AT&T INC. 10-K

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Consolidated Statements of Income 2023 2022 2021 Operating Revenues Service $ 99,649 $ 97,831 $ 111,565 Equipment 22,779 22,910 22,473 Total operating revenues 122,428 120,741 134,038 Operating Expenses Cost of revenues Equipment 23,136 24,009 23,685 Broadcast, programming and operations — — 8,106 Other cost of revenues (exclusive of depreciation and amortization shown separately below) 26,987 26,839 28,616 Selling, general and administrative 28,874 28,961 29,669 Asset impairments and abandonments and restructuring 1,193 27,498 213 Depreciation and amortization 18,777 18,021 17,852 Total operating expenses 98,967 125,328 108,141 Operating Income (Loss) 23,461 ( 4,587 ) 25,897 Other Income (Expense) Interest expense ( 6,704 ) ( 6,108 ) ( 6,716 ) Equity in net income of affiliates 1,675 1,791 603 Other income (expense) – net 1,416 5,810 9,387 Total other income (expense) ( 3,613 ) 1,493 3,274 Income (Loss) from Continuing Operations Before Income Taxes 19,848 ( 3,094 ) 29,171 Income tax expense on continuing operations 4,225 3,780 5,395 Income (Loss) from Continuing Operations 15,623 ( 6,874 ) 23,776 Loss from discontinued operations, net of tax — ( 181 ) ( 2,297 ) Net Income (Loss) 15,623 ( 7,055 ) 21,479 Less: Net Income Attributable to Noncontrolling Interest ( 1,223 ) ( 1,469 ) ( 1,398 ) Net Income (Loss) Attributable to AT&T $ 14,400 $ ( 8,524 ) $ 20,081 Less: Preferred Stock Dividends ( 208 ) ( 203 ) ( 207 ) Net Income (Loss) Attributable to Common Stock $ 14,192 $ ( 8,727 ) $ 19,874 Basic Earnings (Loss) Per Share from continuing operations $ 1.97 $ ( 1.10 ) $ 3.07 Basic Loss Per Share from discontinued operations $ — $ ( 0.03 ) $ ( 0.30 ) Basic Earnings (Loss) Per Share Attributable to Common Stock $ 1.97 $ ( 1.13 ) $ 2.77 Diluted Earnings (Loss) Per Share from continuing operations $ 1.97 $ ( 1.10 ) $ 3.02 Diluted Loss Per Share from discontinued operations $ — $ ( 0.03 ) $ ( 0.29 ) Diluted Earnings (Loss) Per Share Attributable to Common Stock $ 1.97 $ ( 1.13 ) $ 2.73 The accompanying notes are an integral part of the consolidated financial statements. 43 AT&T Inc. Dollars in millions except per share amounts Consolidated Statements of Comprehensive Income 2023 2022 2021 Net income (loss) $ 15,623 $ ( 7,055 ) $ 21,479 Other comprehensive income (loss), net of tax: Foreign Currency: Translation adjustment (includes $ 0 , $ 0 and $( 2 ) attributable to noncontrolling interest), net of taxes of $ 143 , $ 90 and $( 44 ) 463 346 ( 127 ) Reclassification adjustment included in net income (loss), net of taxes of $ 0 , $ 0 and $ 204 — — 2,087 Distributions of WarnerMedia, net of taxes of $ 0 , $( 38 ) and $ 0 — ( 182 ) — Securities: Net unrealized gains (losses), net of taxes of $ 8 , $( 49 ) and $( 21 ) 22 ( 143 ) ( 63 ) Reclassification adjustment included in net income (loss), net of taxes of $ 4 , $ 3 and $( 1 ) 11 8 ( 3 ) Derivative Instruments: Net unrealized gains (losses), net of taxes of $ 228 , $( 183 ) and $( 192 ) 922 ( 648 ) ( 715 ) Reclassification adjustment included in net income (loss), net of taxes of $ 12 , $ 25 and $ 19 47 96 72 Distributions of WarnerMedia, net of taxes of $ 0 , $( 12 ) and $ 0 — ( 24 ) — Defined benefit postretirement plans: Net prior service (cost) credit arising during period, net of taxes of $ 10 , $ 583 and $( 8 ) 32 1,787 ( 34 ) Amortization of net prior service credit included in net income (loss), net of taxes of $( 642 ), $( 663 ) and $( 660 ) ( 1,963 ) ( 2,028 ) ( 2,020 ) Distributions of WarnerMedia, net of taxes of $ 0 , $ 5 and $ 0 — 25 — Other comprehensive income (loss) ( 466 ) ( 763 ) ( 803 ) Total comprehensive income (loss) 15,157 ( 7,818 ) 20,676 Less: Total comprehensive income attributable to noncontrolling interest ( 1,223 ) ( 1,469 ) ( 1,396 ) Total Comprehensive Income (Loss) Attributable to AT&T $ 13,934 $ ( 9,287 ) $ 19,280 The accompanying notes are an integral part of the consolidated financial statements. 44 AT&T Inc. Dollars in millions except per share amounts Consolidated Balance Sheets December 31, 2023 2022 Assets Current Assets Cash and cash equivalents $ 6,722 $ 3,701 Accounts receivable – net of related allowance for credit loss of $ 499 and $ 588 10,289 11,466 Inventories 2,177 3,123 Prepaid and other current assets 17,270 14,818 Total current assets 36,458 33,108 Property, Plant and Equipment – Net 128,489 127,445 Goodwill – Net 67,854 67,895 Licenses – Net 127,219 124,092 Other Intangible Assets – Net 5,283 5,354 Investments in and Advances to Equity Affiliates 1,251 3,533 Operating Lease Right-Of-Use Assets 20,905 21,814 Other Assets 19,601 19,612 Total Assets $ 407,060 $ 402,853 Liabilities and Stockholders’ Equity Current Liabilities Debt maturing within one year $ 9,477 $ 7,467 Note payable to DIRECTV — 130 Accounts payable and accrued liabilities 35,852 42,644 Advanced billings and customer deposits 3,778 3,918 Dividends payable 2,020 2,014 Total current liabilities 51,127 56,173 Long-Term Debt 127,854 128,423 Deferred Credits and Other Noncurrent Liabilities Deferred income taxes 58,666 57,032 Postemployment benefit obligation 8,734 7,260 Operating lease liabilities 17,568 18,659 Other noncurrent liabilities 23,696 28,849 Total deferred credits and other noncurrent liabilities 108,664 111,800 Redeemable Noncontrolling Interest 1,973 — Stockholders’ Equity Preferred stock ($ 1 par value, 10,000,000 authorized at December 31, 2023 and December 31, 2022): Series A ( 48,000 issued and outstanding at December 31, 2023 and December 31, 2022) — — Series B ( 20,000 issued and outstanding at December 31, 2023 and December 31, 2022) — — Series C ( 70,000 issued and outstanding at December 31, 2023 and December 31, 2022) — — Common stock ($ 1 par value, 14,000,000,000 authorized at December 31, 2023 and December 31, 2022: issued 7,620,748,598 at December 31, 2023 and December 31, 2022) 7,621 7,621 Additional paid-in capital 114,519 123,610 Retained (deficit) earnings ( 5,015 ) ( 19,415 ) Treasury stock ( 470,685,237 at December 31, 2023 and 493,156,816 at December 31, 2022, at cost) ( 16,128 ) ( 17,082 ) Accumulated other comprehensive income 2,300 2,766 Noncontrolling interest 14,145 8,957 Total stockholders’ equity 117,442 106,457 Total Liabilities and Stockholders’ Equity $ 407,060 $ 402,853 The accompanying notes are an integral part of the consolidated financial statements. 45 AT&T Inc. Dollars in millions except per share amounts Consolidated Statements of Cash Flows 2023 2022 2021 Operating Activities Income (loss) from continuing operations $ 15,623 $ ( 6,874 ) $ 23,776 Adjustments to reconcile income (loss) from continuing operations to net cash provided by operating activities from continuing operations: Depreciation and amortization 18,777 18,021 17,852 Provision for uncollectible accounts 1,969 1,865 1,241 Deferred income tax expense 3,037 2,975 7,412 Net (gain) loss on investments, net of impairments 441 381 ( 369 ) Pension and postretirement benefit expense (credit) ( 2,552 ) ( 3,237 ) ( 3,857 ) Actuarial and settlement (gain) loss on pension and postretirement benefits - net 1,594 ( 1,999 ) ( 4,143 ) Asset impairments and abandonments and restructuring 1,193 27,498 213 Changes in operating assets and liabilities: Receivables 82 727 ( 1,125 ) Other current assets ( 642 ) ( 674 ) ( 1,288 ) Accounts payable and other accrued liabilities ( 1,764 ) ( 1,109 ) ( 1,570 ) Equipment installment receivables and related sales ( 133 ) 154 ( 271 ) Deferred customer contract acquisition and fulfillment costs 1 ( 947 ) 18 Postretirement claims and contributions ( 735 ) ( 823 ) ( 822 ) Other – net 1,423 ( 146 ) 103 Total adjustments 22,691 42,686 13,394 Net Cash Provided by Operating Activities from Continuing Operations 38,314 35,812 37,170 Investing Activities Capital expenditures ( 17,853 ) ( 19,626 ) ( 15,545 ) Acquisitions, net of cash acquired ( 2,942 ) ( 10,200 ) ( 25,453 ) Dispositions 72 199 7,136 Distributions from DIRECTV in excess of cumulative equity in earnings 2,049 2,649 1,323 (Purchases), sales and settlements of securities and investments - net ( 902 ) 82 44 Other – net ( 84 ) ( 3 ) 6 Net Cash Used in Investing Activities from Continuing Operations ( 19,660 ) ( 26,899 ) ( 32,489 ) Financing Activities Net change in short-term borrowings with original maturities of three months or less ( 914 ) ( 519 ) 1,316 Issuance of other short-term borrowings 5,406 3,955 21,856 Repayment of other short-term borrowings ( 3,415 ) ( 18,345 ) ( 7,510 ) Issuance of long-term debt 10,004 2,979 9,931 Repayment of long-term debt ( 12,044 ) ( 25,118 ) ( 3,039 ) Note payable to DIRECTV, net of payments ( 130 ) ( 1,211 ) 1,341 Payment of vendor financing ( 5,742 ) ( 4,697 ) ( 4,596 ) Purchase of treasury stock ( 194 ) ( 890 ) ( 202 ) Issuance of treasury stock 3 28 96 Issuance of preferred interests in subsidiary 7,151 — — Redemption of preferred interests in subsidiary ( 5,333 ) ( 2,665 ) — Dividends paid ( 8,136 ) ( 9,859 ) ( 15,068 ) Other – net ( 2,270 ) ( 3,222 ) ( 2,231 ) Net Cash (Used in) Provided by Financing Activities from Continuing Operations ( 15,614 ) ( 59,564 ) 1,894 Net increase (decrease) in cash and cash equivalents and restricted cash from continuing operations 3,040 ( 50,651 ) 6,575 Cash flows from Discontinued Operations: Cash (used in) provided by operating activities — ( 3,789 ) 4,788 Cash provided by investing activities — 1,094 399 Cash provided by (used in) financing activities — 35,823 ( 316 ) Net increase (decrease) in cash and cash equivalents and restricted cash from discontinued operations — 33,128 4,871 Net increase (decrease) in cash and cash equivalents and restricted cash 3,040 ( 17,523 ) 11,446 Cash and cash equivalents and restricted cash beginning of year 3,793 21,316 9,870 Cash and Cash Equivalents and Restricted Cash End of Year $ 6,833 $ 3,793 $ 21,316 The accompanying notes are an integral part of the consolidated financial statements. 46 AT&T Inc. Dollars and shares in millions except per share amounts Consolidated Statements of Changes in Stockholders’ Equity 2023 2022 2021 Shares Amount Shares Amount Shares Amount Preferred Stock – Series A Balance at beginning of year — $ — — $ — — $ — Balance at end of year — $ — — $ — — $ — Preferred Stock – Series B Balance at beginning of year — $ — — $ — — $ — Balance at end of year — $ — — $ — — $ — Preferred Stock – Series C Balance at beginning of year — $ — — $ — — $ — Balance at end of year — $ — — $ — — $ — Common Stock Balance at beginning of year 7,621 $ 7,621 7,621 $ 7,621 7,621 $ 7,621 Balance at end of year 7,621 $ 7,621 7,621 $ 7,621 7,621 $ 7,621 Additional Paid-In Capital Balance at beginning of year $ 123,610 $ 130,112 $ 130,175 Distribution of WarnerMedia — ( 6,832 ) — Preferred stock dividends ( 205 ) — — Common stock dividends ($ 1.11 per share in 2023) ( 7,991 ) — — Issuance of treasury stock ( 379 ) ( 171 ) ( 76 ) Share-based payments ( 109 ) ( 162 ) 13 Redemption or reclassification of interests held by noncontrolling owners ( 407 ) 663 — Balance at end of year $ 114,519 $ 123,610 $ 130,112 Retained (Deficit) Earnings Balance at beginning of year $ ( 19,415 ) $ 42,350 $ 37,457 Net income (loss) attributable to AT&T 14,400 ( 8,524 ) 20,081 Distribution of WarnerMedia — ( 45,041 ) — Preferred stock dividends — ( 207 ) ( 224 ) Common stock dividends ($ 1.11 and $ 2.08 per share in 2022 and 2021, respectively) — ( 7,993 ) ( 14,964 ) Balance at end of year $ ( 5,015 ) $ ( 19,415 ) $ 42,350 The accompanying notes are an integral part of the consolidated financial statements. 47 AT&T Inc. Dollars and shares in millions except per share amounts Consolidated Statements of Changes in Stockholders’ Equity - continued 2023 2022 2021 Shares Amount Shares Amount Shares Amount Treasury Stock Balance at beginning of year ( 493 ) $ ( 17,082 ) ( 480 ) $ ( 17,280 ) ( 495 ) $ ( 17,910 ) Repurchase and acquisition of common stock ( 10 ) ( 194 ) ( 44 ) ( 890 ) ( 8 ) ( 237 ) Issuance of treasury stock 32 1,148 31 1,088 23 867 Balance at end of year ( 471 ) $ ( 16,128 ) ( 493 ) $ ( 17,082 ) ( 480 ) $ ( 17,280 ) Accumulated Other Comprehensive Income Attributable to AT&T, net of tax Balance at beginning of year $ 2,766 $ 3,529 $ 4,330 Other comprehensive income (loss) attributable to AT&T ( 466 ) ( 763 ) ( 801 ) Balance at end of year $ 2,300 $ 2,766 $ 3,529 Noncontrolling Interest 1 Balance at beginning of year $ 8,957 $ 17,523 $ 17,567 Net income attributable to noncontrolling interest 1,146 1,469 1,398 Issuance and acquisition (disposition) of noncontrolling owners 5,180 ( 21 ) 7 Redemption of noncontrolling interest ( 53 ) ( 2,665 ) — Reclassification of noncontrolling interest — ( 5,997 ) — Distributions ( 1,085 ) ( 1,352 ) ( 1,447 ) Translation adjustments attributable to noncontrolling interest, net of taxes — — ( 2 ) Balance at end of year $ 14,145 $ 8,957 $ 17,523 Total Stockholders’ Equity at beginning of year $ 106,457 $ 183,855 $ 179,240 Total Stockholders’ Equity at end of year $ 117,442 $ 106,457 $ 183,855 1 Excludes redeemable noncontrolling interest. The accompanying notes are an integral part of the consolidated financial statements. 48 AT&T Inc. Dollars in millions except per share amounts Notes to Consolidated Financial Statements NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation Throughout this document, AT&T Inc. is referred to as “AT&T,” “we” or the “Company.” The consolidated financial statements include the accounts of the Company and subsidiaries and affiliates which we control. AT&T is a holding company whose subsidiaries and affiliates operate worldwide in the telecommunications and technology industries. On April 8, 2022, we completed the separation of our WarnerMedia business, which represented substantially all of our WarnerMedia segment, in a Reverse Morris Trust transaction, under which Magallanes, Inc. (Spinco), a formerly wholly-owned subsidiary of AT&T that held the WarnerMedia business, was distributed to AT&T stockholders via a pro rata dividend, followed by the combination of Spinco with a subsidiary of Discovery, Inc. (Discovery), which was renamed Warner Bros. Discovery, Inc. (WBD). (See Note 6) Upon the separation and distribution, the WarnerMedia business met the criteria for discontinued operations. For discontinued operations, we also evaluated transactions that were components of AT&T’s single plan of a strategic shift, including dispositions that previously did not individually meet the criteria due to materiality, and have determined discontinued operations to be comprised of WarnerMedia, Vrio, Xandr and Playdemic Ltd. (Playdemic). These businesses are reflected in the accompanying financial statements as discontinued operations, including for periods prior to the consummation of the WarnerMedia/Discovery transaction. (See Notes 6 and 24) On July 31, 2021, we closed our transaction with TPG Capital (TPG) to form a new company named DIRECTV Entertainment Holdings, LLC (DIRECTV). With the close of the transaction, we separated and deconsolidated our Video business, comprised of our U.S. video operations, and began accounting for our investment in DIRECTV under the equity method (see Notes 6, 10 and 19). All significant intercompany transactions are eliminated in the consolidation process. Investments in subsidiaries and partnerships which we do not control but have significant influence are accounted for under the equity method. Earnings from certain investments accounted for using the equity method are included in our results on a one quarter lag. We also record our proportionate share of our equity method investees’ other comprehensive income (OCI) items, including translation adjustments. We treat distributions received from equity method investees as returns on investment and classify them as cash flows from operating activities until those distributions exceed our cumulative equity in the earnings of that investment. We treat the excess amount as a return of investment and classify it as cash flows from investing activities. The preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP) requires management to make estimates and assumptions, including other estimates of fair value, probable losses and expenses, that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Moreover, unfavorable changes in market conditions, including interest rates, could adversely impact those estimates and result in asset impairments. Certain prior-period amounts have been conformed to the current period’s presentation. Unless otherwise noted, the information in Notes 1 through 23 and 25 refer only to our continuing operations and do not include discussion of balances or activity of WarnerMedia, Vrio, Xandr and Playdemic, which are part of discontinued operations. Adopted and New Accounting Standards Supplier Finance Obligations As of January 1, 2023, we adopted, with retrospective application, the Financial Accounting Standards Board’s (FASB) Accounting Standards Update (ASU) No. 2022-04, “Liabilities – Supplier Finance Programs (Subtopic 405-50): Disclosure of Supplier Finance Program Obligations” (ASU 2022-04), which establishes interim and annual reporting disclosure requirements about a company’s supplier finance programs for its purchase of goods and services. Interim and annual requirements include disclosure of outstanding amounts under the obligations as of the end of the reporting period, and annual requirements include a rollforward of those obligations for the annual reporting period, as well as a description of payment and other key terms of the programs. We elected to adopt the annual rollforward requirement for the year ended December 31, 2023, with prospective application (see Note 22). In the year of adoption, the disclosure of payment and other key terms under the programs and outstanding balances under the obligations also applies to interim reporting dates. Convertible Instruments Beginning with 2022 interim reporting, we adopted, through retrospective application, ASU No. 2020-06, “Debt—Debt With Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” (ASU 2020-06). ASU 2020-06 requires that instruments which may be settled in cash or stock are presumed settled in stock in calculating diluted earnings per share. Prior to the April 2023 repurchase, settlement of our Series A Cumulative Perpetual Membership Interests in AT&T Mobility II LLC (Mobility preferred interests) could have resulted in additional 49 AT&T Inc. Dollars in millions except per share amounts dilutive impact, the magnitude of which was influenced by the fair value of the Mobility preferred interests and the average AT&T common stock price during the reporting period, which varied from period-to-period (see Note 16). Reference Rate Reform In March 2020, the FASB issued ASU No. 