Revenues

General

We recognize revenue when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for the goods or services. Revenue is recognized net of allowances for returns, discounts, distributor incentives and end-user rebates, and any taxes collected from customers and subsequently remitted to governmental authorities.

For arrangements with multiple performance obligations, which may include hardware, software licenses, cloud services, support and maintenance, and professional services, we allocate revenue to each performance obligation on a relative fair value basis based on management’s estimate of stand-alone selling price (“SSP”). Judgment is required to determine the SSP for each performance obligation. The determination of SSP is made by taking into consideration observable prices in historical transactions. When observable prices in historical transactions are not available or are inconsistent, we estimate SSP based on observable prices in historical transactions of similar products, pricing discount practices, product margins, and other factors that may vary over time depending upon the unique facts and circumstances related to each performance obligation.

Enterprise Security

Revenue for our Enterprise Security products is earned from arrangements that can include various combinations of software licenses, cloud services, hardware, support and maintenance, and professional services, which are sold directly to end-users or through a multi-tiered distribution channel.

We generally do not offer rights of return for Enterprise Security products and the distribution channel does not hold inventory. As a result, historical returns and related reserves have been insignificant. We offer channel rebates and marketing programs for our Enterprise Security products. Our estimated reserves for channel volume incentive rebates are based on distributors’ and resellers’ performance compared to the terms and conditions of volume incentive rebate programs, which are typically entered into quarterly. We had reserves for Enterprise Security rebates and marketing programs of $5 million recorded in Other current liabilities as of June 29, 2018, and $6 million recorded against Accounts receivable, net as of March 30, 2018.

Consumer Digital Safety

We sell consumer products and services directly to end-users and consumer packaged software products through a multi-tiered distribution channel.

We offer various channel and end-user rebates for our Consumer Digital Safety products. Our estimated reserves for channel volume incentive rebates are based on distributors’ and resellers’ performance compared to the terms and conditions of volume incentive rebate programs, which are typically entered into quarterly. Our reserves for end-user rebates are estimated based on the terms and conditions of the promotional program, actual sales during the promotion, the amount of redemptions received, historical redemption trends by product and by type of promotional program, and the value of the rebate. We record estimated reserves for channel and end-user rebates as an offset to revenue or contract liabilities. We had reserves for Consumer Digital Safety rebates of $11 million recorded in Other current liabilities as of June 29, 2018 and $21 million recorded against Accounts receivable, net as of March 30, 2018. For consumer products that include content updates, rebates are recognized as a ratable offset to revenue or contract liabilities over the term of the subscription.

Performance obligations

At contract inception, we assess the products and services promised in the contract to identify each performance obligation and evaluate whether the performance obligations are capable of being distinct and are distinct within the context of the contract. Performance obligations that are not both capable of being distinct and distinct within the context of the contract are combined and treated as a single performance obligation in determining the allocation and recognition of revenue. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment. In determining whether products and services are considered distinct performance obligations, we assess whether the customer can benefit from the products and services on their own or together with other readily available resources, and whether our promise to transfer the product or service to the customer is separately identifiable from other promises in the contract.

Our typical performance obligations include the following:



Performance Obligation		When Performance Obligations is Typically Satisfied
Products and services transferred at a point in time:
License with distinct deliverables		When software activation keys have been made available for download
Hardware with distinct deliverables		When control of the product passes to the customer; typically upon shipment
Products and services transferred over time:
License with interrelated deliverables		Over the expected performance term, beginning on the date that software activation keys are made available to the customer
Cloud hosted solutions		Over the contract term, beginning on the date that service is made available to the customer
Support and maintenance		Ratably over the course of the service term
Professional services		As the services are provided

Timing of revenue recognition

As a result of the adoption of the new revenue recognition guidance, the timing of recognition of certain of our performance obligations has changed. For example, certain term-based licenses with distinct performance obligations have a portion of revenue recognized up front when the software activation keys have been made available for download, whereas these arrangements were previously recognized over time. In addition, allocating the transaction price for perpetual software licenses and support on a relative standalone selling price basis under the new guidance has generally resulted in more revenue allocated to the upfront license compared to the residual method of allocation under the previous guidance. Conversely, certain of our perpetual licenses are not distinct from their accompanying support and maintenance under the new guidance and are now recognized over time.

The following table provides our revenue disaggregated by the timing of recognition under both the new guidance and the legacy guidance during the three months ended June 29, 2018.



(In millions)	As Reported		Amounts Without Adoption of New Standard		Effect of Change
Enterprise Security:
Products and services transferred at a point in time	$	99	$	61	$	38
Products and services transferred over time	$	457	$	490	$	(33	)
Consumer Digital Safety:
Products and services transferred at a point in time	$	12	$	12	$	—
Products and services transferred over time	$	588	$	588	$	—
Total
Products and services transferred at a point in time	$	111	$	73	$	38
Products and services transferred over time	$	1,045	$	1,078	$	(33	)

Contract liabilities

Contract liabilities consist of deferred revenue and customer deposit liabilities and represent cash payments received or due in advance of our performance obligations. Deferred revenue represents billings under non-cancelable contracts before the related product or service is transferred to the customer. Certain arrangements in our Consumer Digital Safety segment include terms that allow the end user to terminate the contract and receive a pro-rata refund for a period of time. In these arrangements, we have concluded there are no enforceable rights and obligations during the period in which the option to cancel is exercisable by the customer and therefore the consideration received or due from the customer is recorded as a customer deposit liability.

During the three months ended June 29, 2018, we recognized $848 million of revenue from our beginning contract liabilities balance.

Contract acquisition costs

Sales commissions that are incremental to obtaining a customer contract for which revenue is deferred are accrued and capitalized, and subsequently amortized to sales and marketing expense on a straight-line basis over three years, the expected period of benefit. In arriving at the average period of benefit, we evaluate both qualitative and quantitative factors which include historical customer renewal rates, anticipated renewal periods, and the estimated useful life of the underlying product sold as part of the transaction. Commissions paid on renewals of support and maintenance are not commensurate with the initial commissions paid, and therefore the amortization period of commissions for initial contracts considers the estimated term of specific anticipated renewal contracts over the life of the customer.

During the three months ended June 29, 2018, we recognized $23 million of amortization expense of capitalized contract acquisition costs. There were no impairment losses recognized during the period.

Remaining performance obligations

Remaining performance obligations represent contracted revenue that has not been recognized, which include contract liabilities and amounts that will be billed and recognized as revenue in future periods. As of June 29, 2018, we had $2.8 billion of remaining performance obligations and the approximate percentages expected to be recognized as revenue in the future are as follows:



	Total Remaining Performance Obligations		Percent Expected to be Recognized as Revenue
(In millions, except percentages)	Total Remaining Performance Obligations		0 - 12 Months		13 - 24 Months		25 - 36 Months		Over 36 Months
Enterprise Security	$	1,747	65	%	23	%	10	%	2	%
Consumer Digital Safety	1,053		96	%	3	%	1	%	—	%
Total	$	2,800	77	%	15	%	7	%	1	%