 will become effective for us in the annual period of fiscal 2025 and early adoption is permitted.

We have chosen not to early adopt this ASU.

In December 2023, the FASB issued ASU 2023-08, “Intangibles—Goodwill and Other—Crypto Assets (Subtopic 350-60):

Accounting for and Disclosure of Crypto Assets” (“ASU 2023-08”).

This ASU is intended to improve the accounting for certain crypto assets by requiring an entity to measure those crypto assets at fair value each reporting period with changes in fair value recognized in net income.

The amendments also improve the information provided to investors about an entity’s crypto asset holdings by requiring disclosure about significant holdings, contractual sale restrictions, and changes during the reporting period.

This ASU will become effective for us in the first quarter of fiscal 2025 and early adoption is permitted.

As of December 31, 2023, we do not hold crypto assets and do not expect ASU 2023-08 will have any impact to our consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, “Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures” (“ASU 2023-07”).

This ASU is intended to improve reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses.

This ASU will become effective for us in annual period fiscal 2024 and early adoption is permitted.

As of December 31, 2023, we are evaluating its impact on our consolidated financial statements.

In October 2023, the FASB issued ASU 2023-06, “Disclosure Improvements:

Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative” (“ASU 2023-06”).

This ASU incorporates certain SEC disclosure requirements into the FASB Accounting Standards Codification (“Codification”).

The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification Topics, allow users to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC’s regulations.

ASU 2023-06 will become effective for each amendment on the effective date of the SEC's corresponding disclosure rule changes.

As of December 31, 2023, we do not expect ASU 2023-06 will have any impact to our consolidated financial statements.

In August 2023, the FASB issued ASU 2023-05, “Business Combinations – Joint Venture Formations (Subtopic 805-60):

Recognition and initial Measurement” (“ASU 2023-05”).

This ASU applies to the formation of entities that meet the definition of a joint venture (or a corporate joint venture).

The amendments in the ASU require that a joint venture apply a new basis of accounting upon formation.

ASU 2023-05 will become effective for us in the first quarter of fiscal 2025 and early adoption is permitted.

As of December 31, 2023, we do not expect ASU 2023-05 will have any impact to our consolidated financial statements.

In August 2023, the FASB issued ASU 2023-04, “Liabilities (Topic 405):

Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

121” (“ASU 2023-04”).

This ASU amends and adds various SEC paragraphs to the FASB Codification to reflect guidance regarding the accounting for obligations to safeguard crypto assets an entity holds for platform users.

This ASU does not provide any new guidance.

ASU 2023-04 became effective for us once the addition to the FASB Codification was made available.

As of December 31, 2023, we do not expect ASU 2023-04 will have any impact to our consolidated financial statements.

In July 2023, the FASB issued ASU 2023-03, “Presentation of Financial Statements (Topic 205), Income Statement—Reporting Comprehensive Income (Topic 220), Distinguishing Liabilities from Equity (Topic 480), Equity (Topic 505), and Compensation—Stock Compensation (Topic 718):

Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

120, SEC Staff Announcement at the March 24, 2022 EITF Meeting, and Staff Accounting Bulletin Topic 6.B, Accounting Series Release 280—General Revision of Regulation S-X:

Income or Loss Applicable to Common Stock” (“ASU 2023-03”).

This ASU amends or supersedes various SEC paragraphs within the applicable codification to conform to past SEC staff announcements.

This ASU does not provide any new guidance.

ASU 2023-03 became effective for us once the addition to the FASB Codification was made available.

As of December 31, 2023, we do not expect ASU 2023-03 will have any impact to our consolidated financial statements.

In March 2023, the FASB issued ASU 2023-02, “Investments-Equity Method and Joint Ventures (Topic 323):

Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method” (“ASU 2023-02”).

These amendments allow reporting entities to elect to account for qualifying tax equity investments using the proportional amortization method, regardless of the program giving rise to the related income tax credits.

ASU 2023-02 will become effective for us in the first quarter of fiscal 2024 and early adoption is permitted.

As of December 31, 2023, we do not expect ASU 2023-02 will have any impact to our consolidated financial statements.

In March 2023, the FASB issued ASU 2023-01, “Leases (Topic 842):

Common Control Arrangements” (“ASU 2023-01”).

These amendments require all entities to amortize leasehold improvements associated with common control leases over the useful life to the common control group.

ASU 2023-01 will become effective for us in the first quarter of fiscal 2024 and early adoption is permitted.

As of December 31, 2023, we do not expect ASU 2023-01 will have any impact to our consolidated financial statements.

In December 2022, the Financial Accounting Standards Board (“FASB”) issued ASU 2022-06, “Reference Rate Reform (Topic 848) – Deferral of the Sunset Date of Topic 848" ("ASU 2022-06").

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Based on our review of our key material contracts through December 31, 2023, ASU 2022-06 does not have a material impact to our consolidated financial statements.

In September 2022, the FASB issued ASU 2022-04, “Liabilities-Supplier Finance Program (Subtopic 405-50):

Disclosure of Supplier Finance Program Obligations ” (“ASU 2022-04”).

These amendments require that a company that uses a supplier finance program in connection with the purchase of goods or services disclose sufficient information about the program to allow a user of financial statements to understand the program’s nature, program activity during the period, changes from period to period and potential magnitude of program transactions.

ASU 2022-04 will become effective for us in the first quarter of fiscal 2023.

As of December 31, 2022, we are reviewing our supplier finance agreements to determine the impact to disclosures in our consolidated financial statements.

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820):

Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions” (“ASU 2022-03”).

These amendments clarify that a contractual restriction on the sales of an investment in equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring fair value.

ASU 2022-03 will become effective for us in the first quarter of fiscal 2023 and early adoption is permitted.

As of December 31, 2022, we do not expect ASU 2022-03 to have an impact to our consolidated financial statements.

In March 2022, the FASB issued ASU 2022-02, “ Financial Instruments-Credit Losses (Topic 326):

Troubled Debt Restructurings (“TDR”) and Vintage Disclosures ” (“ASU 2022-02”).

These amendments eliminate the TDR recognition and measurement guidance, enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty.

ASU 2022-02 will become effective for us in the first quarter of fiscal 2023 and early adoption is permitted.

As of December 31, 2022, we do not expect ASU 2022-02 to have an impact to our consolidated financial statements.

In March 2022, the FASB issued ASU 2022-01, “ Derivatives and Hedging (Topic 815):

Fair Value Hedging-Portfolio Layer Method ” ("ASU 2022-01").

The ASU expands the current single-layer method to allow multiple hedged layers of a single closed portfolio under the method.

ASU 2022-01 will become effective for us in the first quarter of fiscal 2023 and early adoption is permitted.

As of December 31, 2022, we do not expect ASU 2022-01 to have an impact to our consolidated financial statements.

In October 2021, the FASB issued ASU 2021-08, “ Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ” (“ASU 2021-08”), which requires entities to apply Topic 606 to recognize and measure contract assets and contract liabilities in a business combination.

These amendments clarify that a contractual restriction on the sales of an investment in an equity security is not considered part of the unit of account of the equity security and, therefore, is not considered in measuring its fair value.

ASU 2022-03 will become effective for us in the first quarter of fiscal 2024 and early adoption is permitted.

As of December 31, 2022, we do not expect ASU 2021-08 to have an impact to our consolidated financial statements.

As of December 31, 2023, we do not expect ASU 2022-03 will have any impact to our consolidated financial statements.

In January 2021, the FASB issued ASU 2021-01, "Reference Rate Reform (Topic 848):

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Based on our review of our key material contracts through December 31, 2023, ASU 2021-01 will not have a material impact to 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 " ("ASU 2020-04" or "Reference Rate Reform"), designed to ease the burden of accounting for contract modifications related to the global market-wide reference rate transition period.

Subject to certain criteria, ASU 2020-04 provides qualifying entities the option to apply expedients and exceptions to contract modifications and hedging accounting relationships made until December 31, 2022.

These amendments are effective immediately and may be applied prospectively to contract modifications made and hedging relationships entered into or evaluated on or before December 31, 2022.

ASU 2020-04 provides optional guidance for a limited time to ease the potential burden in accounting for reference rate reform.

Based on our review of our key material contracts through December 31, 2022, we do not expect ASU 2020-04 to have a material impact on the consolidated financial statements.

(2) Divestitures of the Latin American and ILEC Businesses and Planned Divestiture of the EMEA Business

(2) Divestitures of the Latin American, ILEC and EMEA Businesses

Latin American Business

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On October 3, 2022, we and certain of our affiliates sold the portion of our incumbent local exchange ("ILEC") business primarily conducted within 20 Midwestern and Southeastern states to affiliates of funds advised by Apollo Global Management, Inc.

In exchange, we received $ 7.5 billion of consideration, which was reduced by approximately $ 0.4 billion of closing adjustments and partially paid through purchaser's assumption of approximately $ 1.5 billion of our long-term consolidated indebtedness, resulting in pre-tax cash proceeds of approximately $ 5.6 billion, subject to certain post-closing adjustments and indemnities.

For the year ended December 31, 2022, we recorded a $ 176 million net pre-tax gain on disposal associated with the sale of our ILEC business.

This gain is reflected as operating income within the consolidated statements of operations.

In connection with the sale, we have entered into a transition services agreement under which we provide the purchaser various support services.

In connection with the sale, we entered into a transition services agreement under which we provide the purchaser various support services.

In addition, Lumen and the purchaser entered into commercial agreements whereby they provide each other various network and other commercial services.

Under these agreements, we have committed to ordering services of approximately $ 373 million from the purchaser over a period of three years and the purchaser has committed to ordering services of approximately $ 67 million from us over a period of three years .

We also agreed to indemnify the purchaser for certain matters for which future cash payments by Lumen are expected.

Lumen has estimated the fair value of these indemnifications to be $ 89 million, which is included in other current liabilities in our consolidated balance sheet and has increased our income tax expense accordingly.

Under these agreements, we committed to ordering services of approximately $ 373 million from the purchaser over a period of three years and the purchaser has committed to ordering services of approximately $ 67 million from us over a period of three years .

We indemnified the purchaser for certain matters for which, at the time of closing, future cash payments by Lumen were expected.

Lumen had estimated the fair value of these indemnifications to be $ 89 million, which was included in other current liabilities in our consolidated balance sheet as of December 31, 2022 and increased our income tax expense accordingly as of December 31, 2022.

As of the first quarter of 2023, the full $ 89 million payments had been made.

The ILEC business was included in our continuing operations and classified as assets and liabilities held for sale on our consolidated balance sheets through the closing of the transaction on October 3, 2022.

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EMEA Business

On November 2, 2022, affiliates of Level 3 Parent, LLC, an indirect wholly-owned subsidiary of Lumen Technologies, Inc., granted an option to Colt Technology Services Group Limited, a portfolio company of Fidelity Investments, to purchase certain of their operations in Europe, the Middle East and Africa (the "EMEA business"), in exchange for $ 1.8 billion in cash, subject to certain working capital and other purchase price adjustments.

Following the completion of a French consultative process, Colt exercised its option and on February 8, 2023, the parties entered into a definitive purchase agreement, which contains various customary covenants for transactions of this type including various indemnities.

Level 3 Parent, LLC expects to close the transaction as early as late 2023, following receipt of all requisite regulatory approvals in the U.S.

and certain countries where the EMEA business operates, as well as the satisfaction of other customary conditions.

The actual amount of our net after-tax proceeds from this divestiture could vary substantially from the amounts we currently estimate, particularly if we experience delays in completing the transaction or if any of our other assumptions prove to be incorrect.

We do not believe these divestiture transactions represent a strategic shift for Lumen.

Therefore, neither of the divested businesses discussed above, nor the planned divestiture of the EMEA business meet the criteria to be classified as discontinued operations.

As a result, we continued to report our operating results for the Latin American and ILEC businesses in our consolidated operating results through their respective disposal dates of August 1, 2022 and October 3, 2022, and we will continue to report our operating results for the EMEA business (the "disposal group") in our consolidated operating results until the transaction is closed.

As of December 31, 2022 in the accompanying consolidated balance sheet, the assets and liabilities of our EMEA business are classified as held for sale and measured at the lower of (i) the carrying value when we classified the disposal group as held for sale and (ii) the fair value of the disposal group, less costs to sell.

Effective with the designation of the disposal group as held for sale on November 2, 2022, we suspended recording depreciation of property, plant and equipment and amortization of finite-lived intangible assets and right-of-use assets while these assets are classified as held for sale.

We estimate that we would have recorded an additional $ 51 million of depreciation, intangible amortization, and amortization of right-of-use assets for the year ended December 31, 2022 if the EMEA business did not meet the held for sale criteria.

The classification of the EMEA business as held for sale was considered an event or change in circumstance which required an assessment of our goodwill for impairment.

We performed a pre-classification and post-classification goodwill impairment test as described further in Note 3—Goodwill, Customer Relationships and Other Intangible Assets.

As a result of our impairment tests, we determined the EMEA business disposal group was impaired resulting in a non-cash, non-tax-deductible goodwill impairment charge of $ 43 million.

As a result of our evaluation of the recoverability of the carrying value of the assets and liabilities held for sale relative to the agreed upon sales price, adjusted for costs to sell, we recorded an estimated loss on disposal of $ 660 million during the year ended December 31, 2022 in the consolidated statement of operations and a valuation allowance included in assets held for sale on the consolidated balance sheet.

We will perform this evaluation each reporting period until disposal and, based on subsequent remeasurements, we will adjust the valuation allowance in assets held for sale (including any gain, limited to the original value).

The principal components of the held for sale assets and liabilities of the EMEA business are as follows:

December 31, 2022

EMEA Business

(Dollars in millions)

Assets held for sale

Cash and cash equivalents $ 43

Accounts receivable, less allowance of $ 5

Other current assets 59

Property, plant and equipment, net accumulated depreciation of $ 1,033

Customer relationships and other intangibles, net 100

Operating lease assets 156

Valuation allowance on assets held for sale (2)

Deferred tax assets 138

Other non-current assets 38

Total assets held for sale $ 1,823

Liabilities held for sale

Accounts payable $ 78

Salaries and benefits 23

Current portion of deferred revenue 28

Current operating lease liabilities 33

Other current liabilities 28

Deferred income taxes 38

Asset retirement obligations 30

Deferred revenue, non-current 85

Operating lease liabilities, non-current 103

Total liabilities held for sale $ 446

______________________________________________________________________

(1) The assignment of goodwill was based on the relative fair value of the applicable reporting unit prior to being classified as held for sale.

Prior to classification as held for sale, the goodwill was fully impaired as described in Note 3—Goodwill, Customer Relationships and Other Intangible Assets.

(2) Includes the impact of $ 365 million, primarily related to loss on foreign currency translation, expected to be reclassified out of accumulated other comprehensive loss upon close of the sale.

On November 1, 2023, affiliates of Level 3 Parent, LLC, sold Lumen's operations in Europe, the Middle East and Africa (the "EMEA business") to Colt Technology Services Group Limited, a portfolio company of Fidelity Investments, for pre-tax cash proceeds of $ 1.7 billion after certain closing adjustments and transaction costs.

This consideration is further subject to other post-closing adjustments and indemnities set forth in the purchase agreement, as amended and supplemented to date.

In connection with the sale, we entered into a transition services agreement under which we provide the purchaser various support services.

