BACKLOG

6 Months Ended

Jan. 03, 2020

Revenue from Contract with Customer [Abstract]

BACKLOG

NOTE 7: CONTRACT ASSETS AND CONTRACT LIABILITIES

Contract assets include unbilled amounts typically resulting from revenue recognized exceeding amounts billed to customers for contracts utilizing the POC cost-to-cost revenue recognition method. We bill customers as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals, upon achievement of contractual milestones or upon deliveries and, in certain arrangements, the customer may withhold payment of a small portion of the contract price until contract completion. Contract liabilities include advance payments and billings in excess of revenue recognized, including deferred revenue associated with extended product warranties. Contract assets and liabilities are reported on a contract-by-contract basis at the end of each reporting period. The increase in contract assets and contract liabilities in the two quarters ended January 3, 2020 was primarily due to contract assets and liabilities acquired in connection with the L3Harris Merger. Changes in contract asset and contract liability balances in the two quarters ended January 3, 2020 were not materially impacted by any factors other than those described above.

Contract assets and contract liabilities are summarized below:

	January 3, 2020			June 28, 2019			June 29, 2018
	(In millions)
Contract assets	$	2,459		$	807		$	782
Contract liabilities, current	(1,214		)	(496		)	(372		)
Contract liabilities, noncurrent(1)	(87		)	(42		)	(35		)
Net contract assets	$	1,158		$	269		$	375

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(1) The non-current portion of contract liabilities is included as a component of the “Other long-term liabilities” line item in our Consolidated Balance Sheet.

The components of contract assets are summarized below:

	January 3, 2020			June 28, 2019			June 29, 2018
	(In millions)
Unbilled contract receivables, gross	$	3,690		$	916		$	881
Progress payments	(1,231		)	(109		)	(99		)
	$	2,459		$	807		$	782

Impairment losses related to our contract assets were not material during the two quarters ended January 3, 2020 or fiscal 2019, 2018 or 2017. In the two quarters ended January 3, 2020, we recognized $776 million of revenue related to contract liabilities that were outstanding at the end of fiscal 2019. In fiscal 2019, 2018 and 2017, we recognized $287 million, $204 million and $221 million, respectively, of revenue related to contract liabilities that were outstanding at the end of the respective prior fiscal year.

NOTE 24: BACKLOG

Backlog, which is the equivalent of our remaining performance obligations, represents the future revenue we expect to recognize as we perform on our current contracts. Backlog comprises both funded backlog (i.e., firm orders for which funding is authorized and appropriated) and unfunded backlog. Backlog excludes unexercised contract options and potential orders under ordering-type contracts, such as IDIQ contracts.

At January 3, 2020, our ending backlog was $20.6 billion. We expect to recognize approximately 60 percent of the revenue associated with this backlog within the next twelve months and the substantial majority of the revenue associated with this backlog within the next three years. At June 28, 2019, our ending backlog was $8.3 billion, at which time we expected to recognize approximately half of the revenue associated with this backlog within the next twelve months and the substantial majority of the revenue associated with this backlog within the next three years.