Contract Balances

9 Months Ended

Jul. 28, 2019

Revenue from Contract with Customer [Abstract]

Contract assets primarily result from receivables for goods transferred to customers where payment is conditional upon technical sign off and not just the passage of time. Contract liabilities consist of unsatisfied performance obligations related to advance payments received and billings in excess of revenue recognized. Applied’s contract assets and liabilities are reported in a net position on a contract-by-contract basis at the end of each reporting period.

Contract assets are generally classified as current and included in Other Current Assets in the Consolidated Condensed Balance Sheets. Contract liabilities are classified as current or non-current based on the timing of when performance obligations will be satisfied and associated revenue is expected to be recognized.

Contract balances at the end of each reporting period were as follows:



	July 28, 2019		October 28, 2018
	(In millions)

Contract assets	$	116	$	99
Contract liabilities	$	1,430	$	1,201

The increase in contract assets during the nine months ended July 28, 2019, was primarily due to goods transferred to customers where payment was conditional upon technical sign off, offset by the reclassification of contract assets to net accounts receivable upon meeting conditions to the right to payment.

During the nine months ended July 28, 2019, Applied recognized revenue of approximately $622 million related to contract liabilities at October 28, 2018. This reduction in contract liabilities was offset by new billings for products and services for which there were unsatisfied performance obligations to customers and revenue had not yet been recognized as of July 28, 2019.

There were no impairment losses recognized on Applied’s accounts receivables and contract assets during the three and nine months ended July 28, 2019.

As of July 28, 2019, the amount of remaining unsatisfied performance obligations on contracts with an original estimated duration of one year or more was approximately $808 million, which is expected to be recognized within the next 36 months. Applied has elected the available practical expedient to exclude the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less.