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” (ASU 2020-04, as amended), which provides optional expedients, and allows for certain exceptions to existing GAAP, for contract modifications triggered by the expected market transition of certain benchmark interest rates to alternative reference rates. ASU 2020-04 applies to contracts, hedging relationships, certain derivatives and other arrangements that reference the London Interbank Offering Rate (LIBOR) or any other rates ending after December 31, 2024. ASU 2020-04, as amended, became effective immediately. We do not believe our adoption of ASU 2020-04, including optional expedients, materially impacts our financial statements. Segment Reporting In November 2023, the FASB issued ASU No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (ASU 2023-07), which requires that a public entity disclose, on an interim and annual basis, significant segment expense categories and amounts that are regularly provided to its chief operating decision maker (CODM) and included in each reported measure of segment profit or loss. An entity must also disclose, by reportable segment, the amount and composition of other expenses. The standard requires an entity disclose the title and position of its CODM and explain how the CODM uses these reported measures in assessing segment performance and determining how to allocate resources. ASU 2023-07 will be effective for annual periods beginning after December 15, 2023, and interim periods beginning after December 31, 2024, with retrospective application. The standard allows early adoption of these requirements; we are currently evaluating the disclosure impacts of our adoption. Income Taxes In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures” (ASU 2023-09), which requires that a public entity disclose specific categories in its annual income tax rate reconciliation table and provide additional qualitative information for reconciling items representing at least 5% of pre-tax income or loss from continuing operations, using the federal statutory tax rate. The standard also requires an annual breakdown of income taxes paid by jurisdiction (i.e., federal, state and foreign), with further disaggregation by jurisdictions representing at least 5% of total income taxes paid. ASU 2023-09 will be effective for annual periods beginning after December 15, 2024, with prospective application. Accounting Policies Income Taxes We record deferred income taxes for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the computed tax basis of those assets and liabilities. We record valuation allowances against the deferred tax assets (included, together with our deferred income tax assets, as part of our reportable net deferred income tax liabilities on our consolidated balance sheets), for which the realization is uncertain. We review these items regularly in light of changes in federal, state and foreign tax laws and changes in our business. Cash and Cash Equivalents Cash and cash equivalents include all highly liquid investments with original maturities of three months or less. The carrying amounts approximate fair value. At December 31, 2023, we held $ 1,368 in cash and $ 5,354 in money market funds and other cash equivalents. Of our total cash and cash equivalents, $ 1,381 resided in foreign jurisdictions, some of which is subject to restrictions on repatriation. Allowance for Credit Losses We record expense to maintain an allowance for credit losses for estimated losses that result from the failure or inability of our customers to make required payments deemed collectible from the customer when the service was provided or product was delivered. When determining the allowances for trade receivables and loans, we consider the probability of recoverability of accounts receivable based on past experience, taking into account current collection trends and general economic factors, including bankruptcy rates. We also consider future economic trends to estimate expected credit losses over the lifetime of the asset. Credit risks are assessed based on historical write-offs, net of recoveries, as well as an analysis of the aged accounts receivable balances with allowances generally increasing as the receivable ages. Accounts receivable may be fully reserved for when specific collection issues are known to exist, such as catastrophes or pending bankruptcies. Inventories Inventories primarily consist of wireless devices and accessories and are valued at the lower of cost or net realizable value . Property, Plant and Equipment Property, plant and equipment is stated at cost, except for assets acquired through business combinations, which are initially recorded at fair value. The cost of additions and substantial improvements to property, plant and equipment is capitalized, and includes internal compensation costs for these projects. The cost of maintenance and repairs of property, plant and equipment is charged to operating expenses. Property, plant and equipment costs are depreciated using straight-line methods over their estimated economic lives. Certain subsidiaries follow composite group depreciation 50 AT&T Inc. Dollars in millions except per share amounts methodology. Accordingly, when a portion of their depreciable property, plant and equipment is retired in the ordinary course of business, the gross book value is reclassified to accumulated depreciation, and no gain or loss is recognized on the disposition of these assets. Property, plant and equipment is reviewed for recoverability whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. We recognize an impairment loss when the carrying amount of a long-lived asset is not recoverable. The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. (See Note 7) The liability for the fair value of an asset retirement obligation is recorded in the period in which it is incurred if a reasonable estimate of fair value can be made. In periods subsequent to initial measurement, we recognize period-to-period changes in the liability resulting from the passage of time and revisions to either the timing or the amount of the original estimate. The increase in the carrying value of the associated long-lived asset is depreciated over the corresponding estimated economic life. Software Costs We capitalize certain costs incurred in connection with developing or obtaining internal-use software. Capitalized software costs are included in “Property, Plant and Equipment – Net” on our consolidated balance sheets. We amortize our capitalized software costs over a three -year to seven -year period, reflecting the estimated period during which these assets will remain in service. Goodwill and Other Intangible Assets We have the following major classes of intangible assets: goodwill; licenses, which include Federal Communications Commission (FCC) and other wireless licenses; customer lists and relationships; and trademarks, trade names and various other finite-lived intangible assets (see Note 9). Goodwill represents the excess of consideration paid over the fair value of identifiable net assets acquired in business combinations. Wireless licenses provide us with the exclusive right to utilize certain radio frequency spectrum to provide wireless communications services. While wireless licenses are issued for a fixed period of time (generally ten years ), renewals of domestic wireless licenses have occurred routinely and at nominal cost. We have determined that there are currently no legal, regulatory, contractual, competitive, economic or other factors that limit the useful lives of our FCC wireless licenses. We amortize our wireless licenses in Mexico over their average remaining economic life of 25 years. We acquired the rights to the AT&T and other trade names in previous acquisitions, classifying certain of those trade names as indefinite-lived. We have the effective ability to retain these exclusive rights permanently at a nominal cost. Goodwill, FCC wireless licenses and other indefinite-lived intangible assets are not amortized but are tested at least annually for impairment (see Note 9). The testing is performed on the value as of October 1 each year and compares the book values of the assets to their fair values. Goodwill is tested by comparing the carrying amount of each reporting unit, deemed to be our principal operating segments or one level below them, to the fair value using both discounted cash flow as well as market multiple approaches. FCC wireless licenses are tested on an aggregate basis, consistent with our use of the licenses on a national scope, using a discounted cash flow approach. Trade names are tested by comparing their book values to their fair values calculated using a discounted cash flow approach on a presumed royalty rate derived from the revenues related to each brand name. Intangible assets that have finite useful lives are amortized over their estimated economic lives (see Note 9). Customer lists and relationships are amortized using primarily the sum-of-the-months-digits method of amortization over the period in which those relationships are expected to contribute to our future cash flows. Finite-lived trademarks and trade names are amortized using the straight-line method over the estimated useful life of the assets. The remaining finite-lived intangible assets are generally amortized using the straight-line method. These assets, along with other long-lived assets, are reviewed for recoverability whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Advertising Costs We expense advertising costs for products and services or for promoting our corporate image as incurred (see Note 23). Foreign Currency Translation Our foreign subsidiaries and foreign investments generally report their earnings in their local currencies. We translate their foreign assets and liabilities at exchange rates in effect at the balance sheet dates. We translate their revenues and expenses using average rates during the year. The resulting foreign currency translation adjustments are recorded as a separate component of accumulated OCI in our consolidated balance sheets (see Note 3). 51 AT&T Inc. Dollars in millions except per share amounts Pension and Other Postretirement Benefits See Note 14 for a comprehensive discussion of our pension and postretirement benefits, including a discussion of the actuarial assumptions, our policy for recognizing the associated gains and losses and our method used to estimate service and interest cost components. NOTE 2. EARNINGS PER SHARE A reconciliation of the numerators and denominators of basic and diluted earnings per share is shown in the table below: Year Ended December 31, 2023 2022 2021 Numerators Numerator for basic earnings per share: Income (loss) from continuing operations, net of tax $ 15,623 $ ( 6,874 ) $ 23,776 Net income from continuing operations attributable to noncontrolling interests ( 1,223 ) ( 1,469 ) ( 1,485 ) Preferred Stock Dividends ( 208 ) ( 203 ) ( 207 ) Income (loss) from continuing operations attributable to common stock 14,192 ( 8,546 ) 22,084 Adjustment to carrying value of noncontrolling interest — 663 — Numerator for basic earnings per share from continuing operations 1 14,192 ( 7,883 ) 22,084 Loss from discontinued operations, net of tax — ( 181 ) ( 2,297 ) Loss from discontinued operations attributable to noncontrolling interests — — 87 Loss from discontinued operations attributable to common stock — ( 181 ) ( 2,210 ) Numerator for basic earnings per share 1 $ 14,192 $ ( 8,064 ) $ 19,874 Dilutive potential common shares: Mobility preferred interests 2 72 526 560 Share-based payment 2 13 17 22 Numerator for diluted earnings per share $ 14,277 $ ( 7,521 ) $ 20,456 Denominators (000,000) Denominator for basic earnings per share: Weighted average number of common shares outstanding 7,181 7,166 7,168 Dilutive potential common shares: Mobility preferred interests (in shares) 71 378 304 Share-based payment (in shares) 6 43 31 Denominator for diluted earnings per share 2 7,258 7,587 7,503 1 For 2022, in the calculation of basic earnings per share, income (loss) attributable to common stock for continuing operations and total company has been increased by $ 663 from adjustment to carrying value of noncontrolling interest. (See Note 16) 2 For 2022, dilutive potential common shares are not included in the computation of diluted earnings per share because their effect is antidilutive as a result of the net loss. On April 5, 2023, we repurchased all our Mobility preferred interests (see Note 16). For periods prior to repurchase, under ASU 2020-06, the ability to settle the Mobility preferred interests in stock was reflected in our diluted earnings per share calculation (see Note 1). 52 AT&T Inc. Dollars in millions except per share amounts NOTE 3. OTHER COMPREHENSIVE INCOME Changes in the balances of each component included in accumulated OCI are presented below. All amounts are net of tax and exclude noncontrolling interest. Foreign Currency Translation Adjustment Net Unrealized Gains (Losses) on Securities Net Unrealized Gains (Losses) on Derivative Instruments Defined Benefit Postretirement Plans Accumulated Other Comprehensive Income Balance as of December 31, 2020 $ ( 3,926 ) $ 111 $ ( 779 ) $ 8,924 $ 4,330 Other comprehensive income (loss) before reclassifications ( 125 ) ( 63 ) ( 715 ) ( 34 ) ( 937 ) Amounts reclassified from accumulated OCI 2,087 1,4 ( 3 ) 1 72 2 ( 2,020 ) 3 136 Net other comprehensive income (loss) 1,962 ( 66 ) ( 643 ) ( 2,054 ) ( 801 ) Balance as of December 31, 2021 ( 1,964 ) 45 ( 1,422 ) 6,870 3,529 Other comprehensive income (loss) before reclassifications 346 ( 143 ) ( 648 ) 1,787 1,342 Amounts reclassified from accumulated OCI — 1 8 1 96 2 ( 2,028 ) 3 ( 1,924 ) Distribution of WarnerMedia ( 182 ) — ( 24 ) 25 ( 181 ) Net other comprehensive income (loss) 164 ( 135 ) ( 576 ) ( 216 ) ( 763 ) Balance as of December 31, 2022 ( 1,800 ) ( 90 ) ( 1,998 ) 6,654 2,766 Other comprehensive income (loss) before reclassifications 463 22 922 32 1,439 Amounts reclassified from accumulated OCI — 1 11 1 47 2 ( 1,963 ) 3 ( 1,905 ) Net other comprehensive income (loss) 463 33 969 ( 1,931 ) ( 466 ) Balance as of December 31, 2023 $ ( 1,337 ) $ ( 57 ) $ ( 1,029 ) $ 4,723 $ 2,300 1 (Gains) losses are included in “Other income (expense) – net” in the consolidated statements of income. 2 (Gains) losses are primarily included in “Interest expense” in the consolidated statements of income (see Note 12). 3 The amortization of prior service credits associated with postretirement benefits is included in “Other income (expense) – net” in the consolidated statements of income (see Note 14). 4 Represents unrealized foreign currency translation adjustments at Vrio that were released upon sale (see Note 6). NOTE 4. SEGMENT INFORMATION Our segments are comprised of strategic business units or other operations that offer products and services to different customer segments over various technology platforms and/or in different geographies that are managed accordingly. We have two reportable segments: Communications and Latin America. We also evaluate segment and business unit performance based on EBITDA and/or EBITDA margin, which is defined as operating income excluding depreciation and amortization. EBITDA is used as part of our management reporting and we believe EBITDA to be a relevant and useful measurement to our investors as it measures the cash generation potential of our business units. EBITDA does not give effect to depreciation and amortization expenses incurred in operating income nor is it burdened by cash used for debt service requirements and thus does not reflect available funds for distributions, reinvestment or other discretionary uses. EBITDA margin is EBITDA divided by total revenue. 53 AT&T Inc. Dollars in millions except per share amounts Effective for the first quarter of 2023, we stopped recording prior service credits to our individual business units or the corresponding charge to Corporate and Other, and segment operating expenses were recast to remove prior service credits from our historical reporting. Prior service credits are, and will continue to be, recorded as other income in our consolidated income statement in accordance with GAAP. This recast increased Communications segment operations and support expenses by approximately $ 2,400 in 2022 and $ 2,100 in 2021. Correspondingly, this recast lowered administrative expenses within Corporate and Other, with no change on a consolidated basis. The Communications segment provides wireless and wireline telecom and broadband services to consumers located in the U.S. and businesses globally. Our business strategies reflect integrated product offerings that cut across product lines and utilize shared assets. This segment contains the following business units: • Mobility provides nationwide wireless service and equipment. • Business Wireline provides advanced ethernet-based fiber services, IP Voice and managed professional services, as well as traditional voice and data services and related equipment to business customers. • Consumer Wireline provides broadband services, including fiber connections that provide multi-gig services to residential customers in select locations and our fixed wireless access product that provides home internet services delivered over our 5G wireless network where available. Consumer Wireline also provides legacy telephony voice communication services. The Latin America segment provides wireless services and equipment in Mexico. Corporate and Other reconciles our segment results to consolidated operating income and income before income taxes. Corporate includes : • DTV-related retained costs , which are costs previously allocated to the Video business that were retained after the transaction, net of reimbursements from DIRECTV under transition service agreements. • Parent administration support , which includes costs borne by AT&T where the business units do not influence decision making. • Securitization fees associated with our sales of receivables (see Note 17). • Value portfolio , which are businesses no longer integral to our operations or which we no longer actively market. Other items consist of : • Video, which includes our former U.S. video operations that were contributed to DIRECTV on July 31, 2021 (see Note 19). • Held-for-sale and other reclassifications, which includes our former Crunchyroll and Government Solutions businesses. • Certain significant items , which includes items associated with the merger and integration of acquired or divested businesses, including amortization of intangible assets, employee separation charges associated with voluntary and/or strategic offers, asset impairments and abandonments and restructuring, and other items for which the segments are not being evaluated. • Eliminations and consolidations , removed transactions involving dealings between Mobility and our Video business, prior to the July 31, 2021 separation of Video. “Interest expense” and “Other income (expense) – net” are managed only on a total company basis and are, accordingly, reflected only in consolidated results. 54 AT&T Inc. Dollars in millions except per share amounts For the year ended December 31, 2023 Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Communications Mobility $ 83,982 $ 49,604 $ 34,378 $ 8,517 $ 25,861 Business Wireline 20,883 14,217 6,666 5,377 1,289 Consumer Wireline 13,173 9,053 4,120 3,469 651 Total Communications 118,038 72,874 45,164 17,363 27,801 Latin America – Mexico 3,932 3,349 583 724 ( 141 ) Segment Total 121,970 76,223 45,747 18,087 27,660 Corporate and Other Corporate: DTV-related retained costs — 686 ( 686 ) 586 ( 1,272 ) Parent administration support ( 7 ) 1,416 ( 1,423 ) 6 ( 1,429 ) Securitization fees 85 604 ( 519 ) — ( 519 ) Value portfolio 380 99 281 22 259 Total Corporate 458 2,805 ( 2,347 ) 614 ( 2,961 ) Certain significant items — 1,162 ( 1,162 ) 76 ( 1,238 ) Total Corporate and Other 458 3,967 ( 3,509 ) 690 ( 4,199 ) AT&T Inc. $ 122,428 $ 80,190 $ 42,238 $ 18,777 $ 23,461 For the year ended December 31, 2022 Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Communications Mobility $ 81,780 $ 49,770 $ 32,010 $ 8,198 $ 23,812 Business Wireline 22,538 14,934 7,604 5,314 2,290 Consumer Wireline 12,749 8,946 3,803 3,169 634 Total Communications 117,067 73,650 43,417 16,681 26,736 Latin America – Mexico 3,144 2,812 332 658 ( 326 ) Segment Total 120,211 76,462 43,749 17,339 26,410 Corporate and Other Corporate: DTV-related retained costs 8 878 ( 870 ) 549 ( 1,419 ) Parent administration support ( 32 ) 1,378 ( 1,410 ) 16 ( 1,426 ) Securitization fees 65 419 ( 354 ) — ( 354 ) Value portfolio 489 139 350 41 309 Total Corporate 530 2,814 ( 2,284 ) 606 ( 2,890 ) Certain significant items — 28,031 ( 28,031 ) 76 ( 28,107 ) Total Corporate and Other 530 30,845 ( 30,315 ) 682 ( 30,997 ) AT&T Inc. $ 120,741 $ 107,307 $ 13,434 $ 18,021 $ ( 4,587 ) 55 AT&T Inc. Dollars in millions except per share amounts For the year ended December 31, 2021 Revenues Operations and Support Expenses EBITDA Depreciation and Amortization Operating Income (Loss) Communications Mobility $ 78,254 $ 47,453 $ 30,801 $ 8,122 $ 22,679 Business Wireline 23,937 15,653 8,284 5,192 3,092 Consumer Wireline 12,539 8,922 3,617 3,095 522 Total Communications 114,730 72,028 42,702 16,409 26,293 Latin America – Mexico 2,747 2,652 95 605 ( 510 ) Segment Total 117,477 74,680 42,797 17,014 25,783 Corporate and Other Corporate: DTV-related retained costs 49 413 ( 364 ) 236 ( 600 ) Parent administration support ( 18 ) 1,699 ( 1,717 ) 36 ( 1,753 ) Securitization fees 61 89 ( 28 ) — ( 28 ) Value portfolio 639 208 431 40 391 Total Corporate 731 2,409 ( 1,678 ) 312 ( 1,990 ) Video 15,513 12,900 2,613 356 2,257 Held-for-sale and other reclassifications 453 310 143 — 143 Certain significant items — 126 ( 126 ) 170 ( 296 ) Eliminations and consolidations ( 136 ) ( 136 ) — — — Total Corporate and Other 16,561 15,609 952 838 114 AT&T Inc. $ 134,038 $ 90,289 $ 43,749 $ 17,852 $ 25,897 The following table is a reconciliation of operating income (loss) to “Income (Loss) from Continuing Operations Before Income Taxes” reported in our consolidated statements of income: 2023 2022 2021 Communications $ 27,801 $ 26,736 $ 26,293 Latin America ( 141 ) ( 326 ) ( 510 ) Segment Operating Income 27,660 26,410 25,783 Reconciling Items: Corporate ( 2,961 ) ( 2,890 ) ( 1,990 ) Video — — 2,257 Held-for-sale and other reclassifications — — 143 Transaction and other costs ( 98 ) ( 425 ) ( 41 ) Amortization of intangibles acquired ( 76 ) ( 76 ) ( 170 ) Asset impairments and abandonments and restructuring ( 1,193 ) ( 27,498 ) ( 213 ) Benefit-related gains (losses) 129 ( 108 ) 128 AT&T Operating Income (Loss) 23,461 ( 4,587 ) 25,897 Interest expense 6,704 6,108 6,716 Equity in net income of affiliates 1,675 1,791 603 Other income (expense) – net 1,416 5,810 9,387 Income (Loss) from Continuing Operations Before Income Taxes $ 19,848 $ ( 3,094 ) $ 29,171 56 AT&T Inc. Dollars in millions except per share amounts The following table sets forth revenues earned from customers, and property, plant and equipment located in different geographic areas: 2023 2022 2021 Revenues Net Property, Plant & Equipment Revenues Net Property, Plant & Equipment Revenues Net Property, Plant & Equipment United States $ 117,097 $ 124,387 $ 116,006 $ 123,305 $ 129,157 $ 117,690 Mexico 3,993 3,750 3,210 3,718 2,824 3,460 Asia/Pacific Rim 521 99 592 124 747 136 Europe 504 166 584 201 907 249 Latin America 194 67 217 74 251 82 Other 119 20 132 23 152 32 Total $ 122,428 $ 128,489 $ 120,741 $ 127,445 $ 134,038 $ 121,649 The following table presents assets, investments in equity affiliates and capital expenditures by segment: At or for the years ended December 31, 2023 2022 Assets Investments in Equity Method Investees Capital Expenditures Assets Investments in Equity Method Investees