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Revenue Recognition | 9 Months Ended
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Sep. 29, 2018
Revenue Recognition |
Revenue Recognition | Note 2 – Revenue Recognition Seaboard recognizes revenue when control of the promised goods or services is transferred to its customers, in an amount that reflects the consideration it expects to receive in exchange for those goods or services. A performance obligation, the unit of account in Topic 606 Revenue from Contracts with Customers (“Topic 606”), is a promise in a contract to transfer a distinct good or service to the customer. The majority of Seaboard’s revenue arrangements consist of a single performance obligation as the promise to transfer the individual product or service is not separately identifiable from other promises in the contracts, including shipping and handling and customary storage, and, therefore, not distinct. Seaboard’s transaction prices are mostly fixed, but occasionally include minimal variable consideration for early payment, volume and other similar discounts, which are highly probable based on the history with the respective customers. Taxes assessed by a governmental authority that are collected by Seaboard from a customer are excluded from sales. Seaboard has multiple segments with diverse revenue streams. For additional information on Seaboard’s segments, see Note 10. The following tables present Seaboard’s sales disaggregated by revenue source and segment for the three and nine month periods ended September 29, 2018.
|  |  | Three Months Ended September 29, 2018 |
(Millions of dollars) |  |  | Pork |  |  | Commodity Trading & Milling |  |  | Marine |  |  | Sugar |  |  | Power |  |  | All Other |  |  | Consolidated Totals |
Major Products/Services Lines: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Products |  | $ | 334 |  | $ | 894 |  | $ | — |  | $ | 39 |  | $ | — |  | $ | 5 |  | $ | 1,272 |
Transportation |  |  | 4 |  |  | — |  |  | 259 |  |  | — |  |  | — |  |  | — |  |  | 263 |
Energy |  |  | 66 |  |  | — |  |  | — |  |  | 4 |  |  | 34 |  |  | — |  |  | 104 |
Other |  |  | 8 |  |  | 4 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 12 |
Segment/Consolidated Totals |  | $ | 412 |  | $ | 898 |  | $ | 259 |  | $ | 43 |  | $ | 34 |  | $ | 5 |  | $ | 1,651 |
|  |  | Nine Months Ended September 29, 2018 |
(Millions of dollars) |  |  | Pork |  |  | Commodity Trading & Milling |  |  | Marine |  |  | Sugar |  |  | Power |  |  | All Other |  |  | Consolidated Totals |
Major Products/Services Lines: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Products |  | $ | 1,060 |  | $ | 2,560 |  | $ | — |  | $ | 149 |  | $ | — |  | $ | 13 |  | $ | 3,782 |
Transportation |  |  | 12 |  |  | — |  |  | 771 |  |  | — |  |  | — |  |  | — |  |  | 783 |
Energy |  |  | 225 |  |  | — |  |  | — |  |  | 6 |  |  | 88 |  |  | — |  |  | 319 |
Other |  |  | 23 |  |  | 14 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 37 |
Segment/Consolidated Totals |  | $ | 1,320 |  | $ | 2,574 |  | $ | 771 |  | $ | 155 |  | $ | 88 |  | $ | 13 |  | $ | 4,921 |
Revenue from goods and services transferred to customers at a single point in time accounted for approximately 85% of Seaboard’s net sales for the nine month period of 2018. Substantially all of the sales in Seaboard’s Marine segment are recognized ratably over the transit time for each voyage as Seaboard believes this is a faithful depiction of the performance obligation to its customers. Almost all of Seaboard’s contracts with its customers are short-term, defined as less than one year. As of September 29, 2018, Seaboard had $14 million of remaining performance obligations that were unsatisfied, of which 11% is expected to be recognized as net sales in the fourth quarter of 2018, an additional 44% in 2019, and the remaining balance