In addition, Lumen and the purchaser entered into commercial agreements whereby they provide each other various network and other commercial services.

The classification of the EMEA business as held for sale was considered an event or change in circumstance which requires an assessment of the goodwill of the disposal group for impairment each reporting period until disposal.

We performed a pre-classification and post-classification goodwill impairment test of the disposal group as described further in Note 3—Goodwill, Customer Relationships and Other Intangible Assets.

As a result of our impairment tests, we determined the EMEA business disposal group was impaired, resulting in a non-cash, non-tax-deductible goodwill impairment charge of $ 43 million in the fourth quarter of 2022.

We evaluated the recoverability of the carrying value of the assets and liabilities held for sale relative to the agreed upon sales price, adjusted for costs to sell, and recorded an estimated loss on disposal of $ 660 million during the year ended December 31, 2022 in the consolidated statement of operations and a valuation allowance included in assets held for sale on the consolidated balance sheet as of December 31, 2022.

For the year ended December 31, 2023, we recorded a $ 102 million net loss on disposal associated with the sale of our EMEA business.

This loss is reflected as operating expense within the consolidated statements of operations.

The EMEA business was included in our continuing operations and classified as assets and liabilities held for sale on our consolidated balance sheets through the closing of the transaction on November 1, 2023.

As a result of closing the transaction, we derecognized net assets of $ 2.1 billion, primarily made up of (i) property, plant and equipment, net of accumulated depreciation, of $ 2.0 billion and (ii) customer relationships and other intangible assets, net of accumulated amortization of $ 107 million.

In addition, we reclassified $ 382 million of realized loss on foreign currency translation, net of tax, with an offset to the valuation allowance and loss on sale of the EMEA business.

Other Information

We do not believe these divestiture transactions represented a strategic shift for Lumen.

Therefore, the divested businesses discussed above did not meet the criteria to be classified as discontinued operations.

As a result, we continued to report our operating results for the Latin American, ILEC and EMEA businesses in our consolidated operating results through their respective disposal dates of August 1, 2022, October 3, 2022, and November 1, 2023, respectively.

(3) Goodwill, Customer Relationships and Other Intangible Assets

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(Dollars in millions)

Goodwill $ 12,657 15,986

$ 1,964 12,657

Indefinite-lived intangible assets $ 9 9

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(1) These values exclude assets classified as held for sale.

(2) Certain customer relationships with a gross carrying value of $ 8.7 billion became fully amortized during 2021 and were retired during the first quarter of 2022.

(2) We recorded cumulative non-cash, non-tax-deductible goodwill impairment charges of $ 10.7 billion during the year ended December 31, 2023.

(3) For the year ended December 31, 2023, customer relationships decreased $ 121 million in conjunction with the sale of select CDN customer contracts in the fourth quarter of 2023 that resulted in a net loss of $ 73 million included in selling, general and administrative expenses in our consolidated statements of operations.

(4) Certain capitalized software with a gross carrying value of $ 183 million and trade names with a gross carrying value of $ 130 million became fully amortized during 2022 and were retired during the first quarter of 2023.

As of December 31, 2023, the gross carrying amount of goodwill, customer relationships, indefinite-lived and other intangible assets was $ 15.8 billion.

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As of December 31, 2023, we had three reporting units for goodwill impairment testing, which are (i) Mass Markets, (ii) North America Business ("NA Business") and (iii) Asia Pacific ("APAC") region.

Prior to the planned divestiture of the EMEA business, the EMEA region was also a reporting unit and was tested for impairment in the pre-classification test as of October 31, 2022 discussed below.

Prior to the divestiture of the EMEA business, the EMEA region was also a reporting unit and was tested for impairment in the pre-classification test as of October 31, 2022 discussed below.

Prior to its August 1, 2022 divestiture, the Latin American ("LATAM") region was also a reporting unit.

At October 31, 2020 we used eight reporting units for goodwill impairment testing, which were consumer, small and medium business, enterprise, wholesale, North American global accounts ("NA GAM"), EMEA, LATAM and APAC.

Our reporting units are not discrete legal entities with discrete full financial statements.

Our assets and liabilities are employed in and relate to the operations of multiple reporting units.

For each reporting unit, we compare its estimated fair value of equity to its carrying value of equity that we assign to the reporting unit.

For each reporting unit, we compare its estimated fair value of equity to its carrying value of equity that we assign to it.

If the estimated fair value of the reporting unit is greater than the carrying value, we conclude that no impairment exists.

If the estimated fair value of the reporting unit is less than the carrying value, we record a non-cash impairment charge equal to the excess amount.

Depending on the facts and circumstances, we typically estimate the fair value of our reporting units by considering either or both of (i) a discounted cash flow method, which is based on the present value of projected cash flows over a discrete projection period and a terminal value, which is based on the expected normalized cash flows of the reporting units following the discrete projection period, and (ii) a market approach, which includes the use of market multiples of publicly-traded companies whose services are comparable to ours.

If the estimated fair value of the reporting unit is less than its carrying value, we record a non-cash impairment charge equal to the excess amount.

2023 Goodwill Impairment Analyses

At October 31, 2023, we performed our annual impairment analysis of the goodwill of our three above-mentioned reporting units.

Given the continued erosion in our market capitalization, we determined our quantitative impairment analysis would estimate the fair value of our reporting units using only the market approach.

Applying this approach, we utilized company comparisons and analyst reports within the telecommunications industry which supported a range of fair values derived from annualized revenue and Earnings Before Interest, Tax, Depreciation and Amortization ("EBITDA") multiples between 1.5 x and 3.5 x and 4.8 x and 8.4 x, respectively.

In determining the fair value of each reporting unit, we used revenue and EBITDA multiples below these comparable market multiples.

We reconciled the estimated fair values of the reporting units to our market capitalization as of October 31, 2023 and concluded that the indicated control premium of approximately 2 % was reasonable based on recent market transactions.

Based on our assessments performed with respect to the reporting units as described above, we concluded the estimated fair value of certain of our reporting units was less than their carrying value of equity.

As a result, we recorded a non-cash, non-tax-deductible goodwill impairment charge of $ 1.9 billion on October 31, 2023.

During the second quarter of 2023, we determined circumstances existed indicating it was more likely than not that the carrying value of our reporting units exceed their fair value.

Given the continued erosion in our market capitalization, we determined our quantitative impairment analysis would estimate the fair value of our reporting units using only the market approach.

Applying this approach, we utilized company comparisons and analyst reports within the telecommunications industry which supported a range of fair values derived from annualized revenue and EBITDA multiples between 1.5 x and 4.3 x and 4.6 x and 10.5 x, respectively.

In determining the fair value of each reporting unit, we used revenue and EBITDA multiples below these comparable market multiples.

The estimated fair values of the reporting units determined in connection with our impairment analysis in the second quarter of 2023 resulted in no control premium, which we determined to be reasonable based on our market capitalization relative to recent transactions.

For the three months ended June 30, 2023, based on our assessments performed with respect to the reporting units as described above, we concluded the estimated fair value of certain of our reporting units was less than their carrying value of equity.

As a result, we recorded a non-cash, non-tax-deductible goodwill impairment charge of $ 8.8 billion for the three months ended June 30, 2023.

The market approach that we used in the quarter ended June 30, 2023 and October 31, 2023 tests incorporated estimates and assumptions related to the forecasted results for the remainder of the year, including revenues, expenses, and the achievement of certain strategic initiatives.

In developing the market multiples applicable to each reporting unit, we considered observed trends of our industry participants.

Our assessment included many factors that required significant judgment.

Alternative interpretations of these factors could have resulted in different conclusions regarding the size of our impairments.

2022 Goodwill Impairment Analyses

As of October 31, 2022, we estimated the fair value of our four above-mentioned reporting units by considering both a market approach and a discounted cash flow method.

We discounted the projected cash flows for our Mass Markets, NA Business, EMEA and APAC reporting units using a rate that represented their weighted average cost of capital as of the assessment date, which comprised an after-tax cost of debt and a cost of equity, as disclosed in the table below.

We utilized company comparisons and analyst reports within the telecommunications industry which at the time of assessment supported a range of fair values derived from annualized revenue and earnings before interest, taxes, depreciation and amortization ("EBITDA") multiples between 1.8 x and 4.6 x and 4.7 x and 10.8 x, respectively.

We utilized company comparisons and analyst reports within the telecommunications industry which at the time of assessment supported a range of fair values derived from annualized revenue and EBITDA multiples between 1.8 x and 4.6 x and 4.7 x and 10.8 x, respectively.

We selected a revenue and EBITDA multiple for each of our reporting units, resulting in an overall company revenue and EBITDA multiple of 2.5 x and 5.5 x, respectively.

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Cost of equity 14.0 % 14.0 % 14.4 % 16.2 %

The classification of held for sale related to the EMEA business as described in Note 2—Divestitures of the Latin American and ILEC Businesses and Planned Divestiture of the EMEA Business was considered an event or change in circumstance which required an assessment of our goodwill for impairment as of October 31, 2022.

Our classification of the EMEA Business as being held for sale as described in Note 2—Divestitures of the Latin American, ILEC and EMEA Businesses was considered an event or change in circumstance which required an assessment of our goodwill for impairment as of October 31, 2022.

We performed a pre-announcement goodwill impairment test described above to determine whether there was an impairment prior to the classification of these assets as held for sale and to determine the November 2, 2022, fair values to be utilized for goodwill allocation regarding the disposal group to be classified as assets held for sale.

We also performed a post-announcement goodwill impairment test using our estimated post-divestiture cash flows and carrying value of equity to evaluate whether the fair value of our NA Business, Mass Markets and APAC reporting units that will remain following the divestiture exceeds the carrying value of the equity of such reporting units after classification of assets held for sale.

We concluded no impairment existed of our reporting units that remain following the divestiture.

We concluded no impairment existed regarding our post-divestiture reporting units.

Separate from the annual, pre-announcement and post-announcement goodwill assessments discussed above, we performed an assessment of our EMEA business disposal group for impairment using the purchase price compared to the carrying value of the EMEA business net assets.

As a result, the EMEA business disposal group was impaired, resulting in a non-cash, non-tax-deductible goodwill impairment charge of $ 43 million.

See Note 2—Divestitures of the Latin American and ILEC Businesses and Planned Divestiture of the EMEA Business for additional information regarding the purchase price, carrying value, and impairment for goodwill of the EMEA business.

See Note 2—Divestitures of the Latin American, ILEC and EMEA Businesses for additional information regarding the purchase price, carrying value, and impairment for goodwill of the EMEA business.

See the goodwill rollforward by segment table below for the impairment charges by segment.

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Therefore, we concluded no impairment existed as of our assessment date.

Our classification of held for sale assets related to the divestitures of the Latin American and ILEC businesses on August 1, 2022 and October 3, 2022, respectively, as described in Note 2—Divestitures of the Latin American and ILEC Businesses and Planned Divestiture of the EMEA Business, was considered an event or change in circumstance which required an assessment of our goodwill for impairment as of July 31, 2021.

Our third quarter 2021 classification of held for sale assets related to the divestitures of the Latin American and ILEC businesses as described in Note 2—Divestitures of the Latin American, ILEC and EMEA Businesses, was considered an event or change in circumstance which required an assessment of our goodwill for impairment as of July 31, 2021.

We performed a pre-classification goodwill impairment test to determine whether there was an impairment prior to the classification of these assets and to determine the July 31, 2021 fair values to be utilized for goodwill allocation regarding the Latin American and ILEC businesses classified as assets held for sale.

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We also performed a post-classification goodwill impairment test using our estimated post-divestiture cash flows and carrying value of equity to evaluate whether the fair value of our reporting units that would remain following the divestitures exceeded the carrying value of the equity of such reporting units after classification of assets held for sale.

At July 31, 2021, we estimated the fair value of our five above-mentioned reporting units by considering both a market approach and a discounted cash flow method.

At July 31, 2021, we estimated the fair value of our five above-mentioned reporting units as of such date by considering both a market approach and a discounted cash flow method.

As of July 31, 2021, we determined that the estimated fair value of equity exceeded the carrying value of equity for our Mass Markets, NA Business, EMEA, LATAM and APAC reporting units by 150 %, 24 %, 58 %, 100 % and 134 %, respectively.

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Therefore, we concluded no impairment existed as of our assessment date.

2020 Goodwill Impairment Analyses

At October 31, 2020, we estimated the fair value of our eight above-mentioned reporting units (prior to the January 2021 reorganization) by considering both a market approach and a discounted cash flow method.

We discounted the projected cash flows for our consumer, enterprise, wholesale, small and medium business, NA GAM, EMEA, LATAM and APAC reporting units using a rate that represented their weighted average cost of capital as of the assessment date, which comprised an after-tax cost of debt and a cost of equity, as disclosed in the table below.

We utilized company comparisons and analyst reports within the telecommunications industry which at the time of assessment supported a range of fair values derived from annualized revenue and EBITDA multiples between 2.0 x and 5.5 x and 4.8 x and 12.5 x, respectively.

We selected a revenue and EBITDA multiple for each of our reporting units, resulting in an overall company revenue and EBITDA multiple of 2.3 x and 5.7 x, respectively.

We also reconciled the estimated fair values of the reporting units to our market capitalization as of October 31, 2020 and concluded that the indicated control premium of approximately 33 % was reasonable based on recent market transactions.

Due to the depressed trading price of our stock at October 31, 2020 and our assessment performed with respect to the reporting units described above, we concluded that the estimated fair value of our consumer, wholesale, small and medium business and EMEA reporting units was less than our carrying value of equity for those reporting units.

As a result, these reporting units were impaired, resulting in a non-cash, non-tax-deductible goodwill impairment charge of approximately $ 2.6 billion.

As of October 31, 2020, the estimated fair value of equity exceeded the carrying value of equity for our enterprise, NA GAM, LATAM and APAC reporting units by 2 %, 46 %, 74 % and 23 %, respectively.

Based on our assessments performed, we concluded that the goodwill assigned to our enterprise, NA GAM, LATAM and APAC reporting units was not impaired at October 31, 2020.

As of October 31, 2020

Reporting Units

Consumer, Enterprise, Wholesale, Small and medium business, and NA GAM EMEA LATAM APAC

Weighted average cost of capital 7.6 % 8.0 % 14.3 % 10.1 %

After-tax cost of debt 2.5 % 2.9 % 6.9 % 3.9 %

Cost of equity 10.7 % 11.2 % 18.8 % 14.0 %

The following table shows the rollforward of goodwill assigned to our reportable segments (including the January 2021 reorganization discussed above) from December 31, 2020 through December 31, 2022.

International and Global Accounts Enterprise Small and Medium Business Wholesale Consumer Business Mass Markets Total

The following table shows the rollforward of goodwill assigned to our reportable segments from December 31, 2021 through December 31, 2023.

Business Mass Markets Total

(Dollars in millions)

As of December 31, 2021 $ 11,235 4,751 15,986

$ 2,555 4,738 2,808 3,114 5,655 — — 18,870

January 2021 reorganization ( 2,555 ) ( 4,738 ) ( 2,808 ) ( 3,114 ) ( 5,655 ) 12,173 6,697 —

Classified as held for sale — — — — — ( 913 ) ( 1,946 ) ( 2,859 )

Effect of foreign currency exchange rate change and other $ ( 58 ) — ( 58 )

As of December 31, 2021 (1)

$ — — — — — 11,235 4,751 15,986

Business Mass Markets Total

(Dollars in millions)

Impairment $ ( 3,271 ) — ( 3,271 )

As of December 31, 2022 (1)

$ 7,906 4,751 12,657

Effect of foreign currency exchange rate change and other ( 58 ) — ( 58 )

Impairment ( 7,906 ) ( 2,787 ) ( 10,693 )

3 unchanged sentences

(1) Goodwill at December 31, 2023, December 31, 2022 and December 31, 2021 is net of accumulated impairment losses of $ 21.7 billion, $ 11.0 billion and $ 7.7 billion, respectively.

