REVENUES

On January 1, 2018, we adopted Topic 606 using the modified retrospective method. As a result, we have changed our accounting policies for revenue recognition as detailed below.

Product Sales

We recognize revenue from product sales when control of the product transfers, generally upon shipment or delivery, to the customer. Upon recognition of revenue from product sales, provisions are made for various forms of variable consideration, which include government and other rebates such as Medicaid reimbursements, customer incentives such as cash discounts for prompt payment, distributor fees and expected returns of expired products, as appropriate. Our payment terms to customers generally range from 30 to 90 days.

Royalty, Contract and Other Revenues

Royalty revenue is recognized in the period in which the obligation is satisfied and the corresponding sales by our corporate partners occur.

Policy Elections and Practical Expedients Taken


•	We account for shipping and handling activities that are performed after a customer has obtained control of a good as fulfillment costs rather than as separate performance obligations; and


•	If we expect, at contract inception, that the period between the transfer of control and corresponding payment from the customer will be one year or less, we do not adjust the amount of consideration for the effects of a significant financing component.

Variable Consideration

Rebates and Chargebacks

We estimate reductions to our revenues for amounts paid to payers and healthcare providers in the United States, including Medicaid rebates, AIDS Drug Assistance Program rebates and chargebacks, Veterans Administration and Public Health Service chargebacks and other rebates, as well as foreign government rebates. Rebates and chargebacks are based on contractual arrangements or statutory requirements which may vary by product, payer and individual payer plans. Our estimates are based on products sold, historical utilization rates, and as available, pertinent third-party industry information, estimated patient population, known market events or trends, and for our U.S. product sales, channel inventory data obtained from our major U.S. wholesalers in accordance with our inventory management agreements. We also take into consideration, as available, new information regarding changes in programs’ regulations and guidelines that would impact the amount of the actual rebates and/or our expectations regarding future utilization rates for these programs. Government and other chargebacks that are payable to our direct customers are classified as reductions of Accounts receivable on our Condensed Consolidated Balance Sheets. Government and other rebates that are invoiced directly to us are recorded in Accrued government and other rebates on our Condensed Consolidated Balance Sheets.

Cash Discounts

We estimate cash discounts based on contractual terms, historical utilization rates and our expectations regarding future utilization rates.

Distributor Fees

Under our inventory management agreements with our significant U.S. wholesalers, we pay the wholesalers a fee primarily for compliance with certain contractually determined covenants such as the maintenance of agreed upon inventory levels. These distributor fees are based on a contractually determined fixed percentage of sales.

Product Returns

We do not provide our customers with a general right of product return, but typically permit returns if the product is damaged or defective when received by the customer, or in the case of product sold in the United States and certain countries outside the United States, if the product has expired. We will accept returns for product that will expire within six months or that have expired up to one year after their expiration dates. Our estimates for expected returns of expired products are based primarily on an ongoing analysis of our historical return patterns, historical industry information reporting the return rates for similar products and contractual agreements intended to limit the amount of inventory maintained by our wholesalers.

Revenue Recognized from Performance Obligations Satisfied in Prior Periods

During the three months ended March 31, 2018, revenue recognized from performance obligations satisfied in prior periods was $10 million, consisting primarily of royalties for licenses of our intellectual property and revised estimates for variable consideration related to sales made in prior periods.

Contract Assets

Our contract assets, which consist of unbilled amounts primarily from arrangements where the licensing of intellectual property is the only or predominant performance obligation, totaled $117 million and $132 million at March 31, and January 1, 2018, respectively.

Disaggregation of Revenues

The following table disaggregates our product sales by product and geographic region and disaggregates our royalty, contract and other revenues by geographic region for the three months ended March 31, 2018 and 2017. The information for the three months ended March 31, 2017 has not been adjusted in accordance with our modified retrospective adoption of Topic 606 and continues to be reported in accordance with our historical accounting under Topic 605.



	Three Months Ended March 31, 2018								Three Months Ended March 31, 2017
(In millions)	U.S.		Europe		Other International		Total		U.S.		Europe		Other International		Total
Antiviral products:
Biktarvy	$	35	$	—	$	—	$	35	$	—	$	—	$	—	$	—
Descovy	274		75		12		361		209		37		5		251
Genvoya	853		186		43		1,082		669		87		13		769
Odefsey	279		58		5		342		203		23		1		227
Atripla	228		51		35		314		316		94		42		452
Complera/Eviplera	67		109		14		190		112		125		16		253
Stribild	133		29		12		174		226		67		16		309
Truvada	507		97		48		652		464		189		61		714
Vemlidy	47		3		8		58		11		—		—		11
Viread	7		30		60		97		117		71		72		260
Epclusa	269		198		69		536		735		138		19		892
Harvoni	234		56		58		348		926		243		202		1,371
Vosevi	86		16		5		107		—		—		—		—
Other antiviral	4		13		62		79		41		110		181		332
Other products:
Yescarta	40		—		—		40		—		—		—		—
Zydelig	14		18		1		33		15		19		1		35
Letairis	204		—		—		204		211		—		—		211
Ranexa	195		—		—		195		153		—		—		153
AmBisome	17		56		34		107		9		52		31		92
Other	34		10		3		47		33		11		1		45
Total product sales	3,527		1,005		469		5,001		4,450		1,266		661		6,377
Royalty, contract and other revenues	20		52		15		87		19		93		16		128
Total revenues	$	3,547	$	1,057	$	484	$	5,088	$	4,469	$	1,359	$	677	$	6,505