Capital Expenditures Communications $ 504,006 $ — $ 16,876 $ 471,444 $ — $ 18,962 Latin America 9,314 — 298 8,408 — 360 Corporate and eliminations ( 106,260 ) 1,251 679 ( 76,999 ) 3,533 304 Total $ 407,060 $ 1,251 $ 17,853 $ 402,853 $ 3,533 $ 19,626 NOTE 5. REVENUE RECOGNITION We report our revenues net of sales taxes and record certain regulatory fees, primarily Universal Service Fund (USF) fees, on a net basis. No customer accounted for more than 10% of consolidated revenues in 2023, 2022 or 2021. Wireless, Advanced Data, Legacy Voice & Data Services and Equipment Revenue We offer service-only contracts and contracts that bundle equipment used to access the services and/or with other service offerings. Some contracts have fixed terms and others are cancelable on a short-term basis (i.e., month-to-month arrangements). Examples of service revenues include wireless, strategic services (e.g., virtual private network service), and legacy voice and data (e.g., traditional local and long-distance). These services represent a series of distinct services that is considered a separate performance obligation. Service revenue is recognized when services are provided, based upon either usage (e.g., bytes of data processed) or period of time (e.g., monthly service fees). Some of our services require customer premises equipment that, when combined and integrated with AT&T’s specific network infrastructure, facilitates the delivery of service to the customer. In evaluating whether the equipment is a separate performance obligation, we consider the customer’s ability to benefit from the equipment on its own or together with other readily available resources and if so, whether the service and equipment are separately identifiable (i.e., is the service highly dependent on, or highly interrelated with the equipment). When equipment is a separate performance obligation, we record the sale of equipment when title has passed and the products are accepted by the customer. For devices sold through indirect channels (e.g., national retailers), revenue is recognized when the retailer accepts the device, not upon activation. Our equipment and service revenues are predominantly recognized on a gross basis, as most of our services do not involve a third party and we typically control the equipment that is sold to our customers. Revenue recognized from fixed term contracts that bundle services and/or equipment is allocated based on the standalone selling price of all required performance obligations of the contract (i.e., each item included in the bundle). Promotional discounts are attributed to each required component of the arrangement, resulting in recognition over the contract term. 57 AT&T Inc. Dollars in millions except per share amounts Standalone selling prices are determined by assessing prices paid for service-only contracts (e.g., arrangements where customers bring their own devices) and standalone device pricing. We offer the majority of our customers the option to purchase certain wireless devices in installments over a specified period of time, and, in many cases, they may be eligible to trade in the original equipment for a new device and have the remaining unpaid balance paid or settled. For customers that elect these equipment installment payment programs, at the point of sale, we recognize revenue for the entire amount of revenue allocated to the customer receivable net of fair value of the trade-in right guarantee, when applicable. The difference between the revenue recognized and the consideration received is recorded as a note receivable when the devices are not discounted and our right to consideration is unconditional. When installment sales include promotional discounts that are earned by customers over the contract term (e.g., “buy one get one free” or equipment discounts with trade-in of a device), notes receivable are recognized net of discounts and the difference between revenue recognized and consideration received is recorded as a contract asset to be amortized over the contract term. Less commonly, we offer certain customers highly discounted devices when they enter into a minimum service agreement term. For these contracts, we recognize equipment revenue at the point of sale based on a standalone selling price allocation. The difference between the revenue recognized and the cash received is recorded as a contract asset that will amortize over the contract term. Our contracts allow for customers to frequently modify their arrangement, without incurring penalties in many cases. When a contract is modified, we evaluate the change in scope or price of the contract to determine if the modification should be treated as a new contract or if it should be considered a change of the existing contract. We generally do not have significant impacts from contract modifications. Revenues from transactions between us and our customers are recorded net of revenue-based regulatory fees and taxes. Cash incentives given to customers are recorded as a reduction of revenue. Nonrefundable, upfront service activation and setup fees associated with service arrangements are deferred and recognized over the associated service contract period or customer relationship life. Revenue Categories The following tables set forth reported revenue by category and by business unit: For the year ended December 31, 2023 Communications Mobility Business Wireline Consumer Wireline Latin America Corporate & Other Elim. Total Wireless service $ 63,175 $ — $ — $ 2,569 $ — $ — $ 65,744 Business service — 20,274 — — — — 20,274 Broadband — — 10,455 — — — 10,455 Legacy voice and data — — 1,508 — 294 — 1,802 Other — — 1,210 — 164 — 1,374 Total Service 63,175 20,274 13,173 2,569 458 — 99,649 Equipment 20,807 609 — 1,363 — — 22,779 Total $ 83,982 $ 20,883 $ 13,173 $ 3,932 $ 458 $ — $ 122,428 58 AT&T Inc. Dollars in millions except per share amounts For the year ended December 31, 2022 Communications Mobility Business Wireline Consumer Wireline Latin America Corporate & Other Elim. Total Wireless service $ 60,499 $ — $ — $ 2,162 $ 13 $ — $ 62,674 Business service — 21,891 — — — — 21,891 Broadband — — 9,669 — — — 9,669 Legacy voice and data — — 1,746 — 323 — 2,069 Other — — 1,334 — 194 — 1,528 Total Service 60,499 21,891 12,749 2,162 530 — 97,831 Equipment 21,281 647 — 982 — — 22,910 Total $ 81,780 $ 22,538 $ 12,749 $ 3,144 $ 530 $ — $ 120,741 For the year ended December 31, 2021 Communications Mobility Business Wireline Consumer Wireline Latin America Corporate & Other Elim. Total Wireless service $ 57,590 $ — $ — $ 1,834 $ 74 $ — $ 59,498 Video service — — — — 15,423 — 15,423 Business service — 23,224 — — 70 — 23,294 Broadband — — 9,085 — — — 9,085 Legacy voice and data — — 1,977 — 429 — 2,406 Other — — 1,384 — 611 ( 136 ) 1,859 Total Service 57,590 23,224 12,446 1,834 16,607 ( 136 ) 111,565 Equipment 20,664 713 93 913 90 — 22,473 Total $ 78,254 $ 23,937 $ 12,539 $ 2,747 $ 16,697 $ ( 136 ) $ 134,038 Deferred Customer Contract Acquisition and Fulfillment Costs Costs to acquire and fulfill customer contracts, including commissions on service activations, for our Mobility, Business Wireline and Consumer Wireline services, are deferred and amortized over the contract period or expected customer relationship life, which typically ranges from three years to five years . During the first quarter of 2022, we updated our analysis of expected economic lives of customer relationships. As of January 1, 2022, we extended the amortization period for deferred acquisition and fulfillment contract costs within Mobility, Business Wireline, and Consumer Wireline to better reflect the estimated economic lives of the relationships. These changes in accounting estimate decreased “Other cost of revenues” approximately $ 395 , or $ 0.04 per diluted share from continuing operations for the year ended December 31, 2022. The following table presents the deferred customer contract acquisition and fulfillment costs included on our consolidated balance sheets at December 31: Consolidated Balance Sheets 2023 2022 Deferred Acquisition Costs Prepaid and other current assets $ 3,233 $ 2,893 Other Assets 4,077 3,913 Total deferred customer contract acquisition costs $ 7,310 $ 6,806 Deferred Fulfillment Costs Prepaid and other current assets $ 2,340 $ 2,481 Other Assets 3,843 4,206 Total deferred customer contract fulfillment costs $ 6,183 $ 6,687 59 AT&T Inc. Dollars in millions except per share amounts The following table presents deferred customer contract acquisition and fulfillment cost amortization, which are primarily included in “Selling, general and administrative” and “Other cost of revenues,” respectively, for the years ended December 31: Consolidated Statements of Income 2023 2022 Deferred acquisition cost amortization $ 3,476 $ 2,935 Deferred fulfillment cost amortization 2,700 2,688 Contract Assets and Liabilities A contract asset is recorded when revenue is recognized in advance of our right to bill and receive consideration. The contract asset will decrease as services are provided and billed. For example, when installment sales include promotional discounts (e.g., trade-in device credits) the difference between revenue recognized and consideration received is recorded as a contract asset to be amortized over the contract term. Our contract assets primarily relate to our wireless businesses. Promotional equipment sales where we offer handset credits, which are allocated between equipment and service in proportion to their standalone selling prices, when customers commit to a specified service period result in additional contract assets recognized. These contract assets will amortize over the service contract period, resulting in lower future service revenue. When consideration is received in advance of the delivery of goods or services, a contract liability is recorded. Reductions in the contract liability will be recorded as we satisfy the performance obligations. The following table presents contract assets and liabilities on our consolidated balance sheets at December 31: Consolidated Balance Sheets 2023 2022 Contract asset $ 6,518 $ 5,512 Current portion in “Prepaid and other current assets” 3,549 2,941 Contract liability 3,994 4,170 Current portion in “Advanced billings and customer deposits” 3,666 3,816 Our contract asset balance in 2023 reflects increased promotional equipment sales in our wireless business. Our beginning of period contract liabilities recorded as customer contract revenue during 2023 was $ 3,830 . Remaining Performance Obligations Remaining performance obligations represent services we are required to provide to customers under bundled or discounted arrangements, which are satisfied as services are provided over the contract term. In determining the transaction price allocated, we do not include non-recurring charges and estimates for usage, nor do we consider arrangements with an original expected duration of less than one year, which are primarily prepaid wireless and residential internet agreements. Remaining performance obligations associated with business contracts reflect recurring charges billed, adjusted to reflect estimates for sales incentives and revenue adjustments. Performance obligations associated with wireless contracts are estimated using a portfolio approach in which we review all relevant promotional activities, calculating the remaining performance obligation using the average service component for the portfolio and the average device price. As of December 31, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was $ 38,613 , of which we expect to recognize approximately 82 % by the end of 2025, with the balance recognized thereafter. NOTE 6. ACQUISITIONS, DISPOSITIONS AND OTHER ADJUSTMENTS Acquisitions Spectrum Auctions On January 14, 2022, the Federal Communications Commission (FCC) announced that we were the winning bidder for 1,624 3.45 GHz licenses in Auction 110. We provided the FCC an upfront deposit of $ 123 in the third quarter of 2021 and paid the remaining $ 8,956 in the first quarter of 2022, for a total of $ 9,079 . We funded the purchase price using cash and short-term investments. We received the licenses in May 2022 and classified the auction deposits and related capitalized interest as “Licenses – Net” on our December 31, 2022 consolidated balance sheet. 60 AT&T Inc. Dollars in millions except per share amounts In February 2021, the FCC announced that AT&T was the winning bidder for 1,621 C-Band licenses, comprised of a total of 80 MHz nationwide, including 40 MHz in Phase I. We provided to the FCC an upfront deposit of $ 550 in 2020 and cash payments totaling $ 22,856 in the first quarter of 2021, for a total of $ 23,406 . We received the licenses in July 2021 and classified the auction deposits, related capitalized interest and billed relocation costs as “Licenses – Net” on our December 31, 2021 consolidated balance sheet. In December 2021, we paid $ 955 of Incentive Payments upon clearing of Phase I spectrum and paid $ 2,112 upon clearing of Phase II spectrum in 2023. Additionally, we are responsible for approximately $ 1,100 of compensable relocation costs over the next several years as the spectrum is being cleared by satellite operators, of which we paid $ 650 in 2021, $ 98 in 2022 and $ 109 in 2023. Funding for the purchase price of the spectrum included a combination of cash on hand and short-term investments, as well as short- and long-term debt. Cash paid, including spectrum deposits (net of refunds), capitalized interest, and any payments for incentive and relocation costs are included in “Acquisitions, net of cash acquired” on our consolidated statements of cash flows. Interest is capitalized until the spectrum is ready for its intended use. Dispositions Video Business On July 31, 2021, we closed our transaction with TPG to form a new company named DIRECTV, which is jointly governed by a board with representation from both AT&T and TPG, with TPG having tie-breaking authority on certain key decisions, most significantly the appointment and removal of the CEO. In connection with the transaction, we contributed our U.S. Video business unit to DIRECTV for $ 4,250 of junior preferred units, an additional distribution preference of $ 4,200 and a 70 % economic interest in common units (collectively “equity considerations”). TPG contributed approximately $ 1,800 in cash to DIRECTV for $ 1,800 of senior preferred units and a 30 % economic interest in common units. See Note 10 for additional information on our accounting for our investment in DIRECTV. Upon close of the transaction in the third quarter of 2021, we received approximately $ 7,170 in cash from DIRECTV ($ 7,600 , net of $ 430 cash on hand) and transferred $ 195 of DIRECTV debt. Approximately $ 1,800 of the cash received is reported as cash received from financing activities in our consolidated statement of cash flows, as it related to a note payable to DIRECTV, for which payment was tied to our agreement to cover net losses under the remaining term of the NFL SUNDAY TICKET contract up to a cap of $ 2,100 over the remaining period of the contract (see Note 19). The remainder of the net proceeds is reported as cash from investing activities. This transaction did not result in a material gain or loss. Dispositions Reflected as Discontinued Operations WarnerMedia On April 8, 2022, we completed the separation and distribution of our WarnerMedia business, and merger of Spinco, an AT&T subsidiary formed to hold the WarnerMedia business, with a subsidiary of Discovery, Inc., which was renamed Warner Bros. Discovery, Inc (WBD). Each AT&T shareholder was entitled to receive 0.241917 shares of WBD common stock for each share of AT&T common stock held as of the record date , which represented approximately 71 % of WBD. In connection with and in accordance with the terms of the Separation and Distribution Agreement (SDA), prior to the distribution and merger, AT&T received approximately $ 40,400 , which includes $ 38,800 of Spinco cash and $ 1,600 of debt retained by WarnerMedia. During the second quarter of 2022, $ 45,041 of retained earnings and $ 5,632 of additional paid-in capital associated with the transaction were removed from our balance sheet. Additionally, in August 2022, we and WBD finalized the post-closing adjustment, pursuant to Section 1.3 of the SDA, which resulted in a $ 1,200 payment to WBD in the third quarter of 2022 and was reflected in the balance sheet as an adjustment to additional paid-in capital. (See Note 24) Xandr On June 6, 2022, we completed the sale of the marketplace component of Xandr to Microsoft Corporation. Xandr was reflected in our historical financial statements as discontinued operations. Vrio On November 15, 2021, we completed the sale of our Latin America video operations, Vrio, to Grupo Werthein and recorded a note receivable of $ 610 to be paid over four years , of which $ 300 is in the form of seller financing and the remainder is related to working capital adjustments. In the second quarter of 2021, we classified the Vrio disposal group as held-for-sale and reported the disposal group at fair value less cost to sell, which resulted in a noncash, pre-tax impairment charge of $ 4,555 , including approximately $ 2,100 related to accumulated foreign currency translation adjustments and $ 2,500 related to property, plant and equipment and intangible assets. Approximately $ 80 of the impairment was attributable to noncontrolling interest. This disposition did not result in a net material gain or loss. Otter Media During the third quarter of 2021, we disposed of substantially all of the assets of Otter Media. We received approximately $ 1,540 in cash. The disposition did not result in a material gain or loss. 61 AT&T Inc. Dollars in millions except per share amounts Playdemic Ltd. On September 20, 2021, we sold WarnerMedia’s mobile games app studio, Playdemic for approximately $ 1,370 in cash and recognized a pre-tax gain of $ 706 in “Other income (expense) – net,” on our consolidated statement of income. NOTE 7. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment is summarized as follows at December 31: Lives (years) 2023 2022 Land - $ 1,377 $ 1,381 Buildings and improvements 2 - 44 39,380 38,751 Central office equipment 1 3 - 10 100,264 98,468 Cable, wiring and conduit 15 - 50 90,109 84,447 Other equipment 3 - 20 85,379 81,761 Software 3 - 7 17,742 17,640 Under construction - 5,640 7,182 339,891 329,630 Accumulated depreciation and amortization 211,402 202,185 Property, plant and equipment – net $ 128,489 $ 127,445 1 Includes certain network software. Our depreciation expense was $ 18,593 in 2023, $ 17,852 in 2022, and $ 17,634 in 2021. Depreciation expense included amortization of software totaling $ 3,023 in 2023, $ 2,972 in 2022 and $ 2,909 in 2021. In December 2022, we recorded a noncash pre-tax charge of $ 1,413 to abandon conduits that will not be utilized to support future network activity. The abandonment was considered outside the ordinary course of business. During the first quarter of 2022, we updated our analysis of economic lives of AT&T owned fiber network assets. As of January 1, 2022, we extended the estimated economic life and depreciation period of such costs to better reflect the physical life of the assets that we had been experiencing and absence of technological changes that would replace fiber as the best broadband technology in the industry. The change in accounting estimate decreased depreciation expense $ 280 , or $ 0.03 per diluted share from continuing operations for the year ended December 31, 2022. NOTE 8. LEASES We have operating and finance leases for certain facilities and equipment used in our operations. Our leases generally have remaining lease terms of up to 15 years. Some of our operating leases (e.g., for towers and real estate) contain renewal options that may be exercised, and some of our leases include options to terminate the leases within one year. We have recognized a right-of-use asset for both operating and finance leases, and a corresponding lease liability that represents the present value of our obligation to make payments over the lease term. The present value of the lease payments is calculated using the incremental borrowing rate for operating and finance leases, which was determined using a portfolio approach based on the rate of interest that we would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term. We use the unsecured borrowing rate and risk-adjust that rate to approximate a collateralized rate in the currency of the lease, which will be updated on a quarterly basis for measurement of new lease liabilities. The components of lease expense were as follows: 2023 2022 2021 Operating lease cost $ 5,577 $ 5,437 $ 5,363 Finance lease cost: Amortization of leased assets in property, plant and equipment $ 232 $ 204 $ 179 Interest on lease obligation 184 159 145 Total finance lease cost $ 416 $ 363 $ 324 62 AT&T Inc. Dollars in millions except per share amounts The following table provides supplemental cash flows information related to leases: 2023 2022 2021 Cash Flows from Operating Activities Cash paid for amounts included in lease obligations: Operating cash flows from operating leases $ 4,588 $ 4,679 $ 4,580 Supplemental Lease Cash Flow Disclosures Operating lease right-of-use assets