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Significant Accounting Policies and Recent Accounting Standards | 9 Months Ended
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Mar. 29, 2019
Accounting Policies [Abstract] |
Significant Accounting Policies and Recent Accounting Standards | Note A — Significant Accounting Policies and Recent Accounting Standards Basis of Presentation The accompanying Condensed Consolidated Financial Statements (Unaudited) include the accounts of Harris Corporation and its consolidated subsidiaries. As used in these Notes to Condensed Consolidated Financial Statements (Unaudited) (these “Notes”), the terms “Harris,” “Company,” “we,” “our” and “us” refer to Harris Corporation and its consolidated subsidiaries. Intracompany transactions and accounts have been eliminated in consolidation. The accompanying Condensed Consolidated Financial Statements (Unaudited) have been prepared by Harris, without an audit, in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information and with the rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, such interim financial statements do not include all information and footnotes necessary for a complete presentation of financial condition, results of operations, cash flows and equity in conformity with GAAP for annual financial statements. In the opinion of management, such interim financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of our financial condition, results of operations and cash flows for the periods presented therein. The results for the quarter and three quarters ended March 29, 2019 are not necessarily indicative of the results that may be expected for the full fiscal year or any subsequent period. The balance sheet at June 29, 2018 has been derived from our audited financial statements, but does not include all of the information and footnotes required by GAAP for annual financial statements. We provide complete, audited financial statements in our Annual Report on Form 10-K, which includes information and footnotes required by the rules and regulations of the SEC. The information included in this Quarterly Report on Form 10-Q (this “Report”) should be read in conjunction with the Management’s Discussion and Analysis of Financial Condition and Results of Operations and the Consolidated Financial Statements and accompanying Notes to Consolidated Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended June 29, 2018 (our “Fiscal 2018 Form 10-K”) and in our Current Report on Form 8-K filed with the SEC on December 13, 2018 (our “Fiscal 2017-2018 Update 8-K”), which updated and superseded historical fiscal 2018 and fiscal 2017 financial information contained in Item 7, Item 8 and certain other Items in our Fiscal 2018 Form 10-K to reflect the impact for those two fiscal years of retrospective application of Accounting Standards Update (“ASU”) 2014-09, Accounting Standards Codification (“ASC”) 606, Revenue from Contracts with Customers (Topic 606), as amended (“ASC 606”), and ASU 2017-07, Compensation - Retirement Benefits (Topic 715): Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost (“ASU 2017-07”), each of which we adopted effective June 30, 2018. See “Adoption of New Accounting Standards” below in this Note A for additional information. Amounts contained in this Report may not always add to totals due to rounding. Reclassifications The classification of certain prior-period amounts has been adjusted in our Condensed Consolidated Financial Statements (Unaudited) to conform with current-period classifications. Reclassifications include certain direct selling and bid and proposal costs from the “Cost of product sales and services” line item to the “Engineering, selling and administrative expenses” line item in our Condensed Consolidated Statement of Income (Unaudited) and in these Notes. Use of Estimates The preparation of financial statements in accordance with GAAP requires us to make estimates and assumptions that affect the amounts reported in the accompanying Condensed Consolidated Financial Statements (Unaudited) and these Notes and related disclosures. These estimates and assumptions are based on experience and other information available prior to issuance of the accompanying Condensed Consolidated Financial Statements (Unaudited) and these Notes. Materially different results can occur as circumstances change and additional information becomes known. Adoption of New Accounting Standards As discussed above, we adopted ASC 606 effective June 30, 2018. This standard supersedes nearly all revenue recognition guidance under GAAP and International Financial Reporting Standards and supersedes some cost guidance for construction-type and production-type contracts. The guidance in this standard is principles-based, and, consequently, entities are required to use more judgment and make more estimates than under prior guidance, including identifying contract performance obligations, estimating variable consideration to include in the contract price and allocating the transaction price to separate performance obligations. The core principle of this standard is that entities should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. To help financial statement users better understand the nature, amount, timing and potential uncertainty of the revenue and cash flows, this standard requires significantly more interim and annual disclosures. We adopted the requirements of the new standard using the full