The change in accumulated impairment losses at December 31, 2021 is the result of amounts classified as held for sale related to the divestitures of our Latin American and ILEC business on August 1, 2022 and October 3, 2022, respectively.

The change in accumulated impairment losses at December 31, 2022 is the result of the impairments discussed above.

For additional information on our segments, see Note 17—Segment Information.

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We estimate that total amortization expense for finite-lived intangible assets for the years ending December 31, 2024 through 2028 will be as provided in the table below.

As a result of classifying our EMEA business as being held for sale on our December 31, 2022 consolidated balance sheet, the amounts presented below do not include future amortization expense for intangible assets of the business to be divested.

See Note 2—Divestitures of the Latin American and ILEC Businesses and Planned Divestiture of the EMEA Business for more information.

(Dollars in millions)

2 unchanged sentences

We categorize our products and services revenue among the following categories for the Business segment:

• Compute and Application Services , which include our Edge Cloud services, IT solutions, Unified Communications and Collaboration ("UC&C"), data center, content delivery network ("CDN") and managed security services;

• IP and Data Services , which include Ethernet, IP, and VPN data networks, including software-defined wide area networks ("SD WAN") based services, Dynamic Connections and Hyper WAN;

• Fiber Infrastructure Services , which include dark fiber, optical services and equipment;

• Voice and Other , which include Time Division Multiplexing ("TDM") voice, private line and other legacy services.

• Grow , which includes products and services that we anticipate will grow, including our dark fiber, Edge Cloud services, IP, managed security, software-defined wide area networks ("SD WAN"), secure access service edge ("SASE"), Unified Communications and Collaboration ("UC&C") and wavelengths services;

• Nurture , which includes our more mature offerings, including ethernet and VPN data networks services;

• Harvest , which includes our legacy services managed for cash flow, including Time Division Multiplexing ("TDM") voice, private line and other legacy services;

• Other , which includes equipment sales, IT solutions and other services.

We categorize our products and services revenue among the following categories for the Mass Markets segment:

1 unchanged sentence

• Other Broadband , under which we provide primarily lower speed broadband services to residential and small business customers utilizing our copper-based network infrastructure;

• Voice and Other, under which we derive revenues from (i) providing local and long-distance services, professional services, and other ancillary services, and (ii) federal broadband and state support payments.

• Voice and Other, under which we derive revenues from (i) providing local and long-distance voice services, professional services, and other ancillary services, and (ii) federal broadband and state support programs.

Reconciliation of Total Revenue to Revenue from Contracts with Customers

1 unchanged sentence

They also provide the amount of revenue that is not subject to ASC 606, " Revenue from Contracts with Customers " ("ASC 606"), but is instead governed by other accounting standards.

The amounts in the tables below include the Latin American and ILEC businesses revenues prior to their sales on August 1, 2022 and October 3, 2022, respectively:

The amounts in the tables below include revenue for the Latin American, ILEC and EMEA businesses prior to their sales on August 1, 2022, October 3, 2022 and November 1, 2023, respectively:

Year Ended December 31, 2023

3 unchanged sentences

Business Segment by Sales Channel and Product Category

International and Global Accounts ("IGAM")

Compute and Application Services $ 667 ( 227 ) 440

IP and Data Services 1,510 — 1,510

Fiber Infrastructure 830 ( 136 ) 694

Voice and Other 638 — 638

Total IGAM Revenue 3,645 ( 363 ) 3,282

Large Enterprise

Compute and Application Services 621 ( 60 ) 561

IP and Data Services 1,517 — 1,517

Fiber Infrastructure 478 ( 46 ) 432

Voice and Other 793 — 793

Grow $ 2,167 ( 294 ) 1,873

Nurture 1,450 — 1,450

Harvest 760 — 760

Other 239 ( 5 ) 234

Total Large Enterprise Revenue 4,616 ( 299 ) 4,317

Mid-Market Enterprise

Compute and Application Services 135 ( 29 ) 106

IP and Data Services 1,629 ( 4 ) 1,625

Fiber Infrastructure 192 ( 7 ) 185

Voice and Other 509 — 509

Grow 803 ( 28 ) 775

Nurture 797 — 797

Harvest 378 ( 4 ) 374

Other 33 ( 4 ) 29

Total Mid-Market Enterprise Revenue 2,011 ( 36 ) 1,975

Compute and Application Services 242 ( 157 ) 85

IP and Data Services 1,115 — 1,115

Fiber Infrastructure 652 ( 113 ) 539

Voice and Other 1,511 ( 239 ) 1,272

Public Sector

Grow 469 ( 81 ) 388

Nurture 398 — 398

Harvest 383 ( 1 ) 382

Other 533 — 533

Total Public Sector Revenue 1,783 ( 82 ) 1,701

Grow 1,030 ( 251 ) 779

Nurture 820 ( 25 ) 795

Harvest 1,264 ( 165 ) 1,099

Other 11 — 11

Total Wholesale Revenue 3,125 ( 441 ) 2,684

Business Segment by Product Category

Compute and Application Services 1,665 ( 473 ) 1,192

IP and Data Services 5,771 ( 4 ) 5,767

Fiber Infrastructure 2,152 ( 302 ) 1,850

Voice and Other 3,451 ( 239 ) 3,212

Grow 4,469 ( 654 ) 3,815

Nurture 3,465 ( 25 ) 3,440

Harvest 2,785 ( 170 ) 2,615

Other 816 ( 9 ) 807

Total Business Segment Revenue 11,535 ( 858 ) 10,677

14 unchanged sentences

Business Segment by Sales Channel and Product Category

International and Global Accounts ("IGAM")

Compute and Application Services $ 731 ( 279 ) 452

IP and Data Services 1,716 ( 1 ) 1,715

Fiber Infrastructure 889 ( 129 ) 760

Voice and Other 747 — 747

Total IGAM Revenue 4,083 ( 409 ) 3,674

Large Enterprise

Compute and Application Services 696 ( 62 ) 634

IP and Data Services 1,583 — 1,583

Fiber Infrastructure 540 ( 50 ) 490

Voice and Other 952 ( 1 ) 951

Grow $ 2,415 ( 352 ) 2,063

Nurture 1,685 — 1,685

Harvest 1,022 — 1,022

Other 255 ( 8 ) 247

Total Large Enterprise Revenue 5,377 ( 360 ) 5,017

Mid-Market Enterprise

Compute and Application Services 127 ( 30 ) 97

IP and Data Services 1,710 ( 6 ) 1,704

Fiber Infrastructure 207 ( 8 ) 199

Voice and Other 605 — 605

Grow 757 ( 32 ) 725

Nurture 915 — 915

Harvest 510 ( 7 ) 503

Other 30 ( 1 ) 29

Total Mid-Market Enterprise Revenue 2,212 ( 40 ) 2,172

Compute and Application Services 188 ( 159 ) 29

IP and Data Services 1,198 — 1,198

Fiber Infrastructure 622 ( 118 ) 504

Voice and Other 1,608 ( 252 ) 1,356

Public Sector

Grow 444 ( 103 ) 341

Nurture 490 — 490

Harvest 468 ( 4 ) 464

Other 459 ( 2 ) 457

Total Public Sector Revenue 1,861 ( 109 ) 1,752

Grow 979 ( 271 ) 708

Nurture 1,004 ( 23 ) 981

Harvest 1,557 ( 215 ) 1,342

Other 51 — 51

Total Wholesale Revenue 3,591 ( 509 ) 3,082

Business Segment by Product Category

Compute and Application Services 1,742 ( 530 ) 1,212

IP and Data Services 6,207 ( 7 ) 6,200

Fiber Infrastructure 2,258 ( 305 ) 1,953

Voice and Other 3,912 ( 253 ) 3,659

Grow 4,595 ( 758 ) 3,837

Nurture 4,094 ( 23 ) 4,071

Harvest 3,557 ( 226 ) 3,331

Other 795 ( 11 ) 784

Total Business Segment Revenue 13,041 ( 1,018 ) 12,023

14 unchanged sentences

Business Segment by Sales Channel and Product Category

International and Global Accounts ("IGAM")

Compute and Application Services $ 759 ( 265 ) 494

IP and Data Services 1,736 — 1,736

Fiber Infrastructure 846 ( 110 ) 736

Voice and Other 796 — 796

Total IGAM Revenue 4,137 ( 375 ) 3,762

Large Enterprise

Compute and Application Services 665 ( 82 ) 583

IP and Data Services 1,628 ( 2 ) 1,626

Fiber Infrastructure 601 ( 46 ) 555

Voice and Other 1,067 ( 2 ) 1,065

Grow $ 2,552 ( 427 ) 2,125

Nurture 1,906 — 1,906

Harvest 1,205 ( 2 ) 1,203

Other 255 ( 5 ) 250

Total Large Enterprise Revenue 5,918 ( 434 ) 5,484

Mid-Market Enterprise

Compute and Application Services 127 ( 16 ) 111

IP and Data Services 1,809 ( 6 ) 1,803

Fiber Infrastructure 212 ( 9 ) 203

Voice and Other 753 — 753

Grow 724 ( 29 ) 695

Nurture 1,026 — 1,026

Harvest 613 ( 7 ) 606

Other 35 ( 4 ) 31

Total Mid-Market Enterprise Revenue 2,398 ( 40 ) 2,358

Compute and Application Services 184 ( 161 ) 23

IP and Data Services 1,249 — 1,249

Fiber Infrastructure 618 ( 121 ) 497

Voice and Other 1,758 ( 258 ) 1,500

Public Sector

Grow 481 ( 84 ) 397

Nurture 528 — 528

Harvest 569 ( 3 ) 566

Other 533 ( 2 ) 531

Total Public Sector Revenue 2,111 ( 89 ) 2,022

Grow 930 ( 279 ) 651

Nurture 1,080 ( 25 ) 1,055

Harvest 1,682 ( 228 ) 1,454

Total Wholesale Revenue 3,692 ( 532 ) 3,160

Business Segment by Product Category

Compute and Application Services 1,735 ( 524 ) 1,211

IP and Data Services 6,422 ( 8 ) 6,414

Fiber Infrastructure 2,277 ( 286 ) 1,991

Voice and Other 4,374 ( 260 ) 4,114

Grow 4,687 ( 819 ) 3,868

Nurture 4,540 ( 25 ) 4,515

Harvest 4,069 ( 240 ) 3,829

Other 823 ( 11 ) 812

Total Business Segment Revenue 14,119 ( 1,095 ) 13,024

21 unchanged sentences

(1) Reflects gross customer receivables of $ 1.3 billion and $ 1.5 billion, net of allowance for credit losses of $ 60 million and $ 73 million, at December 31, 2023 and December 31, 2022, respectively.

These amounts exclude customer receivables, net, classified as held for sale of $ 76 million at December 31, 2022 (related to the EMEA business) and $ 288 million at December 31, 2021 (related to both the Latin American business and the ILEC business).

(2) These amounts exclude contract assets classified as held for sale of $ 16 million at December 31, 2022 (related to the EMEA business) and $ 9 million at December 31, 2021 (related to both the Latin American business and the ILEC business).

(3) These amounts exclude contract liabilities classified as held for sale of $ 59 million at December 31, 2022 (related to the EMEA business) and $ 161 million at December 31, 2021 (related to both the Latin American business and the ILEC business).

At December 31, 2022 amounts exclude customer receivables, net, classified as held for sale of $ 76 million, related to the EMEA business which was sold November 1, 2023.

(2) At December 31, 2022 these amounts exclude contract assets classified as held for sale of $ 16 million, related to the EMEA business which was sold November 1, 2023.

(3) At December 31, 2022 these amounts exclude contract liabilities classified as held for sale of $ 59 million, related to the EMEA business which was sold November 1, 2023.

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 typically ranges from one to five years depending on the service.

Contract liabilities are included within deferred revenue in our consolidated balance sheets.

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As of December 31, 2023, we expect to recognize approximately $ 6.8 billion of revenue in the future related to performance obligations associated with existing customer contracts that are partially or wholly unsatisfied.

We expect to recognize approximately 75 % of this revenue through 2025, with the balance recognized thereafter.

These amounts exclude (i) the value of unsatisfied performance obligations for contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed (for example, uncommitted usage or non-recurring charges associated with professional or technical services to be completed), (ii) contracts that are classified as leasing arrangements or government assistance that are not subject to ASC 606 and (iii) the value of unsatisfied performance obligations for contracts which relate to our planned divestiture of the EMEA business.

As of December 31, 2023, the transaction price related to unsatisfied performance obligation that are expected to be recognized in 2024, 2025 and thereafter was $ 2.8 billion, $ 1.7 billion and $ 2.3 billion, respectively.

These amounts exclude (i) the value of unsatisfied performance obligations for contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed (for example, uncommitted usage or non-recurring charges associated with professional or technical services to be completed) and (ii) contracts that are classified as leasing arrangements or government assistance that are not subject to ASC 606.

Contract Costs

6 unchanged sentences

Amortization ( 152 ) ( 140 )

Classified as held for sale (1)

Change in contract costs held for sale

End of period balance $ 182 184

6 unchanged sentences

Classified as held for sale (1)

( 34 ) ( 32 )

End of period balance $ 202 192

_____________________________________________________________________

(1) Represents changes in amounts classified as held for sale related to the divestitures of our Latin American and ILEC businesses on August 1, 2022 and October 3, 2022, respectively, and $ 6 million acquisition costs and no fulfillment costs classified as held for sale as of December 31, 2022 related to the planned divestiture of the EMEA business.

See Note 2—Divestitures of the Latin American and ILEC Businesses and Planned Divestiture of the EMEA Business.

(2) Represents the amounts classified as held for sale related to the divestitures of our Latin American and ILEC businesses on August 1, 2022 and October 3, 2022, respectively.

See Note 2—Divestitures of the Latin American and ILEC Businesses and Planned Divestiture of the EMEA Business.

(1) Represents changes in amounts classified as held for sale related to the divestitures of our Latin American and ILEC businesses on August 1, 2022 and October 3, 2022, respectively, as well as changes of $ 6 million acquisition costs and no fulfillment costs classified as held for sale as of December 31, 2022 related to the divestiture of the EMEA business, held for sale as of December 31, 2022 and completed November 1, 2023.

See Note 2—Divestitures of the Latin American, ILEC and EMEA Businesses.

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 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 the average contract life of approximately 32 months for mass markets customers and 30 months for 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 12 months are included in other current assets on our consolidated balance sheets.

The amount of deferred costs expected to be amortized beyond the next twelve months is included in other non-current assets on our consolidated balance sheets.

Deferred acquisition and fulfillment costs are assessed for impairment on a quarterly basis.

We amortize deferred acquisition and fulfillment costs based on the transfer of services on a straight-line basis over the average contract life of approximately 36 months for mass markets customers and 33 months for business customers.

