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Joint Venture | 9 Months Ended
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Jun. 30, 2019
Joint Venture |
Joint Venture | Note 6. Joint venture On January 4, 2016, Woodward and General Electric Company (“GE”), acting through its GE Aviation business unit, consummated the formation of a strategic joint venture between Woodward and GE (the “JV”) to develop, manufacture and support fuel systems for specified existing and all future GE commercial aircraft engines that produce thrust in excess of fifty thousand pounds. As part of the JV formation, Woodward contributed to the JV certain contractual rights and intellectual property applicable to the existing GE commercial aircraft engine programs within the scope of the JV. Woodward had no initial cost basis in the JV because Woodward had no cost basis in the contractual rights and intellectual property contributed to the JV. GE purchased from Woodward a 50% ownership interest in the JV for a $250,000 cash payment to Woodward. In addition, GE will pay contingent consideration to Woodward consisting of fifteen annual payments of $4,894 per year, which began on January 4, 2017, subject to certain claw-back conditions. During the three-months ended March 31, 2018 and March 31, 2019, Woodward received its second and third annual payments of $4,894, respectively, which were recorded as deferred income and included in Net cash provided by operating activities on the Condensed Consolidated Statements of Cash Flows. Neither Woodward nor GE contributed any tangible assets to the JV. Under previous accounting guidance, Woodward concluded that the formation of the JV was not the culmination of an earnings event and deferred recognition of the consideration paid until earned in the future. Under ASC 606, Woodward also concluded the formation of the JV was not a culmination of an earnings event and has further concluded that the consideration paid or receivable from GE represents a material right. Accordingly, under both ASC 606 and the previous standard, Woodward concluded it was appropriate to defer the consideration received as a liability and recognize it as an increase to net sales in proportion to revenue realized on sales of applicable fuel systems within the scope of the JV. Recognition to net sales in a particular period is determined as a percentage of total revenue expected to be realized by Woodward over the estimated remaining lives of the underlying commercial aircraft engine programs assigned to the JV. Unamortized deferred revenue from material rights in connection with the JV formation included accrued liabilities of $6,806 as of June 30, 2019 and $7,087 as of September 30, 2018, and other liabilities of $234,038 as of June 30, 2019 and $235,300 as of September 30, 2018. Amortization of the deferred income (material right) recognized as an increase to sales was $2,013 for the three-months and $5,712 for the nine-months ended June 30, 2019, and $1,564 for the three-months and $4,103 for the nine-months ended June 30, 2018. Woodward and GE jointly manage the JV and any significant decisions and/or actions of the JV require the mutual consent of both parties. Neither Woodward nor GE has a controlling financial interest in the JV, but both Woodward and GE do have the ability to significantly influence the operating and financial decisions of the JV. Therefore, Woodward is accounting for its 50% ownership interest in the JV using the equity method of accounting. The JV is a related party to Woodward. Other income includes income of $3,290 for the three-months and $7,761 for the nine-months ended June 30, 2019, and income of $738 for the three-months and $2,340 for the nine-months ended June 30, 2018 related to Woodward’s equity interest in the earnings of the JV. During the three and nine-months ended June 30, 2019, Woodward received cash distributions from the JV of $4,500 and $12,000 respectively, which is included in Net cash provided by operating activities on the Condensed Consolidated Statements of Cash Flows. Woodward received no cash distributions from the JV during the three and nine-months ended June 30, 2018. Woodward’s net investment in the JV, which is included in other assets, was $5,373 as of June 30, 2019 and $9,611 as of September 30, 2018. Woodward’s net sales include $18,049 for the three-months and $45,176 for the nine-months ended June 30, 2019 of sales to the JV, compared to $20,085 for the three-months and $50,137 for the nine-months ended June 30, 2018. Woodward recorded a reduction to sales of $6,897 for the three-months and $25,148 for the nine-months ended June 30, 2019 related to royalties paid to the JV by Woodward on sales by Woodward directly to third party aftermarket customers, compared to $7,340 for the three-months and $19,670 for the nine-months ended June 30, 2018. The Condensed Consolidated Balance Sheets include “Accounts receivable” of $5,441 at June 30, 2019, and $10,499 at September 30, 2018, related to amounts the JV owed Woodward, and include “Accounts payable” of $2,365 at June 30, 2019, and $2,944 at September 30, 2018, related to amounts Woodward owed the JV. Upon the October 1, 2018 adoption of ASC 606, Woodward recorded $57,529 of revenue recognized in prior periods for the JV’s engineering and development projects as an increase to contract liabilities in “Other liabilities” and $57,529 of costs recognized in prior periods as costs to fulfill a contract in “Other assets.” Woodward recognized an additional $3,042 during the three-months and $11,640 during the nine-months ended June 30, 2019 of contract liabilities in “Other liabilities,” and $3,042 during the three-months and $11,640 during the nine-months ended June 30, 2019 of additional costs to fulfill a contract in “Other assets.” In the three and nine-months ended June 30, 2019, Woodward recognized a $2,774 reduction in both the contract liability in “Other liabilities” and costs to fulfill a contract in “Other assets” related to the termination of a JV engineering and development project previously recognized as a material right.

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- Definition The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -URI http://asc.fasb.org/topic&trid=2196965 + Details
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