Contract Assets and Liabilities (Notes)

6 Months Ended

Jun. 30, 2020

Revenue from Contract with Customer [Abstract]

Contract Assets and Liabilities

Contract assets reflect revenue recognized and performance obligations satisfied in advance of customer billing. Contract liabilities relate to payments received in advance of the satisfaction of performance under the contract. We receive payments from customers based on the terms established in our contracts. Total contract assets and contract liabilities as of June 30, 2020 and December 31, 2019 are as follows:


(dollars in millions)	June 30, 2020		December 31, 2019
Contract assets	$	9,943	$	4,462
Contract liabilities, current	(11,997)		(9,014)
Contract liabilities, non-current (included within Other long-term liabilities)	(111)		—
Net contract liabilities	$	(2,165)	$	(4,552)

Contract assets increased $5.5 billion during the six months ended June 30, 2020, primarily due to the Raytheon Merger, which accounted for an increase of $5.4 billion. Contract liabilities increased $3.1 billion during the six months ended June 30, 2020 due to the Raytheon Merger, which accounted for an increase of $3.2 billion. We recognized revenue of $625 million and $1,808 million during the quarter and six months ended June 30, 2020, respectively, related to contract liabilities as of January 1, 2020 and $587 million and $1,538 million during the quarter and six months ended June 30, 2019, respectively, related to contract liabilities as of January 1, 2019.

Our contract assets and liabilities also include amounts related to foreign government direct commercial sales contracts for precision guided munitions to certain Middle Eastern customers for which we have not yet obtained regulatory approval and licenses. We had approximately $1.2 billion of total contract value, recognized approximately $400 million of sales for work performed through the date of the Raytheon Merger and approximately $50 million of sales subsequent to the date of the Raytheon Merger through June 30, 2020, and received approximately $450 million in advances as of June 30, 2020 on these contracts. On a contract by contract basis, we had $150 million of both net contract assets and net contract liabilities, related to the contracts pending approval.

Total contract assets include an allowance for credit losses of $155 million as of June 30, 2020. The increase in the allowance for the six months ended June 30, 2020 includes incremental reserves of $108 million related to a number of airline customers that have filed for bankruptcy due to the current economic environment primarily caused by the COVID-19 pandemic. In addition, in the quarter and six months ended June 30, 2020, we wrote off $96 million and $106 million, respectively, of contract assets due to the impact of lower estimated future customer activity principally driven by the expected acceleration of fleet retirements of a certain aircraft.