We include amortized fulfillment costs in cost of services and products and amortized acquisition costs are included in selling, general and administrative expenses in our consolidated statements of operations.

We include the amount of these deferred costs that are anticipated to be amortized in the next 12 months in other current assets on our consolidated balance sheets.

We include the amount of deferred costs expected to be amortized beyond the next twelve months in other non-current assets on our consolidated balance sheets.

We assess deferred acquisition and fulfillment costs for impairment on a quarterly basis.

Governmental Funding

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federal and state programs under which government support payments are received to offset costs associated with providing services in targeted locations such as unserved or underserved high-cost or rural areas, or for certain types of customers, including non-profit organizations, educational institutions and local governmental bodies.

Support payments may be conditioned on specified infrastructure buildouts by milestone deadlines or provision of services at specified locations and speed requirements.

In certain instances, support payments are conditioned on specified infrastructure buildouts by milestone deadlines or provision of services at specified locations and speed requirements.

Commitments may be made annually, on a multi-year basis ranging from one to ten years or be on-going subject to periodic change or termination.

5 unchanged sentences

Lumen evaluates each program and establishes a liability under the principles of ASC 450 if it is probable support payments will be recaptured or a penalty will be imposed.

For the year ended December 31, 2022, Lumen recorded non-customer revenue of $ 190 million under government assistance programs, of which 31 % was associated with state universal service fund support programs.

Between 2015 and 2021, we received approximately $ 500 million annually through the FCC's Connect America Fund II ("CAF II"), a federal multi-year recurring subsidy program for more extensive broadband deployment in price-cap ILEC territories.

For the years ended December 31, 2023 and 2022, Lumen recorded non-customer revenue of $ 85 million and $ 190 million, respectively, under government assistance programs, of which 17 % and 31 %, respectively, was associated with state universal service fund support programs.

Between 2015 and 2021, we received approximately $ 500 million annually through the Federal Communications Commission (the "FCC")'s Connect America Fund II ("CAF II"), a federal multi-year recurring subsidy program for more extensive broadband deployment in price-cap ILEC territories.

For this program, which ended on December 31, 2021, we were required to meet certain specified infrastructure buildout requirements in 33 states by the end of 2021, which required substantial capital expenditures.

1 unchanged sentence

The government has the right to audit our compliance with the CAF II program and the ultimate outcome of any remaining examinations is unknown, but could result in a liability to us in excess of our reserve accruals established for these matters.

In early 2020, the FCC created the Rural Digital Opportunity Fund (the “RDOF”), which is a federal support program designed to replace the CAF II program.

On December 7, 2020, the FCC allocated in its RDOF Phase I auction $ 9.2 billion in support payments over 10 years to deploy high speed broadband to over 5.2 million unserved locations.

We won bids to receive approximately $ 26 million of annual RDOF Phase I support payments approximately 36 % of which is attributable to the ILEC business we divested on October 3, 2022.

Our support payments under the RDOF Phase I program commenced during the second quarter of 2022.

In early 2020, the FCC created the Rural Digital Opportunity Fund (the “RDOF”) program, a federal support program designed to fund broadband deployment in rural America.

For the first phase of this program, RDOF Phase I, the FCC ultimately awarded $ 6.4 billion support payments to be paid in equal monthly installments over 10 years.

We were awarded RDOF funding in several of the states in which we operate and began receiving monthly support payments during the second quarter of 2022.

We received approximately $ 17 million in annual RDOF Phase I support payments for the years ended December 31, 2023 and 2022 and expect to receive this same amount each year thereafter during the program period.

Lumen participates in multiple state sponsored programs for broadband deployment in unserved and underserved areas for which the states have state universal service funds sourced from fees levied on telecommunications providers and passed on to consumers.

During the year ending December 31, 2022, Lumen participated in these types of programs primarily in the states of Arkansas, California, Colorado, Maine, Nebraska, New Mexico, Oregon, Utah, Vermont, and Wisconsin.

During the years ending December 31, 2023 and 2022, Lumen participated in these types of programs primarily in the states of Nebraska, North Carolina, New Mexico, Minnesota, Virginia and Wisconsin.

We primarily lease to or from third parties various office facilities, colocation facilities, equipment and transmission capacity.

32 unchanged sentences

The lease term for most leases includes the initial non-cancelable term plus any term under renewal options that we believe are reasonably assured.

During the years ended December 31, 2021 and 2020, we rationalized our lease footprint and ceased using 23 and 16 underutilized leased property locations, respectively.

Beginning in the second half of 2020 and continuing into 2023, we rationalized our lease footprint and ceased using 42 underutilized leased property locations.

We determined that we no longer needed the leased space and, due to the limited remaining term on the contracts, concluded that we had neither the intent nor ability to sublease the properties.

For the years ended December 31, 2023 and 2021, we incurred accelerated lease costs of approximately $ 8 million and $ 35 million, respectively.

We did not further rationalize our lease footprint or incur material accelerated lease costs during the year ended December 31, 2022.

However, in conjunction with our plans to continue to reduce costs, we expect to continue our real estate rationalization efforts and expect to incur additional accelerated lease costs in future periods.

We did not incur material accelerated lease costs during 2022.

Additionally, during the second quarter of 2023, we also donated our Monroe, Louisiana campus and leased back a portion thereof.

This donation resulted in a $ 101 million loss recognized for the year ended December 31, 2023.

In conjunction with our plans to continue to reduce costs, we expect to continue our real estate rationalization efforts and expect to incur additional accelerated real estate costs in future periods.

For the years ended December 31, 2023, 2022 and 2021, our gross rental expense, including the accelerated lease costs discussed above, was $ 503 million, $ 503 million and $ 588 million, respectively.

17 unchanged sentences

Finance leases 4.98 % 4.96 %

At December 31, 2022, we classified certain operating and finance lease assets and liabilities related to the EMEA business as held for sale and discontinued recording amortization on the related right-of-use assets upon this classification.

At December 31, 2022, we classified certain operating and finance lease assets and liabilities related to the EMEA business, which was sold as of November 1, 2023, as held for sale and discontinued recording amortization on the related right-of-use assets upon this classification.

These operating and finance lease assets and liabilities held for sale are not reflected in the above or throughout the disclosures within this note.

See Note 2—Divestitures of the Latin American and ILEC Businesses and Planned Divestiture of the EMEA Business for more information.

See Note 2—Divestitures of the Latin American, ILEC and EMEA Businesses for more information.

Supplemental consolidated cash flow statement information related to leases is included below:

45 unchanged sentences

(Dollars in millions)

Balance at January 1, 2021 (1)

Beginning balance at January 1, 2021 $ 109 82 191

Provision for expected losses 50 55 105

10 unchanged sentences

Balance at December 31, 2022 $ 57 28 85

Provision for expected losses 35 65 100

Write-offs charged against the allowance ( 62 ) ( 65 ) ( 127 )

Recoveries collected 6 3 9

Balance at December 31, 2023

______________________________________________________________________

(1) We completed an internal reorganization in January 2021.

As a result of this change, the allowance for credit losses previously included in the Consumer and Business portfolio of $ 70 million related to consumer and $ 12 million related to our small business group, respectively, were reclassified to the Mass Markets allowance for credit losses on January 1, 2021.

(1) Represents the amounts classified as held for sale related to the divestitures of our Latin American and ILEC businesses on August 1, 2022 and October 3, 2022, respectively.

See Note 2—Divestitures of the Latin American and ILEC Businesses and Planned Divestiture of the EMEA Business.

(3) Represents changes in amounts classified as held for sale related to the divestitures of our Latin American and ILEC businesses on August 1, 2022 and October 3, 2022, respectively, and the inclusion of a $ 5 million allowance for credit losses classified as held for sale as of December 31, 2022 related to the planned divestiture of the EMEA business.

See Note 2—Divestitures of the Latin American and ILEC Businesses and Planned Divestiture of the EMEA Business.

For the year ended December 31, 2022, we decreased our allowance for credit losses for our business and mass markets accounts receivable portfolios primarily due to releasing COVID-19 related reserves during 2022.

For the year ended December 31, 2021, we decreased our allowance for credit losses for our business and mass markets accounts receivable portfolios primarily due to higher write-off activity during 2021, along with the easing of prior delays due to COVID-19 related restrictions from 2020 and lower receivable balances.

(2) Represents changes in amounts classified as held for sale related to the divestitures of our Latin American and ILEC businesses on August 1, 2022 and October 3, 2022, respectively, and the inclusion of a $ 5 million allowance for credit losses classified as held for sale as of December 31, 2022 related to the divestiture of the EMEA business.

See Note 2—Divestitures of the Latin American, ILEC and EMEA Businesses.

(7) Long-Term Debt and Credit Facilities

8 unchanged sentences

Revolving Credit Facility (3)

LIBOR + 2.00 %

SOFR + 2.00 %

Term Loan A (4)

LIBOR + 2.00 %

2025 991 1,050

SOFR + 2.00 %

Term Loan A-1 (4)

LIBOR + 2.00 %

SOFR + 2.00 %

Term Loan B (5)

LIBOR + 2.25 %

SOFR + 2.25 %

2027 3,891 3,941

4 unchanged sentences

Tranche B 2027 Term Loan (6)

LIBOR + 1.75 %

SOFR + 1.75 %

2027 2,411 2,411

Senior notes 3.400 % - 10.500 %

Embarq Corporation subsidiaries

First mortgage bonds N/A N/A — 138

Senior Notes and Other Debt:

7 unchanged sentences

Term loan (7)

LIBOR + 2.25 %

SOFR + 2.50 %

Qwest Capital Funding, Inc.

2 unchanged sentences

Various Various 285 317

Unamortized (discounts) premiums, net ( 7 ) 21

Unamortized discounts, net ( 4 ) ( 7 )

Unamortized debt issuance costs ( 145 ) ( 169 )

5 unchanged sentences

(2) See the remainder of this Note for a description of certain parent or subsidiary guarantees and liens securing this debt.

(3) The Revolving Credit Facility had an interest rate of 2.103 % as of December 31, 2021.

(3) Revolving Credit Facility had an interest rate of 7.464 % as of December 31, 2023.

(4) Term Loans A and A-1 had interest rates of 7.470 % and 6.384 % as of December 31, 2023 and December 31, 2022, respectively.

1 unchanged sentence

(6) The Level 3 Tranche B 2027 Term Loan had interest rates of 7.220 % and 6.134 % as of December 31, 2023 and December 31, 2022, respectively.

(7) The table excludes $ 1.4 billion of indebtedness under Embarq Corporation's 7.995 % senior notes maturing in 2036 that was classified as held for sale as of December 31, 2021 and was transferred as of October 3, 2022 concurrent with the sale of the ILEC business.

See Note 2—Divestitures of the Latin American and ILEC Businesses and Planned Divestiture of the EMEA Business.

(7) The Qwest Corporation Term Loan had interest rates of 7.970 % and 6.640 % as of December 31, 2023 and December 31, 2022, respectively.

(9) The table excludes finance lease obligations that were classified as held for sale as of December 31, 2022 and December 31, 2021.

See Note 2—Divestitures of the Latin American and ILEC Businesses and Planned Divestiture of the EMEA Business.

(8) December 31, 2022 excludes finance lease obligations of our EMEA business that were classified as held for sale as of December 31, 2022 and sold on November 1, 2023.

See Note 2—Divestitures of the Latin American, ILEC and EMEA Businesses.

Long-Term Debt Maturities

Set forth below is the aggregate principal amount of our long-term debt as of December 31, 2022 (excluding unamortized (discounts) premiums, net, and unamortized debt issuance costs) maturing during the following years.

As a result of classifying our EMEA business as held for sale on our December 31, 2022 consolidated balance sheet, the amounts presented below do not include maturities of the finance lease obligations of that business.

See Note 2—Divestitures of the Latin American and ILEC Businesses and Planned Divestiture of the EMEA Business.

Set forth below is the aggregate principal amount of our long-term debt as of December 31, 2023 (excluding unamortized discounts, net, and unamortized debt issuance costs) maturing during the following years.

(Dollars in millions)

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At December 31, 2023, the Amended Credit Agreement consisted of the following facilities:

• a $ 2.2 billion senior secured revolving credit facility (“the Revolving Credit Facility”);

• a $ 2.2 billion senior secured revolving credit facility (“the Revolving Credit Facility”), against which $ 200 million of borrowings and $ 218 million of undrawn letters of credit were issued under this facility as of December 31, 2023, discussed further below;

• a $ 933 million senior secured Term Loan A credit facility;

1 unchanged sentence

• a $ 3.9 billion senior secured Term Loan B credit facility (the term loan facilities and the Revolving Credit Facility being referred to collectively as the "Amended Secured Credit Facilities").

Loans under the Term Loan A and A-1 facilities and the Revolving Credit Facility bear interest at a rate equal to, at our option, the Eurodollar rate or the alternative base rate (each as defined in the Amended Credit Agreement) plus an applicable margin between 1.50 % to 2.25 % per annum for Eurodollar loans and 0.50 % to 1.25 % per annum for alternative base rate loans, depending on our then current total leverage ratio.

Loans under the Term Loan B facility bear interest at the Eurodollar rate plus 2.25 % per annum or the alternative base rate plus 1.25 % per annum.

Loans under the Term Loan A and A-1 facilities and the Revolving Credit Facility bear interest at a rate equal to, at our option, the Secured Overnight Financing Rate ("SOFR") or the alternative base rate (each as defined in the Amended Credit Agreement) plus an applicable margin between 1.50 % to 2.25 % per annum for SOFR loans and 0.50 % to 1.25 % per annum for alternative base rate loans, depending on our then current total leverage ratio.

Loans under the Term Loan B facility bear interest at SOFR plus 2.25 % per annum or the alternative base rate plus 1.25 % per annum.

Loans under each of the term loan facilities require certain specified quarterly amortization payments and certain specified mandatory prepayments in connection with certain asset sales and debt issuances and out of excess cash flow, among other things, subject in each case to certain significant exceptions.

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A portion of the revolving credit facility in an amount not to exceed $ 250 million is available for swingline loans, and a portion in an amount not to exceed $ 800 million is available for the issuance of letters of credit.

During the year ended December 31, 2023, we issued approximately $ 218 million of letters of credit under our revolving credit facility, which reduced our borrowing capacity available thereunder by the same amount.

As of December 31, 2023, these issued letters of credit were undrawn.

Lumen Technologies is permitted under the Amended Credit Agreement to request certain incremental borrowings subject to the satisfaction of various conditions and to certain other limitations.

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The outstanding unpaid principal amount of this term loan plus any accrued and unpaid interest is due on October 23, 2027.

Interest is paid at least quarterly based upon either the London Interbank Offered Rate ("LIBOR") or the base rate (as defined in the credit agreement) plus an applicable margin between 1.50 % to 2.50 % per annum for LIBOR loans and 0.50 % to 1.50 % per annum for base rate loans depending on Qwest Corporation's then current senior unsecured long-term debt rating.

Interest is paid at least quarterly based upon either SOFR or the base rate (as defined in the credit agreement) plus an applicable margin between 1.50 % to 2.50 % per annum for SOFR loans and 0.50 % to 1.50 % per annum for base rate loans depending on Qwest Corporation's then current senior unsecured long-term debt rating.

Level 3 Financing, Inc .

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owed $ 2.4 billion under a senior secured Tranche B 2027 Term Loan, which matures on March 1, 2027.

