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 and six months ended June 30, 2018, revenue recognized from performance obligations satisfied in prior years was $222 million and $232 million, respectively, consisting primarily of royalties for licenses of our intellectual property of $131 million and $228 million, respectively, and revised estimates for variable consideration related to sales made in prior years of $91 million and $4 million, respectively.

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 $126 million and $132 million at June 30, 2018 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 and six months ended June 30, 2018 and 2017. The information for the three and six months ended June 30, 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 June 30, 2018								Three Months Ended June 30, 2017
(In millions)	U.S.		Europe		Other International		Total		U.S.		Europe		Other International		Total
Product sales:
Atripla	$	274	$	39	$	36	$	349	$	334	$	86	$	55	$	475
Biktarvy	183		2		—		185		—		—		—		—
Complera/Eviplera	82		103		14		199		112		127		15		254
Descovy	311		78		14		403		232		47		7		286
Genvoya	904		207		49		1,160		710		125		22		857
Odefsey	303		77		5		385		230		27		1		258
Stribild	144		34		9		187		225		54		14		293
Truvada	649		86		30		765		567		184		61		812
Other HIV⁽¹⁾	11		3		5		19		7		2		2		11
Revenue share - Symtuza⁽²⁾	—		13		—		13		—		—		—		—
AmBisome	14		55		34		103		8		50		34		92
Epclusa	239		168		93		500		864		248		59		1,171
Harvoni	230		22		79		331		984		230		168		1,382
Letairis	244		—		—		244		230		—		—		230
Ranexa	208		—		—		208		200		—		—		200
Vemlidy	59		3		14		76		21		1		—		22
Viread	16		32		34		82		141		76		83		300
Vosevi	86		20		3		109		—		—		—		—
Yescarta	68		—		—		68		—		—		—		—
Zydelig	17		22		—		39		19		16		—		35
Other⁽³⁾	27		41		47		115		98		126		144		368
Total product sales	4,069		1,005		466		5,540		4,982		1,399		665		7,046
Royalty, contract and other revenues	14		79		15		108		22		59		14		95
Total revenues	$	4,083	$	1,084	$	481	$	5,648	$	5,004	$	1,458	$	679	$	7,141



	Six Months Ended June 30, 2018								Six Months Ended June 30, 2017
(In millions)	U.S.		Europe		Other International		Total		U.S.		Europe		Other International		Total
Product Sales:
Atripla	$	502	$	90	$	71	$	663	$	650	$	180	$	97	$	927
Biktarvy	218		2		—		220		—		—		—		—
Complera/Eviplera	149		212		28		389		224		252		31		507
Descovy	585		153		26		764		441		84		12		537
Genvoya	1,757		393		92		2,242		1,379		212		35		1,626
Odefsey	582		135		10		727		433		50		2		485
Stribild	277		63		21		361		451		121		30		602
Truvada	1,156		183		78		1,417		1,031		373		122		1,526
Other HIV⁽¹⁾	20		4		8		32		21		3		2		26
Revenue share - Symtuza⁽²⁾	—		20		—		20		—		—		—		—
AmBisome	31		111		68		210		17		102		65		184
Epclusa	508		366		162		1,036		1,599		386		78		2,063
Harvoni	464		78		137		679		1,910		473		370		2,753
Letairis	448		—		—		448		441		—		—		441
Ranexa	403		—		—		403		353		—		—		353
Vemlidy	106		6		22		134		32		1		—		33
Viread	23		62		94		179		258		147		155		560
Vosevi	172		36		8		216		—		—		—		—
Yescarta	108		—		—		108		—		—		—		—
Zydelig	31		40		1		72		34		35		1		70
Other⁽³⁾	56		56		109		221		158		246		326		730
Total product sales	7,596		2,010		935		10,541		9,432		2,665		1,326		13,423
Royalty, contract and other revenues	34		131		30		195		41		152		30		223
Total revenues	$	7,630	$	2,141	$	965	$	10,736	$	9,473	$	2,817	$	1,356	$	13,646

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⁽¹⁾ Includes Emtriva and Tybost
⁽²⁾Represents Gilead’s revenue from cobicistat (C), emtricitabine (FTC) and tenofovir alafenamide (TAF) in Symtuza (darunavir/C/FTC/TAF), a fixed dose combination product commercialized by Janssen
⁽³⁾ Includes Cayston, Hepsera and Sovaldi