thereafter. Seaboard elected to use all practical expedients and therefore will not disclose the value of unsatisfied performance obligations for: (i) contracts with an original expected length of one year or less; and (ii) contracts for which revenue is recognized at the amount to which it has the right to invoice for services performed. Also, Seaboard will recognize a financing component only on obligations that extend longer than one year. Deferred revenue represents cash payments received in advance of Seaboard’s performance or revenue billed that is unearned. The Commodity Trading and Milling (“CT&M”) segment, which operates internationally with sales in Africa, South America, the Caribbean and Asia, requires certain customers to pay in advance or upon delivery to avoid collection risk. The Marine segment’s deferred revenue balance primarily relates to the unearned portion of billed revenue when a ship is on the water and has not arrived at the designated port. The Pork segment has a marketing agreement with Triumph Foods, LLC, of which certain fees paid at commencement are recognized over the term of the agreement. Deferred revenue balances are reduced when revenue is recognized. Deferred revenue recognized as revenue for the three and nine month periods of 2018 was $73 million and $229 million, respectively. The primary impact of adopting the new guidance was the acceleration of revenue related to sales in Seaboard’s CT&M segment that previously had not been recognized as a fixed and determinable price was not established at the time of sale. Under the new guidance, revenue is recognized when control is transferred, and adjustments are made to revenue for pending sale prices dependent upon market fluctuations, further processing, or other factors until sales prices are finalized. The following tables summarize the impacts of adoption on Seaboard’s condensed consolidated financial statements.
Consolidated Statement of Comprehensive Income |  |  |  |  |  |  |  |  |  |
|  |  | Three Months Ended |  | Nine Months Ended
|  |  | September 29, 2018 |  |  | September 29, 2018
|  |  | Balances Without |  |  |  |  |  |  |  |  | Balances Without |  |  |  |  |  |  |
|  |  | Adoption |  |  |  |  |  | As |  |  | Adoption |  |  |  |  |  | As |
(Millions of dollars) |  |  | of Topic 606 |  |  | Adjustments |  |  | Reported |  |  | of Topic 606 |  |  | Adjustments |  |  | Reported |
Total net sales |  | $ | 1,658 |  | $ | (7) |  | $ | 1,651 |  | $ | 4,899 |  | $ | 22 |  | $ | 4,921 |
Total cost of sales |  | $ | 1,534 |  | $ | (5) |  | $ | 1,529 |  | $ | 4,488 |  | $ | 23 |  | $ | 4,511 |
Net earnings |  | $ | 36 |  | $ | (2) |  | $ | 34 |  | $ | 74 |  | $ | (1) |  | $ | 73 |
Consolidated Balance Sheet |  |  | September 29, 2018
|  |  | Balances Without |  |  |  |  |  | As |
(Millions of dollars) |  |  | Adoption of Topic 606 |  |  | Adjustments |  |  | Reported |
Receivables, net |  | $ | 500 |  | $ | 6 |  | $ | 506 |
Inventories |  | $ | 907 |  | $ | (33) |  | $ | 874 |
Deferred revenue |  | $ | 109 |  | $ | (26) |  | $ | 83 |
Total Seaboard stockholders’ equity |  | $ | 3,413 |  | $ | (1) |  | $ | 3,412 |
Consolidated Statement of Cash Flows |  |  | Nine Months Ended September 29, 2018
|  |  | Balances Without |  |  |  |  |  | As |
(Millions of dollars) |  |  | Adoption of Topic 606 |  |  | Adjustments |  |  | Reported |
Net earnings |  | $ | 74 |  | $ | (1) |  | $ | 73 |
Changes in assets and liabilities, net of acquisitions: |  |  |  |  |  |  |  |
Receivables, net of allowance |  | $ | (2) |  | $ | (6) |  | $ | (8) |
Inventories |  | $ | (139) |  | $ | 33 |  | $ | (106) |
Current liabilities, exclusive of debt |  | $ | (2) |  | $ | (26) |  | $ | (28) |

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- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
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