The Tranche B 2027 Term Loan carries an interest rate, in the case of base rate borrowings, equal to (i) the greater of the Prime Rate, the Federal Funds Effective Rate plus 50 basis points, or LIBOR plus 100 basis points (with all such terms and calculations as defined or further specified in the credit agreement) plus (ii) 0.75 % per annum.

Any Eurodollar borrowings under the Tranche B 2027 Term Loan bear interest at LIBOR plus 1.75 % per annum.

The Tranche B 2027 Term Loan carries an interest rate, in the case of base rate borrowings, equal to (i) the greater of the Prime Rate, the Federal Funds Effective Rate plus 50 basis points, or SOFR plus 100 basis points (with all such terms and calculations as defined or further specified in the credit agreement) plus (ii) 0.75 % per annum.

Any Eurodollar borrowings under the Tranche B 2027 Term Loan bear interest at SOFR plus 1.75 % per annum.

The Tranche B 2027 Term Loan requires certain specified mandatory prepayments in connection with certain asset sales and other transactions, subject to certain significant exceptions.

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Letters of credit issued under this uncommitted facility are backed by credit enhancements in the form of secured guarantees issued by certain of our subsidiaries.

As of December 31, 2022 and 2021, we had (i) $ 94 million and $ 88 million, respectively, of letters of credit outstanding under our committed facility and various other facilities and (ii) no letters of credit outstanding under our Revolving Credit Facility.

As of December 31, 2023 and 2022, we had (i) $ 40 million and $ 94 million, respectively, of letters of credit outstanding under our committed facility and various other facilities and (ii) $ 218 million and no letters of credit outstanding, respectively, under our revolving credit facility.

As of December 31, 2023, these issued letters of credit were undrawn.

Lumen's consolidated indebtedness at December 31, 2023 included (i) senior secured notes issued by Lumen Technologies, Inc.

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2023 Borrowings and Repayments

During 2023, Lumen borrowed $ 925 million from, and made repayments of $ 725 million to, its revolving credit facility.

2023 Exchange Offers and Repurchases

Pursuant to exchange offers that commenced on March 16, 2023 (the “Exchange Offers”), on March 31, 2023, Level 3 Financing, Inc.

issued $ 915 million of its 10.500 % Senior Secured Notes due 2030 (the “ 10.500 % Notes”) in exchange for $ 1.535 billion of Lumen’s outstanding senior unsecured notes.

On April 17, 2023, in connection with the Exchange Offers, Level 3 Financing, Inc.

issued an additional $ 9 million of its 10.500 % Notes in exchange for $ 19 million of Lumen's outstanding senior unsecured notes.

All exchanged notes were concurrently cancelled.

These transactions resulted in a $ 630 million net reduction in the aggregate principal amount of Lumen’s consolidated indebtedness.

In addition to the above described exchange offers, we repurchased $ 24 million aggregate principal amount of Lumen's outstanding senior unsecured notes during the first quarter of 2023.

These above-described transactions resulted in an aggregate net gain of $ 618 million for the year ended December 31, 2023.

The following table sets forth the aggregate principal amount of each series of Lumen’s senior unsecured notes retired during the year ended December 31, 2023, in connection with the above-described exchange transactions:

Debt Period of Reduction Aggregate principal (amounts in millions)

5.625 % Senior Notes, Series X, due 2025

7.200 % Senior Notes, Series D, due 2025

5.125 % Senior Notes due 2026

6.875 % Debentures, Series G, due 2028

5.375 % Senior Notes due 2029

4.500 % Senior Notes due 2029

7.600 % Senior Notes, Series P, due 2039

7.650 % Senior Notes, Series U, due 2042

5.625 % Senior Notes, Series X, due 2025

4.500 % Senior Notes due 2029

7.600 % Senior Notes, Series P, due 2039

7.650 % Senior Notes, Series U, due 2042

Total $ 1,554

2022 Borrowings and Repayments

During 2022, Lumen borrowed $ 2.4 billion from, and made repayments of $ 2.6 billion to, its revolving credit facility.

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Total debt repayments

During 2021, Lumen borrowed $ 400 million from, and made repayments of $ 350 million to, its Revolving Credit Facility.

We also used available cash (including funds from the debt issuances mentioned below) to repay the following aggregate principal amounts of indebtedness through a combination of redemptions, prepayments, amortization payments and payments at maturity.

These transactions resulted in a net gain on the extinguishment of debt of $ 8 million.

Debt Period of Repayment (Dollars in millions)

Lumen Technologies, Inc.

6.450 % Senior Notes, Series S, due 2021 (at maturity)

Q2 2021 $ 1,231

Scheduled term loan payments Multiple 125

Level 3 Financing, Inc.

5.375 % Senior Notes due 2024

Qwest Corporation, Inc.

6.750 % Senior Notes (at maturity)

7.000 % Senior Notes due 2056

Qwest Capital Funding, Inc.

Senior Notes (at maturity) Q3 2021 97

Total Debt Repayments $ 3,538

On June 15, 2021, Lumen Technologies, Inc.

issued $ 1.0 billion aggregate principal amount of 5.375 % Senior Notes due 2029.

The net proceeds were used, together with cash on hand, to repay at maturity our outstanding $ 1.2 billion 6.450 % Senior Notes, Series S, due 2021, shown in the table above.

On January 13, 2021, Level 3 Financing, Inc.

issued $ 900 million aggregate principal amount of 3.750 % Sustainability-Linked Senior Notes due 2029 (the "Sustainability-Linked Notes").

The net proceeds were used, together with cash on hand, to redeem $ 900 million of our outstanding senior note indebtedness, shown in the table above.

The Sustainability-Linked Notes are guaranteed by Level 3 Parent, LLC and Level 3 Communications, LLC.

Interest Expense

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As further noted above, several of the subsidiaries guaranteeing these obligations have pledged substantially all of their assets to secure certain of their respective guarantees.

Subsequent Event

See Note 24—Subsequent Events, for information regarding certain debt restructuring transactions contemplated under our amended and restated transaction support agreement dated as of January 22, 2024.

(8) Accounts Receivable

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As of December 31,

2023 2022 (1)

(Dollars in millions)

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Accounts receivable, less allowance $ 1,318 1,508

______________________________________________________________________

(1) Amounts have been adjusted to reflect the immaterial correction of accounts receivable.

See Note 1—Background and Summary of Significant Accounting Policies under the header Correction of Immaterial Errors .

We are exposed to concentrations of credit risk from our customers.

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We have not experienced any significant loss associated with these purchased receivables.

The following table presents details of our allowance for credit losses accounts:

Balance Additions Deductions Ending

(Dollars in millions)

2022 $ 114 133 ( 162 ) 85

2021 191 105 ( 182 ) 114

106 189 ( 104 ) 191

_______________________________________________________________________________

(1) On January 1, 2020, we adopted ASU 2016-13 "Measurement of Credit Losses on Financial Instruments" and recognized a cumulative adjustment to our accumulated deficit as of the date of adoption of $ 9 million, net of a $ 2 million tax effect.

This adjustment is included within "Deductions." See Note 6—Credit Losses on Financial Instruments for more information.

(9) Property, Plant and Equipment

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(2) Central office and other network electronics consists of circuit and packet switches, routers, transmission electronics and electronics providing service to customers.

(3) Support assets consist of buildings, cable landing stations, data centers, computers and other administrative and support equipment.

(3) Support assets consist of buildings, data centers, computers and other administrative and support equipment.

(4) Construction in progress includes inventory held for construction and property of the aforementioned categories that has not been placed in service as it is still under construction.

(5) These values exclude assets classified as held for sale.

At December 31, 2022, we classified $ 1.9 billion of certain property, plant and equipment, net related to our EMEA business as held for sale and discontinued recording depreciation on this disposal group as of November 2, 2022.

At December 31, 2021, we had $ 5.1 billion of certain property, plant and equipment, net related to our Latin American and ILEC businesses sold on August 1, 2022 and October 3, 2022, respectively, classified as held for sale and discontinued recording depreciation on these disposal groups during their classification as assets held for sale.

See Note 2—Divestitures of the Latin American and ILEC Businesses and Planned Divestiture of the EMEA Business for more information.

(5) At December 31, 2022, we had $ 1.9 billion of certain property, plant and equipment, net related to our EMEA business which was classified as held for sale at this date and which was sold on November 1, 2023.

See Note 2—Divestitures of the Latin American, ILEC and EMEA Businesses for more information.

We recorded depreciation expense of $ 1.9 billion, $ 2.1 billion and $ 2.7 billion for the years ended December 31, 2023, 2022 and 2021, respectively.

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Classified as held for sale (1)

( 30 ) ( 12 )

Balance at end of year $ 157 156

_______________________________________________________________________________

(1) Represents the amounts classified as held for sale related to our divestitures.

See Note 2—Divestitures of the Latin American and ILEC Businesses and Planned Divestiture of the EMEA Business.

(1) Represents the amounts classified as held for sale related to our EMEA business.

See Note 2—Divestitures of the Latin American, ILEC and EMEA Businesses.

The changes in estimate referred to in the table above were offset against gross property, plant and equipment.

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These workforce reductions result primarily from the progression or completion of our post-acquisition integration plans, increased competitive pressures, cost reduction initiatives, process improvements through automation and reduced workloads due to reduced demand for certain services.

During the fourth quarter of 2023 we reduced our global workforce by approximately 4 % as part of our ongoing efforts to reorganize Lumen for growth by right-sizing our operations to improve our profitability.

As a result of this plan, we incurred severance and related costs of approximately $ 53 million.

We do not expect to incur any material impairment or exit costs related to this plan.

We report severance liabilities within accrued expenses and other liabilities - salaries and benefits in our consolidated balance sheets and report severance expenses in selling, general and administrative expenses in our consolidated statements of operations.

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Transferred Participants’ benefits were not reduced as a result of this transaction.

As of January 1, 2022, we spun off the Lumen Pension Plan from the Lumen Combined Pension Plan in anticipation of the sale of the ILEC business, as described further in Note 2—Divestitures of the Latin American and ILEC Businesses and Planned Divestiture of the EMEA Business.

At the time of the spin-off, the Lumen Pension Plan covered approximately 2,500 active plan participants along with 19,000 other participants.

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Our funding policy for our Combined Pension Plan is to make contributions with the objective of accumulating ample assets to pay all qualified pension benefits when due under the terms of the plan.

The accounting unfunded status of the Combined Pension Plan was $ 580 million and $ 1.1 billion as of December 31, 2022 and 2021, respectively.

The accounting unfunded status of the Combined Pension Plan was $ 736 million and $ 580 million as of December 31, 2023 and 2022, respectively.

We made no voluntary cash contributions to the Combined Pension Plan in 2023 or 2022.

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We recognize in our consolidated balance sheets the funded status of the legacy Level 3 defined benefit post-retirement plans.

These plans were fully funded as of December 31, 2022.

The net unfunded status of these plans was $ 17 million, as of December 31, 2021.

These plans were fully funded as of December 31, 2023 and 2022.

Additionally, as previously mentioned, we sponsor unfunded non-qualified pension plans for certain current and former highly-compensated employees.

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2029 - 2033 1,974 762 ( 6 )

Net Periodic Benefit Expense (Income)

Net Periodic Benefit Expense

We utilize a full yield curve approach in connection with estimating the service and interest components of net periodic benefit expense by applying the specific spot rates along the yield curve used in the determination of the benefit obligation to the relevant projected cash flow.

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Prior to the sale of the ILEC business on October 3, 2022, we realized pension costs related to the Lumen Pension Plan.

Net periodic benefit expense (income) for our Combined Pension Plan and the Lumen Pension Plan (together the "Pension Plans") includes the following components:

Net periodic benefit expense (income) for our Combined Pension Plan and the Lumen Pension Plan (through October 3, 2022, together the "Pension Plans") includes the following components:

Pension Plans

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Recognition of actuarial loss 104 122 184

Net periodic pension expense (income) $ 511 286 ( 4 )

Net periodic pension expense $ 107 511 286

Net periodic benefit expense for our post-retirement benefit plans includes the following components:

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Interest cost 103 72 47

Expected return on plan assets — — ( 1 )

Realized to gain on sale of businesses — ( 32 ) —

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Recognition of actuarial loss ( 20 ) ( 4 ) 4

Curtailment loss — — 8

Net periodic post-retirement benefit expense $ 80 54 80

Service costs for our Combined Pension Plan and post-retirement benefit plans are included in the cost of services and products and selling, general and administrative line items on our consolidated statements of operations and all other costs listed above, except for amounts realized as part of the net gain on sale of businesses, are included in other income (expense), net on our consolidated statements of operations for the years ended December 31, 2022, 2021 and 2020.

Service costs for our Combined Pension Plan and post-retirement benefit plans are included in the cost of services and products and selling, general and administrative line items on our consolidated statements of operations and all other costs listed above, except for amounts realized as part of the net gain on sale of businesses, are included in other (expense) income, net on our consolidated statements of operations for the years ended December 31, 2023, 2022 and 2021.

Additionally, a portion of the service cost is also allocated to certain assets under construction, which are capitalized and reflected as part of property, plant and equipment in our consolidated balance sheets.

As a result of ongoing efforts to reduce our workforce, we recognized one-time charges in 2021 of $ 6 million and in 2020 of $ 21 million for curtailment and special termination benefit enhancements paid to certain eligible employees upon voluntary retirement.

As a result of ongoing efforts to reduce our workforce, we recognized a one-time charge in 2023 and in 2021 of $ 2 million and $ 6 million, respectively, for special termination benefit enhancements paid to certain eligible employees upon voluntary retirement.

Our pension plan contains provisions that allow us, from time to time, to offer lump sum payment options to certain former employees in settlement of their future retirement benefits.

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In addition, during the fourth quarter of 2021, we executed an annuity purchase contract with a third party insurer that triggered additional settlement activity (see discussion above for further information).

As a result, we recognized a non-cash settlement charge of $ 383 million as of December 31, 2021 to accelerate the recognition of a portion of the previously unrecognized actuarial losses in the qualified pension plan, which is reflected in other income (expense), net in our consolidated statement of operations for the year ended December 31, 2021.

As a result, we recognized a non-cash settlement charge of $ 383 million as of December 31, 2021 to accelerate the recognition of a portion of the previously unrecognized actuarial losses in the qualified pension plan, which is reflected in other (expense) income, net in our consolidated statement of operations for the year ended December 31, 2021.

This non-cash charge increased our recorded net loss and increased our recorded accumulated deficit, with an offset to accumulated other comprehensive loss in shareholders' equity for the year ended December 31, 2021.

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N/A - Not applicable

In 2021 and 2020, we adopted the revised mortality tables and projection scales released by the Society of Actuaries, which increased the projected benefit obligation of our benefit plans by $ 37 million for 2021, and decreased the projected benefit obligation of our benefit plans by $ 3 million for 2020.

The Society of Actuaries did not release any revised mortality tables or projection scales in 2022.

In 2021, we adopted the revised mortality tables and projection scales released by the Society of Actuaries, which increased the projected benefit obligation of our benefit plans by $ 37 million for 2021.

The Society of Actuaries did not release any revised mortality tables or projection scales in 2022 or 2023.

The short-term and long-term interest crediting rates during 2023 for cash balance components of the Combined Pension Plan were 4.0 % and 3.5 %, respectively.

