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REVENUES
 9 Months Ended
Sep. 30, 2022
Revenue from Contract with Customer [Abstract]  
REVENUES REVENUESRevenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer and is the unit of account in the contract. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. Some of our contracts have multiple performance obligations. For contracts with multiple performance obligations, we allocate the
contract’s transaction price to each performance obligation using our best estimate of the standalone selling price of each distinct good or service in the contract. Our global payment terms are typically between 30-90 days.
Most of our performance obligations are satisfied at a point in time. This includes sales of our broad portfolio of essential healthcare products across our business segments. Our three legacy Baxter geographic segments include acute and chronic dialysis therapies; sterile IV solutions; infusion systems and devices; parenteral nutrition therapies; inhaled anesthetics; generic injectable pharmaceuticals; and surgical hemostat and sealant products. Our legacy Hillrom segment includes smart bed systems; patient monitoring and diagnostic technologies; respiratory health devices; and advanced equipment for the surgical space. For most of those sales, our performance obligation is satisfied upon delivery to the customer. Shipping and handling activities are considered to be fulfillment activities and are not considered to be a separate performance obligation.
To a lesser extent, we enter into arrangements for which revenue may be recognized over time. For example, our Americas segment includes contract manufacturing arrangements, our Hillrom segment includes digital and connected care solutions and collaboration tools that are implemented over time and all of our segments include equipment leases and certain subscription software and licensing arrangements. We recognize revenue for these arrangements over time or at a point in time depending on our evaluation of when the customer obtains control of the promised goods or services. Revenue is recognized over time when we are creating or enhancing an asset that the customer controls as the asset is created or enhanced or our performance does not create an asset with an alternative use and we have an enforceable right to payment for performance completed.
As of September 30, 2022, we had $10.9 billion of transaction price allocated to remaining performance obligations related to executed contracts with an original duration of more than one year, which are primarily included in the Americas segment. Some contracts in the United States included in this amount contain index-dependent price increases, which are not known at this time. We expect to recognize approximately 10% of this amount as revenue over the remainder of 2022, 30% in each of 2023 and 2024, 15% in 2025 and 15% thereafter.
Significant Judgments
Revenues from product sales are recorded at the net sales price (transaction price), which includes estimates of variable consideration primarily related to rebates and wholesaler chargebacks. These reserves are based on estimates of the amounts earned or to be claimed on the related sales and are included in accrued expenses and other current liabilities and accounts receivable, net on the condensed consolidated balance sheets. Management's estimates take into consideration historical experience, current contractual and statutory requirements, specific known market events and trends, industry data, and forecasted customer buying and payment patterns. Overall, these reserves reflect our best estimates of the amount of consideration to which we are entitled based on the terms of the contract using the expected value method. The amount of variable consideration included in the net sales price is limited to the amount for which it is probable that a significant reversal in revenue will not occur when the related uncertainty is resolved. Revenue recognized during the three and nine months ended September 30, 2022 and 2021 related to performance obligations satisfied in prior periods was not material. Additionally, our contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately and determining the allocation of the transaction price may require significant judgement.
Contract Balances
The timing of revenue recognition, billings and cash collections results in the recognition of trade accounts receivable, unbilled receivables, contract assets and customer advances and deposits (contract liabilities) on our condensed consolidated balance sheets. Net trade accounts receivable was $2.3 billion and $2.4 billion as of September 30, 2022 and December 31, 2021, respectively.
For contract manufacturing arrangements, revenue is primarily recognized throughout the production cycle, which typically lasts up to 90 days, resulting in the recognition of contract assets until the related services are completed and the customers are billed. Additionally, for certain arrangements containing a performance obligation to deliver software that can be used with medical devices, we recognize revenue upon delivery of the software, which results in the recognition of contract assets when customers are billed over time, generally over one to five years. For bundled contracts involving equipment delivered up-front and consumable medical products to be delivered over time, total contract revenue is allocated between the equipment and consumable medical products. In certain of those arrangements, a contract asset is created for the difference between the amount of equipment revenue recognized upon delivery and the amount of consideration initially receivable from the customer. In those arrangements, the
contract asset becomes a trade account receivable as consumable medical products are delivered and billed, generally over one to seven years.
The following table summarizes our contract assets:
(in millions)September 30,
2022		December 31,
2021
Contract manufacturing services$65 $50 
Software sales44 45 
Bundled equipment and consumable medical products contracts120 100 
Contract assets$229 $195 
The following table summarizes the classification of contract assets and contract liabilities as reported in the condensed consolidated balance sheets:
(in millions)September 30,
2022		December 31,
2021
Prepaid expenses and other current assets$106 $84 
Other non-current assets123 111 
Contract assets$229 $195 
Accrued expenses and other current liabilities$158 $162 
Other non-current liabilities82 84 
Contract liabilities$240 $246 
Contract liabilities represent deferred revenues that arise as a result of cash received from customers or where the timing of billing for services precedes satisfaction of our performance obligations. Such remaining performance obligations represent the portion of the contract price for which work has not been performed and are primarily related to our installation and service contracts. We expect to satisfy the majority of the remaining performance obligations and recognize revenue related to installation and service contracts within the next 12 months with most of the non-current performance obligations satisfied within 24 months.
