Revenue from Contracts with Customers

Disaggregation of Revenue from Contracts with Customers

The following table presents a disaggregation of revenue for the years ended December 31:



In millions	2018		2017*		2016*
Americas
Recurring	$	801	$	739	$	703
Perpetual software licenses and hardware	127		234		369
Consulting services	198		222		262
Total Americas	1,126		1,195		1,334
International
Recurring	453		406		368
Perpetual software licenses and hardware	213		195		231
Consulting services	372		360		320
Total International	1,038		961		919
Marketing applications	—		—		69
Total Revenue	$	2,164	$	2,156	$	2,322

*As noted above, prior period amounts have not been adjusted under the modified retrospective adoption method of Topic 606; however, as discussed in Note 1, prior period revenue captions have been reclassified to conform to the current year presentation.

Hardware rental revenue, included in recurring revenue, was $32 million in 2018, $17 million in 2017 and $7 million in 2016.

Contract Balances

The timing of revenue recognition, billings and cash collections results in billed accounts receivable, contract assets, and customer advances and deposits (deferred revenue or contract liabilities) on the consolidated balance sheet. Accounts receivable include amounts due from customers that are unconditional. Contract assets relate to the Company’s rights to consideration for goods delivered or services completed and recognized as revenue but billing and the right to receive payment is conditional upon the completion of other performance obligations. Contract assets are included in other current assets on the balance sheet and are transferred to accounts receivable when the rights become unconditional. Deferred revenue consists of advance payments and billings in excess of revenue recognized. Deferred revenue is classified as either current or noncurrent based on the timing of when the Company expects to recognize revenue. These assets and liabilities are reported on a contract-by-contract basis at the end of each reporting period. The following table provides information about receivables, contract assets and deferred revenue from contracts with customers:



In millions	December 31, 2018		January 1, 2018 (as adjusted)
Accounts receivable, net	$	588	$	534
Contract assets	$	14	$	20
Current deferred revenue	$	490	$	395
Long-term deferred revenue	$	105	$	85

Revenue recognized during the twelve months ended December 31, 2018 from amounts included in deferred revenue at the beginning of the period was approximately $384 million

Transaction Price Allocated to Unsatisfied Obligations

The following table includes estimated revenue expected to be recognized in the future related to the Company's unsatisfied (or partially satisfied) obligations at December 31, 2018:



In millions	Total at December 31, 2018		Year 1		Year 2 and Thereafter
Remaining unsatisfied obligations	$	2,547	$	1,200	$	1,347

The amounts above represent the price of firm orders for which work has not been performed or goods have not been delivered and exclude unexercised contract options outside the stated contractual term that do not represent material rights to the customer. Although the Company believes that the contract value in the above table is firm, approximately $1,468 million of the amount includes customer-only general cancellation for convenience terms that the Company is contractually obligated to perform unless the customer notifies us. The Company expects to recognize revenue of approximately $729 million in the next year from contracts that are non-cancelable. Customers typically do not cancel before the end of the contractual term and historically the Company has seen very little churn in its customer base. The Company believes the inclusion of this information is important to understanding the obligations that the Company is contractually required to perform and provides useful information regarding remaining obligations related to these executed contracts.

Impacts on Financial Statements

The Company adopted Topic 606 using the modified retrospective method. The cumulative effect of applying the new guidance to all contracts with customers that were not completed as of January 1, 2018 was recorded as an adjustment to accumulated deficit as of the adoption date. As a result of applying the modified retrospective method to adopt Topic 606, the following adjustments were made to accounts on the consolidated balance sheets as of January 1, 2018:


•	The Company reduced current deferred revenue and accumulated deficit by $19 million for contracts that were not complete as of the date of adoption and would have been recognized in a prior period under Topic 606. The revenue adjustment primarily relates to term licenses that are recognized upfront under Topic 606 but were recognized ratably under the previous guidance.


•	Prior to the adoption of Topic 606, the Company expensed sales commissions on long-term contracts. Under Topic 606, the Company capitalizes these incremental costs of obtaining customer contracts. The impact of this change resulted in an increase of other assets and a reduction in accumulated deficit of $17 million on January 1, 2018.


•	The tax impact of these items was $10 million, which was recorded as a deferred tax liability, resulting in a net $26 million reduction in accumulated deficit on January 1, 2018.


•	In addition, the Company reclassified $20 million of contract assets from accounts receivable to other current assets on January 1, 2018.

The following summarizes the significant changes on the Company’s consolidated financial statements for the twelve months ended December 31, 2018 because of the adoption of Topic 606 on January 1, 2018 compared to if the Company had continued to recognize revenue under the previous guidance:


•	The impact to revenues was a net increase of $15 million for the twelve months ended December 31, 2018, under Topic 606.


•	Topic 606 resulted in the amortization of capitalized contract costs that were recorded as part of the cumulative effect adjustment upon adoption. The amortization of these capitalized costs was offset by new capitalized costs in the period resulting in $37 million less selling, general and administrative expenses for the twelve months ended December 31, 2018 under Topic 606.


•	Because of higher revenue and the capitalization of contract costs under Topic 606, net income reported under Topic 606 was higher by $33 million or $0.27 per share for the twelve months ended December 31, 2018.


•	Total reported assets at December 31, 2018 were $43 million higher under Topic 606, which includes $54 million of capitalized contract costs that were expensed as incurred under the previous guidance, partially offset by $11 million of deferred costs related to the timing of revenue that would have been deferred under the previous guidance but recognized under Topic 606.


•	Total reported liabilities were $16 million less under Topic 606 primarily due to revenue that would have been deferred and recognized over time under the previous guidance, but is recognized upfront under Topic 606, offset by the change in deferred tax liability.

The adoption of Topic 606 had no impact on the Company’s total cash flows from operations.