Contract Assets and Contract Liabilities

6 Months Ended

Jun. 29, 2018

Revenue from Contract with Customer [Abstract]

Contract Assets and Contract Liabilities

Contract Assets and Contract Liabilities

Contract assets represent accumulated incurred costs and earned profits on contracts with customers that have been recorded as sales but have not been billed to customers and are classified as current. Contract liabilities consist of advance payments and billings in excess of costs incurred and deferred revenue and represent amounts received in excess of sales recognized on contracts. The Company classifies advance payments and billings in excess of costs incurred as current and deferred revenue as current or non-current based on the expected timing of sales recognition. Contract assets and contract liabilities are determined on a contract by contract basis at the end of each reporting period. The non-current portion of contract liabilities is included in other liabilities in the Company's consolidated balance sheets (see Note 10).

The table below presents the components of net contract assets (liabilities).

	June 29, 2018			January 1, 2018
	(in millions)
Contract assets	$	1,611		$	1,349
Contract liabilities — current	(554		)	(565		)
Contract liabilities — non-current	(33		)	(28		)
Net contract assets (liabilities)	$	1,024		$	756

Net contract assets (liabilities) increased from January 1, 2018 to June 29, 2018, primarily due to sales exceeding billings due to contractual billing terms on U.S. Government contracts related to Link Training & Simulation, Space & Power Systems, Advanced Communications and Mission Integration. Contract assets increased by $262 million primarily due to the same factors as discussed above. Contract liabilities decreased by $6 million primarily due to advances received by Mission Integration for aircraft procurements related to U.S. and foreign government contracts during the first half period ended June 29, 2018.

The Company did not recognize any impairment losses on contract assets during the quarterly and first half periods ended June 29, 2018.

For the first half period ended June 29, 2018, the Company recognized sales of $351 million related to its contract liabilities at January 1, 2018.

The components of contract assets are presented in the table below.

	June 29, 2018			January 1, 2018
	(in millions)
Unbilled contract receivables, gross	$	2,643		$	2,232
Unliquidated progress payments and advances	(1,032		)	(883		)
Total contract assets	$	1,611		$	1,349