retrospective transition method. We opted for this transition method because we believe it provides enhanced comparability and transparency across periods. We elected to apply the practical expedient related to backlog disclosures for prior reporting periods and the practical expedient related to evaluating the effects of contract modifications that occurred prior to the earliest period presented. No other transition practical expedients were applied. Retrospective application of this standard resulted in the recognition of a cumulative-effect adjustment of $15 million to reduce the opening balance of retained earnings at July 2, 2016. This standard also resulted in the establishment of “Contract assets” and “Contract liabilities” line items and the reclassification to these line items of amounts previously presented in the “Receivables,” “Inventories” and “Advance payments and unearned income” line items in our Condensed Consolidated Balance Sheet. See Note 2: “Accounting Changes or Recent Accounting Pronouncements” in our Notes to Consolidated Financial Statements in our Fiscal 2017-2018 Update 8-K for a table summarizing the effect of adopting ASC 606 on our previously reported Consolidated Balance Sheet as of June 29, 2018. Total net cash provided by operating activities and total net cash provided by or used in investing activities and financing activities in our previously reported Condensed Consolidated Statements of Cash Flows (Unaudited) were not impacted by our adoption of ASC 606. We also adopted ASU 2017-07 effective June 30, 2018, as discussed above. This update requires that entities present components of net periodic pension and postretirement benefit costs other than the service cost component (“non-service cost amounts”) separately from the service cost component. We adopted this update retrospectively by recasting each prior period presented, using as our estimation basis for recasting prior periods the amounts disclosed in Note 13: “Pension and Other Postretirement Benefits” in our Notes to Consolidated Financial Statements in our Fiscal 2018 Form 10-K. Retrospective application of this update resulted in reclassification to the “Non-operating income” line item of non-service cost amounts that were included in the “Cost of product sales and services” and “Engineering, selling and administrative expenses” line items in our Condensed Consolidated Statement of Income (Unaudited) prior to adopting ASU 2017-07. The following table summarizes the effect of adopting ASC 606 and ASU 2017-07 on our previously reported Condensed Consolidated Statement of Income (Unaudited) for the quarter and three quarters ended March 30, 2018:
| Quarter Ended March 30, 2018
| Previously Reported |  | Effect of Adopting ASC 606 |  | Effect of Adopting ASU 2017-07 |  | Currently Reported
| (In millions, except per share amounts)
Revenue from product sales and services | $ | 1,568 |  |  | $ | (6 | ) |  | $ | — |  |  | $ | 1,562 |
Cost of product sales and services | (994 | ) |  | 3 |  |  | (37 | ) |  | (1,028 | )
Engineering, selling and administrative expenses | (318 | ) |  | (4 | ) |  | (9 | ) |  | (331 | )
Non-operating income | — |  |  | — |  |  | 46 |  |  | 46 |
Interest expense | (41 | ) |  | — |  |  | — |  |  | (41 | )
Income from continuing operations before income taxes | 215 |  |  | (7 | ) |  | — |  |  | 208 |
Income taxes | (12 | ) |  | 2 |  |  | — |  |  | (10 | )
Income from continuing operations | 203 |  |  | (5 | ) |  | — |  |  | 198 |
Discontinued operations, net of income taxes | (2 | ) |  | — |  |  | — |  |  | (2 | )
Net income | $ | 201 |  |  | $ | (5 | ) |  | $ | — |  |  | $ | 196 |
Net income per common share |  |  |  |  |  |  |
Basic |  |  |  |  |  |  |
Continuing operations | $ | 1.71 |  |  | $ | (0.05 | ) |  | $ | — |  |  | $ | 1.66 |
Discontinued operations | (0.01 | ) |  | — |  |  | — |  |  | (0.01 | )
| $ | 1.70 |  |  | $ | (0.05 | ) |  | $ | — |  |  | $ | 1.65 |
Diluted |  |  |  |  |  |  |
Continuing operations | $ | 1.67 |  |  | $ | (0.04 | ) |  | $ | — |  |  | $ | 1.63 |
Discontinued operations | (0.01 | ) |  | — |  |  | — |  |  | (0.01 | )
| $ | 1.66 |  |  | $ | (0.04 | ) |  | $ | — |  |  | $ | 1.62 |
| Three Quarters Ended March 30, 2018
| Previously Reported |  | Effect of Adopting ASC 606 |  | Effect of Adopting ASU 2017-07 |  | Currently Reported
| (In millions, except per share amounts)
Revenue from product sales and services | $ | 4,516 |  |  | $ | (9 | ) |  | $ | — |  |  | $ | 4,507 |
Cost of product sales and services | (2,866 | ) |  | 7 |  |  | (110 | ) |  | (2,969 | )
Engineering, selling and administrative expenses | (850 | ) |  | (12 | ) |  | (28 | ) |  | (890 | )
Non-operating income (loss) | (2 | ) |  | — |  |  | 138 |  |  | 136 |
Interest income | 1 |  |  | — |  |  | — |  |  | 1 |
Interest expense | (124 | ) |  | — |  |  | — |  |  | (124 | )
Income from continuing operations before income taxes | 675 |  |  | (14 | ) |  | — |  |  | 661 |
Income taxes | (166 | ) |  | (1 | ) |  | — |  |  | (167 | )
Income from continuing operations | 509 |  |  | (15 | ) |  | — |  |  | 494 |
Discontinued operations, net of income taxes | (8 | ) |  | — |  |  | — |  |  | (8 | )
Net income | $ | 501 |  |  | $ | (15 | ) |  | $ | — |  |  | $ | 486 |
Net income per common share |  |  |  |  |  |  |
Basic |  |  |  |  |  |  |
Continuing operations | $ | 4.28 |  |  | $ | (0.13 | ) |  | $ | — |  |  | $ | 4.15 |
Discontinued operations | (0.07 | ) |  | — |  |  | — |  |  | (0.07 | )
