REVENUE

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which requires recognition of revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those goods or services. Aptiv adopted this guidance in the first quarter of 2018 using the modified retrospective method. In accordance with the standard, revenue is measured based on consideration specified in a contract with a customer. Customer contracts generally are represented by a combination of a current purchase order and a current production schedule issued by the customer. The Company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer. From time to time, Aptiv enters into pricing agreements with its customers that provide for price reductions, some of which are conditional upon achieving certain joint cost savings targets. In these instances, revenue is recognized based on the agreed-upon price at the time of shipment.

Sales incentives and allowances are recognized as a reduction to revenue at the time of the related sale. Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction that are collected by Aptiv from a customer are excluded from revenue. Shipping and handling fees billed to customers are included in net sales, while costs of shipping and handling are included in cost of sales.

Nature of Goods and Services

The principal activity from which the Company generates its revenue is the manufacturing of production parts for OEM customers. Aptiv recognizes revenue at a point in time, rather than over time, as the performance obligation is satisfied when customers obtain control of the product upon title transfer and not as the product is manufactured or developed.

Aptiv recognizes revenue for production parts at a point in time as title transfers to the customer. Although production parts are highly customized with no alternative use, Aptiv does not have an enforceable right to payment as customers have the right to cancel a product program without a notification period. The amount of revenue recognized is based on the purchase order price and adjusted for revenue allocated to variable consideration (i.e. estimated rebates and price discounts), as applicable. Customers typically pay for production parts based on customary business practices with payment terms averaging 60 days.

Disaggregation of Revenue

Revenue generated from Aptiv’s operating segments is disaggregated by primary geographic market in the following tables for the three and nine months ended September 30, 2018 and 2017. Information concerning geographic market reflects the manufacturing location.



For the Three Months Ended September 30, 2018:	Signal and Power Solutions		Advanced Safety and User Experience		Eliminations and Other			Total

	(in millions)
Geographic Market
North America	$	1,070	$	326	$	—		$	1,396
Europe, Middle East & Africa	681		377		(1		)	1,057
Asia Pacific	720		252		(4		)	968
South America	64		1		(1		)	64
Total net sales	$	2,535	$	956	$	(6	)	$	3,485



For the Three Months Ended September 30, 2017:	Signal and Power Solutions		Advanced Safety and User Experience		Eliminations and Other			Total

	(in millions)
Geographic Market
North America	$	881	$	276	$	(2	)	$	1,155
Europe, Middle East & Africa	694		336		(4		)	1,026
Asia Pacific	664		232		(9		)	887
South America	79		2		(1		)	80
Total net sales	$	2,318	$	846	$	(16	)	$	3,148



For the Nine Months Ended September 30, 2018:	Signal and Power Solutions		Advanced Safety and User Experience		Eliminations and Other			Total

	(in millions)
Geographic Market
North America	$	3,162	$	1,005	$	(4	)	$	4,163
Europe, Middle East & Africa	2,322		1,247		(10		)	3,559
Asia Pacific	2,114		777		(20		)	2,871
South America	204		3		(1		)	206
Total net sales	$	7,802	$	3,032	$	(35	)	$	10,799



For the Nine Months Ended September 30, 2017:	Signal and Power Solutions		Advanced Safety and User Experience		Eliminations and Other			Total

	(in millions)
Geographic Market
North America	$	2,775	$	869	$	(8	)	$	3,636
Europe, Middle East & Africa	2,140		991		(16		)	3,115
Asia Pacific	1,884		626		(27		)	2,483
South America	207		4		(1		)	210
Total net sales	$	7,006	$	2,490	$	(52	)	$	9,444

Contract Balances

Consistent with the recognition of production parts revenue at a point in time as title transfers to the customer, Aptiv has no contract assets or contract liabilities balances as of September 30, 2018 or December 31, 2017.

Outstanding Performance Obligations

As customer contracts generally are represented by a combination of a current purchase order and a current production schedule issued by the customer for a production part, there are no contracts outstanding beyond one year. Aptiv does not enter into fixed long-term supply agreements.

As permitted, Aptiv does not disclose information about remaining performance obligations that have original expected durations of one year or less.

Costs to Obtain a Contract

From time to time, Aptiv makes payments to customers in conjunction with ongoing and future business. These payments to customers are generally recognized as a reduction to revenue at the time of the commitment to make these payments.

Certain of these payments or upfront fees meet the criteria to be considered a cost to obtain a contract as they are directly attributable to a contract, are incremental and management expects the fees to be recoverable. As of September 30, 2018 and December 31, 2017, Aptiv has recorded $66 million (of which $8 million was classified within other current assets and $58 million was classified within other long-term assets) and $36 million (of which $5 million was classified within other current assets and $31 million was classified within other long-term assets), respectively, related to these capitalized upfront fees.

Capitalized upfront fees are amortized to revenue based on the transfer of goods and services to the customer for which the upfront fees relate, which typically range from three to five years. There have been no impairment losses in relation to the costs capitalized. The amount of amortization to net sales was $1 million for the three months ended September 30, 2018 and $3 million and $2 million for the nine months ended September 30, 2018 and 2017, respectively.