SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2022

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

Accounting estimates are an integral part of the condensed consolidated financial statements. These estimates require the use of judgments and assumptions that may affect the reported amounts of assets, liabilities, revenues, and expenses in the periods presented. The Company believes that the accounting estimates and related assumptions employed by the Company are appropriate and the resulting balances are reasonable under the circumstances. However, due to the inherent uncertainties involved in making estimates, actual results could differ from original estimates, requiring adjustments to these amounts in future periods.

Cash and Cash Equivalents

Cash and cash equivalents include cash on hand, cash in banks, payments due from financial institutions for the settlement of credit card and debit card transactions, and short-term, highly liquid investments with maturities of three months or less. The Company’s cash equivalents are classified within Level 1 of the fair value hierarchy because they are valued using observable inputs that reflect quoted prices in active markets for identical instruments. The cost of the Company’s cash equivalents

approximated their fair values as of December 31, 2021 and September 30, 2022. The following table presents the fair value of the Company’s “Cash and cash equivalents” on the Condensed Consolidated Balance Sheets (in millions):


	December 31, 2021		September 30, 2022
Cash	$	5,438	$	1,750
Money market funds	11,827		9,399
Certificates of deposit	450		360
Commercial papers	268		592
United States Treasury securities	150		1,171
Total cash and cash equivalents	$	18,133	$	13,272

Restricted Cash

Cash and cash equivalents that are restricted as to withdrawal or use under the terms of certain contractual agreements are

classified as restricted cash and are recorded in “Other non-current assets” on the Company’s Condensed Consolidated Statements of Operations. Restricted cash primarily consists of the balance of an account under the dominion and control of the administrative agent under the Company’s senior secured asset-based revolving credit facility (“ABL Facility”). See Note 4 “Debt” for more information on the ABL Facility. Total restricted cash was $290 million and $528 million as of December 31, 2021 and September 30, 2022, respectively.

Accounts Receivable, Net

Receivables are reported at the invoiced amount, less an allowance for any potentially uncollectible amounts. The Company had no allowance for uncollectible amounts as of December 31, 2021 and September 30, 2022.

Inventory and Inventory Valuation

Inventory is stated at the lower of cost or net realizable value (“LCNRV”). Net realizable value (“NRV”) is the estimated selling price of inventory in the ordinary course of business, less estimated costs of completion, disposal, and transportation. The following table summarizes the components of “Inventory” on the Condensed Consolidated Balance Sheets (in millions):


	December 31, 2021		September 30, 2022
Raw materials	$	236	$	723
Work in progress	9		58
Finished goods	29		168
Total inventory	$	274	$	949

The Company recorded a $696 million charge to reflect the LCNRV of inventory and losses on firm purchase commitments as of September 30, 2022 in “Cost of revenues” in the Company’s Condensed Consolidated Statements of Operations.

Derivative Instruments

In the normal course of business, the Company is exposed to global market risks, including the effect of changes in certain commodity prices, interest rates, and foreign currency exchange rates, and may enter into derivative contracts, such as forwards, options, swaps, or other instruments, to manage these risks. Derivative instruments are recorded on the Condensed Consolidated Balance Sheets in either Other current assets or Current portion of lease liabilities and other current liabilities and are measured at fair value. They are classified within Level 2 of the fair value hierarchy because they are valued using observable inputs other than quoted prices in active markets. For commodity contracts, the Company records gains and losses resulting from changes in fair value in “Cost of revenues” in the Condensed Consolidated Statements of Operations and cash flows in “Cash flows from operating activities” in the Condensed Consolidated Statements of Cash Flows. The Company

also may enter into master netting agreements with its counterparties to allow for netting of transactions with the same counterparty. The Company does not utilize derivative instruments for trading or speculative purposes.

The Company has entered into commodity contracts, and the resulting liability is not material as of September 30, 2022. The aggregate notional amount of these derivatives was $55 million as of September 30, 2022. These derivatives are economic hedges used to manage overall price risk and have not been designated as hedging instruments. During the three and nine months ended September 30, 2022, losses resulting from changes in fair value were not material.

Revenues

The Company primarily recognizes revenue from the sale of EVs. Revenue from the sale of EVs is generally recognized upon delivery, when control of the EV transfers to the customer. Payment for EV sales is generally due upon delivery, and an insignificant amount of revenue is recognized after delivery for performance obligations satisfied over time. Sales are subject to a right of return and involve variable consideration for certain sales to employees.

The expected value of variable consideration is used to estimate the transaction price. Variable consideration is included in the transaction price only to the extent it is probable that a significant reversal of revenue recognized will not occur. The transaction price is allocated based on the estimated relative standalone selling price of each performance obligation. The Company utilizes directly observable standalone selling prices when possible. If not available, the standalone selling prices are estimated using appropriate methods, such as the “adjusted market assessment” approach, “expected cost plus a margin” approach, and others.

Contract Liabilities

The Company recognizes contract liabilities when payments are received or due before the related performance obligation is satisfied. The Company’s contract liabilities exclude fully-refundable customer deposits. The Company’s contract liabilities were not material as of December 31, 2021 and September 30, 2022, and were recorded in “Current portion of lease liabilities and other current liabilities” and “Other non-current liabilities” on the Condensed Consolidated Balance Sheets.

Concentration of Risk

Counterparty Credit Risk

Financial instruments that potentially subject the Company to concentration of counterparty credit risk consist of cash and cash equivalents, restricted cash, deposits, derivatives, and loans. The Company is exposed to credit risk to the extent that its cash balance with a financial institution is in excess of Federal Deposit Insurance Company insurance limits. The degree of counterparty credit risk will vary based on many factors, including the duration of the transaction and the contractual terms of the agreement. Management evaluates and approves credit standards and oversees the credit risk management function related to investments. As of December 31, 2021 and September 30, 2022, all of the Company’s cash and cash equivalents were placed at financial institutions that management believes are of high credit quality. These balances are typically in excess of insured limits.

Supply Risk

The Company is subject to risks related to its dependence on suppliers, the majority of which are single source providers of parts or components for the Company’s products. Any inability of the Company’s suppliers to deliver necessary product components, including semiconductors, at timing, prices, quality, and volumes that are acceptable to the Company could have a material and adverse impact on Rivian’s business, growth prospects, and financial and operating results.

The Company’s manufacturing facility in Normal, Illinois (the “Normal Factory”) is operational, and Rivian is continuing to invest in the Normal Factory. The Company’s ability to sustain production depends, among other things, on the readiness and solvency of suppliers and vendors through various macroeconomic factors, including factors resulting from the COVID-19 pandemic, and economic uncertainties, such as geopolitical instability and its effects on inflation and commodity prices.