XML 54 R11.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
Revenue from Contract with Customer (Notes)
 12 Months Ended
Dec. 28, 2019
Revenue from Contract with Customer [Abstract]  
Revenue from Contract with Customer [Text Block] Revenue Recognition

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. ASU 2014-09 replaced most existing revenue recognition guidance in U.S. GAAP. The standard contains a five-
step process to be followed in determining the amount and timing of revenue recognition. It also provides guidance on accounting for costs incurred to obtain or fulfill contracts with customers, and establishes disclosure requirements which are more extensive than those required under prior U.S. GAAP.

ASU 2014-09, as amended ("Topic 606"), was effective for the Company in the first quarter of 2018. We selected the Modified Retrospective (cumulative effect) transition method of adoption. Such method provides that the cumulative effect from prior periods upon applying the new guidance to contracts which were not complete as of the adoption date be recognized in our consolidated balance sheets as of December 31, 2017, including an adjustment to retained earnings. A summary of such cumulative effect adjustment is as follows:
(In thousands)
 
 
Increase /
(Decrease)
 
 
 
 
Receivables, net
 
 
$
(79,492
)
Prepaid expenses and other
 
 
(2,253
)
Other assets
 
 
81,157

Accounts payable
 
 
(9,361
)
Deferred income taxes
 
 
1,173

Retained earnings
 
 
7,600



Prior periods were not retrospectively adjusted. The impact of applying Topic 606 (versus prior U.S. GAAP) increased 2018 revenues and earnings before income taxes by $207 million and $101 million, respectively. This impact was primarily driven by certain new contracts in 2018, which included certain specified upgrades for which we are required to estimate stand-alone selling price when allocating transaction consideration to performance obligations. Under prior U.S. GAAP, we would not have been able to establish vendor specific objective evidence ("VSOE") of fair value for such items, and thus would have delayed the timing of revenue recognition for such contracts.

The application of Topic 606 (versus prior U.S. GAAP) did not have a significant impact on other line items in our consolidated statements of operations, statements of comprehensive income, and statements of cash flows in 2018. Additionally, the application of Topic 606 did not have a significant impact on our consolidated balance sheet as of December 29, 2018.

Revenue Recognition Policy

We enter into contracts with customers that may include various combinations of our software solutions and related services, which are generally capable of being distinct and accounted for as separate performance obligations. The predominant model of customer procurement involves multiple deliverables and includes a software license agreement, project-related implementation and consulting services, software support, hosting services, and computer hardware. We allocate revenues to each performance obligation within an arrangement based on estimated relative stand-alone selling price. Revenue is then recognized for each performance obligation upon transfer of control of the software solution or services to the customer in an amount that reflects the consideration we expect to receive.

Generally, we recognize revenue under Topic 606 for each of our performance obligations as follows:

•
Perpetual software licenses - We recognize perpetual software license revenues when control of such licenses are transferred to the client ("point in time"). We determine the amount of consideration allocated to this performance obligation using the residual approach.

•
Software as a service - We recognize software as a service ratably over the related hosting period ("over time").

•
Time-based software and content license fees - We recognize a license component of time-based software and content license fees upon delivery to the client ("point in time") and a non-license component (i.e. support) ratably over the respective contract term ("over time").

•
Hosting - Remote hosting recurring services are recognized ratably over the hosting service period ("over time"). Certain of our hosting arrangements contain fees deemed to be a "material right" under Topic 606. We recognize such fees over the term that will likely affect the client's decision about whether to renew the related hosting service ("over time").

•
Services - We recognize revenue for fixed fee services arrangements over time, utilizing a labor hours input method. For fee-for-service arrangements, we recognize revenue over time as hours are worked at the rates clients are invoiced, utilizing the "as invoiced" practical expedient available in Topic 606. For stand-ready services arrangements, we recognize revenue ratably over the related service period.

•
Support and maintenance - We recognize support and maintenance fees ratably over the related contract period ("over time").

•
Hardware - We recognize hardware revenues when control of such hardware/devices is transferred to the client ("point in time").

•
Transaction processing - We recognize transaction processing revenues ratably as we provide such services ("over time").

Such revenues are recognized net of any taxes collected from customers and subsequently remitted to governmental authorities.

