Revenue is recognized as each distinct performance obligation within a contract is satisfied. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. The Company enters into long-term agreements (“LTAs”) and distributor agreements with certain customers. The LTAs and distributor agreements do not include committed volumes until underlying purchase orders are issued; therefore, the Company determined that purchase orders are the contract with a customer. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when the performance obligation is satisfied, as there is no right of return.

Some of the Company's contracts include multiple performance obligations, most commonly the sale of both a transmission and Extended Transmission Coverage ("ETC"). The Company allocates the contract’s transaction price to each performance obligation based on the standalone selling price of each distinct good or service in the contract.

The Company may also use volume based discounts and rebates as marketing incentives in the sales of both transmissions and service parts, which are accounted for as variable consideration. The Company records the impact of the incentives as a reduction to revenue when it is determined that the adjustment is not likely to reverse, historically on a quarterly basis. The Company estimates the impact of all other incentives based on the related sales and market conditions in the end market vocation. The Company recorded no adjustments based on variable consideration during the three and nine months ended September 30, 2019 and 2018.

Net sales are made on credit terms, generally 30 days, based on an assessment of the customer’s creditworthiness. For certain goods or services, the Company receives consideration prior to satisfying the related performance obligation. Such consideration is recorded as a contract liability in current and non-current Deferred revenue as of September 30, 2019 and December 31, 2018. See Note J, “Deferred Revenue” for more information including the amount of revenue earned during the three and nine months ended September 30, 2019 that had been previously deferred. The Company had no contract assets as of September 30, 2019 and December 31, 2018.

The following presents disaggregated revenue by categories that best depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors (dollars in millions):

	Three months ended September 30,				Nine months ended September 30,
	2019		2018		2019		2018
North America On-Highway	$	369	$	332	$	1,144	$	1,014
North America Off-Highway		6		12		29		76
Defense		40		42		109		122
Outside North America On-Highway		99		96		299		288
Outside North America Off-Highway		24		46		91		82
Service Parts, Support Equipment and Other		131		164		409		484
Total Net Sales	$	669	$	692	$	2,081	$	2,066

As of September 30, 2019, current and non-current deferred revenue was $35 million and $103 million, respectively. As of September 30, 2018, current and non-current deferred revenue was $35 million and $89 million, respectively.

	Three months ended September 30,						Nine months ended September 30,
	2019			2018			2019			2018
Beginning balance	$	133		$	125		$	122		$	110
Increases		15			11			44			44
Revenue earned		(10	)		(12	)		(28	)		(30	)
Ending balance	$	138		$	124		$	138		$	124

Deferred revenue recorded in current and non-current liabilities related to ETC as of September 30, 2019 was $28 million and $82 million, respectively. Deferred revenue recorded in current and non-current liabilities related to ETC as of September 30, 2018 was $30 million and $73 million, respectively.