Note 22 Revenue Recognition

On January 1, 2018, we adopted Topic 606, Revenue from Contracts with Customers (ASC 606). Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration we expect to receive in exchange for those goods or services. In addition, ASC 606 requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers.

We elected to adopt the standard using the modified retrospective method to all contracts that were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. There was no material impact to our consolidated financial statements as a result of adopting ASC 606. Revenues for reporting periods beginning after January 1, 2018 are presented under ASC 606, while revenues prior to January 1, 2018 continue to be reported under previous revenue recognition requirements of ASC 605.

We recognize revenue when control of a good or service promised in a contract (i.e., performance obligation) is transferred to a customer. Control is obtained when a customer has the ability to direct the use of and obtain substantially all of the remaining benefits from that good or service. Contract drilling revenues are recorded over time utilizing the input method based on time elapsed. The measurement of progress considers the transfer of the service to the customer as we provide daily drilling services. We receive payment after the services have been performed by billing customers periodically (typically monthly). However, a portion of our revenues are recognized at a point-in-time as control is transferred at a distinct point in time such as with the sale of our top drives and other capital equipment. Within our drilling contracts, we have identified one performance obligation in which the transaction price is allocated.

Disaggregation of revenue

In the following table, revenue is disaggregated by geographical region. The table also includes a reconciliation of the disaggregated revenue with the reportable segments:


	Year Ended
	December 31, 2018

		U.S. Drilling		Canada Drilling		International Drilling		Drilling Solutions		Rig Technologies		Other		Total
	(In thousands)
Lower 48	$	910,819	$	—	$	—	$	173,219	$	188,550	$	—	$	1,272,588
U.S. Offshore Gulf of Mexico		122,946		—		—		13,776		—		—		136,722
Alaska		49,462		—		—		3,670		777		—		53,909
Canada		—		105,000		—		5,849		29,682		—		140,531
Middle East & Asia		—		—		888,500		35,486		26,236		—		950,222
Latin America		—		—		360,385		15,350		8,514		—		384,249
Europe, Africa & CIS		—		—		220,153		2,892		17,229		—		240,274
Eliminations & other		—		—		—		—		—		(120,876)		(120,876)
Total	$	1,083,227	$	105,000	$	1,469,038	$	250,242	$	270,988	$	(120,876)	$	3,057,619


	Year Ended
	December 31, 2017

		U.S. Drilling		Canada Drilling		International Drilling		Drilling Solutions		Rig Technologies		Other		Total
	(In thousands)
Lower 48	$	681,669	$	—	$	—	$	118,574	$	211,609	$	—	$	1,011,852
U.S. Offshore Gulf of Mexico		75,994		—		—		1,021		—		—		77,015
Alaska		47,560		—		—		3,925		623		—		52,108
Canada		—		82,929		—		6,054		7,618		—		96,601
Middle East & Asia		—		—		875,175		7,397		13,493		—		896,065
Latin America		—		—		388,235		3,266		392		—		391,893
Europe, Africa & CIS		—		—		210,650		464		807		—		211,921
Eliminations & other		—		—		—		—		—		(173,170)		(173,170)
Total	$	805,223	$	82,929	$	1,474,060	$	140,701	$	234,542	$	(173,170)	$	2,564,285


	Year Ended
	December 31, 2016

		U.S. Drilling		Canada Drilling		International Drilling		Drilling Solutions		Rig Technologies		Other		Total
	(In thousands)
Lower 48	$	402,415	$	—	$	—	$	49,377	$	133,271	$	—	$	585,063
U.S. Offshore Gulf of Mexico		79,730		—		—		252		—		—		79,982
Alaska		71,927		—		—		3,036		555		—		75,518
Canada		—		51,472		—		4,572		8,968		—		65,012
Middle East & Asia		—		—		894,216		5,152		9,157		—		908,525
Latin America		—		—		306,042		1,157		—		—		307,199
Europe, Africa & CIS		—		—		308,632		213		—		—		308,845
Eliminations & other		—		—		—		—		—		(102,305)		(102,305)
Total	$	554,072	$	51,472	$	1,508,890	$	63,759	$	151,951	$	(102,305)	$	2,227,839

Contract balances

We perform our obligations under a contract with a customer by transferring goods or services in exchange for consideration from the customer. We recognize a contract asset or liability when we transfer goods or services to a customer and bill an amount which differs from the revenue allocated to the related performance obligations.

The timing of revenue recognition may differ from the timing of invoicing to customers and these timing differences result in receivables, contract assets, or contract liabilities (deferred revenue) on our consolidated balance sheet. In general, we receive payments from customers based on dayrates as stipulated in our contracts (i.e. operating rate, standby rate). The invoices billed to the customer are based on the varying rates applicable to the operating status on each rig. Accounts receivable are recorded when the right to consideration becomes unconditional.

Dayrate contracts also may contain fees charged to the customer for up-front rig modifications, mobilization and demobilization of equipment and personnel. These fees are associated with contract fulfillment activities, and the related revenue (subject to any constraint on estimates of variable consideration) is allocated to a single performance obligation and recognized ratably over the initial term of the contract. Mobilization fees are generally billable to the customer in the initial phase of a contract and generate contract liabilities until they are recognized as revenue. Demobilization fees are generally received at the end of the contract and generate contract assets when they are recognized as revenue prior to becoming receivables from the customer.

We receive reimbursements from our customers for the purchase of supplies, equipment, personnel services and other services provided at their request. Reimbursable revenues are variable and subject to uncertainty as the amounts received and timing thereof are dependent on factors outside of our influence. Accordingly, these revenues are constrained and not recognized until the uncertainty is resolved, which typically occurs when the related costs are incurred on behalf of the customer. We are generally considered a principal in these transactions and record the associated revenues at the gross amounts billed to the customer.

The opening and closing balances of our receivables, contract assets and current and long-term contract liabilities are as follows (in millions):


			Contract		Contract		Contract		Contract
	Contract		Assets		Assets		Liabilities		Liabilities
	Receivables		(Current)		(Long-term)		(Current)		(Long-term)

As of December 31, 2017	$	738.0	$	67.0	$	46.9	$	218.4	$	135.0
As of December 31, 2018	$	791.2	$	55.8	$	32.3	$	116.7	$	69.7

Approximately 60% of the contract liability balance at the beginning of the period was recognized as revenue during 2018 and 23% is expected to be recognized during 2019. The remaining 17% of the contract liability balance at the beginning of the period is expected to be recognized as revenue during 2020 or thereafter.

Additionally, 59% of the contract asset balance at the beginning of the period was recognized as expense during 2018 and 27% is expected to be recognized during 2019. The remaining 14% of the contract asset balance at the beginning of the period is expected to be recognized as expense during 2020 or thereafter. This disclosure does not include variable consideration allocated entirely to a wholly unsatisfied performance obligation or promise to transfer a distinct good or service that forms part of a single performance obligation.