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Contract Assets and Contract Liabilities
 9 Months Ended
Oct. 01, 2021
Revenue from Contract with Customer [Abstract]  
Contract Assets and Contract Liabilities
Note F — Contract Assets and Contract Liabilities
Contract assets include unbilled amounts typically resulting from revenue recognized exceeding amounts billed to customers for contracts utilizing the percentage of completion (“POC”) cost-to-cost revenue recognition method. We bill customers as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals, upon achievement of contractual milestones or upon deliveries and, in certain arrangements, the customer may withhold payment of a small portion of the contract price until contract completion. Contract liabilities include advance payments and billings in excess of revenue recognized, including deferred revenue associated with extended product warranties. Contract assets and liabilities are reported on a contract-by-contract basis at the end of each reporting period.
Contract assets and liabilities in the three quarters ended October 1, 2021 were impacted primarily by reclassifications to assets and liabilities of businesses held for sale, accelerated progress payments due to the U.S. Government’s temporary increase in the progress payment rate from 80 percent to 90 percent and the timing of contractual billing milestones. See Note B — Business Divestitures in these Notes for additional information regarding assets and liabilities of businesses classified as held for sale.
Contract assets and contract liabilities are summarized below:
(In millions)October 1, 2021January 1, 2021
Contract assets$2,813 $2,437 
Contract liabilities, current(1,174)(1,198)
Contract liabilities, non-current(1)
(98)(73)
Net contract assets$1,541 $1,166 
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(1)The non-current portion of contract liabilities is included as a component of the “Other long-term liabilities” line item in our Condensed Consolidated Balance Sheet (Unaudited).
The components of contract assets are summarized below:
(In millions)October 1, 2021January 1, 2021
Unbilled contract receivables, gross$4,587 $4,268 
Unliquidated progress payments and advances(1,774)(1,831)
Contract assets$2,813 $2,437 
Impairment losses related to our contract assets were not material for the quarter or three quarters ended October 1, 2021 or October 2, 2020. Contract liabilities recognized as revenue that were outstanding at the end of the prior fiscal year were $94 million and $821 million for the quarter and three quarters ended October 1, 2021, respectively, and $97 million and $882 million for the quarter and three quarters ended October 2, 2020, respectively.
Note R — Backlog
Backlog, which is the equivalent of our remaining performance obligations, represents the future revenue we expect to recognize as we perform on our current contracts. Backlog comprises both funded backlog (i.e., firm orders for which funding is authorized and appropriated) and unfunded backlog. Backlog excludes unexercised contract options and potential orders under ordering-type contracts, such as indefinite delivery, indefinite quantity contracts.
At October 1, 2021, our ending backlog was $21.1 billion. We expect to recognize approximately 60 percent of the revenue associated with this backlog by the end of 2022 and approximately 77 percent by the end of 2023, with the remainder to be recognized thereafter. At January 1, 2021, our ending backlog was $21.7 billion, including $1.5 billion of backlog associated with businesses that were divested during the three quarters ended October 1, 2021.