obtained in exchange for new operating lease obligations 2,693 3,751 3,396 The following tables set forth supplemental balance sheet information related to leases at December 31: 2023 2022 Operating Leases Operating lease right-of-use assets $ 20,905 $ 21,814 Accounts payable and accrued liabilities $ 3,524 $ 3,547 Operating lease obligation 17,568 18,659 Total operating lease obligation $ 21,092 $ 22,206 Finance Leases Property, plant and equipment, at cost $ 2,828 $ 2,770 Accumulated depreciation and amortization ( 1,399 ) ( 1,224 ) Property, plant and equipment – net $ 1,429 $ 1,546 Current portion of long-term debt $ 183 $ 170 Long-term debt 1,655 1,647 Total finance lease obligation $ 1,838 $ 1,817 2023 2022 Weighted-Average Remaining Lease Term (years) Operating leases 7.7 8.1 Finance leases 7.2 7.9 Weighted-Average Discount Rate Operating leases 4.1 % 3.7 % Finance leases 8.3 % 8.0 % 63 AT&T Inc. Dollars in millions except per share amounts The following table provides the expected future minimum maturities of lease obligations: At December 31, 2023 Operating Leases Finance Leases 2024 $ 4,699 $ 334 2025 4,105 338 2026 3,443 331 2027 2,805 331 2028 2,172 334 Thereafter 8,132 840 Total lease payments 25,356 2,508 Less: imputed interest ( 4,264 ) ( 670 ) Total $ 21,092 $ 1,838 NOTE 9. GOODWILL AND OTHER INTANGIBLE ASSETS We test goodwill for impairment at a reporting unit level, which is deemed to be our principal operating segments or one level below. With our annual impairment testing as of October 1, the calculated fair value of each reporting unit exceeded its book value; however, the Consumer Wireline fair value exceeded its book value by less than 10%, with interest rates negatively impacting fair value, offset by higher long-term cash flow projections driven by our fiber investment. In 2022, we recorded noncash impairment charges of $ 13,478 in our Business Wireline reporting unit, $ 10,508 in our Consumer Wireline reporting unit and $ 826 in our Mexico reporting unit. The decline in fair values was primarily due to changes in the macroeconomic environment, namely increased weighted-average cost of capital. Also, inflation pressure and lower projected cash flows driven by secular declines, predominantly at Business Wireline, impacted the fair values. A combination of discounted cash flow and market multiple approaches was used to determine the fair values. In the Communications segment, if all other assumptions were to remain unchanged, we expect the impairment charge would have increased by approximately $ 3,400 if the weighted average cost of capital increased by 25 basis points, or $ 2,100 if the projected terminal growth rate declined by 25 basis points, or $ 2,800 if the projected long-term EBITDA margin declined 100 basis points. Changes to our goodwill in 2023 primarily resulted from goodwill attributed to assets contributed to the formation of strategic joint ventures. Changes to our goodwill in 2022 primarily resulted from the noncash impairments discussed above. At December 31, 2023, our Communications segment has three reporting units: Mobility, Business Wireline and Consumer Wireline. The reporting unit is deemed to be the operating segment for Latin America. The following table sets forth the changes in the carrying amounts of goodwill by operating segment: 2023 2022 Balance at Jan. 1 Dispositions and other Balance at Dec. 31 Balance at Jan. 1 Impairments Dispositions, currency exchange and other Balance at Dec. 31 Communications Goodwill $ 91,881 $ ( 41 ) $ 91,840 $ 91,924 $ — $ ( 43 ) $ 91,881 Accumulated Impairments ( 23,986 ) — ( 23,986 ) — ( 23,986 ) — ( 23,986 ) Net goodwill 67,895 ( 41 ) 67,854 91,924 ( 23,986 ) ( 43 ) 67,895 Latin America — — — 816 ( 826 ) 10 — Total $ 67,895 $ ( 41 ) $ 67,854 $ 92,740 $ ( 24,812 ) $ ( 33 ) $ 67,895 We review amortizing intangible assets for impairment whenever events or circumstances indicate that the carrying amount may not be recoverable over the remaining life of the asset or asset group. 64 AT&T Inc. Dollars in millions except per share amounts Indefinite-lived wireless licenses increased in 2023 primarily due to compensable relocation and incentive payments and $ 695 of capitalized interest (see Notes 6 and 23). Indefinite-lived wireless licenses increased in 2022 primarily due to auction activity and $ 1,120 of capitalized interest (see Notes 6 and 23). Our other intangible assets at December 31 are summarized as follows: 2023 2022 Other Intangible Assets Weighted-Average Life Gross Carrying Amount Accumulated Amortization Currency Translation Adjustment Gross Carrying Amount Accumulated Amortization Currency Translation Adjustment Amortized intangible assets: Wireless licenses 21.6 years $ 3,034 $ 572 $ 23 $ 3,045 $ 425 $ ( 297 ) Customer lists and relationships 14.3 years 379 286 ( 74 ) 413 304 ( 75 ) Trademarks, trade names and other 7.8 years 289 261 ( 5 ) 330 245 ( 6 ) Total 21.4 years $ 3,702 $ 1,119 $ ( 56 ) $ 3,788 $ 974 $ ( 378 ) Indefinite-lived intangible assets not subject to amortization: Wireless licenses $ 124,734 $ 121,769 Trade names 5,241 5,241 Total $ 129,975 $ 127,010 Amortized intangible assets are definite-life assets, and, as such, we record amortization expense based on a method that most appropriately reflects our expected cash flows from these assets. Amortization expense for definite-life intangible assets was $ 184 for the year ended December 31, 2023, $ 169 for the year ended December 31, 2022 and $ 218 for the year ended December 31, 2021. Estimated amortization expense for the next five years is: $ 171 for 2024, $ 164 for 2025, $ 164 for 2026, $ 164 for 2027 and $ 163 for 2028. NOTE 10. EQUITY METHOD INVESTMENTS Investments in partnerships, joint ventures and less than majority-owned subsidiaries in which we have significant influence are accounted for under the equity method. On May 11, 2023, we closed our transaction with BlackRock, through a fund managed by its Diversified Infrastructure business, related to Gigapower, LLC (Gigapower). We deconsolidated Gigapower’s operations and began accounting for it as an equity method investment on May 12, 2023. On July 31, 2021, we closed our transaction with TPG to form a new company named DIRECTV (see Note 6). The transaction resulted in our deconsolidation of the Video business, with DIRECTV being accounted for under the equity method beginning August 1, 2021. Our investments in equity affiliates at December 31, 2023, primarily included our interests in DIRECTV, Gigapower and SKY Mexico. DIRECTV We account for our investment in DIRECTV under the equity method of accounting. DIRECTV is considered a variable interest entity for accounting purposes. As DIRECTV is jointly governed by a board with representation from both AT&T and TPG, with TPG having tie-breaking authority on certain key decisions, most significantly the appointment and removal of the CEO, we have concluded that we are not the primary beneficiary of DIRECTV. The ownership interests in DIRECTV, based on seniority are as follows: • Preferred units with distribution rights of $ 1,800 held by TPG, which were fully distributed in 2021. 65 AT&T Inc. Dollars in millions except per share amounts • Junior preferred units with distribution rights of $ 4,250 held by AT&T, which were fully distributed as of December 31, 2023. • Distribution preference associated with Common units of $ 4,200 held by AT&T, of which $ 2,975 of distribution rights remain as of December 31, 2023. • Common units, with 70 % held by AT&T and 30 % held by TPG. The initial fair value of the equity considerations on July 31, 2021 was $ 6,852 , which was determined using a discounted cash flow model reflecting distribution rights and preference of the individual instruments. During 2023, 2022 and 2021, we recognized $ 1,666 , $ 1,808 and $ 619 of equity in net income of affiliates and received total distributions of $ 3,715 , $ 4,457 and $ 1,942 , respectively, from DIRECTV. The book value of our investment in DIRECTV was $ 877 and $ 2,911 at December 31, 2023 and 2022. Our share of net income or loss may differ from the stated ownership percentage interest of DIRECTV as the terms of the arrangement prescribe substantive non-proportionate cash distributions, both from operations and in liquidation, that are based on classes of interests held by investors. In the event that DIRECTV records a loss, that loss will be allocated to ownership interests based on their seniority, beginning with the most subordinated interests. Gigapower We hold a 50 % interest in this joint venture with BlackRock, which will provide a fiber network to internet service providers and other businesses across the U.S. that serve customers outside of our wireline service area. SKY Mexico We hold a 41.3 % interest in SKY Mexico, which is a leading pay-TV provider in Mexico. The following table presents summarized financial information for DIRECTV and our other equity method investments, consisting primarily of Gigapower, SKY Mexico and certain sports-related programming investments, at December 31, or for the year then ended: 2023 2022 2021 Income Statements 1,2 Operating revenues $ 22,938 $ 25,794 $ 12,220 Operating income 2,873 3,175 1,179 Net income 2,393 2,581 938 Balance Sheets 2 Current assets 3,058 4,240 Noncurrent assets 12,203 14,211 Current liabilities 5,148 6,681 Noncurrent liabilities 8,193 7,951 1 Does not include DIRECTV for periods prior to August 1, 2021. 2 Does not include Gigapower for periods prior to May 12, 2023. The following table is a reconciliation of our investments in equity affiliates as presented on our consolidated balance sheets: 2023 2022 Beginning of year $ 3,533 $ 6,168 Additional investments 135 3 Distributions from DIRECTV in excess of cumulative equity in earnings ( 2,049 ) ( 2,649 ) Dividends and distributions of cumulative earnings received ( 1,668 ) ( 1,815 ) Equity in net income of affiliates 1,675 1,791 Impairments ( 450 ) — Currency translation adjustments 61 25 Other adjustments 14 10 End of year $ 1,251 $ 3,533 66 AT&T Inc. Dollars in millions except per share amounts NOTE 11. DEBT Long-term debt of AT&T and its subsidiaries, including interest rates and maturities, is summarized as follows at December 31: 2023 2022 Notes and debentures Interest Rates 1 Maturities 0.00 % – 2.99 % 2023 – 2033 $ 24,560 $ 24,603 3.00 % – 4.99 % 2023 – 2061 87,855 91,201 5.00 % – 6.99 % 2023 – 2095 27,286 20,083 7.00 % – 12.00 % 2023 – 2097 3,639 4,884 Credit agreement borrowings — 2,500 Fair value of interest rate swaps recorded in debt 7 13 143,347 143,284 Unamortized (discount) premium – net ( 9,509 ) ( 9,650 ) Unamortized issuance costs ( 436 ) ( 427 ) Total notes and debentures 133,402 133,207 Finance lease obligations 1,838 1,817 Total long-term debt, including current maturities 135,240 135,024 Current maturities of long-term debt ( 7,386 ) ( 6,601 ) Total long-term debt $ 127,854 $ 128,423 1 Foreign debt includes the impact from hedges, when applicable. We had outstanding Euro, British pound sterling, Canadian dollar, Swiss franc, and Australian dollar denominated debt of approximately $ 35,192 and $ 35,525 at December 31, 2023 and 2022, respectively. The weighted-average interest rate of our long-term debt portfolio, including credit agreement borrowings and the impact of derivatives, was approximately 4.2 % as of December 31, 2023 and 4.1 % as of December 31, 2022. Debt maturing within one year consisted of the following at December 31: 2023 2022 Current maturities of long-term debt $ 7,386 $ 6,601 Commercial paper 2,091 866 Total $ 9,477 $ 7,467 The weighted average interest rate on our outstanding short-term borrowings was approximately 6.0 % as of December 31, 2023 and 4.8 % as of December 31, 2022. 67 AT&T Inc. Dollars in millions except per share amounts Financing Activities During 2023, we received net proceeds of $ 10,004 on the issuance of $ 10,061 in long-term debt and proceeds of $ 750 on the issuance of credit agreement borrowings in various markets, with an average weighted maturity of approximately 6.3 years and a weighted average interest rate of 5.2 %. We repaid $ 12,458 of long-term debt and credit agreement borrowings with a weighted average interest rate of 5.3 %. Our debt activity during 2023 primarily consisted of the following: First Quarter Second Quarter Third Quarter Fourth Quarter Full Year 2023 Net commercial paper borrowings $ 2,341 $ 1,284 $ ( 112 ) $ ( 2,436 ) $ 1,077 Issuance of notes and debentures: USD notes $ 1,747 $ 2,730 $ — $ — $ 4,477 EUR notes 1,319 3,537 — — 4,856 Other 1,050 — — 371 1,421 Debt issuances $ 4,116 $ 6,267 $ — $ 371 $ 10,754 Repayments: Private financing $ — $ ( 750 ) $ — $ — $ ( 750 ) Repayment of other short-term borrowings $ — $ ( 750 ) $ — $ — $ ( 750 ) USD notes $ ( 376 ) $ ( 750 ) $ — $ — $ ( 1,126 ) EUR notes ( 1,626 ) ( 473 ) ( 3,503 ) — ( 5,602 ) AUD notes — — ( 450 ) — ( 450 ) 2025 Term Loan ( 2,500 ) — — — ( 2,500 ) Other ( 1,443 ) ( 441 ) ( 327 ) ( 155 ) ( 2,366 ) Repayments of long-term debt $ ( 5,945 ) $ ( 1,664 ) $ ( 4,280 ) $ ( 155 ) $ ( 12,044 ) As of December 31, 2023 and 2022, we were in compliance with all covenants and conditions of instruments governing our debt. Substantially all of our outstanding long-term debt is unsecured. Maturities of outstanding long-term notes and debentures, as of December 31, 2023, and the corresponding weighted-average interest rate scheduled for repayment are as follows: 2024 2025 2026 2027 2028 Thereafter Debt repayments 1,2 $ 7,537 $ 5,399 $ 10,402 $ 6,310 $ 6,905 $ 109,511 Weighted-average interest rate 2 3.5 % 4.7 % 3.5 % 3.7 % 3.2 % 4.3 % 1 Debt repayments represent maturity value. Foreign debt includes the impact from hedges, when applicable. 2 Includes credit agreement borrowings. Credit Facilities General In November 2022, we entered into and drew on a $ 2,500 term loan agreement due February 16, 2025 (2025 Term Loan), with Mizuho Bank, Ltd., as agent. On March 30, 2023, the $ 2,500 Term Loan was paid off and terminated. In March 2021, we entered into and drew on a $ 2,000 term loan credit agreement (BAML Bilateral Term Loan) consisting of (i) a $ 1,000 facility (BAML Tranche A Facility), and (ii) a $ 1,000 facility (BAML Tranche B Facility), with Bank of America, N.A., as agent. On April 13, 2022, the BAML Bilateral Term Loan was paid off and terminated. In January 2021, we entered into a $ 14,700 Term Loan Credit Agreement (2021 Syndicated Term Loan), with Bank of America, N.A., as agent. In March 2021, we borrowed $ 7,350 under the 2021 Syndicated Term Loan and the remaining $ 7,350 of lenders’ commitments was terminated. On April 13, 2022, the 2021 Syndicated Term Loan was paid off and terminated. 68 AT&T Inc. Dollars in millions except per share amounts Revolving Credit Agreement We currently have a $ 12,000 revolving credit agreement that terminates on November 18, 2028 (Revolving Credit Agreement), for which we extended the termination date, pursuant to the terms of the agreement, by one year in November 2023. No amount was outstanding under the Revolving Credit Agreement as of December 31, 2023. Our Revolving Credit Agreement contains covenants that are customary for an issuer with investment grade senior debt credit rating as well as a net debt-to-EBITDA financial ratio covenant requiring AT&T to maintain, as of the last day of each fiscal quarter, a ratio of not more than 3.75 -to-1. The events of default are customary for agreements of this type and such events would result in the acceleration of, or would permit the lenders to accelerate, as applicable, required payments and would increase each agreement’s relevant Applicable Margin by 2.00 % per annum. The obligations of the lenders under the Revolving Credit Agreement to provide advances will terminate on November 18, 2028, unless the commitments are terminated in whole prior to that date. All advances must be repaid no later than the date on which lenders are no longer obligated to make any advances under the Revolving Credit Agreement. The Revolving Credit Agreement provides that we and lenders representing more than 50 % of the facility amount may agree to extend their commitments under the credit agreement for one additional one-year periods beyond the initial termination date. We have the right to terminate, in whole or in part, amounts committed by the lenders under the credit agreement in excess of any outstanding advances; however, any such terminated commitments may not be reinstated. Advances under the Revolving Credit Agreement would bear interest, at our option, either: • at a variable annual rate equal to: (1) the highest of (but not less than zero) (a) the rate of interest announced publicly by Citibank in New York, New York, from time to time, as Citibank’s base rate, (b) 0.5 % per annum above the federal funds rate, and (c) the forward-looking term rate based on the secured overnight financing rate (Term SOFR) for a period of one month plus a credit spread adjustment of 0.10 % plus 1.00 %, plus (2) an applicable margin, as set forth in the credit agreement (the “Applicable Margin for Base Advances”); or • at a rate equal to: (i) Term SOFR for a period of one, three or six months, as applicable, plus (ii) a credit spread adjustment of 0.10 % plus (iii) an applicable margin, as set forth in the Revolving Credit Agreement (the “Applicable Margin for Benchmark Rate Advances”). We pay a facility fee of 0.060 %, 0.070 %, 0.080 % or 0.100 % per annum of the amount of the lender commitments, depending on AT&T’s credit rating. NOTE 12. FAIR VALUE MEASUREMENTS AND DISCLOSURE The Fair Value Measurement and Disclosure framework in ASC 820, “Fair Value Measurement,” provides a three-tiered fair value hierarchy based on the reliability of the inputs used to determine fair value. Level 1 refers to fair values determined based on quoted prices in active markets for identical assets. Level 2 refers to fair values estimated using significant other observable inputs and Level 3 includes fair values estimated using significant unobservable inputs. The level of an asset or liability within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Our valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. The valuation methodologies described above may produce a fair value calculation that may not be indicative of future net realizable value or reflective of future fair values. We believe our valuation methods are appropriate and consistent with other market participants. The use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. There have been no changes in the methodologies used since December 31, 2022. 69 AT&T Inc. Dollars in millions except per share amounts Long-Term Debt and Other Financial Instruments The carrying amounts and estimated fair values of our long-term debt, including current maturities, and other financial instruments, are summarized as follows: December 31, 2023 December 31, 2022 Carrying Amount Fair Value Carrying Amount Fair Value Notes and debentures 1 $ 133,402 $ 128,474 $ 133,207 $ 122,524 Commercial paper 2,091 2,091 866 866 Investment securities 2 2,836 2,836 2,692 2,692 1 Includes credit agreement borrowings. 2 Excludes investments accounted for under the equity method. The carrying amount of debt with an original maturity of less than one year approximates fair value. The fair value measurements used for notes and debentures are considered Level 2 and are determined using various methods, including quoted prices for identical or similar securities in both active and inactive markets. Following is the fair value leveling for investment securities that are measured at fair value and derivatives as of December 31, 2023 and December 31, 2022. Derivatives designated as hedging instruments are reflected as “Prepaid and other current assets,” “Other Assets,” “Accounts payable and accrued liabilities,” and “Other noncurrent liabilities” on our consolidated balance sheets. December 31, 2023 Level 1 Level 2 Level 3 Total Equity Securities Domestic equities $ 1,002 $ — $ — $ 1,002 International equities 215 — — 215 Fixed income equities 209 — — 209 Available-for-Sale Debt Securities — 1,228 — 1,228 Asset Derivatives Cross-currency swaps — 424 — 424 Liability Derivatives Interest rate swaps — ( 2 ) — ( 2 ) Cross-currency swaps — ( 3,601 ) — ( 3,601 ) December 31, 2022 Level 1 Level 2 Level 3 Total Equity Securities Domestic equities $ 995 $ — $ — $ 995 International equities 198 — — 198 Fixed income equities 189 — — 189 Available-for-Sale Debt Securities — 1,132 — 1,132 Asset Derivatives Cross-currency swaps — 28 — 28 Liability Derivatives Cross-currency swaps — ( 6,010 ) — ( 6,010 ) Foreign exchange contracts — ( 23 ) — ( 23 ) Investment Securities Our investment securities include both equity and debt securities that are measured at fair value, as well as equity securities without readily determinable fair values. A substantial portion of the fair values of our investment securities is estimated based on quoted market prices. Investments in equity securities not traded on a national securities exchange are valued at cost, less any impairment, and adjusted for changes resulting from observable, orderly transactions for identical or similar securities. 