Disaggregation of Revenue

The following table presents revenues disaggregated by our business models:

 
For the Years Ended
 
2019
 
2018
 
2017(1)
(In thousands)
Domestic
Segment
International
Segment
Total
 
Domestic
Segment
International
Segment
Total
 
Domestic
Segment
International
Segment
Total
 
 
 
 
 
 
 
 
 
 
 
 
Licensed software
$
628,958

$
51,627

$
680,585

 
$
573,034

$
40,544

$
613,578

 
$
563,524

$
48,666

$
612,190

Technology resale
225,076

21,809

246,885

 
208,722

36,354

245,076

 
248,524

25,069

273,593

Subscriptions
333,298

25,417

358,715

 
300,555

25,154

325,709

 
446,426

22,963

469,389

Professional services
1,760,532

231,946

1,992,478

 
1,574,407

237,056

1,811,463

 
1,393,056

198,793

1,591,849

Managed services
1,098,695

115,205

1,213,900

 
1,060,081

94,860

1,154,941

 
970,609

76,523

1,047,132

Support and maintenance
904,204

200,434

1,104,638

 
921,336

196,780

1,118,116

 
856,304

190,352

1,046,656

Reimbursed travel
87,364

8,033

95,397

 
92,131

5,311

97,442

 
96,728

4,735

101,463

 
 
 
 
 
 
 
 
 
 
 
 
Total revenues
$
5,038,127

$
654,471

$
5,692,598

 
$
4,730,266

$
636,059

$
5,366,325

 
$
4,575,171

$
567,101

$
5,142,272

 
 
 
 
 
 
 
 
 
 
 
 
(1)As noted above, prior period amounts were not adjusted upon our adoption of Topic 606.
 
 
 
 

The following table presents our revenues disaggregated by timing of revenue recognition:

 
For the Years Ended
 
2019
 
2018
(In thousands)
Domestic
Segment
International
Segment
Total
 
Domestic
Segment
International
Segment
Total
 
 
 
 
 
 
 
 
Revenue recognized over time
$
4,565,172

$
600,953

$
5,166,125

 
$
4,271,934

$
569,780

$
4,841,714

Revenue recognized at a point in time
472,955

53,518

526,473

 
458,332

66,279

524,611

 
 
 
 
 
 
 
 
Total revenues
$
5,038,127

$
654,471

$
5,692,598

 
$
4,730,266

$
636,059

$
5,366,325




Significant Customers

In 2019, a certain customer within our Domestic segment comprised 13% of our consolidated revenues.
Transaction Price Allocated to Remaining Performance Obligations

As of December 28, 2019, the aggregate amount of transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) for executed contracts approximates $13.71 billion, of which we expect to recognize approximately 30% of the revenue over the next 12 months and the remainder thereafter. As of December 29, 2018, the aggregate amount of transaction price allocated to performance obligations that were unsatisfied (or partially unsatisfied) for executed contracts approximated $15.25 billion.

Contract Liabilities

Our payment arrangements with clients typically include an initial payment due upon contract signing and date-based licensed software payment terms and payments based upon delivery for services, hardware and sublicensed software. Customer payments received in advance of satisfaction of the related performance obligations are deferred as contract liabilities. Such amounts are classified in our consolidated balance sheets as deferred revenue. During 2019 and 2018, substantially all of our contract liability balance at the beginning of each respective year was recognized in revenues during that year.

Costs to Obtain or Fulfill a Contract

We have determined the only significant incremental costs incurred to obtain contracts with clients within the scope of Topic 606 are sales commissions paid to our associates. We record sales commissions as an asset, and amortize to expense ratably over the remaining performance periods of the related contracts with remaining performance obligations. As of December 28, 2019 and December 29, 2018, our consolidated balance sheets included assets of $89 million and $86 million, respectively, related to sales commissions to be expensed in future periods, which are included in other assets.

We recognized $41 million of amortization related to these sales commissions assets in each of 2019 and 2018, which is included in costs of revenue in our consolidated statements of operations.

Significant Judgments when Applying Topic 606

Our contracts with clients typically include various combinations of our software solutions and related services. Determining whether such software solutions and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. Specifically, judgment is required to determine whether software licenses are distinct from services and hosting included in an arrangement.

