2.	REVENUES

Adoption of New Revenue Standard

We adopted the New Revenue Standard on January 1, 2018 using the modified retrospective approach. The New Revenue Standard did not have an impact on the amount and timing of our revenue recognition; however, certain payments to customers were reclassified from expense to a reduction from revenues resulting in an immaterial impact to the individual financial statement line items of our condensed consolidated unaudited statement of income. Results for reporting periods beginning on and after January 1, 2018 are presented under the New Revenue Standard, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for those periods.

Revenue Recognition

Revenue primarily consists of sales of air conditioning, heating and refrigeration equipment and related parts and supplies. We generate our revenue primarily from the sale of finished products to customers, therefore, the significant majority of our contracts are short-term in nature and have a single performance obligation to deliver products, in which our performance obligation is satisfied when control of the product is transferred to the customer. Some contracts contain a combination of product sales and services which are distinct and accounted for as separate performance obligations. Our performance obligations for services are satisfied when the services are rendered within the arranged service period. Total service revenue is not material and accounted for less than 1% of revenues for the quarter ended March 31, 2018.

Revenue is recognized when control transfers to our customers via shipment of products or delivery of services. We measure revenue as the amount of consideration we expect to be entitled to receive in exchange for those goods or services, net of any variable considerations (e.g., rights to return product, sales incentives, others) and any taxes collected from customers and subsequently remitted to governmental authorities. Revenue for shipping and handling charges is recognized when products are delivered to or picked up by the customer.

Product Returns

We estimate product returns based on historical experience and record them on a gross basis. Substantially all customer returns relate to products that are returned under warranty obligations underwritten by manufacturers. Accrued sales returns of $11,414 at March 31, 2018 were included in accrued expenses and other current liabilities in our condensed consolidated unaudited balance sheet.

Sales Incentives

We estimate sales incentives expected to be paid over the term of the contract based on the most likely amount. Contract liabilities related to sales incentives are accounted for as a reduction in the transaction price and are generally paid on an annual basis. Accrued sales incentives of $6,260 and $13,001 as of March 31, 2018 and December 31, 2017, respectively, were included in accrued expenses and other current liabilities in our condensed consolidated unaudited balance sheets.

Disaggregation of Revenues

The following table presents our revenues disaggregated by primary geographical regions and major product lines within our single reporting segment:


*Quarters Ended March 31,*	2018			2017(1)
Primary Geographical Regions:
United States	$	840,268		$	786,280
Canada		52,360			51,533
Mexico		33,949			34,282

	$	926,577		$	872,095

Major Product Lines:
HVAC equipment		66	%		65	%
Other HVAC products		29	%		30	%
Commercial refrigeration products		5	%		5	%

		100	%		100	%

(1)	As noted above, prior period amounts have not been adjusted under the modified retrospective method.

Practical Expedients

We generally expense sales commissions when incurred because the amortization period is one year or less. These costs are recorded within selling, general and administrative expenses. We do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.