SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

3 Months Ended

Mar. 31, 2023

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

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, 2022 and March 31, 2023. 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, 2022		March 31, 2023
Cash	$	2,604	$	1,918
Money market funds	7,147		7,791
Commercial papers	845		663
United States Treasury securities	822		747
Certificates of deposits	150		125
Total cash and cash equivalents	$	11,568	$	11,244

Restricted Cash

Restricted cash is recorded in “Other non-current assets” on the Company’s Condensed Consolidated Balance Sheets and was $531 million and $536 million as of December 31, 2022 and March 31, 2023, respectively. Restricted cash primarily consisted of the balance of an account under the dominion and control of the administrative agent under the senior secured asset-based revolving credit facility (“ABL Facility”).

In April 2023, all of the Company’s restricted cash associated with the ABL Facility was released due to expanded assets in the borrowing base in conjunction with the ABL Facility amendment. Refer to Note 5 "Debt" for more information about the ABL Facility amendment.

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 asset, liability, and aggregate notional amount are not material as of December 31, 2022 and March 31, 2023. These derivatives are economic hedges used to manage overall price risk and have not been designated as hedging instruments. During the three months ended March 31, 2023, losses resulting from changes in fair value were not material.

Revenues

The Company primarily recognizes revenue from the sale of EVs. The Company’s contract liabilities are primarily related to payments for vehicles collected prior to delivery of the EV, generally satisfied within one quarter or less, and over-the-air (“OTA”) vehicle software updates. The Company’s contract liabilities were not material as of December 31, 2022. As of March 31, 2023 the Company’s contract liabilities were $116 million, with $58 million recorded in “Current portion of lease liabilities and other current liabilities” and $58 million recorded in “Other non-current liabilities” on the Condensed Consolidated Balance Sheets.

Product Warranty

The following table summarizes the Company’s warranty reserve recorded within the corresponding line items on the Condensed Consolidated Balance Sheets (in millions):


	December 31, 2022		March 31, 2023
Current portion of lease liabilities and other current liabilities	$	30	$	38
Other non-current liabilities	70		99
Total warranty reserve	$	100	$	137

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, customer deposits, derivative instruments, and debt to the extent the ABL Facility lenders are not able to extend credit. 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, 2022 and March 31, 2023, all of the Company’s cash, cash equivalents, and restricted cash were distributed across several large financial institutions that management believes are of high credit quality. These amounts are typically in excess of insured limits. In addition, the counterparties to the Company’s derivative instruments are financial institutions that management believes are of high credit quality.

Supply Risk

The Company is subject to risks related to its dependence on its suppliers, the majority of which are single source providers of parts or components for the Company’s products. Any inability or unwillingness of the Company’s suppliers to deliver necessary input materials or product components, including semiconductors, at timing, prices, quality, and volumes that are acceptable to the Company could have a material impact on Rivian’s business, prospects, financial condition, results of operations, and cash flows. Fluctuations in the cost of input materials or product components and supply interruptions or shortages could materially impact the Company’s business.