4. REVENUE

In accordance with ASC 606, Revenue from Contracts with Customers, revenue is measured based on consideration specified in a contract with a customer, adjusted for any variable consideration (i.e. price concessions or annual price adjustments) and estimated at contract inception. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product to a customer.

In addition, from time to time, Autoliv may make payments to customers in connection with ongoing and future business. These payments to customers are generally recognized as a reduction to revenue at the time of the commitment to make these payments unless certain criteria are met warranting capitalization. The Company considers qualitative factors such as the maturity of the product and technology involved in a potential transaction as well as how current the customer relationship is, when evaluating if a payment(s) warrant capitalization. If the payments are capitalized, the amounts are amortized to revenue as the related goods are transferred.

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue.

Shipping and handling costs associated with outbound freight after control of a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of sales.

Nature of goods and services

The following is a description of principal activities from which the Company generates its revenue. The Company has after the spin-off of its Electronics business one operating segment, Passive Safety, which includes airbag and seatbelt products and components. The Company generates revenue from the sale of production parts to original equipment manufacturers (“OEMs”).

The Company accounts for individual products separately if they are distinct (i.e., if a product is separately identifiable from other items and if a customer can benefit from it on its own or with other resources that are readily available to the customer). The consideration, including any price concessions or annual price adjustments, is based on their stand-alone selling prices for each of the products. The stand-alone selling prices are determined based on the cost-plus margin approach.

The Company recognizes revenue for production parts primarily at a point in time.

For production parts with revenue recognized at a point in time, the Company recognizes revenue upon shipment to the customers and transfer of title and risk of loss under standard commercial terms (typically FOB shipping point). There are certain contracts where the criteria to recognize revenue over time have been met (e.g., there is no alternative use to the Company and the Company has an enforceable right to payment). In such cases, at period end, the Company recognizes revenue and a related asset and associated cost of goods sold and inventory. However, the financial impact of these contracts is immaterial considering the very short production cycles and limited inventory days on hand, which is typical for the automotive industry.

The amount of revenue recognized is based on the purchase order price and adjusted for variable consideration (i.e. price concessions or annual price adjustments). Customers typically pay for the production parts based on customary business practices with stated payment terms averaging 30 days.

Disaggregation of revenue

In the following tables, revenue from the Company’s continuing operations is disaggregated by primary region and products.

Net Sales by Region
(Dollars in millions)	Three months ended				Nine months ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
China	$	351.9	$	343.2	$	1,103.5	$	973.1
Japan		196.3		193.4		606.4		578.6
Rest of Asia		200.9		200.4		623.6		587.9
Americas		684.8		575.3		2,034.3		1,835.9
Europe		599.1		640.3		2,117.6		2,002.6
Total net sales	$	2,033.0	$	1,952.6	$	6,485.4	$	5,978.1

Net Sales by Products
(Dollars in millions)	Three months ended				Nine months ended
	September 30, 2018		September 30, 2017		September 30, 2018		September 30, 2017
Airbag Products and Other¹⁾	$	1,357.4	$	1,276.5	$	4,234.9	$	3,947.6
Seatbelt Products¹⁾		675.6		676.1		2,250.5		2,030.5
Total net sales	$	2,033.0	$	1,952.6	$	6,485.4	$	5,978.1
¹⁾ Including Corporate and other sales.

Contract balances

The contract assets relate to the Company's rights to consideration for work completed but not billed (generally in conjunction with contracts for which revenue is recognized over time) at the reporting date on production parts. The contract assets are reclassified into the receivables balance when the rights to receive payments become unconditional. There have been no impairment losses recognized related to contract assets arising from the Company’s contracts with customers. Certain contracts have resulted in consideration in advance of fulfilling the performance obligations and the amounts received have been classified as contract liabilities.

The following tables provides information about receivables, contract assets, and contract liabilities from contracts with customers.

Contract Balances with Customers
(Dollars in millions)	As of
	September 30, 2018		December 31, 2017
Receivables, net	$	1,784.5	$	1,696.7
Contract assets ¹⁾		19.3		—
Contract liabilities ²⁾		31.6		33.0
¹⁾ Included in other current assets.
²⁾ Included in other current and other non-current liabilities.

Receivables, net of allowance
(Dollars in millions)	As of
	September 30, 2018			December 31, 2017
Receivables	$	1,790.3		$	1,703.0
Allowance at beginning of period		(6.3	)		(4.2	)
Net decrease/(increase) of allowance		0.5			(1.8	)
Translation difference		0.0			(0.3	)
Allowance at end of period		(5.8	)		(6.3	)
Receivables, net of allowance	$	1,784.5		$	1,696.7

Changes in the contract assets and the contract liabilities balances during the period are as follows:

Change in Contract Balances with Customers
(Dollars in millions)
	Three months ended September 30, 2018						Nine months ended September 30, 2018
	Contract assets			Contract liabilities			Contract assets			Contract liabilities
Beginning balance	$	18.7		$	30.3		$	—		$	33.0
Increases/(decreases) due to cumulative catch up adjustment		—			—			15.0			—
Increases/(decreases) due to revenue recognized		19.3			(1.5	)		56.1			(3.9	)
Increases/(decreases) due to cash received		—			—			—			—
Increases/(decreases) due to transfer to receivables		(18.7	)		—			(51.8	)		—
Translation difference		—			2.8			—			2.5
Ending balance	$	19.3		$	31.6		$	19.3		$	31.6

The increases/(decreases) in the table above related to contracts assets reflect the total adjustments needed to align revenue recognition for work completed but not billed at each quarter period end.

Contract costs

Shipping and handling costs associated with outbound freight after control over a product has transferred to a customer are accounted for as a fulfillment cost and are included in cost of sales. The amount of fulfillment costs was not material for any period presented.