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Special termination benefits charge 2 — 6

Actuarial (gain) loss ( 1,432 ) ( 337 ) 749

Actuarial loss (gain) 114 ( 1,432 ) ( 337 )

Benefits paid from plan assets ( 494 ) ( 590 ) ( 766 )

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Plan amendments — ( 41 ) —

Actuarial (gain) loss ( 591 ) ( 125 ) 134

Curtailment loss — — 4

Actuarial loss (gain) 14 ( 591 ) ( 125 )

Benefits paid by company ( 228 ) ( 249 ) ( 247 )

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As previously noted, assets in the post-retirement benefit plan trusts were substantially depleted as of December 31, 2016.

The fair value of post-retirement benefit plan assets was $ 5 million at December 31, 2022, 2021 and 2020.

The fair value of post-retirement benefit plan assets was $ 1 million, $ 5 million and $ 5 million at December 31, 2023, 2022 and 2021, respectively.

Due to the insignificance of these assets on our consolidated financial statements, we have predominantly excluded them from the disclosures of plan assets in this Note, unless otherwise indicated.

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• Level 3—Assets were valued using unobservable inputs in which little or no market data exists as reported by the respective institutions at the measurement date.

Valuation methods may consider a range of factors, including estimates based on the assumptions of the investment entity or actuarial assumptions of insurers for valuing Group Annuity Contracts.

Valuation methods may consider a range of factors, including estimates based on the assumptions of the investment entity.

The Combined Pension Plan's assets are invested in various asset categories utilizing multiple strategies and investment managers.

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Multi-asset strategies (l) 28 — — 28

Cash equivalents and short-term investments (o) — 1 — 1

Total investments, excluding investments valued at NAV $ 728 1,927 5 2,660

Repurchase agreements (n) $ — ( 269 ) — ( 269 )

Repurchase agreements & other obligations (n) $ — ( 375 ) — ( 375 )

Derivatives (m) ( 1 ) — — ( 1 )

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Multi-asset strategies (l) 25 — — 25

Derivatives (m) — 1 — 1

Cash equivalents and short-term investments (o) — 1 — 1

1 unchanged sentence

Repurchase agreements (n) $ — ( 269 ) — ( 269 )

Derivatives (m) ( 1 ) ( 10 ) — ( 11 )

Investments valued at NAV 2,259

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Below is an overview of the asset categories and the underlying strategies used in the preceding tables:

(a) Investment grade bonds represent investments in fixed income securities as well as commingled bond funds comprised of U.S.

(a) Investment grade bonds represent investments in U.S.

Treasury securities, agencies, corporate bonds, mortgage-backed securities, asset-backed securities and commercial mortgage-backed securities.

(b) High yield bonds represent investments in below investment grade fixed income securities as well as commingled high yield bond funds.

(c) Emerging market bonds represent investments in securities issued by governments and other entities located in emerging countries as well as registered mutual funds and commingled emerging market bond funds.

(b) High yield bonds represent investments in below investment grade fixed income securities.

stocks represent investments in stocks of U.S.

based companies as well as commingled U.S.

stocks represent investments in stocks of companies based in developed countries outside the U.S.

as well as commingled funds.

(f) Emerging market stocks represent investments in commingled funds comprised of stocks of companies located in emerging markets.

based companies.

stocks represent investments in companies based in developed countries outside the U.S.

(f) Emerging market stocks represent investments in stocks of companies located in emerging markets.

(g) Private equity represents non-public investments in domestic and foreign buy out and venture capital funds.

Private equity funds are primarily structured as limited partnerships and are valued according to the valuation policy of each partnership, subject to prevailing accounting and other regulatory guidelines.

(h) Private debt represents non-public investments in distressed or mezzanine debt funds and pension group insurance contracts.

(h) Private debt represents non-public investments in distressed or mezzanine debt.

(i) Market neutral hedge funds hold investments in a diversified mix of instruments that are intended in combination to exhibit low correlations to market fluctuations.

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(j) Directional hedge funds —This asset category represents investments that may exhibit somewhat higher correlations to market fluctuations than the market neutral hedge funds.

Investments in hedge funds include both direct investments and investments in diversified funds of funds.

(k) Real estate represents investments in commingled funds and limited partnerships that invest in a diversified portfolio of real estate properties.

(k) Real estate represents investments in a diversified portfolio of real estate properties.

(l) Multi-asset strategies represent broadly diversified strategies that have the flexibility to tactically adjust exposures to different asset classes through time.

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The market values represent gains or losses that occur due to differences between stated contract terms and fluctuations in underlying market instruments.

(n) Repurchase Agreements includes contracts where the security owner sells a security with the agreement to buy it back at a future date and price.

(n) Repurchase agreements and other obligations includes contracts where the security owner sells a security with the agreement to buy it back at a future date and price.

Other obligations include obligations to repay cash collateral held by a plan, net liability for investment purchases pending settlement, and accrued plan expenses.

(o) Cash equivalents and short-term investments represent investments that are used in conjunction with derivatives positions or are used to provide liquidity for the payment of benefits or other purposes.

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Exchange-traded Foreign currency futures 1 2

Exchange-traded EURO futures — 5

Interest rate swaps 214 82

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Balance at December 31, 2021 $ 6 5 11

Dispositions ( 1 ) ( 4 ) ( 5 )

Actual return on plan assets ( 1 ) — ( 1 )

Balance at December 31, 2022 4 1 5

Dispositions ( 1 ) ( 4 ) ( 5 )

(Dispositions) acquisitions ( 2 ) — ( 2 )

Actual return on plan assets 2 — 2

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These allocations also impact our calculation of net acquisitions and dispositions.

For the year ended December 31, 2022, the investment program produced actual losses on Combined Pension Plan assets of $ 987 million as compared to expected returns of $ 329 million, for a difference of $ 1.3 billion.

For the year ended December 31, 2021, the investment program produced actual gains on Combined Pension Plan assets of $ 422 million as compared to the expected returns of $ 535 million, for a difference of $ 113 million.

For the year ended December 31, 2023, the investment program produced actual gains on Combined Pension Plan assets of $ 255 million as compared to expected returns of $ 287 million, for a difference of $ 32 million.

For the year ended December 31, 2022, the investment program produced actual losses on Combined Pension Plan assets of $ 987 million as compared to the expected returns of $ 329 million, for a difference of $ 1.3 billion.

The short-term annual returns on plan assets will almost always be different from the expected long-term returns and the plans could experience net gains or losses, due primarily to the volatility occurring in the financial markets during any given year.

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Post-retirement benefit plans:

Net actuarial (loss) gain ( 217 ) ( 3 ) 591 588 371

Prior service (cost) benefit ( 5 ) 1 41 42 37

Net actuarial gain (loss) 371 ( 20 ) ( 14 ) ( 34 ) 337

Prior service benefit (cost) 37 ( 8 ) — ( 8 ) 29

Curtailment loss 4 — — — 4

Deferred income tax benefit (expense) 54 1 ( 159 ) ( 158 ) ( 104 )

Deferred income tax (expense) benefit ( 104 ) 7 3 10 ( 94 )

Total post-retirement benefit plans 308 ( 21 ) ( 11 ) ( 32 ) 276

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Currently, we match a percentage of employee contributions in cash.

At December 31, 2022 and 2021, the assets of the plan included approximately 10 million shares of our common stock, all of which were the result of the combination of previous employer match and participant directed contributions.

At December 31, 2023 and 2022, the assets of the plan included approximately 9 million and 10 million shares of our common stock, all of which were the result of the combination of previous employer match and participant directed contributions.

We recognized expenses related to this plan of $ 87 million, $ 91 million and $ 96 million for the years ended December 31, 2023, 2022 and 2021, respectively.

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incentive and non-qualified stock options, stock appreciation rights, restricted stock awards, restricted stock units and market and performance shares.

Stock options generally expire ten years from the date of grant.

There were no outstanding stock options as of December 31, 2022.

Restricted Stock Awards and Restricted Stock Unit Awards

For equity based restricted stock and restricted stock unit awards that contain only service conditions for vesting (time-based awards), we calculate the award fair value based on the closing price of our common stock on the accounting grant date.

We also grant equity-based awards that contain additional market or performance conditions, as well as service conditions.

For awards having both service and market conditions, the award fair value is calculated using Monte-Carlo simulations.

Awards with service as well as performance conditions specify a target number of shares for the award, although each recipient ultimately has the opportunity to receive between 0 % and 200 % of the target number of shares.

For awards with service and market conditions, the percentage received is typically based on our total shareholder return over the up to three-year service period versus that of selected peer companies.

For awards with service and performance conditions, the percentage received depends upon the attainment of one or more performance targets during the two - or three-year service period.

We grant equity based restricted stock and restricted stock units that contain service only conditions for vesting (“Service Awards”), awards that contain both service and market conditions for vesting (“Market Awards”) and awards that contain both service and performance conditions for vesting (“Performance Awards”).

The fair value of Service Awards is based upon the closing stock price on the accounting grant date and the awards generally vest over periods ranging from one to three years .

The fair value of Market Awards is determined using Monte-Carlo simulations and the awards vest over periods up to three years .

The number of shares ultimately earned for Market Awards is typically based upon our total shareholder return as compared to the return of selected peer companies and can range between 0 % and 200 % of the target number of shares for the award.

The fair value of Performance Awards is based upon the closing stock price on the accounting grant date;

however, the award value may increase, or decrease based upon the outcome of the performance conditions.

Performance Awards vest over periods of up to three-years and specify a target number of shares for the award.

The recipient ultimately can receive between 0 % and 200 % of the target number of shares depending upon the outcome of the performance conditions.

The following table summarizes activity involving restricted stock and restricted stock unit awards for the year ended December 31, 2023:

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Compensation Expense and Tax Benefit

For time-based awards that vest ratably over the service period, we recognize compensation expense on a straight-line basis over the requisite service period for the entire award.

For our performance stock-based awards, we recognize compensation expense over the service period and based upon the expected performance outcome, until the final performance outcome is determined.

For Service Awards that vest ratably over the service period, we recognize compensation expense on a straight-line basis over the requisite service period for the entire award.

For Service Awards that vest at the end of the service period and for Market Awards, we recognize compensation expense over the service period.

For our Performance Awards, we recognize compensation expense over the service period and based upon the expected performance outcome, until the final performance outcome is determined.

Total compensation expense for all stock-based payment arrangements for the years ended December 31, 2023, 2022 and 2021, was $ 52 million, $ 98 million and $ 120 million, respectively.

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At December 31, 2023, there was $ 65 million of total unrecognized compensation expense related to our stock-based payment arrangements, which we expect to recognize over a weighted-average period of 1.5 years.

(13) Earnings (Loss) Per Common Share

Basic and diluted earnings (loss) per common share for the years ended December 31, 2022, 2021 and 2020 were calculated as follows:

(13) (Loss) Earnings Per Common Share

Basic and diluted (loss) earnings per common share for the years ended December 31, 2023, 2022 and 2021 were calculated as follows:

Years Ended December 31,

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Basic (loss) earnings per common share $ ( 10.48 ) ( 1.54 ) 1.92

Diluted earnings (loss) per common share (1)

Diluted (loss) earnings per common share (1)

$ ( 10.48 ) ( 1.54 ) 1.91

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Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between independent and knowledgeable parties who are willing and able to transact for an asset or liability at the measurement date.

We use valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs when determining fair value and then we rank the estimated values based on the reliability of the inputs used following the fair value hierarchy.

We determined the fair values of our long-term debt, including the current portion, based on quoted market prices where available or, if not available, based on inputs other than quoted market prices in active markets that are either directly or indirectly observable such as discounted future cash flows using current market interest rates.

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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 financial assets and liabilities as of December 31, 2022:

The following table presents the carrying amounts and estimated fair values of our following financial assets and liabilities as of December 31, 2023 and 2022:

As of December 31, 2023 As of December 31, 2022

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2 19,703 13,304 20,255 17,309

Interest rate swap contracts (see Note 15)

Indemnifications related to the sale of the Latin American business (2)

3 86 86 86 86

(1) For the year ended December 31, 2022, we recognized $ 109 million of loss on equity securities in other (expense) income, net in our consolidated statements of operations.

(2) As of December 31, 2021, these amounts excluded $ 1.4 billion of carrying amount and $ 1.6 billion of fair value of debt that had been classified as held for sale related to our divestiture of the ILEC business on October 3, 2022.

See Note 2—Divestitures of the Latin American and ILEC Businesses and Planned Divestiture of the EMEA Business for more information.

______________________________________________________________________

(1) For the years ended December 31, 2023 and 2022, we recognized a $ 22 million and a $ 109 million of loss on equity securities in other (expense) income, net in our consolidated statements of operations.

(2) Nonrecurring fair value is measured as of August 1, 2022.

Investment Held at Net Asset Value

We hold an investment in a limited partnership created as a holding company for various investments, including a portion of the colocation and data center business that we divested in 2017.

We hold an investment in a limited partnership created as a holding company for various investments.

The limited partnership has sole discretion as to the amount and timing of distributions of the underlying assets.

As of December 31, 2022, the underlying investments held by the limited partnership are traded in active markets and, as such, we account for our investment in the limited partnership using NAV.

The investments held by the limited partnership were subject to lock-up agreements that restricted the sale or distribution of certain underlying assets prior to July 2022 and October 2022.

The restrictions on one of the investments held by the limited partnership expired on July 29, 2022, and we received a distribution of 11.5 million shares of publicly-traded common stock, which are reflected in our fair value table as of December 31, 2022, as seen above.

The restriction on the remaining underlying investment expired on October 12, 2022.

No shares have been distributed to date.

As of December 31, 2023, the underlying investments held by the limited partnership were traded in active markets and as such, we account for our investment in the limited partnership using net asset value ("NAV").

Subject to restrictions imposed by law and other provisions of the limited partnership agreement, the general partner has the sole discretion as to the amounts and timing of distributions of partnership assets to partners.

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______________________________________________________________________

(1) For the years ended December 31, 2022 and December 31, 2021, we recognized $ 83 million of loss on investment and $ 138 million of gain on investment, respectively, reflected in other income (expense), net in our consolidated statement of operations.

(1) For the years ended December 31, 2023 and December 31, 2022, we recognized $ 75 million and $ 83 million of loss on investment, respectively, reflected in other (expense) income, net in our consolidated statement of operations.

(15) Derivative Financial Instruments

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In 2019, we entered into variable-to-fixed interest rate swap agreements to hedge the interest on $ 4.0 billion notional amount of floating rate debt.

As of December 31, 2021 and 2020, we evaluated the effectiveness of our remaining hedges quantitatively and determined that hedges in effect on such dates qualified as effective hedge relationships.

We may be exposed to credit-related losses in the event of non-performance by counterparties.

The counterparties to any of the financial derivatives we enter into are major institutions with investment grade credit ratings.

We evaluate counterparty credit risk before entering into any hedge transaction and continue to closely monitor the financial markets and the risk that our counterparties will default on their obligations as part of our quarterly qualitative effectiveness evaluation.

Amounts accumulated in accumulated other comprehensive loss related to derivatives are indirectly recognized in earnings as periodic settlement payments are made throughout the term of the swaps.

