REVENUE RECOGNITION

12 Months Ended

Dec. 31, 2023

Revenue from Contract with Customer [Abstract]

REVENUE RECOGNITION

REVENUE RECOGNITION

CONTRACT ASSETS.

Contract assets primarily reflect revenue recognized on contracts with customers in excess of billings based on contractual terms. Contract assets are classified as current or non-current based on the amount of time expected to lapse until the Company’s right to consideration becomes unconditional. Other deferred assets consist of costs to obtain contracts, primarily commissions, other cost deferrals for shipped products, and deferred service, labor, and direct overhead costs.

Contract and Other Deferred Assets
	As of
	December 31, 2023		December 31, 2022
Contract assets	$	600	$	584
Other deferred assets	400		405
Contract and other deferred assets	1,000		989
Non-current contract assets(1)	72		37
Non-current other deferred assets(1)	96		82
Total contract and other deferred assets	$	1,168	$	1,108

(1)Non-current contract and other deferred assets are recognized within All other assets in the Consolidated and Combined Statements of Financial Position.

Capitalized costs to obtain a contract were $213 million and $204 million as of December 31, 2023 and December 31, 2022, respectively. Generally, these costs are recognized within two years of being capitalized. When recognized, the costs to obtain a contract are recorded within SG&A in the Consolidated and Combined Statements of Income.

CONTRACT LIABILITIES.

Contract liabilities primarily include customer advances and deposits received when orders are placed and billed in advance of completion of performance obligations. Contract liabilities are classified as current or non-current based on the periods over which remaining performance obligations are expected to be satisfied with our customers.

As of December 31, 2023 and December 31, 2022, contract liabilities were approximately $2,623 million and $2,526 million, respectively, of which the non-current portion of $705 million and $630 million, respectively, was recognized in All other liabilities in the Consolidated and Combined Statements of Financial Position. Contract liabilities increased $97 million in 2023 primarily due to an increase in extended warranty contracts. Revenue recognized related to the contract liabilities balance at the beginning of the year was approximately $1,554 million and $1,562 million for the years ended December 31, 2023 and 2022, respectively.

REMAINING PERFORMANCE OBLIGATIONS.

Remaining performance obligations represent the estimated revenue expected from customer contracts that are partially or fully unperformed inclusive of amounts deferred in contract liabilities, excluding contracts, or portions thereof, that provide the customer with the ability to cancel or terminate without incurring a substantive penalty. As of December 31, 2023, the aggregate amount of the contracted revenues allocated to our unsatisfied (or partially unsatisfied) performance obligations was $14,655 million. We expect to recognize revenue as we satisfy our remaining performance obligations as follows: a) product-related remaining performance obligations of $4,930 million of which 98% is expected to be recognized within two years, and the remaining thereafter; and b) services-related remaining performance obligations of $9,725 million of which 65% and 93% are expected to be recognized within two years and five years, respectively, and the remaining thereafter.