Contract transaction price is allocated to performance obligations using estimated stand-alone selling price. Judgment is required in estimating stand-alone selling price for each distinct performance obligation. We determine stand-alone selling price maximizing observable inputs such as stand-alone sales when they exist or substantive renewal prices charged to clients. In instances where stand-alone selling price is not observable, we utilize an estimate of stand-alone selling price. Such estimates are derived from various methods that include: cost plus margin, historical pricing practices, and the residual approach, which requires a considerable amount of judgment.

The labor hours input method used for our fixed fee services performance obligation is dependent on our ability to reliably estimate the direct labor hours to complete a project, which may span several years. We utilize our historical project experience and detailed planning process as a basis for our future estimates to complete current projects.

Certain of our arrangements contain variable consideration. We do not believe our estimates of variable consideration to be significant to our determination of revenue recognition.

Practical Expedients - Topic 606 Adoption

We reflected the aggregate effect of all contract modifications occurring prior to the Topic 606 adoption date when (i) identifying the satisfied and unsatisfied performance obligations, (ii) determining the transaction price, and (iii) allocating the transaction price to the satisfied and unsatisfied performance obligations.





Revenue Recognition - 2017 and Prior

Prior to the adoption of Topic 606, we recognized software related revenue in accordance with the provisions of ASC 985-605, Software - Revenue Recognition and non-software related revenue in accordance with ASC 605, Revenue Recognition. In general, revenue was recognized when all of the following criteria were met:
•
Persuasive evidence of an arrangement existed;
•
Delivery had occurred or services had been rendered;
•
Our fee was fixed or determinable; and
•
Collection of the revenue was reasonably assured.

For multiple element arrangements that contained software and non-software elements, we allocated revenue to software and software-related elements as a group and any non-software element separately. After the arrangement consideration had been allocated to the non-software elements, revenue was recognized when the basic revenue recognition criteria were met for each element. For the group of software and software-related elements, revenue was recognized under the guidance applicable to software transactions.
Since we did not have VSOE of fair value on software licenses within our multiple element arrangements, we recognized revenue on our software and software-related elements using the residual method. Under the residual method, license revenue was recognized in a multiple-element arrangement when VSOE of fair value existed for all of the undelivered elements in the arrangement, when software was delivered, installed and all other conditions to revenue recognition were met. We allocated revenue to each undelivered element in a multiple-element arrangement based on the element's respective fair value, with the fair value determined by the price charged when that element was sold separately. Specifically, we determined the fair value of (i) the software support, hardware maintenance, sublicensed software support, remote hosting, subscriptions and software as a service portions of the arrangement based on the substantive renewal price for those services charged to clients; (ii) the professional services (including training and consulting) portion of the arrangement based on the hourly rates that we charged for these services when sold apart from a software license; and (iii) the sublicensed software based on its price when sold separately from the software. The residual amount of the fee after allocating revenue to the fair value of the undelivered elements was attributed to the licenses for software solutions. If evidence of the fair value could not be established for the undelivered elements of a license agreement using VSOE, the entire amount of revenue under the arrangement was deferred until those elements were delivered or VSOE of fair value was established.
We also entered into arrangements that included multiple non-software deliverables. For each element in a multiple element arrangement that did not contain software-related elements to be accounted for as a separate unit of accounting, the following were met: the delivered products or services had value to the client on a stand-alone basis; and for an arrangement that includes a general right of return relative to the delivered products or services, delivery or performance of the undelivered product or service was considered probable and is substantially controlled by the Company. We allocated the arrangement consideration to each element based on the selling price hierarchy of VSOE of fair value, if it existed, or third-party evidence ("TPE") of selling price. If neither VSOE nor TPE were available, we used estimated selling price.
For certain arrangements, revenue for software, implementation services and, in certain cases, support services for which VSOE of fair value could not be established were accounted for as a single unit of accounting. If VSOE of fair value could not be established for both the implementation services and the support services, the entire arrangement fee was recognized ratably over the period during which the implementation services were expected to be performed or the support period, whichever was longer, beginning with delivery of the software, provided that all other revenue recognition criteria were met.