The table below presents the fair value of our derivative financial instruments as well as their classification on the consolidated balance sheets at December 31, 2022 and December 31, 2021 as follows (in millions):

December 31, 2022 December 31, 2021

Derivatives designated as Balance Sheet Location Fair Value

Cash flow hedging contracts Other current and noncurrent liabilities $ — 25

As of December 31, 2021, we evaluated the effectiveness of our remaining hedges quantitatively and determined that hedges in effect on such dates qualified as effective hedge relationships.

All remaining hedges were expired as of December 31, 2022.

Amounts accumulated in accumulated other comprehensive loss related to derivatives were indirectly recognized in earnings as periodic settlement payments were made throughout the term of the swaps.

The amount of unrealized losses recognized in accumulated other comprehensive loss consists of the following (in millions):

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Cash flow hedging contracts

Years Ended December 31, $ — 1 115

Year Ended December 31, 2021

The amount of realized losses reclassified from accumulated other comprehensive loss to the statement of operations consists of the following (in millions):

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Years Ended December 31, $ 22 83

Amounts included in accumulated other comprehensive loss at the beginning of the period were reclassified into earnings upon the settlement of the cash flow hedging contracts on March 31, 2022 and June 30, 2022.

For the year ended December 31, 2022, amounts included in accumulated other comprehensive loss at the beginning of the period were reclassified into earnings upon the settlement of the cash flow hedging contracts on March 31, 2022 and June 30, 2022.

During the year ended December 31, 2022, $ 19 million of net losses on the interest rate swaps have been reflected in our consolidated statements of operations upon settlement of the agreements in the first half of 2022.

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Change in liability for unrecognized tax position ( 0.1 ) % ( 0.2 ) % 0.1 %

Legislative changes to Global Intangible Low-Taxes Income ("GILTI") — % — % 1.8 %

Nondeductible executive stock compensation — % ( 0.1 ) % 0.2 %

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(1) Includes GILTI incurred as a result of the sale of our Latin American business.

The effective tax rate for the year ended December 31, 2022 includes a $ 682 million unfavorable impact of non-deductible goodwill impairments and $ 128 million unfavorable impact related to incurring GILTI as a result of the sale of our Latin American business.

The effective tax rate for the year ended December 31, 2020 includes a $ 555 million unfavorable impact of non-deductible goodwill impairments, a $ 14 million favorable impact in tax regulations passed in 2020 allowing a high tax exception related to our tax exposure of to GILTI, as well as a $ 20 million benefit related to the release of previously established valuation allowances against capital losses.

(1) Includes GILTI (as defined below) incurred as a result of the sale of our Latin American business.

The effective tax rate for the year ended December 31, 2023 includes a $ 2.2 billion unfavorable impact of a non-deductible goodwill impairment and a $ 137 million favorable impact as a result of utilizing available capital losses generated by the sale of our Latin American business in 2022.

The effective tax rate for the year ended December 31, 2022 includes a $ 682 million unfavorable impact of non-deductible goodwill impairments and $ 128 million unfavorable impact related to incurring tax on Global Intangible Low-Tax Income ("GILTI") as a result of the sale of our Latin American business.

The tax effects of temporary differences that gave rise to significant portions of the deferred tax assets and deferred tax liabilities were as follows:

As of December 31,

2023 2022 (1)

(Dollars in millions)

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(1) Excludes $ 138 million of deferred tax assets and $ 38 million of deferred tax liabilities related to the EMEA business that were classified as held for sale as of December 31, 2022.

Excludes $ 46 million of deferred tax assets and $ 129 million of deferred tax liabilities related to the Latin American business sold on August 1, 2022 that were classified as held for sale as of December 31, 2021.

There were no material deferred tax amounts classified as held for sale related to the ILEC business.

Of the $ 3.0 billion and $ 3.9 billion net deferred tax liability at December 31, 2022 and 2021, respectively, $ 3.2 billion and $ 4.0 billion is reflected as a long-term liability and $ 133 million and $ 160 million is reflected as a net noncurrent deferred tax asset, in other, net on our consolidated balance sheets at December 31, 2022 and 2021, respectively.

Income taxes payable as of December 31, 2022 and 2021 were $ 943 million and $ 3 million, respectively.

The increase to our payable in the current period is primarily driven by the sale of our Latin American and ILEC businesses.

At December 31, 2022, we had federal NOLs of $ 1.0 billion, net of expirations from Section 382 limitations and uncertain tax positions, for U.S.

(1) Excludes $ 138 million of deferred tax assets and $ 38 million of deferred tax liabilities related to the EMEA business sold November 1, 2023, that were classified as held for sale as of December 31, 2022.

Of the $ 3.0 billion net deferred tax liability at December 31, 2023 and 2022, respectively, $ 3.1 billion and $ 3.2 billion is reflected as a long-term liability and $ 112 million and $ 133 million is reflected as a net noncurrent deferred tax asset, in other, net on our consolidated balance sheets at December 31, 2023 and 2022, respectively.

Income taxes receivable as of December 31, 2023 was $ 273 million and income taxes payable as of December 31, 2022 was $ 943 million.

At December 31, 2023, we had federal NOLs of approximately $ 800 million, net of expirations from Section 382 limitations and uncertain tax positions, for U.S.

federal income tax purposes.

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Our ability to use these NOLs is subject to annual limits imposed by Section 382.

As a result, we anticipate that our cash income tax liabilities will increase substantially in future periods.

As a result, we anticipate that our cash income tax liabilities will increase in future periods.

If unused, the NOLs will expire between 2026 and 2029.

The federal NOLs will expire as follows:

Expiring Amount

December 31, (Dollars in millions)

NOLs per return 3,204

Uncertain tax positions ( 2,190 )

Financial NOLs $ 1,014

At December 31, 2023 we had state net operating loss carryforwards of $ 13 billion (net of uncertain tax positions).

Our acquisitions of Level 3, Qwest and SAVVIS, Inc.

caused "ownership changes" within the meaning of Section 382 for the acquired companies.

As a result, our ability to use these NOLs and tax credits are subject to annual limits imposed by Section 382.

Our ability to use these NOLs is subject to annual limits imposed by Section 382.

We establish valuation allowances when necessary to reduce the deferred tax assets to amounts we expect to realize.

As of December 31, 2022, a valuation allowance of $ 550 million was established as it is more likely than not that this amount of net operating loss, capital loss and tax credit carryforwards will not be utilized prior to expiration.

As of December 31, 2023, we established a valuation allowance of $ 399 million as it is more likely than not that this amount of net operating loss will not be utilized prior to expiration.

Our valuation allowance at December 31, 2023 and 2022 is primarily related to NOL carryforwards.

This valuation allowance decreased by $ 1.0 billion during 2022, primarily due to the impact of adjustments related to the planned divestiture of our EMEA business, including classification of a portion of the valuation allowance as held for sale.

This valuation allowance decreased by $ 151 million during 2023, primarily due to the impact of utilization of available capital losses.

A reconciliation of the change in our gross unrecognized tax benefits (excluding both interest and any related federal benefit) from January 1 to December 31 for 2023 and 2022 is as follows:

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Unrecognized tax benefits at beginning of year $ 1,318 1,375

Increase in tax positions of the current year netted against deferred tax assets — 1

Increase in tax positions of prior periods netted against deferred tax assets — —

Decrease in tax positions of the current year netted against deferred tax assets — ( 101 )

Decrease in tax positions of prior periods netted against deferred tax assets ( 411 ) ( 661 )

Increase in tax positions taken in the current year 634 4

(Decrease) increase in tax positions taken in the prior year ( 3 ) 2

(Decrease) increase in tax positions taken in the current year ( 73 ) 634

Increase (decrease) in tax positions taken in the prior year 752 ( 3 )

Decrease due to payments/settlements ( 1 ) —

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Unrecognized tax benefits at end of year $ 1,424 1,318

The total amount (including both interest and any related federal benefit) of unrecognized tax benefits that, if recognized, would impact the effective income tax rate was $ 847 million and $ 273 million at December 31, 2022 and 2021, respectively.

As of December 31, 2023 the total amount of unrecognized tax benefits that, if recognized, would impact the effective income tax rate was $ 280 million.

The unrecognized tax benefits also includes tax positions that, if recognized, would result in adjustments to other tax accounts, primarily deferred taxes, that would not impact the effective tax rate but could impact cash tax amounts payable to taxing authorities.

Our policy is to reflect interest expense associated with unrecognized tax benefits in income tax expense.

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The actual amount of such decrease, if any, will depend on several future developments and events, many of which are outside our control.

In August 2022, the Inflation Reduction Act was signed into law and which, among other things, implemented a corporate alternative minimum tax (“CAMT”) on adjusted financial statement income effective for tax periods occurring after December 31, 2022.

The CAMT had no material impact on our financial results as of December 31, 2023.

In addition, the Organization for Economic Co-operation and Development has issued Pillar Two model rules introducing a new global minimum tax of 15% intended to be effective on January 1, 2024.

While the US has not yet adopted the Pillar Two rules, various other governments around the world are enacting legislation, some of which are effective for tax periods after December 31, 2023.

While the global minimum tax will increase our administrative and compliance burdens, it is expected to have an immaterial impact to our financial statements.

(17) Segment Information

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Under our Business segment we provide products and services to meet the needs of our enterprise and wholesale customers under four distinct sales channels:

International and Global Accounts, Large Enterprise, Mid-Market Enterprise and Wholesale.

As previously disclosed, we plan to update these sales channels beginning with our first quarterly report filed after this annual report.

Large Enterprise, Mid-Market Enterprise, Public Sector and Wholesale.

For Business segment revenue, we report the following product categories:

Compute and Application Services, IP and Data Services, Fiber Infrastructure Services and Voice and Other, in each case through the sales channels outlined above.

The Business segment included the results of our Latin American business prior to it being sold on August 1, 2022.

Grow, Nurture, Harvest and Other, in each case through the sales channels outlined above.

The Business segment included the results of our Latin American, ILEC and EMEA businesses prior to their sales on August 1, 2022, October 3, 2022 and November 1, 2023, respectively.

Under our Mass Markets Segment, we provide products and services to residential and small business customers.

Following the completion of the CAF II program at December 31, 2021, we recategorized our products used to report our Mass Markets segment revenue and currently use the following categories:

We report the following product categories:

Fiber Broadband, Other Broadband and Voice and Other.

The Mass Markets segment included the results of our ILEC business prior to its sale on October 3, 2022.

See detailed descriptions of these product and service categories in Note 4—Revenue Recognition.

As described in more detail below, our segments are managed based on the direct costs of providing services to their customers and directly associated selling, general and administrative costs (primarily salaries and commissions).

Shared costs are managed separately and included in "Operations and Other" in the tables below.

Shared costs are managed separately and included in "other unallocated expense" in the table included below "—Revenue and Expenses".

As referenced above, we reclassified certain prior period amounts to conform to the current period presentation.

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Year Ended December 31, 2023

Business Mass Markets Total Segments Operations and Other Total

Business Mass Markets

(Dollars in millions)

$ 13,039 4,439 17,478 — 17,478

Segment revenue $ 11,535 3,022

Segment expense

Cost of services and products 3,138 92

Selling, general and administrative 1,232 1,341

Gain on sale of businesses — — — ( 773 ) ( 773 )

Loss on disposal groups held for sale — — — 700 700

stock-based compensation — — — ( 98 ) ( 98 )

Total expense 4,370 1,433

Total adjusted EBITDA $ 8,678 3,754 12,432 ( 5,729 ) 6,703

Total segment adjusted EBITDA $ 7,165 1,589

Year Ended December 31, 2022

Business Mass Markets Total Segments Operations and Other Total

Business Mass Markets

(Dollars in millions)

$ 14,119 5,568 19,687 — 19,687

Segment revenue $ 13,041 4,437

Segment expense

Cost of services and products 3,257 124

Selling, general and administrative 1,215 1,623

stock-based compensation — — — ( 120 ) ( 120 )

Total expense 4,472 1,747

Total adjusted EBITDA $ 9,453 4,876 14,329 ( 5,905 ) 8,424

Total segment adjusted EBITDA $ 8,569 2,690

Year Ended December 31, 2021

Business Mass Markets Total Segments Operations and Other Total

Business Mass Markets

(Dollars in millions)

$ 14,808 5,904 20,712 — 20,712

Segment revenue $ 14,119 5,568

Segment expense

Cost of services and products 3,488 153

Selling, general and administrative 1,273 1,685

stock-based compensation — — — ( 175 ) ( 175 )

Total expense 4,761 1,838

Total adjusted EBITDA $ 9,885 5,122 15,007 ( 6,518 ) 8,489

Total segment adjusted EBITDA $ 9,358 3,730

Revenue and Expenses

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The following items are excluded from our segment results, because they are centrally managed and not monitored by or reported to our chief operating decision maker by segment:

• network expenses not incurred as a direct result of providing services and products to segment customers and centrally managed expenses such as Finance, Human Resources, Legal, Marketing, Product Management and IT, all of which are reported as "Operations and Other" in the tables above, and "Operations and other expenses" in the table below;

• depreciation and amortization expense;

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Goodwill impairment ( 10,693 ) ( 3,271 ) —

Operations and other expenses ( 5,729 ) ( 5,905 ) ( 6,518 )

Other unallocated expense ( 4,608 ) ( 4,556 ) ( 4,664 )

Stock-based compensation ( 52 ) ( 98 ) ( 120 )

Operating income 95 4,285 962

Operating (loss) income ( 9,584 ) 95 4,285

Total other expense, net ( 653 ) ( 1,086 ) ( 1,584 )

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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 December 31, 2022 and December 31, 2021 aggregated to approximately $ 88 million and $ 103 million, respectively, and are included in other current liabilities, other liabilities, or liabilities held for sale in our consolidated balance sheets as of such dates.

Subject to these limitations, at December 31, 2023 and December 31, 2022, we had accrued $ 84 million and $ 88 million, respectively, in the aggregate for our litigation and non-income tax contingencies, which is included in other current liabilities or other liabilities in our consolidated balance sheet as of such date.

We cannot at this time estimate the reasonably possible loss or range of loss in excess of this $ 84 million accrual due to the inherent uncertainties and speculative nature of contested proceedings.

The establishment of an accrual does not mean that actual funds have been set aside to satisfy a given contingency.

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Principal Proceedings

Shareholder Class Action Suit

Shareholder Class Action Suits

Lumen and certain Lumen Board of Directors members and officers were named as defendants in a putative shareholder class action lawsuit filed on June 12, 2018 in the Boulder County District Court of the state of Colorado, captioned Houser et al.

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It then remanded the case to the district court for further proceedings.

Plaintiff filed an amended complaint, and we filed a motion to dismiss.

The court granted our motion to dismiss and the plaintiffs have appealed that dismissal.

On March 3, 2023, a purported shareholder of Lumen filed a putative class action complaint captioned Voigt v.

Lumen Technologies, Inc., et al., Case 3:23-cv-00286-TAD-KDM, in the U.S.

District Court for the Western District of Louisiana.

The complaint alleges that Lumen and certain of its current or former officers violated the federal securities laws by omitting or misstating material information related to Lumen’s expansion of its Quantum Fiber business.

The complaint seeks money damages, attorneys’ fees and costs, and other relief.

On September 15, 2023, a purported shareholder of Lumen filed a putative class action complaint captioned McLemore v.

Lumen Technologies, Inc., et al., Case 3:23-cv-01290, in the U.S.

District Court for the Western District of Louisiana.

The complaint seeks money damages, attorneys’ fees and costs, and other relief.

