Contract revenue

3 Months Ended

Mar. 31, 2020

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, assets under management and the level of client-driven transactions, as specified in fee schedules. See Note 10 of the Notes to Consolidated Financial Statements in our 2019 Annual Report for information on the nature of our services and revenue recognition. See Note 24 of the Notes to Consolidated Financial Statements in our 2019 Annual Report 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)
	Quarter ended
	March 31, 2020											Dec. 31, 2019											March 31, 2019
(in millions)	IS			IM			Other			Total		IS (b)			IM (b)			Other (b)			Total		IS (b)			IM (b)			Other (b)			Total
Fee revenue - contract revenue:
Investment services fees:
Asset servicing fees	$	1,127		$	23		$	(11	)	$	1,139	$	1,117		$	25		$	(14	)	$	1,128	$	1,081		$	20		$	(8	)	$	1,093
Clearing services fees	470			—			—			470		421			—			—			421		398			—			—			398
Issuer services fees	263			—			—			263		264			—			—			264		251			—			—			251
Treasury services fees	149			—			—			149		148			—			—			148		132			—			—			132
Total investment services fees	2,009			23			(11		)	2,021		1,950			25			(14		)	1,961		1,862			20			(8		)	1,874
Investment management and performance fees	5			862			(4		)	863		5			886			(4		)	887		4			841			(4		)	841
Financing-related fees	28			—			—			28		12			—			—			12		17			—			—			17
Distribution and servicing	(12		)	43			—			31		(10		)	44			—			34		(14		)	45			—			31
Investment and other income	72			(50		)	—			22		72			(50		)	—			22		69			(49		)	—			20
Total fee revenue - contract revenue	2,102			878			(15		)	2,965		2,029			905			(18		)	2,916		1,938			857			(12		)	2,783
Fee and other revenue - not in scope of Accounting Standards Codification (“ASC”) 606 (c)(d)	334			(32		)	45			347		207			19			812			1,038		223			12			30			265
Total fee and other revenue	$	2,436		$	846		$	30		$	3,312	$	2,236		$	924		$	794		$	3,954	$	2,161		$	869		$	18		$	3,048


(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)	Prior periods have been restated to reflect the reclassifications. See Note 19 for additional information.


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


(d)	The Investment Management business includes (loss) income from consolidated investment management funds, net of noncontrolling interests, of $(20) million in the first quarter of 2020, $8 million in the fourth quarter of 2019 and $16 million in the first quarter of 2019.

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 $2.6 billion at March 31, 2020 and $2.4 billion at Dec. 31, 2019.

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 $48 million at March 31, 2020 and $32 million at Dec. 31, 2019. Accrued revenues recorded as contract assets are usually billed on an annual basis.

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 $194 million at March 31, 2020 and $168 million at Dec. 31, 2019. Contract liabilities are included in other liabilities on the consolidated balance sheet. Revenue recognized in the first quarter of 2020 relating to contract liabilities as of Dec. 31, 2019 was $50 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 $89 million at March 31, 2020 and $86 million at Dec. 31, 2019. 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 $5 million in the first quarter of 2020, first quarter of 2019 and fourth quarter of 2019.

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 $14 million at March 31, 2020 and $16 million at Dec. 31, 2019. 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 $1 million in the first quarter of 2020, first quarter of 2019 and fourth quarter of 2019. There were no impairments recorded on capitalized contract costs in the first quarter of 2020.

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.