70 AT&T Inc. Dollars in millions except per share amounts Investments in debt securities not traded on a national securities exchange are valued using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. The components comprising total gains and losses in the period on equity securities are as follows: For the years ended December 31, 2023 2022 2021 Total gains (losses) recognized on equity securities $ 257 $ ( 309 ) $ 293 Gains (Losses) recognized on equity securities sold 89 ( 80 ) ( 5 ) Unrealized gains (losses) recognized on equity securities held at end of period $ 168 $ ( 229 ) $ 298 At December 31, 2023, available-for-sale debt securities totaling $ 1,228 have maturities as follows - less than one year: $ 80 ; one to three years: $ 178 ; three to five years: $ 156 ; five or more years: $ 814 . Our cash equivalents (money market securities), short-term investments (certificate and time deposits) and nonrefundable customer deposits are recorded at amortized cost, and the respective carrying amounts approximate fair values. Short-term investments and nonrefundable customer deposits are recorded in “Prepaid and other current assets” and our investment securities are recorded in “Other Assets” on the consolidated balance sheets. Derivative Financial Instruments We enter into derivative transactions to manage certain market risks, primarily interest rate risk and foreign currency exchange risk. This includes the use of interest rate swaps, interest rate locks, foreign exchange forward contracts and combined interest rate foreign exchange contracts (cross-currency swaps). We do not use derivatives for trading or speculative purposes. We record derivatives on our consolidated balance sheets at fair value that is derived from observable market data, including yield curves and foreign exchange rates (all of our derivatives are Level 2). Cash flows associated with derivative instruments are presented in the same category on the consolidated statements of cash flows as the item being hedged. Fair Value Hedging Periodically, we enter into and designate fixed-to-floating interest rate swaps as fair value hedges. The purpose of these swaps is to manage interest rate risk by managing our mix of fixed-rate and floating-rate debt. These swaps involve the receipt of fixed-rate amounts for floating interest rate payments over the life of the swaps without exchange of the underlying principal amount. We also designate most of our cross-currency swaps and foreign exchange contracts as fair value hedges. The purpose of these contracts is to hedge foreign currency risk associated with changes in spot rates on foreign denominated debt. For cross-currency hedges, we have elected to exclude the change in fair value of the swap related to both time value and cross-currency basis spread from the assessment of hedge effectiveness. For foreign exchange contracts, we have elected to exclude the change in fair value of forward points from the assessment of hedge effectiveness. Unrealized and realized gains or losses from fair value hedges impact the same category on the consolidated statements of income as the item being hedged, including the earnings impact of excluded components. In instances where we have elected to exclude components from the assessment of hedge effectiveness related to fair value hedges, unrealized gains or losses on such excluded components are recorded as a component of accumulated OCI and recognized into earnings over the life of the hedging instrument. Unrealized gains on derivatives designated as fair value hedges are recorded at fair value as assets, and unrealized losses are recorded at fair market value as liabilities. Except for excluded components, changes in the fair value of derivative instruments designated as fair value hedges are offset against the change in fair value of the hedged assets or liabilities through earnings. In the years ended December 31, 2023 and 2022, no ineffectiveness was measured on fair value hedges. Cash Flow Hedging We designate some of our cross-currency swaps as cash flow hedges to hedge our exposure to variability in expected future cash flows that are attributable to foreign currency risk and interest rate risk generated from our foreign-denominated debt. These agreements include initial and final exchanges of principal from fixed foreign denominated amounts to fixed U.S. dollar denominated amounts, to be exchanged at a specified rate that is usually determined by the market spot rate upon issuance. They also include an interest rate swap of a fixed or floating foreign denominated interest rate to a fixed U.S. dollar denominated interest rate. On September 30, 2022, we de-designated most of our cross-currency swaps from cash flow hedges and re-designated these swaps as fair value hedges. The amount remaining in accumulated other comprehensive loss related to cash flow hedges on the de-designation date was $ 1,857 . The amount will be reclassified to earnings when the hedged item is recognized in earnings or 71 AT&T Inc. Dollars in millions except per share amounts when it becomes probable that the forecasted transactions will not occur. The election of fair value hedge designation for cross-currency swaps does not have an impact on our financial results. Unrealized gains on derivatives designated as cash flow hedges are recorded at fair value as assets, and unrealized losses are recorded at fair value as liabilities. For derivative instruments designated as cash flow hedges, changes in fair value are reported as a component of accumulated OCI and are reclassified into the consolidated statements of income in the same period the hedged transaction affects earnings. Periodically, we enter into and designate interest rate locks to partially hedge the risk of changes in interest payments attributable to increases in the benchmark interest rate during the period leading up to the probable issuance of fixed-rate debt. We designate our interest rate locks as cash flow hedges. Gains and losses when we settle our interest rate locks are amortized into income over the life of the related debt. Over the next 12 months, we expect to reclassify $ 59 from accumulated OCI to “Interest expense” due to the amortization of net losses on historical interest rate locks. Collateral and Credit-Risk Contingency We have entered into agreements with our derivative counterparties establishing collateral thresholds based on respective credit ratings and netting agreements. At December 31, 2023, we had posted collateral of $ 670 (a deposit asset) and held collateral of $ 5 (a receipt liability). Under the agreements, if AT&T’s credit rating had been downgraded two ratings levels by Fitch Ratings, one level by S&P and one level by Moody’s, before the final collateral exchange in December, we would have been required to post additional collateral of $ 53 . If AT&T’s credit rating had been downgraded three ratings levels by Fitch Ratings, two levels by S&P, and two levels by Moody’s, we would have been required to post additional collateral of $ 3,113 . At December 31, 2022, we had posted collateral of $ 886 (a deposit asset) and held collateral of $ 0 (a receipt liability). We do not offset the fair value of collateral, whether the right to reclaim cash collateral (a receivable) or the obligation to return cash collateral (a payable) exists, against the fair value of the derivative instruments. Following are the notional amounts of our outstanding derivative positions at December 31: 2023 2022 Interest rate swaps $ 1,750 $ — Cross-currency swaps 38,006 38,213 Foreign exchange contracts — 617 Total $ 39,756 $ 38,830 Following are the related hedged items affecting our financial position and performance: Effect of Derivatives on the Consolidated Statements of Income Fair Value Hedging Relationships For the years ended December 31, 2023 2022 2021 Interest rate swaps (“Interest expense”): Gain (loss) on interest rate swaps $ ( 6 ) $ ( 3 ) $ ( 4 ) Gain (loss) on long-term debt 6 3 4 Cross-currency swaps: Gain (loss) on cross-currency swaps 1,121 2,195 ( 91 ) Gain (loss) on long-term debt ( 1,121 ) ( 2,195 ) 91 Gain (loss) recognized in accumulated OCI 1,126 297 ( 17 ) Foreign exchange contracts: Gain (loss) on foreign exchange contracts 12 ( 12 ) — Gain (loss) on long-term debt ( 12 ) 12 — Gain (loss) recognized in accumulated OCI 12 ( 12 ) — 72 AT&T Inc. Dollars in millions except per share amounts In addition, the net swap settlements that accrued and settled in the periods above were offset against “Interest expense.” Cash Flow Hedging Relationships For the years ended December 31, 2023 2022 2021 Cross-currency swaps: Gain (loss) recognized in accumulated OCI $ 12 $ ( 1,119 ) $ ( 873 ) Foreign exchange contracts: Gain (loss) recognized in accumulated OCI — 3 ( 17 ) Other income (expense) – net reclassified from accumulated OCI into income — 1 1 Interest rate locks: Interest income (expense) reclassified from accumulated OCI into income ( 59 ) ( 65 ) ( 92 ) Other income (expense) reclassified from accumulated OCI into income — ( 45 ) — Distribution of WarnerMedia — ( 12 ) — Nonrecurring Fair Value Measurements In addition to assets and liabilities that are recorded at fair value on a recurring basis, impairment indicators may subject goodwill and long-lived assets to nonrecurring fair value measurements. The implied fair values of the Business Wireline, Consumer Wireline and Mexico reporting units were estimated using both the discounted cash flow as well as market multiple approaches (see Note 9). The inputs to these models are considered Level 3. NOTE 13. INCOME TAXES Significant components of our deferred tax liabilities (assets) are as follows at December 31: 2023 2022 Depreciation and amortization $ 37,931 $ 36,570 Licenses and nonamortizable intangibles 20,049 19,339 Lease right-of-use assets 5,100 5,322 Lease liabilities ( 5,146 ) ( 5,417 ) Employee benefits ( 2,970 ) ( 2,251 ) Deferred fulfillment costs 1,941 1,989 Equity in partnership 2,943 3,284 Net operating loss and other carryforwards ( 6,484 ) ( 5,817 ) Other – net 563 ( 248 ) Subtotal 53,927 52,771 Deferred tax assets valuation allowance 4,656 4,175 Net deferred tax liabilities $ 58,583 $ 56,946 Noncurrent deferred tax liabilities $ 58,666 $ 57,032 Less: Noncurrent deferred tax assets ( 83 ) ( 86 ) Net deferred tax liabilities $ 58,583 $ 56,946 At December 31, 2023, we had combined net operating and capital loss carryforwards (tax effected) for federal income tax purposes of $ 824 , state of $ 774 and foreign of $ 2,819 , expiring through 2043. Additionally, we had federal credit carryforwards of $ 485 and state credit carryforwards of $ 1,582 , expiring primarily through 2043. We recognize a valuation allowance if, based on the weight of available evidence, it is more likely than not that some portion, or all, of a deferred tax asset will not be realized. Our valuation allowances at December 31, 2023 and 2022 related primarily to state and foreign net operating losses and state credit carryforwards. We consider post-1986 unremitted foreign earnings subjected to the one-time transition tax not to be indefinitely reinvested as such earnings can be repatriated without any significant incremental tax costs. We consider other types of unremitted foreign 73 AT&T Inc. Dollars in millions except per share amounts earnings to be indefinitely reinvested. U.S. income and foreign withholding taxes have not been recorded on temporary differences related to investments in certain foreign subsidiaries as such differences are considered indefinitely reinvested. The amount of unrecognized deferred tax liability does not have a material impact on the financial statements. We recognize the financial statement effects of a tax return position when it is more likely than not, based on the technical merits, that the position will ultimately be sustained. For tax positions that meet this recognition threshold, we apply our judgment, taking into account applicable tax laws, our experience in managing tax audits and relevant GAAP, to determine the amount of tax benefits to recognize in our financial statements. For each position, the difference between the benefit realized on our tax return and the benefit reflected in our financial statements is recorded on our consolidated balance sheets as an unrecognized tax benefit (UTB). We update our UTBs at each financial statement date to reflect the impacts of audit settlements and other resolutions of audit issues, the expiration of statutes of limitation, developments in tax law and ongoing discussions with taxing authorities. A reconciliation of the change in our UTB balance from January 1 to December 31 for 2023 and 2022 is as follows: Federal, State and Foreign Tax 2023 2022 Balance at beginning of year $ 9,657 $ 8,954 Increases for tax positions related to the current year 1,026 1,389 Increases for tax positions related to prior years 448 577 Decreases for tax positions related to prior years ( 212 ) ( 1,079 ) Lapse of statute of limitations ( 16 ) ( 2 ) Settlements 1,021 ( 182 ) Balance at end of year 11,924 9,657 Accrued interest and penalties 1,785 1,930 Gross unrecognized income tax benefits 13,709 11,587 Less: Deferred federal and state income tax benefits ( 687 ) ( 723 ) Less: Tax attributable to timing items included above ( 6,438 ) ( 4,640 ) Total UTB that, if recognized, would impact the effective income tax rate as of the end of the year $ 6,584 $ 6,224 Periodically we make deposits to taxing jurisdictions which reduce our UTB balance but are not included in the reconciliation above. The amount of deposits that reduced our UTB balance was $ 2,361 at December 31, 2023 and $ 1,767 at December 31, 2022. Current tax assets on our consolidated balance sheet at December 31, 2023 were $ 2,079 . Accrued interest and penalties included in UTBs were $ 1,785 as of December 31, 2023 and $ 1,930 as of December 31, 2022. We record interest and penalties related to federal, state and foreign UTBs in income tax expense. The net interest and penalty expense (benefit) included in income tax expense was $ 324 for 2023, $( 86 ) for 2022 and $( 129 ) for 2021. We file income tax returns in the U.S. federal jurisdiction and various state, local and foreign jurisdictions. As a large taxpayer, our income tax returns are regularly audited by the Internal Revenue Service (IRS) and other taxing authorities. The IRS has completed field examinations of our tax returns through 2015. All audit periods prior to 2006 are closed for federal examination purposes and we have effectively resolved all outstanding audit issues for years through 2010 with the IRS Appeals Division. Those years will be closed as the final paperwork is processed in the coming months. While we do not expect material changes, we are generally unable to estimate the range of impacts on the balance of the remaining uncertain tax positions or the impact on the effective tax rate from the resolution of these issues until each year is closed; and it is possible that the amount of unrecognized benefit with respect to our uncertain tax positions could increase or decrease within the next 12 months. 74 AT&T Inc. Dollars in millions except per share amounts The components of income tax (benefit) expense are as follows: 2023 2022 2021 Federal: Current $ 2,280 $ 579 $ ( 2,400 ) Deferred 2,250 2,206 6,872 4,530 2,785 4,472 State and local: Current 423 21 289 Deferred ( 832 ) 912 648 ( 409 ) 933 937 Foreign: Current 66 106 ( 66 ) Deferred 38 ( 44 ) 52 104 62 ( 14 ) Total $ 4,225 $ 3,780 $ 5,395 “Income (Loss) from Continuing Operations Before Income Taxes” in the consolidated statements of income included the following components for the years ended December 31: 2023 2022 2021 U.S. income (loss) before income taxes $ 20,506 $ ( 1,480 ) $ 29,678 Foreign income (loss) before income taxes ( 658 ) ( 1,614 ) ( 507 ) Total $ 19,848 $ ( 3,094 ) $ 29,171 A reconciliation of income tax expense (benefit) on continuing operations and the amount computed by applying the statutory federal income tax rate of 21% to income from continuing operations before income taxes is as follows: 2023 2022 2021 Taxes computed at federal statutory rate $ 4,168 $ ( 650 ) $ 6,126 Increases (decreases) in income taxes resulting from: State and local income taxes – net of federal income tax benefit 345 795 936 CARES Act federal NOL carryback — — ( 471 ) Tax on foreign investments 102 43 47 Noncontrolling interest ( 259 ) ( 308 ) ( 291 ) Permanent items and R&D credit ( 207 ) ( 121 ) ( 153 ) Audit resolutions 319 ( 642 ) ( 220 ) Divestitures ( 75 ) ( 481 ) ( 558 ) Goodwill impairment 1 9 5,210 16 Other – net ( 177 ) ( 66 ) ( 37 ) Total $ 4,225 $ 3,780 $ 5,395 Effective Tax Rate 21.3 % ( 122.2 ) % 18.5 % 1 Goodwill impairments are not deductible for tax purposes. On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was enacted, which allows for a Net Operating Loss (NOL) generated in 2020 to be carried back to a year with a federal rate of 35%. During 2021, we recorded a $ 471 tax benefit for the rate impact of the 2020 NOL carryback adjusted for the domestic manufacturing deduction limitation in the carryback year and applicable unrecognized tax benefits. 75 AT&T Inc. Dollars in millions except per share amounts NOTE 14. PENSION AND POSTRETIREMENT BENEFITS We offer noncontributory pension programs covering the majority of domestic nonmanagement employees in our Communications business. Nonmanagement employees’ pension benefits are generally calculated using one of two formulas: a flat dollar amount applied to years of service according to job classification or a cash balance plan with negotiated annual pension band credits as well as interest credits. Most employees can elect to receive their pension benefits in either a lump sum payment or an annuity. Pension programs covering U.S. management employees are closed to new entrants. These programs continue to provide benefits to participants that were generally hired before January 1, 2015, who receive benefits under either cash balance pension programs that include annual or monthly credits based on salary as well as interest credits, or a traditional pension formula (i.e., a stated percentage of employees’ adjusted career income). We also provide a variety of medical, dental and life insurance benefits to certain retired employees under various plans and accrue actuarially determined postretirement benefit costs as active employees earn these benefits. On April 26, 2023, AT&T and State Street Global Advisors Trust Company, as independent fiduciary of the AT&T Pension Benefit Plan (Plan), entered into a commitment agreement with subsidiaries of Athene Holding Ltd. (Athene) under which AT&T agreed to purchase nonparticipating single premium group annuity contracts that would transfer to Athene $ 8,067 of the Plan’s defined benefit pension obligations related to certain retirees, participants and beneficiaries under the Plan. The purchase of the group annuity contracts closed on May 3, 2023, covering approximately 96,000 AT&T participants and beneficiaries (Transferred Participants). Under the group annuity contracts, Athene, through its wholly-owned subsidiaries Athene Annuity and Life Company and Athene Annuity & Life Assurance Company of New York, made an irrevocable commitment, and is solely responsible, to pay the pension benefits of each Transferred Participant beginning with their August 2023 pension payments. The transaction does not change the amount of pension benefits payable to the Transferred Participants. The purchase of the group annuity contracts was funded directly by assets of the Plan via the pension trust underlying the Plan and required no cash or asset contributions by AT&T. We transferred $ 8,067 of pension benefit obligation and related plan assets upon close of the transaction and recognized a pre-tax pension settlement gain of $ 363 . The funded status of the Plan did not materially change due to this transaction. This transaction with Athene was considered a settlement for accounting purposes and required us to remeasure our pension plan assets and obligations at quarter-end for the second and third quarters of 2023. During the third quarter of 2022, we committed to, and reflected in our results, plan changes impacting postretirement health and welfare benefits. This plan change aligns our benefit plans to market level. Obligations and Funded Status For defined benefit pension plans, the benefit obligation is the projected benefit obligation, the actuarial present value, as of our December 31 measurement date, of all benefits attributed by the pension benefit formula to employee service rendered to that date. The amount of benefit to be paid depends on a number of future events incorporated into the pension benefit formula, including estimates of the average life of employees and their beneficiaries and average years of service rendered. It is measured based on assumptions concerning future interest rates and future employee compensation levels as applicable. For postretirement benefit plans, the benefit obligation is the accumulated postretirement benefit obligation, the actuarial present value as of the measurement date of all future benefits attributed under the terms of the postretirement benefit plans to employee service. 