Contract revenue

12 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

Fee revenue in Investment Services and Investment Management is primarily variable, based on levels of assets under custody and/or administration (“AUC/A”), AUM and the level of client-driven transactions, as specified in fee schedules.

Investment services fees are based primarily on the market value of AUC/A; client accounts, balances and the volume of transactions; securities lending volume and spreads; and fees for other services. Certain fees based on the market value of assets are calculated in arrears on a monthly or quarterly basis.

Substantially all services within the Investment Services business are provided over time. Revenue on these services is recognized using the time elapsed method, equal to the expected invoice amount, which typically represents the value provided to the customer for our performance completed to date.

Clearing services revenue includes multiple types of fees, some of which are driven by customer actions

and are delivered at a point-in-time. These transaction-based fees are generally recognized on trade date. Other contractual clearing services fees are driven by the amount of AUC/A or the number of accounts or securities positions and are billed on a monthly or quarterly basis.

Investment management fees are dependent on the overall level and mix of AUM. The management fees, expressed in basis points, are charged for managing those assets. Management fees are typically subject to fee schedules based on the overall level of assets managed and products in which those assets are invested.

Investment management fee revenue also includes transactional- and account-based fees. These fees along with distribution and servicing fees are recognized when the services have been completed. Clients are generally billed for services performed on a monthly or quarterly basis.

Performance fees are generally calculated as a percentage of the applicable portfolio’s performance in excess of a benchmark index or a peer group’s performance. Performance fees are recognized at the end of the measurement period when they are determinable.

See Note 24 for additional information on our principal businesses, Investment Services and Investment Management, and the primary services provided.

Disaggregation of contract revenue

Contract revenue is included in fee revenue on the consolidated income statement. The following table presents fee revenue related to contracts with customers, disaggregated by type of fee revenue, for each business segment.



Disaggregation of contract revenue by business segment (a)
	Year ended Dec. 31,
	2019											2018
(in millions)	IS			IM			Other			Total		IS			IM			Other			Total
Fee revenue - contract revenue:
Investment services fees:
Asset servicing fees	$	4,365		$	85		$	1		$	4,451	$	4,395		$	88		$	1		$	4,484
Clearing services fees (b)	1,649			—			(1		)	1,648		1,615			—			—			1,615
Issuer services fees	1,130			—			—			1,130		1,099			—			—			1,099
Treasury services fees	560			1			—			561		553			1			—			554
Total investment services fees (b)	7,704			86			—			7,790		7,662			89			1			7,752
Investment management and performance fees (b)	17			3,373			—			3,390		16			3,619			—			3,635
Financing-related fees	59			—			1			60		61			1			(2		)	60
Distribution and servicing	(49		)	178			—			129		(51		)	191			—			140
Investment and other income	282			(197		)	—			85		279			(202		)	2			79
Total fee revenue - contract revenue	8,013			3,440			1			11,454		7,967			3,698			1			11,666
Fee and other revenue - not in scope of ASC 606 (c)(d)	881			26			887			1,794		959			83			84			1,126
Total fee and other revenue	$	8,894		$	3,466		$	888		$	13,248	$	8,926		$	3,781		$	85		$	12,792


(a)	Business segment data has been determined on an internal management basis of accounting, rather than the generally accepted accounting principles used for consolidated financial reporting.


(b)	In 2019, we reclassified certain platform-related fees to clearing services fees from investment management and performance fees. Prior periods have been reclassified.


(c)	Primarily includes investment and other income, foreign exchange and other trading revenue, financing-related fees, asset servicing fees and net securities gains (losses), all of which are accounted for using other accounting guidance.


(d)	The Investment Management business includes income from consolidated investment management funds, net of noncontrolling interests, of $30 million in 2019 and a loss of $1 million in 2018.

IS - Investment Services segment.

IM - Investment Management segment.

Contract balances

Our clients are billed based on fee schedules that are agreed upon in each customer contract. Receivables from customers were $2.4 billion at Dec. 31, 2019 and $2.5 billion at Dec. 31, 2018. An allowance is maintained for accounts receivable which is generally based on the number of days outstanding. Adjustments to the allowance are recorded in other expense on the consolidated income statement. We recorded a provision of $15 million in 2019 and $11 million in 2018.

Contract assets represent accrued revenues that have not yet been billed to the customers due to certain contractual terms other than the passage of time and were $32 million at Dec. 31, 2019 and $36 million at Dec. 31, 2018. Accrued revenues recorded as contract assets are usually billed on an annual basis.

There were no impairments recorded on contract assets in 2019.

Both receivables from customers and contract assets are included in other assets on the consolidated balance sheet.

Contract liabilities represent payments received in advance of providing services under certain contracts and were $168 million at Dec. 31, 2019 and $171 million at Dec. 31, 2018. Contract liabilities are included in other liabilities on the consolidated balance sheet. Revenue recognized in 2019 relating to contract liabilities as of Dec. 31, 2018 was $99 million.

Changes in contract assets and liabilities primarily relate to either party’s performance under the contracts.

Contract costs

Incremental costs for obtaining contracts that are deemed recoverable are capitalized as contract costs. Such costs result from the payment of sales incentives, primarily in the Wealth Management business, and totaled $86 million at Dec. 31, 2019 and $98 million at Dec. 31, 2018. Capitalized sales incentives are amortized based on the transfer of goods or services to which the assets relate and typically average nine years. The amortization of capitalized sales incentives, which is primarily included in staff expense on the consolidated income statement, totaled $22 million in both 2019 and 2018.

Costs to fulfill a contract are capitalized when they relate directly to an existing contract or a specific anticipated contract, generate or enhance resources that will be used to fulfill performance obligations and are recoverable. Such costs generally represent set-up costs, which include any direct cost incurred at the inception of a contract which enables the fulfillment of the performance obligation and totaled $16 million at Dec. 31, 2019 and $20 million at Dec. 31, 2018. These capitalized costs are amortized on a straight-line basis over the expected contract period which generally ranges from seven to nine years. The amortization is included in other expense on the consolidated income statement and totaled $5 million in both 2019 and 2018. There were no impairments recorded on capitalized contract costs in 2019.

Unsatisfied performance obligations

We do not have any unsatisfied performance obligations other than those that are subject to a practical expedient election under ASC 606, Revenue From Contracts With Customers. The practical expedient election applies to (i) contracts with an original expected length of one year or less, and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.