State Tax Suits

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CenturyLink Sales Practices and Securities Litigation.

We have settled the consumer and securities investor class actions.

Those settlements are final.

The derivative actions remain pending.

We have settled the consumer and securities investor class actions and the derivative actions.

We have engaged in discussions regarding related claims with a number of state attorneys general, and have entered into agreements settling certain of the consumer practices claims asserted by state attorneys general.

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The amount of the settlement was not material to our financial statements.

In December 2020, the Staff of the WUTC filed a complaint against us based on the December 2018 outage, seeking penalties owed for alleged violations of Washington regulations and laws.

The matter was tried before the WUTC in December 2022 and we await a decision by the WUTC.

AT&T Proceedings

In August 2022, certain of our subsidiaries filed a complaint in federal district court in Colorado captioned Central Telephone Company of Virginia, et al, v.

AT&T Corp., et al.

The suit seeks relief and damages for AT&T’s failure to pay amounts for services it receives.

AT&T disputes those claims and has asserted counterclaims alleging breach of contract and seeking declaratory relief.

It has requested the court to enjoin the plaintiffs from terminating services for failure to pay, and it has requested the court transfer the case to federal court in the southern district of New York for further proceedings.

Also in August 2022, AT&T filed a separate lawsuit in federal court in the western district of Louisiana against Central Telephone Company of Virginia and other of our subsidiaries alleging, among other claims, breach of contract provisions pertaining to network architecture.

The Lumen plaintiff entities dispute AT&T’s claims.

In December 2020, the Staff of the WUTC filed a complaint against us based on the December 2018 outage, seeking penalties of approximately $ 7 million for alleged violations of Washington regulations and laws.

The Washington Attorney General's office sought penalties of $ 27 million.

Following trial before the WUTC, it issued an order in June 2023 penalizing us for approximately $ 1 million.

We and the Washington Attorney General's office have both filed for reconsideration.

Those motions are pending.

Latin American Tax Litigation and Claims

In connection with the recent divestiture of our Latin American business, the purchaser assumed responsibility for the Peruvian tax litigation and Brazilian tax claims described in our prior periodic reports filed with the SEC.

We have agreed to indemnify the purchaser for amounts paid in respect of the Brazilian tax claims.

In connection with the 2022 divestiture of our Latin American business, the purchaser assumed responsibility for the Peruvian tax litigation and Brazilian tax claims described in our prior periodic reports filed with the SEC.

We agreed to indemnify the purchaser for amounts paid in respect of the Brazilian tax claims.

The value of this indemnification is included in the indemnification amount as disclosed in Note 14—Fair Value of Financial Instruments.

Huawei Network Deployment Investigations

Lumen has received requests from the following federal agencies for information relating to the use of equipment manufactured by Huawei Technologies Company ("Huawei") in Lumen’s networks.

Lumen has received a civil investigative demand from the U.S.

Department of Justice in the course of a False Claims Act investigation alleging that Lumen Technologies, Inc.

and Lumen Technologies Government Solutions, Inc.

failed to comply with the requirements in federal contracts concerning their use of Huawei equipment.

The FCC’s Enforcement Bureau issued a Letter of Inquiry to Lumen Technologies, Inc.

regarding its written certifications to the FCC that Lumen has complied with FCC rules governing the use of resources derived from the High Cost Program, Lifeline Program, Rural Health Care Program, E-Rate Program, Emergency Broadband Benefit Program, and the Affordable Connectivity Program.

Under these programs, federal funds may not be used to facilitate the deployment or maintenance of equipment or services provided by Huawei, a company that the FCC has determined poses a national security threat to the integrity of communications networks or the communications supply chain.

• Team Telecom.

The Committee for the Assessment of Foreign Participation in the United States Telecommunications Service Sector (comprised of the U.S.

Attorney General, and the Secretaries of the Department of Homeland Security, and the Department of Defense), commonly referred to as Team Telecom, issued questions and requests for information relating to Lumen’s FCC licenses and its use of Huawei equipment.

We are cooperating with the investigations.

Marshall Fire Litigation

On December 30, 2021, a wildfire referred to as the Marshall Fire ignited near Boulder, Colorado.

The Marshall Fire killed two people, and it burned thousands of acres, including entire neighborhoods.

Approximately 300 lawsuits naming various defendants and asserting various claims for relief have been filed.

To date, three of those name our affiliate Qwest Corporation as being at fault:

Allstate Fire and Casualty Insurance Company, et al., v.

Qwest Corp., et al., Case No.

2023-cv-3048, and Wallace, et al.

v, Qwest Corp., et al, Case No.

2023-cv-30488, both of which have been consolidated with Kupfner et al v Public Service Company of Colorado, et al.

2022-cv-30195.

The consolidated proceeding is pending in Colorado District Court, Boulder, Colorado, Preliminary estimates of potential damage claims exceed $ 2 billion.

Qwest is vigorously defending the claims.

911 Surcharge

In June 2021, the Company was served with a complaint filed in the Santa Fe County District Court by Phone Recovery Services, LLC (“PRS”), acting on behalf of the State of New Mexico.

The complaint claims Qwest Corporation and CenturyTel of the Southwest have violated the New Mexico Fraud Against Taxpayers Act since 2004 by failing to bill, collect and remit certain 911 surcharges from customers.

Through pre-trial proceedings, the Court has narrowed the issues to be resolved by jury, ruling that Lumen bears the burden of proving that its actions were reasonable or known and approved by the State.

Qwest is defending the New Mexico claims vigorously, as it has done successfully with other 911 claims involving PRS in other states.

Other Proceedings, Disputes and Contingencies

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Several such proceedings are currently pending, but none is reasonably expected to exceed $ 300,000 in fines and penalties.

In addition, in the past we acquired companies that had installed lead-sheathed cables several decades earlier, or had operated certain manufacturing companies in the first part of the 1900s.

Under applicable environmental laws, we could be named as a potentially responsible party for a share of the remediation of environmental conditions arising from the historical operations of our predecessors.

The outcome of these other proceedings described under this heading is not predictable.

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These amounts do not represent our entire anticipated purchases in the future, but represent only those items for which we were contractually committed as of December 31, 2023.

Amounts included in the Right-of-Way table and in the purchase commitments disclosed above are inclusive of contractual obligations related to our EMEA business to be divested.

(19) Other Financial Information

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As of December 31,

2023 2022 (1)

(Dollars in millions)

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Contract fulfillment costs 102 100

Note receivable — 56

Receivable for sale of land — 56

Total other current assets

______________________________________________________________________

(1) Excludes $ 59 million of other current assets related to the EMEA business that were classified as held for sale as of December 31, 2022.

Excludes $ 126 million of other current assets related to the Latin American and ILEC businesses sold on August 1, 2022 and October 3, 2022, respectively, that were classified as held for sale as of December 31, 2021.

(1) Excludes $ 59 million of other current assets related to the EMEA business sold on November 1, 2023 that were classified as held for sale as of December 31, 2022.

Included in accounts payable at December 31, 2023 and 2022 were $ 274 million and $ 265 million, respectively, associated with capital expenditures.

(20) Repurchases of Lumen Common Stock

Effective November 2, 2022, our Board of Directors authorized a new two-year program to repurchase up to an aggregate of $ 1.5 billion of our outstanding common stock.

During the fourth quarter of 2022, our Board of Directors authorized a two-year program to repurchase up to an aggregate of $ 1.5 billion of our outstanding common stock.

During the year ended December 31, 2023, we did not repurchase any shares of our outstanding common stock under this program.

During the year ended December 31, 2022, we repurchased under this program 33 million shares of our outstanding common stock in the open market for an aggregate market price of $ 200 million, or an average purchase price of $ 6.07 per share.

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As a result, common stock and additional paid-in capital were reduced as of December 31, 2021 by $ 81 million and $ 919 million, respectively.

We expect repurchases made in 2023 and beyond to be subject to a non-deductible 1% excise tax on the fair market value of the stock under the Inflation Reduction Act of 2022.

Any repurchases made in 2024 or thereafter will be subject to a non-deductible 1% excise tax on the fair market value of the stock under the Inflation Reduction Act of 2022.

(21) Accumulated Other Comprehensive Loss

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Benefit Plans Foreign Currency

and Other Interest Rate Swap Total

and Other Total

(Dollars in millions)

Balance at December 31, 2022 $ ( 985 ) 308 ( 422 ) ( 1,099 )

Other comprehensive income (loss) before reclassifications 98 473 ( 134 ) — 437

Other comprehensive loss before reclassifications ( 110 ) ( 11 ) ( 1 ) ( 122 )

Amounts reclassified from accumulated other comprehensive loss 50 ( 21 ) 382 411

Net current-period other comprehensive income (loss) 592 472 ( 22 ) 17 1,059

Net current-period other comprehensive (loss) income ( 60 ) ( 32 ) 381 289

Balance at December 31, 2023 $ ( 1,045 ) 276 ( 41 ) ( 810 )

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Year Ended December 31, 2023 (Decrease) Increase

in Net Income Affected Line Item in Consolidated Statement of

in Net Loss Affected Line Item in Consolidated Statement of

(Dollars in millions)

Interest rate swaps $ 22 Interest expense

Income tax benefit ( 5 ) Income tax expense

Net of tax $ 17

Amortization of pension & post-retirement plans (1)

Net actuarial loss $ 121 Other income (expense), net

Prior service cost ( 2 ) Other income (expense), net

Reclassification of net actuarial loss and prior service credit to gain on the sale of business 539 Gain on sale of businesses

Net actuarial loss $ 82 Other (expense) income, net

Prior service cost ( 15 ) Other (expense) income, net

Total before tax 67

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Net of tax $ 51

Reclassification of realized loss on foreign currency translation to gain on the sale of business $ 112 Gain on sale of businesses

Year Ended December 31, 2023 Reclassification out of Accumulated Other Comprehensive Loss

Affected line item in Consolidated Balance Sheets and Consolidated Statement of Operations

Reclassification of realized loss on foreign currency translation to valuation allowance within assets held for sale (2)

$ 389 Assets held for sale

Reclassification of realized loss on foreign currency translation to loss on sale of business (3)

( 7 ) Net loss (gain) on sale of businesses

Subtotal reclassification of realized loss on foreign currency

Reclassification of net actuarial loss to valuation allowance within assets held for sale (2)

( 24 ) Assets held for sale

Reclassification of net actuarial gain to loss on sale of business (3)

2 Net loss (gain) on sale of businesses

Subtotal reclassification of net actuarial loss

Income tax benefit — Income tax expense

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(1) See Note 11—Employee Benefits for additional information on our net periodic benefit (expense) income related to our pension and post-retirement plans.

(2) Recognized in net income through net loss (gain) on sale of business for the year ended December 31, 2022 and included in our valuation allowance in assets held for sale as of December 31, 2022.

(3) (Decrease) increase to net loss for the year ended December 31, 2023.

Information Relating to 2022

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Balance at December 31, 2021 $ ( 1,577 ) ( 164 ) ( 400 ) ( 17 ) ( 2,158 )

Other comprehensive loss before reclassifications 197 94 ( 135 ) ( 1 ) 155

Other comprehensive income (loss) before reclassifications 98 473 ( 134 ) — 437

Amounts reclassified from accumulated other comprehensive loss 494 ( 1 ) 112 17 622

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Amortization of pension & post-retirement plans (1)

Net actuarial loss $ 190 Other income (expense), net

Settlement charge 383 Other income (expense), net

Prior service cost 6 Other income (expense), net

Net actuarial loss $ 121 Other (expense) income, net

Settlement charge ( 2 ) Other (expense) income, net

Reclassification of net actuarial loss and prior service credit to gain on the sale of business

539 Net loss (gain) on sale of businesses

Total before tax 658

1 unchanged sentence

Net of tax $ 493

Reclassification of realized loss on foreign currency translation to loss (gain) on sale of businesses

$ 112 Net loss (gain) on sale of businesses

Income tax benefit — Income tax expense

Net of tax $ 112

________________________________________________________________________

1 unchanged sentence

(22) Labor Union Contracts

As of December 31, 2022, approximately 20 % of our employees were represented by the Communication Workers of America ("CWA") or the International Brotherhood of Electrical Workers ("IBEW").

As of December 31, 2023, approximately 21 % of our employees were represented by the Communications Workers of America ("CWA") or the International Brotherhood of Electrical Workers ("IBEW").

None of our collective bargaining agreements were in expired status as of December 31, 2023.

1 unchanged sentence

(23) Dividends

Our Board of Directors declared the following dividends payable in 2022 and 2021:

On November 2, 2022, we announced that our Board had terminated our quarterly cash dividend program;

as a result no dividends were declared and paid in 2023.

Our Board of Directors declared the following dividends payable in 2022:

Date Declared Record Date Dividend

4 unchanged sentences

February 24, 2022 3/8/2022 0.25 253 3/18/2022

November 18, 2021 11/29/2021 0.25 251 12/10/2021

August 19, 2021 8/30/2021 0.25 264 9/10/2021

May 20, 2021 6/1/2021 0.25 272 6/11/2021

February 25, 2021 3/8/2021 0.25 276 3/19/2021

The declaration of dividends is solely at the discretion of our Board of Directors.

On November 2, 2022, we announced that our Board had terminated our quarterly cash dividend program.

Under this revised capital allocation policy, the company plans to continue to invest in growth initiatives.

(24) Subsequent Events

Transaction Support Agreement

On January 22, 2024, the Company, Level 3, Qwest and a group of creditors holding a majority of our consolidated debt (the "TSA Parties") amended and restated the transaction support agreement that we originally entered into with a subset of the TSA Parties on October 31, 2023 (as amended and restated, the “Transaction Support Agreement”).

The Transaction Support Agreement defines the parties’ commitments to effect a series of transactions (the “TSA Transactions”) set forth in the term sheet attached thereto (the “Term Sheet”).

Among other things and subject to the terms and conditions set forth therein, the Transaction Support Agreement, including the Term Sheet, contemplates:

• the incurrence by Level 3 of $ 1.325 billion in new money long term senior secured first lien indebtedness, which indebtedness will be backstopped by certain of the consenting lenders;

• a new revolving credit facility at Lumen in an amount expected to be approximately $ 1 billion;

• the extension of maturities, covenant modifications and rate increases of certain secured and unsecured indebtedness at the Company and Level 3 through a series of exchanges and other debt transactions with certain consenting lenders as set forth in the Term Sheet;

• the repayment of certain indebtedness of the Company and Qwest.

The outside date for completion of the TSA Transactions under the Transaction Support Agreement is February 29, 2024, which the Company may unilaterally extend at its discretion to March 31, 2024.

The Company expects to consummate the TSA Transactions in the first quarter of 2024, subject to the satisfaction of remaining closing conditions.

Following consummation of the TSA Transactions, the Company may assess potential follow-on transactions with respect to non-participating creditors.

Additional information about the Transaction Support Agreement and the TSA Transactions is available in our Current Report on Form 8-K filed with the Securities and Exchange Commission on January 25, 2024, and Exhibit 10.16 to this annual report.

During the year ended December 31, 2023 we requested a U.S.

Federal income tax refund of approximately $ 900 million.

We applied approximately $ 200 million of that refund to pay our 2023 estimated taxes and, in January 2024, we received a cash refund of approximately $ 729 million, including interest.

CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7A. Quantitative and Qualitative Disclosures About Market Risk