76 AT&T Inc. Dollars in millions except per share amounts The following table presents the change in the projected benefit obligation for the years ended December 31: Pension Benefits Postretirement Benefits 2023 2022 2023 2022 Benefit obligation at beginning of year $ 42,828 $ 57,212 $ 7,280 $ 12,552 Service cost - benefits earned during the period 477 617 23 32 Interest cost on projected benefit obligation 1,876 1,747 340 277 Amendments — — ( 42 ) ( 2,370 ) Actuarial (gain) loss 976 ( 10,894 ) 278 ( 1,919 ) Benefits paid, including settlements ( 4,863 ) ( 5,854 ) ( 1,186 ) ( 1,292 ) Group annuity contract transfer ( 8,067 ) — — — Benefit obligation at end of year $ 33,227 $ 42,828 $ 6,693 $ 7,280 The following table presents the change in the fair value of plan assets for the years ended December 31 and the plans’ funded status at December 31: Pension Benefits Postretirement Benefits 2023 2022 2023 2022 Fair value of plan assets at beginning of year $ 40,874 $ 54,401 $ 2,160 $ 3,198 Actual return on plan assets 1,791 ( 7,673 ) 227 ( 370 ) Benefits paid, including settlements 1 ( 4,863 ) ( 5,854 ) ( 624 ) ( 788 ) Contributions — — — 120 Group annuity contract transfer ( 7,704 ) — — — Fair value of plan assets at end of year 30,098 40,874 1,763 2,160 Unfunded status at end of year 2 $ ( 3,129 ) $ ( 1,954 ) $ ( 4,930 ) $ ( 5,120 ) 1 At our discretion, certain postretirement benefits may be paid from our cash accounts, which does not reduce Voluntary Employee Benefit Association (VEBA) assets. Future benefit payments may be made from VEBA trusts and thus reduce those asset balances. 2 Funded status is not indicative of our ability to pay ongoing pension benefits or of our obligation to fund retirement trusts. Required pension funding is determined in accordance with the Employee Retirement Income Security Act of 1974, as amended (ERISA) and applicable regulations. Amounts recognized on our consolidated balance sheets at December 31 are listed below: Pension Benefits Postretirement Benefits 2023 2022 2023 2022 Current portion of employee benefit obligation 1 $ — $ — $ ( 521 ) $ ( 1,058 ) Employee benefit obligation 2 ( 3,129 ) ( 1,954 ) ( 4,409 ) ( 4,062 ) Net amount recognized $ ( 3,129 ) $ ( 1,954 ) $ ( 4,930 ) $ ( 5,120 ) 1 Included in “Accounts payable and accrued liabilities.” 2 Included in “Postemployment benefit obligation,” combined with international pension obligations and other postemployment obligations of $ 152 and $ 1,044 at December 31, 2023, and $ 161 and $ 1,083 at December 31, 2022, respectively. The accumulated benefit obligation for our pension plans represents the actuarial present value of benefits based on employee service and compensation as of a certain date and does not include an assumption about future compensation levels. The accumulated benefit obligation for our pension plans was $ 32,481 at December 31, 2023, and $ 42,137 at December 31, 2022. Net Periodic Benefit Cost and Other Amounts Recognized in Other Comprehensive Income Periodic Benefit Costs The service cost component of net periodic pension cost (credit) is recorded in operating expenses in the consolidated statements of income while the remaining components are recorded in “Other income (expense) – net.” Our combined net pension and postretirement cost (credit) recognized in our consolidated statements of income was $( 1,017 ), $( 4,789 ) and $( 7,652 ) for the years ended December 31, 2023, 2022 and 2021. 77 AT&T Inc. Dollars in millions except per share amounts The following table presents the components of net periodic benefit cost (credit): Pension Benefits Postretirement Benefits 2023 2022 2021 2023 2022 2021 Service cost – benefits earned during the period $ 477 $ 617 $ 957 $ 23 $ 32 $ 45 Interest cost on projected benefit obligation 1,876 1,747 1,276 340 277 210 Expected return on assets ( 2,533 ) ( 3,107 ) ( 3,513 ) ( 130 ) ( 112 ) ( 151 ) Amortization of prior service credit ( 133 ) ( 133 ) ( 144 ) ( 2,472 ) ( 2,558 ) ( 2,537 ) Net periodic benefit cost (credit) before remeasurement ( 313 ) ( 876 ) ( 1,424 ) ( 2,239 ) ( 2,361 ) ( 2,433 ) Actuarial (gain) loss 1,717 ( 115 ) ( 3,461 ) 181 ( 1,437 ) ( 334 ) Settlement (gain) loss ( 363 ) — — — — — Net pension and postretirement cost (credit) $ 1,041 $ ( 991 ) $ ( 4,885 ) $ ( 2,058 ) $ ( 3,798 ) $ ( 2,767 ) Other Changes in Benefit Obligations Recognized in Other Comprehensive Income The following table presents the after-tax changes in benefit obligations recognized in OCI and the after-tax prior service credits that were amortized from OCI into net periodic benefit costs: Pension Benefits Postretirement Benefits 2023 2022 2021 2023 2022 2021 Balance at beginning of year $ 316 $ 416 $ 525 $ 6,354 $ 6,496 $ 8,408 Prior service (cost) credit — — — 32 1,786 — Amortization of prior service credit ( 100 ) ( 100 ) ( 109 ) ( 1,863 ) ( 1,928 ) ( 1,912 ) Total recognized in other comprehensive (income) loss ( 100 ) ( 100 ) ( 109 ) ( 1,831 ) ( 142 ) ( 1,912 ) Balance at end of year $ 216 $ 316 $ 416 $ 4,523 $ 6,354 $ 6,496 78 AT&T Inc. Dollars in millions except per share amounts Assumptions In determining the projected benefit obligation and the net pension and postretirement benefit cost, we used the following significant weighted-average assumptions: Pension Benefits Postretirement Benefits 2023 2022 2021 2023 2022 2021 Weighted-average discount rate for determining benefit obligation at December 31 5.00 % 5.20 % 3.00 % 5.00 % 5.20 % 2.80 % Discount rate in effect for determining service cost 1 5.40 % 4.40 % 3.30 % 5.20 % 4.00 % 2.90 % Discount rate in effect for determining interest cost 1 5.30 % 3.90 % 2.30 % 5.10 % 3.20 % 1.60 % Weighted-average interest credit rate for cash balance pension programs 2 4.20 % 4.10 % 3.20 % — % — % — % Long-term rate of return on plan assets 7.50 % 6.75 % 6.75 % 6.50 % 4.50 % 4.50 % Composite rate of compensation increase for determining benefit obligation 3.00 % 3.00 % 3.00 % 3.00 % 3.00 % 3.00 % Composite rate of compensation increase for determining net cost (credit) 3.00 % 3.00 % 3.00 % 3.00 % 3.00 % 3.00 % 1 Weighted-average discount rates shown for years with interim remeasurements: 2023, 2022 and 2021 for pension benefits and 2022 for postretirement benefits. 2 Weighted-average interest crediting rates for cash balance pension programs relate only to the cash balance portion of total pension benefits. A 0.50 % increase in the weighted-average interest crediting rate would increase the pension benefit obligation by $ 135 . We recognize gains and losses on pension and postretirement plan assets and obligations immediately in “Other income (expense) – net” in our consolidated statements of income. These gains and losses are generally measured annually as of December 31 and accordingly, will normally be recorded during the fourth quarter, unless an earlier remeasurement is required. Should actual experience differ from actuarial assumptions, the projected pension benefit obligation and net pension cost and accumulated postretirement benefit obligation and postretirement benefit cost would be affected in future years. Discount Rate Our assumed weighted-average discount rates for both pension and postretirement benefits of 5.00 %, at December 31, 2023, reflect the hypothetical rate at which the projected benefit obligation could be effectively settled or paid out to participants. We determined our discount rate based on a range of factors, including a yield curve composed of the rates of return on several hundred high-quality, fixed income corporate bonds available at the measurement date and corresponding to the related expected durations of future cash outflows. These bonds had an average rating of at least Aa3 or AA- by the nationally recognized statistical rating organizations, denominated in U.S. dollars, and generally not callable, convertible or index linked. For the year ended December 31, 2023, when compared to the year ended December 31, 2022, we decreased our pension discount rate by 0.20 %, resulting in an increase in our pension plan benefit obligation of $ 916 and decreased our postretirement discount rate by 0.20 %, resulting in an increase in our postretirement benefit obligation of $ 110 . For the year ended December 31, 2022, we increased our pension discount rate by 2.20 %, resulting in a decrease in our pension plan benefit obligation of $ 11,738 and increased our postretirement discount rate by 2.40 %, resulting in a decrease in our postretirement benefit obligation of $ 2,102 . We utilize a full yield curve approach in the estimation of the service and interest components of net periodic benefit costs for pension and other postretirement benefits. Under this approach, we apply discounting using individual spot rates from a yield curve composed of the rates of return on several hundred high-quality, fixed income corporate bonds available at the measurement date. These spot rates align to each of the projected benefit obligations and service cost cash flows. The service cost component relates to the active participants in the plan, so the relevant cash flows on which to apply the yield curve are considerably longer in duration on average than the total projected benefit obligation cash flows, which also include benefit payments to retirees. Interest cost is computed by multiplying each spot rate by the corresponding discounted projected benefit obligation cash flows. The full yield curve approach reduces any actuarial gains and losses based upon interest rate expectations (e.g., built-in gains in interest cost in an upward sloping yield curve scenario), or gains and losses merely resulting from the timing and magnitude of cash outflows associated with our benefit obligations. Neither the annual measurement of our total benefit obligations nor annual net benefit cost is affected by the full yield curve approach. 79 AT&T Inc. Dollars in millions except per share amounts Expected Long-Term Rate of Return In 2024, our expected long-term rate of return is 7.75 % on pension plan assets and 4.00 % on postretirement plan assets, an increase of 0.25 % for pension plan assets and a decrease of 2.50 % for postretirement plan assets. This update to our asset return assumptions was due to economic forecasts and changes in the asset mix. Our long-term rates of return reflect the average rate of earnings expected on the funds invested, or to be invested, to provide for the benefits included in the projected benefit obligations. In setting the long-term assumed rate of return, management considers capital markets’ future expectations, the asset mix of the plans’ investment and average historical asset return. Actual long-term returns can, in relatively stable markets, also serve as a factor in determining future expectations. We consider many factors that include, but are not limited to, historical returns on plan assets, current market information on long-term returns (e.g., long-term bond rates) and current and target asset allocations between asset categories. The target asset allocation is determined based on consultations with external investment advisers. If all other factors were to remain unchanged, we expect that a 0.50 % decrease in the expected long-term rate of return would cause 2024 combined pension and postretirement cost to increase $ 150 . However, any differences in the rate and actual returns will be included with the actuarial gain or loss recorded in the fourth quarter when our plans are remeasured. Composite Rate of Compensation Increase Our expected composite rate of compensation increase cost of 3.00 % in 2023 and 2022 reflects the long-term average rate of salary increases. Healthcare Cost Trend Our healthcare cost trend assumptions are developed based on historical cost data, the near-term outlook and an assessment of likely long-term trends. Based on our assessment of expectations of healthcare industry inflation, our 2024 assumed annual healthcare prescription drug cost trend and medical cost trend for eligible participants will remain at an annual and ultimate trend rate of 4.50 %. For 2023, our assumed annual healthcare prescription drug cost trend and medical cost trend for eligible participants increased from an annual and ultimate trend rate of 4.25 % to an annual and ultimate trend rate of 4.50 %. This change in assumption increased our obligation by $ 19 . Plan Assets Plan assets consist primarily of private and public equity, government and corporate bonds, and real assets (real estate and natural resources). The asset allocations of the pension plans are maintained to meet ERISA requirements. Any plan contributions, as determined by ERISA regulations, are made to a pension trust for the benefit of plan participants. We do not have significant ERISA required contributions to our pension plans for 2024. We maintain VEBA trusts to partially fund postretirement benefits; however, there are no ERISA or regulatory requirements that these postretirement benefit plans be funded annually. We made discretionary contributions of $ 120 in December 2022 to our postretirement plan. The principal investment objectives are to ensure the availability of funds to pay pension and postretirement benefits as they become due under a broad range of future economic scenarios, maximize long-term investment return with an acceptable level of risk based on our pension and postretirement obligations, and diversify broadly across and within the capital markets to insulate asset values against adverse experience in any one market. Each asset class has broadly diversified characteristics. Substantial biases toward any particular investing style or type of security are sought to be avoided by managing the aggregation of all accounts with portfolio benchmarks. Asset and benefit obligation forecasting studies are conducted periodically, generally every two to three years, or when significant changes have occurred in market conditions, benefits, participant demographics or funded status. Decisions regarding investment policy are made with an understanding of the effect of asset allocation on funded status, future contributions and projected expenses. The plans’ weighted-average asset targets and actual allocations as a percentage of plan assets, including the notional exposure of future contracts by asset categories at December 31 are as follows: Pension Assets Postretirement (VEBA) Assets Target 2023 2022 Target 2023 2022 Equity securities: Domestic 2 % - 22 % 10 % 7 % 11 % - 21 % 16 % 21 % International — % - 19 % 7 4 6 % - 16 % 11 21 Fixed income securities 34 % - 54 % 47 45 3 % - 13 % 8 47 Real assets 9 % - 29 % 16 16 — % - 6 % 1 1 Private equity 6 % - 26 % 20 14 — % - 6 % 1 1 Preferred interests — % - — % — 13 — % - — % — — Other — % - 5 % — 1 59 % - 69 % 63 9 Total 100 % 100 % 100 % 100 % 80 AT&T Inc. Dollars in millions except per share amounts Prior to April 2023, the pension trust held preferred equity interests in AT&T Mobility II LLC (Mobility II), the primary holding company for our wireless business. The preferred equity interests were valued at $ 5,427 as of December 31, 2022. All outstanding Mobility preferred interests were repurchased in April 2023. (See Note 16) At December 31, 2023, AT&T securities represented less than 1% of assets held by our pension trust. The VEBA trusts do not hold AT&T securities. Investment Valuation Investments are stated at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability at the measurement date. Investments in securities traded on a national securities exchange are valued at the last reported sales price on the final business day of the year. If no sale was reported on that date, they are valued at the last reported bid price. Investments in securities not traded on a national securities exchange are valued using pricing models, quoted prices of securities with similar characteristics or discounted cash flows. Shares of registered investment companies are valued based on quoted market prices, which represent the net asset value of shares held at year-end. Other commingled investment entities are valued at quoted redemption values that represent the net asset values of units held at year-end which management has determined approximates fair value. Real estate and natural resource direct investments are valued at amounts based upon appraisal reports. Fixed income securities valuation is based upon observable prices for comparable assets, broker/dealer quotes (spreads or prices), or a pricing matrix that derives spreads for each bond based on external market data, including the current credit rating for the bonds, credit spreads to Treasuries for each credit rating, sector add-ons or credits, issue-specific add-ons or credits as well as call or other options. Prior to redemption, the preferred interests in Mobility II were valued by an independent fiduciary using an income approach. Purchases and sales of securities are recorded as of the trade date. Realized gains and losses on sales of securities are determined on the basis of average cost. Interest income is recognized on the accrual basis. Dividend income is recognized on the ex-dividend date. Non-interest bearing cash and overdrafts are valued at cost, which approximates fair value. Fair Value Measurements See Note 12 for a discussion of the fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. 81 AT&T Inc. Dollars in millions except per share amounts The following tables set forth by level, within the fair value hierarchy, the pension and postretirement assets and liabilities at fair value as of December 31, 2023: Pension Assets and Liabilities at Fair Value Level 1 Level 2 Level 3 Total Non-interest bearing cash $ 102 $ — $ — $ 102 Interest bearing cash 5 — — 5 Foreign currency contracts — 5 — 5 Equity securities: Domestic equities 2,146 — 2 2,148 International equities 1,085 — — 1,085 Fixed income securities: Corporate bonds and other investments — 7,584 1 7,585 Government and municipal bonds 1 4,856 — 4,857 Mortgage-backed securities — 329 — 329 Real estate and real assets — — 2,954 2,954 Securities lending collateral 719 985 — 1,704 Receivable for variation margin 2 — — 2 Assets at fair value 4,060 13,759 2,957 20,776 Investments sold short and other liabilities at fair value ( 147 ) ( 1 ) — ( 148 ) Total plan net assets at fair value $ 3,913 $ 13,758 $ 2,957 $ 20,628 Assets held at net asset value practical expedient Private equity funds 5,889 Real estate funds 1,877 Commingled funds 3,863 Total assets held at net asset value practical expedient 11,629 Other assets (liabilities) 1 ( 2,159 ) Total Plan Net Assets $ 30,098 1 Other assets (liabilities) include amounts receivable, accounts payable and net adjustment for securities lending payable. Postretirement Assets and Liabilities at Fair Value Level 1 Level 2 Level 3 Total Interest bearing cash $ 1,109 $ 3 $ — $ 1,112 Equity securities: Domestic equities 1 — — 1 International equities — — 1 1 Total plan net assets at fair value $ 1,110 $ 3 $ 1 $ 1,114 Assets held at net asset value practical expedient Private equity funds 8 Real estate funds 11 Commingled funds 624 Total assets held at net asset value practical expedient 643 Other assets (liabilities) 1 6 Total Plan Net Assets $ 1,763 1 Other assets (liabilities) include amounts receivable and accounts payable. 82 AT&T Inc. Dollars in millions except per share amounts The following tables set forth by level, within the fair value hierarchy, the pension and postretirement assets and liabilities at fair value as of December 31, 2022: Pension Assets and Liabilities at Fair Value Level 1 Level 2 Level 3 Total Non-interest bearing cash $ 158 $ — $ — $ 158 Interest bearing cash 5 — — 5 Foreign currency contracts — 4 — 4 Equity securities: Domestic equities 2,312 — 2 2,314 International equities 1,251 — — 1,251 Preferred interests — — 5,427 5,427 Fixed income securities: Corporate bonds and other investments — 9,366 1 9,367 Government and municipal bonds — 5,450 — 5,450 Mortgage-backed securities — 220 — 220 Real estate and real assets — — 4,343 4,343 Securities lending collateral 1,137 1,407 — 2,544 Receivable for variation margin 5 — — 5 Assets at fair value 4,868 16,447 9,773 31,088 Investments sold short and other liabilities at fair value ( 261 ) ( 5 ) — ( 266 ) Total plan net assets at fair value $ 4,607 $ 16,442 $ 9,773 $ 30,822 Assets held at net asset value practical expedient Private equity funds 5,866 Real estate funds 1,907 Commingled funds 5,045 Total assets held at net asset value practical expedient 12,818 Other assets (liabilities) 1 ( 2,766 ) Total Plan Net Assets $ 40,874 1 Other assets (liabilities) include amounts receivable, accounts payable and net adjustment for securities lending payable. Postretirement Assets and Liabilities at Fair Value Level 1 Level 2 Level 3 Total Interest bearing cash $ 191 $ 4 $ — $ 195 Equity securities: Domestic equities 258 — — 258 International equities 233 — 1 234 Securities lending collateral — 12 — 12 Assets at fair value 682 16 1 699 Securities lending payable and other liabilities — ( 12 ) — ( 12 ) Total plan net assets at fair value $ 682 $ 4 $ 1 $ 687 Assets held at net asset value practical expedient Commingled funds 13 Private equity funds 13 Real estate funds 1,445 Total assets held at net asset value practical expedient 1,471 Other assets (liabilities) 1 2 Total Plan Net Assets $ 2,160 1 Other assets (liabilities) include amounts receivable and accounts payable. 