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 payer mix, 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 payer mix 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 customer payment patterns and our expectations regarding future customer payment patterns.

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.

Revenues Recognized from Performance Obligations Satisfied in Prior Periods

During the three and nine months ended September 30, 2018, revenues recognized from performance obligations satisfied in prior years related to royalties for licenses of our intellectual property were $167 million and $395 million, respectively. Changes in estimates for variable consideration related to sales made in prior years were not material during the three and nine months ended September 30, 2018.

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 as of September 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 nine months ended September 30, 2018 and 2017. The information for the three and nine months ended September 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 September 30, 2018								Three Months Ended September 30, 2017
(In millions)	U.S.		Europe		Other International		Total		U.S.		Europe		Other International		Total
Product sales:
Atripla	$	221	$	29	$	8	$	258	$	324	$	79	$	36	$	439
Biktarvy	375		11		—		386		—		—		—		—
Complera/Eviplera	61		67		11		139		91		133		13		237
Descovy	310		81		15		406		241		65		10		316
Genvoya	921		203		52		1,176		810		146		32		988
Odefsey	323		95		5		423		255		37		4		296
Stribild	111		20		15		146		181		40		8		229
Truvada	665		62		30		757		604		154		53		811
Other HIV⁽¹⁾	10		2		2		14		13		2		—		15
Revenue share - Symtuza⁽²⁾	8		14		—		22		—		—		—		—
AmBisome	9		59		34		102		9		51		32		92
Epclusa	225		136		116		477		543		263		76		882
Harvoni	185		38		88		311		718		110		145		973
Letairis	241		—		—		241		213		—		—		213
Ranexa	178		—		—		178		164		—		—		164
Vemlidy	66		2		19		87		34		2		1		37
Viread	17		10		43		70		137		55		82		274
Vosevi	78		21		4		103		117		5		1		123
Yescarta	75		—		—		75		—		—		—		—
Zydelig	15		4		1		20		18		22		—		40
Other⁽³⁾	37		19		8		64		70		33		170		273
Total product sales	4,131		873		451		5,455		4,542		1,197		663		6,402
Royalty, contract and other revenues	20		102		19		141		21		74		15		110
Total revenues	$	4,151	$	975	$	470	$	5,596	$	4,563	$	1,271	$	678	$	6,512



	Nine Months Ended September 30, 2018								Nine Months Ended September 30, 2017
(In millions)	U.S.		Europe		Other International		Total		U.S.		Europe		Other International		Total
Product Sales:
Atripla	$	723	$	119	$	79	$	921	$	974	$	259	$	133	$	1,366
Biktarvy	593		13		—		606		—		—		—		—
Complera/Eviplera	210		279		39		528		315		385		44		744
Descovy	895		234		41		1,170		682		149		22		853
Genvoya	2,678		596		144		3,418		2,189		358		67		2,614
Odefsey	905		230		15		1,150		688		87		6		781
Stribild	388		83		36		507		632		161		38		831
Truvada	1,821		245		108		2,174		1,635		527		175		2,337
Other HIV⁽¹⁾	30		6		10		46		34		5		2		41
Revenue share - Symtuza⁽²⁾	8		34		—		42		—		—		—		—
AmBisome	40		170		102		312		26		153		97		276
Epclusa	733		502		278		1,513		2,142		649		154		2,945
Harvoni	649		116		225		990		2,628		583		515		3,726
Letairis	689		—		—		689		654		—		—		654
Ranexa	581		—		—		581		517		—		—		517
Vemlidy	172		8		41		221		66		3		1		70
Viread	40		72		137		249		395		202		237		834
Vosevi	250		57		12		319		117		5		1		123
Yescarta	183		—		—		183		—		—		—		—
Zydelig	46		44		2		92		52		57		1		110
Other⁽³⁾	93		75		117		285		228		279		496		1,003
Total product sales	11,727		2,883		1,386		15,996		13,974		3,862		1,989		19,825
Royalty, contract and other revenues	54		233		49		336		62		226		45		333
Total revenues	$	11,781	$	3,116	$	1,435	$	16,332	$	14,036	$	4,088	$	2,034	$	20,158

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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