– Revenue

May 2014,

the FASB issued ASU

No.

2014

09,

“

Revenue from Contracts with Customers

(“Topic

606”

)

,” which amended the accounting standards for revenue recognition. The Company adopted Topic

606

January 1, 2018,

and is applying the modified retrospective method. There was

not

a material impact to revenues as a result of applying Topic

606

for the

three

months and

nine

months ended

September 30, 2018,

and there have

not

been significant changes to our business processes, systems or internal controls as a result of implementing the standard. Adoption of the new standard does

not

materially change the timing or amount of revenue recognized in the Company’s Consolidated Statements of Income and Comprehensive Income.

The Company’s revenues are primarily generated from the sale of finished products to customers. Those sales predominantly contain a single delivery element and revenue for such sales is recognized when the customer obtains control, which is typically when the finished product is delivered to the customer. The Company’s material revenue streams have been identified as the following: the sale of new and used commercial vehicles, arrangement of associated commercial vehicle financing and insurance contracts, the performance of commercial vehicle repair services and the sale of commercial vehicle parts. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues.

The following table summarizes the Company’s disaggregated revenue by revenue source for the

three

months and

nine

months ended

September 30, 2018 (

in thousands):

	Three Months Ended September 30, 2018	Nine Months Ended September 30, 2018
Commercial vehicle sales revenue	$ 878,845	$ 2,508,970
Parts revenue	239,401	699,823
Commercial vehicle repair service revenue	187,444	550,257
Finance revenue	2,628	7,826
Insurance revenue	2,425	7,460
Other revenue	4,568	14,070
Total	$ 1,315,311	$ 3,788,406

All of the Company's performance obligations and associated revenues are generally transferred to customers at a point in time. The Company does

not

have any material contract assets or contract liabilities on the Balance Sheet as of

September 30, 2018.

Revenues related to commercial vehicle sales, parts sales, commercial vehicle repair service, finance and the majority of other revenues are related to the Truck Segment.

For the sale of new and commercial vehicles, revenue is recognized at a point in time when control is transferred to the customer, which is when delivery of the commercial vehicle occurs. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring the commercial vehicle. When control is transferred to the customer, the Company has an unconditional right to payment and a receivable is recorded for any consideration

not

received.

The Company controls the commercial vehicle before it is transferred to the customer and it obtains all of the remaining benefits from the commercial vehicle relating to the sale, ability to pledge the asset or hold the asset. The Company is a principal in all commercial vehicle transactions. The Company retains inventory risk, determines the selling price to the customer and delivers the commercial vehicle to the customer. The Company generally pays a commission to internal sales representatives for the sale of a commercial vehicle. The Company will continue to expense the commission and recognize it concurrently with the respective commercial vehicle sale revenue upon delivery of the commercial vehicle to a customer.

Revenue from the sale of parts is recognized when the Company transfers control of the goods to the customer and consideration has been received in the form of cash or a receivable from the customer. The Company provides its customers the right to return eligible parts, estimates the expected returns based on an analysis of historical experience and records an allowance for estimated returns, which has historically

not

been material.

Revenue from the sale of commercial vehicle repair service is recognized when the service performed by the Company on a customer’s vehicle is complete and the customer accepts the repair. Because the Company does

not

have an enforceable right to payment while the repair is being performed, revenue is recognized when the repair is complete. After a customer’s acceptance, the Company has

remaining obligations to transfer goods or services to the customer and consideration has been received in the form of cash or a receivable from the customer.

Any remaining performance obligations represent service orders for which work has

not

been completed. The Company’s service contracts are predominantly short-term in nature with a contract term of

one

month or less. For those contracts, the Company has utilized the practical expedient in Topic

606

exempting the Company from disclosure of the transaction price allocated to remaining performance obligations if the performance obligation is part of a contract that has an original expected duration of

one

year or less.

The Company receives commissions from

third

-party lenders for arranging customer financing for the purchase of commercial vehicles. The receipt of such commissions is deemed to be a single performance obligation that is satisfied when a financing agreement is executed and accepted by the financing provider. Once the contract has been accepted by the financing provider, the Company’s performance obligation has been satisfied and the Company generally has

further obligations under the contract. The Company is the agent in this transaction, as it does

not

have control over the acceptance of the customer’s financing arrangement by the financing provider. Consideration paid to the Company by the financing provider is based on the agreement between the Company and the financing provider.

The Company receives commissions from

third

-party insurance companies for arranging insurance coverage for customers. The receipt of such commissions is deemed to be a single performance obligation that is satisfied when the insurance coverage is bound. The Company has

further obligations under the contract. The Company is the agent in this transaction because it does

not

have control over the insurance coverage provided by the insurance carrier. Consideration paid to the Company by the insurance provider is based on the agreement between the Company and the insurance provider.

The Company records revenues from finance and insurance products at the net commission amount, which includes estimates of chargebacks that can occur if the underlying contract is

not

fulfilled. Chargeback amounts for commissions from financing companies are estimated assuming financing contracts are terminated before the customer has made

six

monthly payments. Chargeback amounts for commissions from insurance companies are estimated assuming insurance contracts are terminated before the underlying insurance contractual term has expired. Chargeback reserve amounts are based on historical chargebacks and have historically been immaterial. The Company does

not

have any right to retrospective commissions based on future profitability of finance and insurance contracts arranged.

Other revenue is mostly documentation fees that are charged to customers in connection with the sale of a commercial vehicle and recognized as other revenue when a truck is sold. The Company recognizes the documentation fees at the point in time when the commercial vehicle is delivered to the customer.