83 AT&T Inc. Dollars in millions except per share amounts For the years ended December 31, 2023 and 2022, our postretirement assets did not include significant investments in Level 3 assets, nor were there significant changes in fair value of those assets during the period. The tables below set forth a summary of changes in the fair value of the Level 3 pension assets: Equities Fixed Income Funds Real Estate and Real Assets Total Balance as of December 31, 2022 $ 5,429 $ 1 $ 4,343 $ 9,773 Realized gains (losses) ( 639 ) — 569 ( 70 ) Unrealized gains (losses) 643 — ( 1,270 ) ( 627 ) Purchases — — 128 128 Sales ( 5,431 ) — ( 816 ) ( 6,247 ) Balance as of December 31, 2023 $ 2 $ 1 $ 2,954 $ 2,957 Equities Fixed Income Funds Real Estate and Real Assets Total Balance as of December 31, 2021 $ 5,569 $ 2 $ 3,318 $ 8,889 Realized gains (losses) 1 — 22 23 Unrealized gains (losses) ( 139 ) — 802 663 Transfers in 1 1 20 22 Transfers out — ( 2 ) ( 29 ) ( 31 ) Purchases — — 716 716 Sales ( 3 ) — ( 506 ) ( 509 ) Balance as of December 31, 2022 $ 5,429 $ 1 $ 4,343 $ 9,773 Estimated Future Benefit Payments Expected benefit payments are estimated using the same assumptions used in determining our benefit obligation at December 31, 2023. Because benefit payments will depend on future employment and compensation levels; average years employed; average life spans; and payment elections, among other factors, changes in any of these assumptions could significantly affect these expected amounts. The following table provides expected benefit payments under our pension and postretirement plans: Pension Benefits Postretirement Benefits 2024 $ 3,185 $ 788 2025 2,907 664 2026 2,841 622 2027 2,826 588 2028 2,803 564 Years 2029 - 2033 13,340 2,252 Supplemental Retirement Plans We also provide certain senior- and middle-management employees with nonqualified, unfunded supplemental retirement and savings plans. While these plans are unfunded, we have assets in a designated non-bankruptcy remote trust that are independently managed and used to provide for certain of these benefits. These plans include supplemental pension benefits as well as compensation-deferral plans, some of which include a corresponding match by us based on a percentage of the compensation deferral. For our supplemental retirement plans, the projected benefit obligation was $ 1,437 and the net supplemental retirement pension cost was $ 87 at and for the year ended December 31, 2023. The projected benefit obligation was $ 1,544 and the net supplemental retirement pension credit was $ 234 at and for the year ended December 31, 2022. We use the same significant assumptions for the composite rate of compensation increase in determining our projected benefit obligation and the net pension and postemployment benefit cost. Our discount rates of 4.90 % at December 31, 2023 and 5.10 % at December 31, 2022 were calculated using the same methodologies used in calculating the discount rates for our qualified pension and postretirement benefit plans. Deferred compensation expense was $ 101 in 2023, $ 94 in 2022 and $ 171 in 2021. 84 AT&T Inc. Dollars in millions except per share amounts Contributory Savings Plans We maintain contributory savings plans that cover substantially all employees. Under the savings plans, we match in cash or company stock a stated percentage of eligible employee contributions, subject to a specified ceiling. There are no debt-financed shares held by the Employee Stock Ownership Plans, allocated or unallocated. Our match of employee contributions to the savings plans is fulfilled with purchases of our stock on the open market or company cash. Benefit cost, which is based on the cost of shares or units allocated to participating employees’ accounts or the cash contributed to participant accounts, was $ 570 , $ 611 and $ 614 for the years ended December 31, 2023, 2022 and 2021. NOTE 15. SHARE-BASED PAYMENTS Under our various plans, senior and other management employees and nonemployee directors have received nonvested stock and stock units. The shares will vest over a period of one to four years in accordance with the terms of those plans. We grant performance stock units, which are nonvested stock units, based upon our stock price at the date of grant and award them in the form of AT&T common stock and cash at the end of a three -year period, subject to the achievement of certain performance goals. We treat the cash settled portion of these awards as a liability. Effective with the 2021 plan year, for the majority of employees, performance shares were replaced with restricted stock units that do not have any performance conditions. These new restricted stock units vest ratably over a three-year period. We grant forfeitable restricted stock and stock units, which are valued at the market price of our common stock at the date of grant and predominantly vest over a three - to five -year period. We also grant other nonvested stock units and award them in cash at the end of a three -year period, subject to the achievement of certain market-based conditions. As of December 31, 2023, we were authorized to issue up to approximately 123 million shares of common stock (in addition to shares that may be issued upon exercise of outstanding options or upon vesting of performance stock units or other nonvested stock units) to officers, employees and directors pursuant to these various plans. We account for our share-based payment arrangements based on the fair value of the awards on their respective grant date, which may affect our ability to fully realize the value shown on our consolidated balance sheets of deferred tax assets associated with compensation expense. We record a valuation allowance when our future taxable income is not expected to be sufficient to recover the asset. Accordingly, there can be no assurance that the current stock price of our common shares will rise to levels sufficient to realize the entire tax benefit currently reflected on our consolidated balance sheets. However, to the extent we generate excess tax benefits (i.e., those additional tax benefits in excess of the deferred taxes associated with compensation expense previously recognized) the potential future impact on income would be reduced. Our consolidated statements of income include the compensation cost recognized for those plans as operating expenses, as well as the associated tax benefits, which are reflected in the table below: 2023 2022 2021 Performance stock units $ 79 $ 168 $ 248 Restricted stock and stock units 400 350 199 Other nonvested stock units — — — Stock options — — — Total $ 479 $ 518 $ 447 Income tax benefit $ 118 $ 127 $ 110 85 AT&T Inc. Dollars in millions except per share amounts A summary of the status of our nonvested stock units as of December 31, 2023, and changes during the year then ended is presented as follows (shares in millions): Nonvested Stock Units Shares Weighted-Average Grant- Date Fair Value Nonvested at January 1, 2023 36 $ 22.07 Granted 22 19.24 Vested ( 27 ) 22.05 Forfeited ( 3 ) 20.05 Nonvested at December 31, 2023 28 $ 20.05 As of December 31, 2023, there was $ 445 of total unrecognized compensation cost related to nonvested share-based payment arrangements granted. That cost is expected to be recognized over a weighted-average period of 1.76 years. The total fair value of shares vested during the year was $ 592 for 2023, compared to $ 783 for 2022 and $ 608 for 2021. It is our intent to satisfy share option exercises using our treasury stock. Cash received from stock option exercises was $ 1 for 2023, $ 2 for 2022 and $ 11 for 2021. NOTE 16. STOCKHOLDERS’ AND MEZZANINE EQUITY Authorized Shares We have authorized 14 billion common shares of AT&T stock and 10 million preferred shares of AT&T stock, each with a par value of $ 1.00 per share. Cumulative perpetual preferred shares consist of the following: • Series A: 48 thousand shares outstanding at December 31, 2023 and December 31, 2022, with a $ 25,000 per share liquidation preference and a dividend rate of 5.000 %. • Series B: 20 thousand shares outstanding at December 31, 2023 and December 31, 2022, with a € 100,000 per share liquidation preference, and an initial rate of 2.875 %, subject to reset after May 1, 2025. • Series C: 70 thousand shares outstanding at December 31, 2023 and December 31, 2022, with a $ 25,000 per share liquidation preference, and a dividend rate of 4.75 %. So long as the quarterly preferred dividends are declared and paid on a timely basis on each series of preferred shares, there are no limitations on our ability to declare a dividend on or repurchase AT&T common shares. The preferred shares are optionally redeemable by AT&T at the liquidation price on or after five years from the issuance date, or upon certain other contingent events. Stock Repurchase Program From time to time, we repurchase shares of common stock for distribution through our employee benefit plans or in connection with certain acquisitions. In March 2014, our Board of Directors approved an authorization program to repurchase 300 million shares of common stock, of which approximately 144 million remain outstanding at December 31, 2023. To implement these authorizations, we used open market repurchases, relying on Rule 10b5-1 of the Securities Exchange Act of 1934, where feasible. We also used accelerated share repurchase agreements with large financial institutions to repurchase our stock. During 2023, there were no shares repurchased and during 2022, we repurchased approximately 34 million shares totaling $ 662 under the March 2014 authorization. Dividend Declarations In December 2023 and December 2022, AT&T declared a quarterly preferred dividend of $ 36 . In December 2023 and December 2022, AT&T declared a quarterly common dividend of $ 0.2775 per share of common stock. Preferred Interests Issued by Subsidiaries We have issued cumulative perpetual preferred membership interests in certain subsidiaries. The preferred interests are entitled to cash distributions, subject to declaration. Mobility II Preferred Interests In 2018, we issued 320 million Series A Cumulative Perpetual Preferred Membership Interests in Mobility II (Mobility preferred interests), which paid cash distributions of 7 % per annum, subject to declaration. So long as the distributions were declared and paid, the terms of the Mobility preferred interests did not impose any limitations on cash movements between 86 AT&T Inc. Dollars in millions except per share amounts affiliates, or our ability to declare a dividend on or repurchase AT&T shares. All outstanding Mobility preferred interests were repurchased as of April 2023, leaving no amounts outstanding at December 31, 2023. Prior to repurchase, a holder of the Mobility preferred interests could put the interests to Mobility II, or Mobility II could have redeemed the interests upon a change in control of Mobility II or on or after September 9, 2022, with either option only allowed to be exercised during certain periods. The price at which a put option or a redemption option could be exercised was the greater of (1) the market value of the interests as of the last date of the quarter preceding the date of the exercise of a put or redemption option and (2) the sum of (a) twenty-five dollars plus (b) any accrued and unpaid distributions. The redemption price was to be paid with cash, AT&T common stock, or a combination of cash and AT&T common stock, at Mobility II’s sole election. In no event was Mobility II required to deliver more than 250 million shares of AT&T common stock to settle put and redemption options. O n October 24, 2022, approximately 105 million Mobility preferred interests were put to AT&T by a third-party investor, for which we paid approximately $ 2,600 cash to redeem. On December 27, 2022, the AT&T pension trust provided written notice of its right to require us to purchase the remaining 213 million, or approximately $ 5,340 , of Mobility preferred interests outstanding. The terms of the instruments limited the amount we were required to redeem in any 12-month period to approximately 107 million shares, or $ 2,670 . With the certainty of redemption, the Mobility preferred interests were reclassified from equity to a liability at fair value, with approximately $ 2,670 recorded in current liabilities as “Accounts payable and accrued liabilities,” representing the amount required to be redeemed within one year, and $ 2,670 recorded in “Other noncurrent liabilities.” The liabilities associated with the Mobility preferred interests were considered Level 3 under the Fair Value Measurement and Disclosure framework (see Notes 12 and 14). The difference between the carrying value of the Mobility preferred interest, which represented fair value at contribution, and the fair value of the instrument upon settlement and/or balance sheet reclassification was recorded as an adjustment to additional paid-in capital. As of December 31, 2022, we had approximately 213 million Mobility preferred interests outstanding, which had a redemption value of approximately $ 5,340 and paid cash distributions of $ 373 per annum, subject to declaration. In April 2023, we accepted the December 2022 put option notice from the AT&T pension trust and repurchased the remaining 213 million Mobility preferred interest for a purchase price, including accrued and unpaid distributions, of $ 5,414 . Tower Holdings Preferred Interests In 2019, we issued $ 6,000 nonconvertible cumulative preferred interests in a wireless subsidiary (Tower Holdings) that holds interests in various tower assets and have the right to receive approximately $ 6,000 if the purchase options from the tower companies are exercised. The membership interests in Tower Holdings consist of (1) common interests, which are held by a consolidated subsidiary of AT&T, and (2) two series of preferred interests (collectively the “Tower preferred interests”). The September series (Tower Class A-1) of the preferred interests totals $ 1,500 and pays an initial preferred distribution of 5.0 %, and the December series (Tower Class A-2) totals $ 4,500 and pays an initial preferred distribution of 4.75 %. Distributions are paid quarterly, subject to declaration, and reset every five years . Any failure to declare or pay distributions on the Tower preferred interests would not impose any limitation on cash movements between affiliates, or our ability to declare a dividend on or repurchase AT&T shares. We can call the Tower preferred interests at the issue price beginning five years from the issuance date or upon the receipt of proceeds from the sale of the underlying assets. The Tower preferred interests are included in “Noncontrolling interest” on the consolidated balance sheets. The holders of the Tower preferred interests have the option to require redemption upon the occurrence of certain contingent events, such as the failure of AT&T to pay the preferred distribution for two or more periods or to meet certain other requirements, including a minimum credit rating. If notice is given upon such an event, all other holders of equal or more subordinate classes of membership interests in Tower Holdings are entitled to receive the same form of consideration payable to the holders of the preferred interests, resulting in a deemed liquidation for accounting purposes. Telco LLC Preferred Interests In September 2020, we issued $ 2,000 nonconvertible cumulative preferred interests (Telco Class A-1) out of a newly created limited liability company (Telco LLC) that was formed to hold telecommunication-related assets. In April 2023, we expanded our September 2020 transaction and issued an additional $ 5,250 of nonconvertible cumulative preferred interests (Telco Class A-2 and A-3). As of December 31, 2023, cumulative preferred interests in our Telco LLC totaled $ 7,250 (collectively the “Telco preferred interests”). Members’ equity in Telco LLC consist of (1) member’s interests, which are held by a consolidated subsidiary of AT&T, (2) Telco Class A-1 preferred interests, which pay an initial preferred distribution of 4.25 % annually, subject to declaration, and subject to reset every seven years , and (3) Telco Class A-2 and A-3 preferred interest which pay an initial preferred distribution 87 AT&T Inc. Dollars in millions except per share amounts of 6.85 % annually, subject to declaration, and subject to reset on November 1, 2027 and every seven years thereafter. Failure to pay distributions on the Telco preferred interests would not limit cash movements between affiliates, or our ability to declare a dividend on or repurchase AT&T shares. We can call the Telco preferred interests at the issue price beginning seven years from the issuance date. The Telco preferred interests are included in “Noncontrolling interest” on the consolidated balance sheets. The holders of the Telco preferred interests have the option to require redemption upon the occurrence of certain contingent events, such as the failure of Telco LLC to pay the preferred distribution for two or more periods or to meet certain other requirements, including a minimum credit rating. If notice is given, all other holders of equal or more subordinate classes of members’ equity are entitled to receive the same form of consideration payable to the holders of the preferred interests, resulting in a deemed liquidation for accounting purposes. Mobility II Redeemable Noncontrolling Interests In June 2023, we issued two million Series B Cumulative Perpetual Preferred Membership Interests in Mobility II LLC (Mobility noncontrolling interests), which pay cash distributions of 6.8 % per annum, subject to declaration. So long as the distributions are declared and paid, the terms of the Mobility noncontrolling interests will not impose any limitations on cash movements between affiliates, or our ability to declare a dividend on or repurchase AT&T shares. The Mobility noncontrolling interests are required to be initially recorded at fair value less issuance costs and will accrete to redemption value of $ 2,000 through “Net Income Attributable to Noncontrolling Interest.” The Mobility noncontrolling interests are considered Level 3 under the Fair Value Measurement and Disclosures framework (see Note 12) and included in “Redeemable Noncontrolling Interest” on the consolidated balance sheets. A holder of the Mobility noncontrolling interests may put the interests to Mobility II on or after the earliest of certain events or each June 15 and December 15, beginning on June 15, 2028. Mobility II may redeem the interests on each March 15 and September 15, beginning on March 15, 2028. The price at which a put option or a redemption option can be exercised is the sum of (a) $ 1,000 per Mobility noncontrolling interest plus (b) any accrued and unpaid distributions. The redemption price must be paid in cash. NOTE 17. SALES OF RECEIVABLES We have agreements with various third-party financial institutions pertaining to the sales of certain types of our accounts receivable. The most significant of these programs consists of receivables arising from equipment installment plans, which are sold for cash and beneficial interests, such as deferred purchase price, when applicable. Under the terms of our agreement for this program, we continue to service the transferred receivables on behalf of the financial institutions. The following table sets forth a summary of cash proceeds received, net of remittances paid, from sales of receivables for the years ended December 31: 2023 2022 2021 Net cash received from equipment installment receivables 1 $ 648 $ 1,875 $ 1,000 Net cash received (paid) from other programs 2 824 620 ( 295 ) Total net cash impact to cash flows from operating activities $ 1,472 $ 2,495 $ 705 1 Cash from initial sales of $ 10,980 , $ 11,129 and $ 9,740 for the years ended December 31, 2023, 2022 and 2021, respectively. 2 Certain transferred receivables are guaranteed by a subsidiary that holds additional receivables in the amount of $ 924 at December 31, 2023, which are pledged as collateral and represent our maximum exposure to loss. The sales of receivables did not have a material impact on our consolidated statements of income or to “Total Assets” reported on our consolidated balance sheets. We reflect cash receipts on sold receivables as cash flows from operations in our consolidated statements of cash flows. In the event cash is received on the beneficial interests, those receipts are classified as cash flows from investing activities, when applicable. 