Revenues

12 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

NOTE 3. REVENUES

On July 1, 2018, the Company adopted ASC 606 on a modified retrospective basis for all contracts which were not completed as of the adoption date. Results for reporting periods beginning after July 1, 2018 are presented under ASC 606 while prior periods have not been restated. Under ASC 606, revenue is recognized when or as the Company satisfies its respective performance obligations under each contract. The Company recorded a $20 million decrease to Accumulated deficit as of July 1, 2018 to reflect the cumulative impact of its adoption of ASC 606.

When implementing ASC 606, the Company applied the practical expedient to reflect the aggregate effect of all contract modifications occurring before the beginning of the earliest period presented when identifying satisfied and unsatisfied performance obligations, determining the transaction price, and allocating the transaction price to the satisfied and unsatisfied performance obligations.

The adoption of ASC 606 primarily resulted in the following changes related to the Company’s revenue recognition policies:

•

Reclassification of certain payments to customers

For certain revenue streams within the Subscription Video Services, Book Publishing and News and Information Services segments, the Company previously recorded certain marketing and sales incentive payments to customers within Operating expenses and Selling, general and administrative expenses. In accordance with ASC 606, such payments are now recorded as a reduction of revenue. For the fiscal year ended June 30, 2019, revenues were $113 million lower as a result of this reclassification, with no impact on the Company’s net income.

•

Deferred installation revenues in the Subscription Video Services segment

Under ASC 606, each customer subscription sold is accounted for as a distinct performance obligation. Installation services are not accounted for as a distinct performance obligation and are instead included within the overall services being provided. Therefore, installation revenues are deferred and recognized over the respective customer contract term. Historically, installation revenues were deferred and recognized over the estimated customer life. For the fiscal year ended June 30, 2019, revenues were $23 million higher as a result of the adoption of ASC 606.

•

Acceleration of revenue associated with REA Group’s financial services business

The Company has historically delayed the recognition of trailing commission revenue associated with REA Group’s financial services business until such amounts became fixed or determinable. Under ASC 606, trailing commission revenue is recognized when the related mortgage loan is established. As a result, the Company established a commission receivable of $121 million and a broker commission payable of $94 million as of July 1, 2018. The current portion of the commission receivable and broker commission payable are classified in Receivables, net and Other current liabilities, respectively, with the

non-current

portion of each classified within Other

non-current

assets and liabilities, respectively, in the Balance Sheets. The change in accounting for trailing commission revenue did not have a material impact on the Statement of Operations.

The Company’s revenues and expenses for the fiscal year ended June 30, 2019 and the opening balance sheet as of July 1, 2018 under both ASC 606 and the prior standard, ASC 605 are as follows:


	For the fiscal year ended June 30, 2019
	ASC 605			Effects of Adoption			ASC 606
	(in millions)
Revenue:
Circulation and subscription	$	4,092		$	12		$	4,104
Advertising		2,743			(5	)		2,738
Consumer		1,744			(65	)		1,679
Real estate		908			—			908
Other		659			(14	)		645

Total Revenues	$	10,146		$	(72	)	$	10,074
Operating expenses and Selling, general and administrative	$	(8,925	)	$	95		$	(8,830	)
Net income	$	212		$	16		$	228


	As of July 1, 2018
	ASC 605			Effects of Adoption			ASC 606
	(in millions)
Assets:
Receivables, net	$	1,612		$	200		$	1,812
Other current assets		372			(4	)		368
Deferred income tax assets		279			2			281
Other non-current assets		831			92			923
Liabilities and Equity:
Deferred revenue	$	516		$	(6	)	$	510
Other current liabilities		372			194			566
Deferred income tax liabilities		389			11			400
Other non-current liabilities		430			71			501
Accumulated deficit		(2,163	)		20			(2,143	)

Disaggregated revenue

The following table presents revenue by type and segment for the fiscal year ended June 30, 2019:


	For the fiscal year ended June 30, 2019
	News and Information Services		Subscription Video Services		Book Publishing		Digital Real Estate Services		Other		Total Revenues
	(in millions)
Revenues:
Circulation and subscription	$	2,128	$	1,926	$	—	$	49	$	1	$	4,104
Advertising		2,400		215		—		122		1		2,738
Consumer		—		—		1,679		—		—		1,679
Real estate		—		—		—		908		—		908
Other		428		61		75		80		1		645

Total Revenues	$	4,956	$	2,202	$	1,754	$	1,159	$	3	$	10,074

Contract liabilities and assets

The Company’s deferred revenue balance primarily relates to amounts received from customers for subscriptions paid in advance of the services being provided. The following table presents changes in the deferred revenue balance for the fiscal year ended June 30, 2019:


	For the fiscal year ended June 30, 2019
	(in millions)
Balance as of July 1, 2018	$	510
Deferral of revenue		3,008
Recognition of deferred revenue (a)		(3,084	)
Other		(6	)

Balance as of June 30, 2019	$	428

(a)	For the fiscal year ended June 30, 2019, the Company recognized approximately $493 million of revenue which was included in the opening deferred revenue balance.

Contract assets were immaterial for disclosure as of June 30, 2019.

Practical expedients

The Company typically expenses sales commissions incurred to obtain a customer contract as those amounts are incurred as the amortization period is 12 months or less. These costs are recorded within Selling, general and administrative in the Statements of Operations. The Company also applies the practical expedient for significant financing components when the transfer of the good or service is paid within 12 months or less, or the receipt of consideration is received within 12 months or less of the transfer of the good or service.

Other revenue disclosures

During the fiscal year ended June 30, 2019, the Company recognized approximately $316 million in revenues related to performance obligations that were satisfied or partially satisfied in a prior reporting period. The remaining transaction price related to unsatisfied performance obligations as of June 30, 2019 was approximately $354 million, of which approximately $182 million is expected to be recognized during fiscal 2020, approximately $129 million is expected to be recognized in fiscal 2021, $35 million is expected to be recognized in fiscal 2022, $5 million is expected to be recognized in fiscal 2023, with the remainder to be recognized thereafter. These amounts do not include (i) contracts with an expected duration of one year or less, (ii) contracts for which variable consideration is determined based on the customer’s subsequent sale or usage and (iii) variable consideration allocated to performance obligations accounted for under the series guidance that meets the allocation objective under ASC 606.