The following table summarizes contract liability activity for the nine months ended September 30, 2022. The contract liability balance represents the transaction price allocated to the remaining performance obligations.
Nine months ended
September 30, 2022
Balance at beginning of period$246 
New revenue deferrals460 
Revenue recognized upon satisfaction of performance obligations(463)
Currency translation(3)
Balance at end of period$240 
During the nine months ended September 30, 2021, the amount of revenue recognized that was included in contract liabilities as of December 31, 2020 was not significant.
Disaggregation of Net Sales
In connection with our acquisition of Hillrom in December 2021, we added three new product categories: Patient Support Systems, Front Line Care and Surgical Solutions.
The following tables disaggregate our net sales from contracts with customers by product category between the U.S. and international:
Three Months Ended September 30,
20222021
(in millions)U.S.InternationalTotalU.S.InternationalTotal
Renal Care 1
$240 $702 $942 $222 $759 $981 
Medication Delivery 2
475 250 725 490 257 747 
Pharmaceuticals 3
173 352 525 188 401 589 
Clinical Nutrition 4
92 139 231 88 156 244 
Advanced Surgery 5
141 106 247 135 114 249 
Acute Therapies 6
53 105 158 69 116 185 
BioPharma Solutions 7
99 73 172 109 97 206 
Patient Support Systems 8
301 79 380 — — — 
Front Line Care 9
209 70 279 — — — 
Surgical Solutions 10
38 38 76 — — — 
Other 11
28 10 38 18 7 25 
Total Baxter$1,849 $1,924 $3,773 $1,319 $1,907 $3,226 
Nine Months Ended September 30,
20222021
(in millions)U.S.InternationalTotalU.S.InternationalTotal
Renal Care 1
$690 $2,077 $2,767 $655 $2,212 $2,867 
Medication Delivery 2
1,406 735 2,141 1,345 751 2,096 
Pharmaceuticals 3
494 1,080 1,574 550 1,137 1,687 
Clinical Nutrition 4
266 422 688 255 460 715 
Advanced Surgery 5
428 310 738 405 317 722 
Acute Therapies 6
179 340 519 211 369 580 
BioPharma Solutions 7
226 265 491 218 306 524 
Patient Support Systems 8
880 247 1,127 — — — 
Front Line Care 9
618 237 855 — — — 
Surgical Solutions 10
111 112 223 — — — 
Other 11
72 31 103 58 21 79 
Total Baxter$5,370 $5,856 $11,226 $3,697 $5,573 $9,270 
1Renal Care includes sales of our peritoneal dialysis (PD), hemodialysis (HD) and additional dialysis therapies and services.
2Medication Delivery includes sales of our intravenous (IV) therapies, infusion pumps, administration sets and drug reconstitution devices.
3Pharmaceuticals includes sales of our premixed and oncology drug platforms, inhaled anesthesia and critical care products and pharmacy compounding services.
4Clinical Nutrition includes sales of our parenteral nutrition (PN) therapies and related products.
5Advanced Surgery includes sales of our biological products and medical devices used in surgical procedures for hemostasis, tissue sealing and adhesion prevention.
6Acute Therapies includes sales of our continuous renal replacement therapies (CRRT) and other organ support therapies focused in the intensive care unit (ICU).
7BioPharma Solutions includes sales of contracted services we provide to various pharmaceutical and biopharmaceutical companies.
8Patient Support Systems includes sales of our connected care solutions: devices, software, communications and integration technologies and smart beds.
9Front Line Care includes sales of our integrated patient monitoring and diagnostic technologies to help diagnose, treat and manage a wide variety of illness and diseases, including respiratory therapy, cardiology, vision screening and physical assessment.
10Surgical Solutions includes sales of our surgical video technologies, tables, lights, pendants, precision positioning devices and other accessories.
11Other includes sales of miscellaneous product and service offerings.
Lease Revenue
We lease smart beds, such as bariatric, critical care, maternal, and home care beds, as well as other surfaces, to customers during periods of peak demand or for specialty purposes. We also lease medical equipment, such as renal dialysis equipment and infusion pumps, to customers, primarily in conjunction with arrangements to provide consumable medical products such as dialysis therapies, IV fluids and inhaled anesthetics. Certain of our equipment leases are classified as sales-type leases and the remainder are operating leases. The terms of the related contracts, including the proportion of fixed versus variable payments and any options to shorten or extend the lease term, vary by customer. We allocate revenue between equipment leases and medical products based on their standalone selling prices.
The components of lease revenue for the three and nine months ended September 30, 2022 and 2021 were:
(in millions)Three months ended September 30, 2022Nine months ended September 30, 2022
Sales-type lease revenue$3 $11 
Operating lease revenue145 380 
Variable lease revenue9 41 
Total lease revenue$157 $432 
(in millions)Three months ended September 30, 2021Nine months ended September 30, 2021
Sales-type lease revenue$3 $19 
Operating lease revenue21 90 
Variable lease revenue27 59 
Total lease revenue$51 $168 
Our net investment in sales-type leases was $95 million as of September 30, 2022, of which $18 million originated in 2018 and prior, $19 million in 2019, $26 million in 2020, $24 million in 2021, and $8 million in 2022.