88 AT&T Inc. Dollars in millions except per share amounts The following table sets forth a summary of the equipment installment receivables and accounts being serviced at December 31: 2023 2022 Gross receivables: $ 3,714 $ 4,165 Balance sheet classification Accounts receivable Notes receivable 1,695 1,789 Trade receivables 548 522 Other Assets Noncurrent notes and trade receivables 1,471 1,854 Outstanding portfolio of receivables derecognized from our consolidated balance sheets $ 12,027 $ 11,030 Cash proceeds received, net of remittances 1 9,361 8,519 1 Represents amounts to which financial institutions remain entitled, excluding the beneficial interests. We offer our customers the option to purchase certain wireless devices in installments over a specified period of time and, in many cases, once certain conditions are met, they may be eligible to trade in the original equipment for a new device and have the remaining unpaid balance paid or settled. We maintain a program under which we transfer a portion of these receivables through our bankruptcy-remote subsidiary in exchange for cash and beneficial interests. In the event a customer trades in a device prior to the end of the installment contract period, we agree to make a payment to the financial institutions equal to any outstanding remaining installment receivable balance. Accordingly, we record a guarantee obligation for this estimated amount at the time the receivables are transferred. The following table sets forth a summary of equipment installment receivables sold under this program: 2023 2022 2021 Gross receivables sold 1 $ 11,104 $ 11,510 $ 10,793 Net receivables sold 2 10,603 11,061 10,502 Cash proceeds received 10,980 11,129 9,740 Beneficial interests recorded — 245 1,080 Guarantee obligation recorded 932 703 434 1 Receivables net of promotion credits. 2 Receivables net of allowance, imputed interest and equipment trade-in right guarantees. Beneficial interests and guarantee obligation are initially recorded at estimated fair value and subsequently adjusted for changes in present value of expected cash flows. The estimation of their fair values is based on remaining installment payments expected to be collected and the expected timing and value of device trade-ins. The estimated value of the device trade-ins considers prices offered to us by independent third parties and contemplates changes in value after the launch of a device model. The fair value measurements used for the beneficial interests and the guarantee obligation are considered Level 3 under the Fair Value Measurement and Disclosure framework (see Note 12). The following table presents the previously transferred equipment installment receivables, which we repurchased in exchange for the associated beneficial interests: 2023 2022 2021 Fair value of repurchased receivables $ 2,997 $ 3,314 $ 1,424 Carrying value of beneficial interests 3,013 3,335 1,334 Gain (loss) on repurchases 1 $ ( 16 ) $ ( 21 ) $ 90 1 These gains (losses) are included in “Selling, general and administrative” expense in the consolidated statements of income. At December 31, 2023 and December 31, 2022, our beneficial interests were $ 2,270 and $ 2,318 , respectively, of which $ 1,296 and $ 1,278 are included in “Prepaid and other current assets” on our consolidated balance sheets, with the remainder in “Other Assets.” The guarantee obligation at December 31, 2023 and December 31, 2022 was $ 385 and $ 419 , respectively, of which $ 111 and $ 73 are included in “Accounts payable and accrued liabilities” on our consolidated balance sheets, with the remainder 89 AT&T Inc. Dollars in millions except per share amounts in “Other noncurrent liabilities.” Our maximum exposure to loss as a result of selling these equipment installment receivables is limited to the total amount of our beneficial interests and guarantee obligation. NOTE 18. TOWER TRANSACTION In December 2013, we closed our transaction with Crown Castle International Corp. (Crown Castle) in which Crown Castle gained the exclusive rights to lease and operate 9,048 wireless towers and purchased 627 of our wireless towers for $ 4,827 in cash. The leases have various terms with an average length of approximately 28 years. As the leases expire, Crown Castle will have fixed price purchase options for these towers totaling approximately $ 4,200 , based on their estimated fair market values at the end of the lease terms. We sublease space on the towers from Crown Castle for an initial term of ten years , as renewed, at current market rates, subject to further optional renewals in the future. We determined that we did not transfer control of the tower assets, which prevented us from achieving sale-leaseback accounting for the transaction, and we accounted for the cash proceeds from Crown Castle as a financing obligation on our consolidated balance sheets. We record interest on the financing obligation using the effective interest method at a rate of approximately 3.9 %. The financing obligation is increased by interest expense and estimated future net cash flows generated and retained by Crown Castle from operation of the tower sites, and reduced by our contractual payments. We continue to include the tower assets in “Property, Plant and Equipment – Net” on our consolidated balance sheets and depreciate them accordingly. At December 31, 2023 and 2022, the tower assets had a balance of $ 647 and $ 686 , respectively. Our depreciation expense for these assets was $ 39 for each of 2023, 2022 and 2021. Payments made to Crown Castle under this arrangement were $ 264 for 2023. At December 31, 2023, the future minimum payments under the sublease arrangement are $ 269 for 2024, $ 274 for 2025, $ 280 for 2026, $ 285 for 2027, $ 291 for 2028 and $ 1,686 thereafter. NOTE 19. TRANSACTIONS WITH DIRECTV We account for our investment in DIRECTV under the equity method and record our share of DIRECTV earnings as equity in net income of affiliates, with DIRECTV considered a related party. (See Note 10) At December 31, 2023, our investment in DIRECTV was $ 877 . The following table sets forth o ur share of DIRECTV’s earnings included in equity in net income of affiliates and cash distributions received from DIRECTV as of December 31: 2023 2022 2021 DIRECTV’s earnings included in equity in net income of affiliates $ 1,666 $ 1,808 $ 619 Distributions classified as operating activities $ 1,666 $ 1,808 $ 619 Distributions classified as investing activities 2,049 2,649 1,323 Cash distributions received from DIRECTV $ 3,715 $ 4,457 $ 1,942 In 2021, in addition to the assets and liabilities contributed to DIRECTV, we recorded total obligations of $ 2,100 to cover certain net losses under the NFL SUNDAY TICKET contract, of which $ 1,800 was in the form of a note payable to DIRECTV. For the years ended December 31, 2023 and 2022, cash payments to DIRECTV on the note totaled $ 130 and $ 1,211 , respectively and were classified as financing activities in our consolidated statement of cash flows. As of December 31, 2023 the notes to DIRECTV have been repaid. We provide DIRECTV with network transport for U-verse products and sales services under commercial arrangements for up to five years . Under separate transition services agreements, we provide DIRECTV certain operational support, including servicing of certain customer receivables. For the years ended December 31, 2023, 2022 and 2021, we billed DIRECTV approximately $ 730 , $ 1,260 and $ 550 for these costs, which were recorded as a reduction to the operations and support expenses incurred. At December 31, 2023, we had accounts receivable from DIRECTV of $ 280 and accounts payable to DIRECTV of $ 30 . We are not committed, implicitly or explicitly, to provide financial or other support, as our involvement with DIRECTV is limited to the carrying amount of the assets and liabilities recognized on our balance sheet. 90 AT&T Inc. Dollars in millions except per share amounts NOTE 20. FIRSTNET In 2017, the First Responder Network Authority (FirstNet) selected AT&T to build and manage the first nationwide broadband network dedicated to America’s first responders. Under the 25 -year agreement, FirstNet provides 20 MHz of valuable telecommunications spectrum and success-based payments of $ 6,500 to support network buildout, which has been substantially completed. We are required to construct a network that achieves coverage and nationwide interoperability requirements and have a contractual commitment to make sustainability payments of $ 18,000 over the 25 -year contract. These sustainability payments represent our commitment to fund FirstNet’s operating expenses and future reinvestments in the network which we own and operate, which we estimate in the $ 3,000 or less range over the life of the 25 -year contract. After FirstNet’s operating expenses are paid, we anticipate the remaining amount, expected to be in the $ 15,000 range, will be reinvested into the network. On January 30, 2024, FirstNet agreed to reinvest up to $ 6,300 in the network over the next 10 years, subject to authorization. During 2023, we submitted $ 195 in sustainability payments, with future payments under the agreement of $ 561 for 2024, $ 420 for 2025; $ 896 for 2026, $ 1,566 for 2027, $ 1,658 for 2028; and $ 11,909 thereafter. Amounts paid to FirstNet, which are not expected to be returned to AT&T to be reinvested into our network, will be expensed in the period paid. In the event FirstNet does not reinvest any funds to construct, operate, improve and maintain this network, our maximum exposure to loss is the total amount of the sustainability payments, which would be reflected in higher expense. The $ 6,500 of initial funding from FirstNet is contingent on the achievement of six operating capability milestones and certain first responder subscriber adoption targets. These milestones are based on coverage objectives of the first responder network during the construction period, which is expected to be over five years , and subscriber adoption targets. Funding payments received from FirstNet are reflected as a reduction from the costs capitalized in the construction of the network and, as appropriate, a reduction of associated operating expenses. As of December 31, 2023, we have collected $ 6,404 of the $ 6,500 for the completion of certain tasks. NOTE 21. CONTINGENT LIABILITIES We are party to numerous lawsuits, regulatory proceedings and other matters arising in the ordinary course of business. In evaluating these matters on an ongoing basis, we take into account amounts already accrued on the balance sheet. In our opinion, although the outcomes of these proceedings are uncertain, they should not have a material adverse effect on our financial position, results of operations or cash flows. We have contractual obligations to purchase certain goods or services from various other parties. Our purchase obligations are expected to be approximately $ 7,555 in 2024, $ 12,856 in total for 2025 and 2026, $ 8,187 in total for 2027 and 2028 and $ 909 in total for years thereafter. See Note 12 for a discussion of collateral and credit-risk contingencies. NOTE 22. SUPPLIER AND VENDOR FINANCING PROGRAMS Supplier Financing Program We actively manage the timing of our supplier payments for operating items to optimize the use of our cash and seek to make payments on 90-day or greater terms, while providing suppliers with access to bank facilities that permit earlier payment at their cost. Our supplier financing program does not result in changes to our normal, contracted payment cycles or cash from operations. At the supplier’s election, they can receive payment of AT&T obligations prior to the scheduled due dates, at a discounted price from the third-party financial institution. The discounted price paid by participating suppliers is based on a variable rate that is indexed to the overnight borrowing rate. We agree to pay the financial institution the stated amount generally within 90 days of receipt of the invoice. We do not have pledged assets or other guarantees under our supplier financing program. Our outstanding payment obligations are included in “Accounts payable and accrued liabilities” on our consolidated balance sheets and are reported as operating or investing (when capitalizable) activities in our statements of cash flows when paid. 91 AT&T Inc. Dollars in millions except per share amounts The following table presents the change in the supplier financing obligation for the year ended December 31: 2023 Confirmed obligations outstanding at the beginning of year $ 2,869 Invoices received 12,496 Invoices paid ( 12,521 ) Confirmed obligations outstanding at the end of year $ 2,844 Direct Supplier Financing We also have arrangements with suppliers of handset inventory that allow us to extend the stated payment terms by up to 90 days at an additional cost to us (variable rate extension fee). Direct supplier financing outstanding is included in “Accounts payable and accrued liabilities” on our consolidated balance sheets and is reported as operating activities in our statements of cash flows when paid. The following table presents the change in the direct supplier financing obligation for the years ended December 31: 2023 2022 Obligations outstanding at the beginning of year $ 5,486 $ 4,551 Invoices extended 17,376 16,570 Invoices paid ( 17,420 ) ( 15,635 ) Obligations outstanding at the end of year $ 5,442 $ 5,486 Vendor Financing In connection with capital improvements and the acquisition of other productive assets, we negotiate favorable payment terms of 120 days or more (referred to as vendor financing), which are reported as financing activities in our statements of cash flows when paid. The following table presents the change in the vendor financing obligation for the years ended December 31: 2023 2022 Obligations outstanding at the beginning of year $ 5,607 $ 4,487 Commitments 2,651 5,817 Payments ( 5,742 ) ( 4,697 ) Obligations outstanding at the end of year 1 $ 2,516 $ 5,607 1 Total vendor financing payables at December 31, 2023 at December 31, 2022 were approximately $ 2,833 and $ 6,147 , respectively, of which $ 1,975 and $ 4,592 are included in “Accounts payable and accrued liabilities.” NOTE 23. ADDITIONAL FINANCIAL INFORMATION December 31, Consolidated Balance Sheets 2023 2022 Accounts payable and accrued liabilities: Accounts payable $ 27,309 $ 31,101 Accrued payroll and commissions 1,698 1,605 Current portion of employee benefit obligation 631 1,173 Current portion of Mobility preferred interests — 2,670 Accrued interest 2,187 2,160 Accrued taxes 1,022 798 Other 3,005 3,137 Total accounts payable and accrued liabilities $ 35,852 $ 42,644 92 AT&T Inc. Dollars in millions except per share amounts Consolidated Statements of Income 2023 2022 2021 Advertising expense $ 2,576 $ 2,462 $ 2,732 Interest income $ 303 $ 143 $ 119 Interest expense incurred $ 7,578 $ 7,402 $ 7,670 Capitalized interest – capital expenditures ( 179 ) ( 174 ) ( 173 ) Capitalized interest – spectrum 1 ( 695 ) ( 1,120 ) ( 781 ) Total interest expense $ 6,704 $ 6,108 $ 6,716 1 Included in “Acquisitions, net of cash acquired” on our consolidated statements of cash flows. Cash and Cash Flows We typically maintain our restricted cash balances for purchases and sales of certain investment securities and funding of certain deferred compensation benefit payments. The following table summarizes cash and cash equivalents and restricted cash balances contained on our consolidated balance sheets: December 31, Cash and Cash Equivalents and Restricted Cash 2023 2022 2021 2020 Cash and cash equivalents from continuing operations $ 6,722 $ 3,701 $ 19,223 $ 7,924 Cash and cash equivalents from discontinued operations — — 1,946 1,816 Restricted cash in Prepaid and other current assets 2 1 3 9 Restricted cash in Other Assets 109 91 144 121 Cash and cash equivalents and restricted cash $ 6,833 $ 3,793 $ 21,316 $ 9,870 The following tables summarize certain cash flow activities from continuing operations: Consolidated Statements of Cash Flows 2023 2022 2021 Cash paid (received) during the year for: Interest $ 7,370 $ 7,772 $ 7,485 Income taxes, net of refunds 1 1,599 592 252 1 Total cash income taxes paid, net of refunds, by AT&T was $ 1,599 , $ 696 and $ 700 for 2023, 2022 and 2021, respectively. Purchase of property and equipment $ 17,674 $ 19,452 $ 15,372 Interest during construction - capital expenditures 1 179 174 173 Total Capital expenditures $ 17,853 $ 19,626 $ 15,545 Business acquisitions $ — $ — $ — Spectrum acquisitions 2,247 9,080 24,672 Interest during construction - spectrum 1 695 1,120 781 Total Acquisitions, net of cash acquired $ 2,942 $ 10,200 $ 25,453 1 Total capitalized interest was $ 874 , $ 1,294 and $ 954 for 2023, 2022 and 2021, respectively. Labor Contracts As of January 31, 2024, we employed approximately 149,900 persons. Approximately 42 % of our employees are represented by the Communications Workers of America (CWA), the International Brotherhood of Electrical Workers (IBEW) or other unions. After expiration of the collective bargaining agreements, work stoppages or labor disruptions may occur in the absence of new contracts or other agreements being reached. The main contracts set to expire in 2024 include the following: • A contract covering approximately 5,000 Mobility employees in Arkansas, Kansas, Missouri, Oklahoma and Texas is set to expire in February. • A wireline contract covering approximately 8,500 employees in California and Nevada is set to expire in April. • Three wireline contracts covering approximately 15,000 employees in the southeastern United States are set to expire in August. 93 AT&T Inc. Dollars in millions except per share amounts NOTE 24. DISCONTINUED OPERATIONS Upon the separation and distribution, the WarnerMedia business met the criteria for discontinued operations. For discontinued operations, we also evaluated transactions that were components of AT&T’s single plan of a strategic shift, including dispositions that previously did not individually meet the criteria due to materiality, and have determined discontinued operations to be comprised of WarnerMedia, Vrio, Xandr and Playdemic. The following is a summary of operating results included in income (loss) from discontinued operations for the years ended: 2023 2022 2021 Revenues $ — $ 9,454 $ 34,826 Operating Expenses Cost of revenues — 5,481 19,400 Selling, general and administrative — 2,791 8,275 Asset abandonments and impairments 1 — — 4,691 Depreciation and amortization — 1,172 5,010 Total operating expenses — 9,444 37,376 Interest expense — 131 168 Equity in net income (loss) of affiliates — ( 27 ) 28 Other income (expense) — net 2 — ( 87 ) 466 Total other income (expense) — ( 245 ) 326 Net loss before income taxes — ( 235 ) ( 2,224 ) Income tax expense (benefit) — ( 54 ) 73 Net loss from discontinued operations $ — $ ( 181 ) $ ( 2,297 ) 1 2021 includes $ 4,555 impairment resulting from our assessment of the recoverability of Vrio’s net assets. The implied fair value of the Vrio business was estimated using both the discounted cash flow as well as market multiple approaches, which are considered Level 3. 2 “Other income (expense) - net” includes the gain of $ 706 from Playdemic for the year ended 2021. In preparation for close of the separation and distribution, on April 7, 2022, Spinco drew $ 10,000 on its $ 10,000 term loan credit agreement (Spinco Term Loan), which conveyed to WBD. Total debt conveyed was approximately $ 41,600 , which included $ 1,600 of existing WarnerMedia debt, $ 30,000 of Spinco senior notes issued in March 2022 and the $ 10,000 Spinco Term Loan. WarnerMedia cash transfer to Discovery was approximately $ 2,660 . NOTE 25. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The following tables represent our quarterly financial results: 2023 Calendar Quarter First Second 1 Third 1 Fourth 1 Annual Total Operating Revenues $ 30,139 $ 29,917 $ 30,350 $ 32,022 $ 122,428 Operating Income 6,002 6,406 5,782 5,271 23,461 Net Income from Continuing Operations 4,453 4,762 3,826 2,582 15,623 Net Income from Continuing Operations Attributable to Common Stock 4,176 4,437 3,444 2,135 14,192 Basic Earnings Per Share Attributable to Common Stock from Continuing Operations 2 $ 0.58 $ 0.61 $ 0.48 $ 0.30 $ 1.97 Diluted Earnings Per Share Attributable to Common Stock from Continuing Operations 2 $ 0.57 $ 0.61 $ 0.48 $ 0.30 $ 1.97 1 Includes actuarial gains and losses on pension and postretirement benefit plans (Note 14). 2 Quarterly earnings per share impacts may not add to full-year earnings per share impacts due to the difference in weighted-average common shares for the quarters versus the weighted-average common shares for the year. 94 AT&T Inc. Dollars in millions except per share amounts 2022 Calendar Quarter First 1 Second 1 Third 1 Fourth 1,2 Annual Total Operating Revenues $ 29,712 $ 29,643 $ 30,043 $ 31,343 $ 120,741 Operating Income (Loss) 5,537 4,956 6,012 ( 21,092 ) ( 4,587 ) Net Income (Loss) from Continuing Operations 5,149 4,751 6,346 ( 23,120 ) ( 6,874 ) Net Income (Loss) from Continuing Operations Attributable to Common Stock 4,747 4,319 5,924 ( 23,536 ) ( 8,546 ) Basic Earnings (Loss) Per Share Attributable to Common Stock from Continuing Operations 3 $ 0.66 $ 0.60 $ 0.82 $ ( 3.20 ) $ ( 1.10 ) Diluted Earnings (Loss) Per Share Attributable to Common Stock from Continuing Operations 3 $ 0.65 $ 0.59 $ 0.79 $ ( 3.20 ) $ ( 1.10 ) 1 Includes actuarial gains and losses on pension and postretirement benefit plans (Note 14). 2 Includes goodwill impairments (Note 9) and an asset abandonment charge (Note 7). 3 Quarterly earnings per share impacts may not add to full-year earnings per share impacts due to the difference in weighted-average common shares for the quarters versus the weighted-average common shares for the year. 95 AT&T Inc. Dollars in millions except per share amounts ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE During our two most recent fiscal years, there has been no change in the independent accountant engaged as the principal accountant to audit our financial statements, and the independent accountant has not expressed reliance on other independent accountants in its reports during such time period.