The following schedule quantifies the impact of adopting the New Revenue Standard on the statement of operations for the three months ended March 31, 2018. The effect of the new standard represents the increase (decrease) in the line item based on the adoption of the New Revenue Standard.



(dollars in millions)	2018, under previous standards			Effect of the New Revenue Standard			2018, as reported
Net Sales:
Product sales	$	10,167		$	91		$	10,258
Service sales	4,853			131			4,984
	15,020			222			15,242
Costs and Expenses:
Cost of products sold	7,886			130			8,016
Cost of services sold	3,168			96			3,264
Research and development	574			(20		)	554
Selling, general and administrative	1,710			1			1,711
	13,338			207			13,545
Other income, net	232			(1		)	231
Operating profit	1,914			14			1,928
Non-service pension (benefit)	(191		)	—			(191		)
Interest expense, net	229			—			229
Income from operations before income taxes	1,876			14			1,890
Income tax expense	518			4			522
Net income	1,358			10			1,368
Less: Noncontrolling interest in subsidiaries' earnings	69			2			71
Net income attributable to common shareowners	$	1,289		$	8		$	1,297

The New Revenue Standard resulted in an increase to Product and Service sales and Cost of products and services sold primarily due to the change to a percentage-of-completion revenue model for certain U.S Government and commercial aerospace equipment contracts and aerospace aftermarket service work at Pratt & Whitney and UTC Aerospace Systems. The New Revenue Standard also resulted in an increase in Cost of products sold related to the timing of manufacturing cost recognition on early-contract OEM units sold during the quarter, with costs in excess of the contract average unit costs recorded through Cost of products sold.

The lower amounts of research and development expense recognized under the New Revenue Standard reflect the capitalization of costs of engineering and development of aerospace products as contract fulfillment costs under contracts with customers.

The following schedule reflects the effect of the New Revenue Standard on our balance sheet as of March 31, 2018.



(dollars in millions)	March 31, 2018 under previous standard		Effect of the New Revenue Standard			March 31, 2018 as reported
Assets
Accounts receivable, net	$	13,105	$	(1,406	)	$	11,699
Inventories	10,788		(1,850		)	8,938
Contract assets, current	—		2,989			2,989
Other assets, current	1,456		(8		)	1,448
Future income tax benefits	1,741		22			1,763
Intangible assets, net	16,064		(69		)	15,995
Other assets	6,222		914			7,136

Liabilities and Equity
Accrued liabilities	$	13,547	$	(5,596	)	$	7,951
Contract liabilities, current	—		5,727			5,727
Other long term liabilities	12,472		933			13,405

Retained earnings	56,005		(472		)	55,533

The decrease in Retained earnings of $472 million in the table above reflects $480 million of adjustments to the balance sheet as of January 1, 2018, resulting from the adoption of the New Revenue Standard, partially offset by higher reported net income under the new revenue standard. The declines in Accounts receivable, net, Inventories, Other assets, current, and Intangible assets, net, reflect reclassifications to contract assets, and specifically for Inventories, earlier recognition of costs of products sold for contracts requiring an over-time method of revenue recognition. The increase in Other assets reflects the establishment of non-current contract assets and contract fulfillment cost assets.

The decline in accrued liabilities is primarily due to the reclassification of payments from customers in advance of work performed as contract liabilities. The Other long term liabilities increase primarily reflects the establishment of non-current contract liabilities for certain customer funding of OEM product engineering and development, which will be recognized as revenue when the OEM products are delivered to the customer.