| $ | 4.21 |  |  | $ | (0.13 | ) |  | $ | — |  |  | $ | 4.08 |
Diluted |  |  |  |  |  |  |
Continuing operations | $ | 4.19 |  |  | $ | (0.12 | ) |  | $ | — |  |  | $ | 4.07 |
Discontinued operations | (0.06 | ) |  | (0.01 | ) |  | — |  |  | (0.07 | )
| $ | 4.13 |  |  | $ | (0.13 | ) |  | $ | — |  |  | $ | 4.00 |
The following table presents the effect of adopting ASC 606 on our previously reported Condensed Consolidated Statement of Cash Flows (Unaudited) for the three quarters ended March 30, 2018:
| Three Quarters Ended March 30, 2018
| Previously Reported |  | Effect of Adopting ASC 606 |  | Currently Reported
| (In millions, except shares)
Net income | $ | 501 |  |  | $ | (15 | ) |  | $ | 486 |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |
Amortization of acquisition-related intangibles(1) | 87 |  |  | — |  |  | 87 |
Depreciation and other amortization(1) | 105 |  |  | — |  |  | 105 |
Share-based compensation | 50 |  |  | — |  |  | 50 |
Qualified pension plan contributions | (301 | ) |  | — |  |  | (301 | )
Pension income | (101 | ) |  | — |  |  | (101 | )
(Increase) decrease in: |  |  |  |  |
Accounts receivable | (120 | ) |  | 26 |  |  | (94 | )
Contract assets | — |  |  | (110 | ) |  | (110 | )
Inventories | (122 | ) |  | 86 |  |  | (36 | )
Increase (decrease) in: |  |  |  |  |
Accounts payable | (46 | ) |  | — |  |  | (46 | )
Advance payments and unearned income | 45 |  |  | (45 | ) |  | — |
Contract liabilities | — |  |  | 58 |  |  | 58 |
Income taxes | 146 |  |  | 2 |  |  | 148 |
Other | (14 | ) |  | (2 | ) |  | (16 | )
Net cash provided by operating activities | $ | 230 |  |  | $ | — |  |  | $ | 230 |
_______________
(1) | “Amortization of acquisition-related intangibles” includes amortization of non-Exelis Inc. acquisition-related intangibles, which was previously included in the “Depreciation and amortization” line item in our Condensed Consolidated Statement of Cash Flows (Unaudited) in our Form 10-Q for the quarter ended March 30, 2018.
Accounting Standards Issued But Not Yet Effective In February 2016, the Financial Accounting Standards Board issued a new lease standard that supersedes existing lease guidance under GAAP. This standard requires, among other things, the recognition of right-of-use assets and liabilities on the balance sheet for most lease arrangements and disclosure of certain information about leasing arrangements. The new standard currently allows two transition methods with certain practical expedients available. Companies may elect to use the modified retrospective approach for leases that exist or are entered into after the beginning of the earliest comparative period in the financial statements or to initially apply this standard at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. This standard is effective for fiscal years, and interim reporting periods within those years, beginning after December 15, 2018, which for us is our fiscal 2020. We expect to adopt the new lease standard on June 29, 2019 by applying the standard at the adoption date and recognizing a cumulative-effect adjustment to the opening balance of retained earnings. We also intend to elect the package of practical expedients permitted by the standard, which, among other things, allows us to carry forward the historical lease classification. The majority of our current lease arrangements are classified as operating leases under existing GAAP lease guidance, and we expect they will continue to be classified as operating leases under the new standard. We have made progress in executing our implementation plan, including identifying our lease population. We are in the process of implementing a new lease management software tool as well as new processes and controls. Once we have configured the new lease management tool and have accumulated compatible lease data, we expect to measure the right-of-use assets and liabilities for leases in effect at the adoption date, which could be material. We do not expect that the adoption of this standard will have a material impact on our results of operations or cash flows.

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- Definition The entire disclosure for the organization, consolidation and basis of presentation of financial statements disclosure, and significant accounting policies of the reporting entity. May be provided in more than one note to the financial statements, as long as users are provided with an understanding of (1) the significant judgments and assumptions made by an enterprise in determining whether it must consolidate a VIE and/or disclose information about its involvement with a VIE, (2) the nature of restrictions on a consolidated VIE's assets reported by an enterprise in its statement of financial position, including the carrying amounts of such assets, (3) the nature of, and changes in, the risks associated with an enterprise's involvement with the VIE, and (4) how an enterprise's involvement with the VIE affects the enterprise's financial position, financial performance, and cash flows. Describes procedure if disclosures are provided in more than one note to the financial statements. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 205 -URI http://asc.fasb.org/topic&trid=2122149 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 810 -URI http://asc.fasb.org/topic&trid=2197479 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 275 -URI http://asc.fasb.org/topic&trid=2134479 + Details
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