Note 3. Revenues from contracts with customers

As discussed in Note 2, on January 1, 2018, we adopted ASC 606 “Revenues from Contracts with Customers.” Except as described in Note 2, our revenue recognition practices for contracts with customers under ASC 606 do not differ significantly from prior practices. Under ASC 606, revenues are recognized when a good or service is transferred to a customer. A good or service is transferred when (or as) the customer obtains control of that good or service. Revenues are based on the consideration we expect to receive in connection with our promises to deliver goods and services to our customers. Our accounting policies related to revenue from contracts with customers follow.

We manufacture and/or distribute a wide variety of industrial, building and consumer products. Our sales contracts provide customers with these products through wholesale and retail channels in exchange for consideration specified under the contracts. Contracts generally represent customer orders for individual products at stated prices. Sales contracts may contain either single or multiple performance obligations. In instances where contracts contain multiple performance obligations, we allocate the revenue to each obligation based on the relative stand-alone selling prices of each product or service.

Sales revenue reflects reductions for returns, allowances, volume discounts and other incentives, some of which may be contingent on future events. In certain customer contracts of our grocery distribution business, sales revenue includes certain state and local excise taxes billed to customers on specified products when those taxes are levied directly upon us by the taxing authorities. Sales revenue excludes sales taxes and value-added taxes collected on behalf of taxing authorities. Sales revenue includes consideration for shipping and other fulfillment activities performed prior to the customer obtaining control of the goods. We also elect to treat consideration for such services performed after control has passed to the customer as sales revenue.

Our product sales revenues are generally recognized at a point in time when control of the product transfers to the customer, which coincides with customer pickup or product delivery or acceptance, depending on terms of the arrangement. We recognize sales revenues and related costs with respect to certain contracts over time, primarily from certain castings, forgings and aerostructures contracts. Control of the product units under these contracts transfers continuously to the customer as the product is manufactured. These products generally have no alternative use and the contract requires the customer to provide reasonable compensation if terminated for reasons other than breach of contract.

Our energy revenue derives primarily from tariff based sales arrangements approved by various regulatory bodies. These tariff based revenues are mainly comprised of energy, transmission, distribution and natural gas and have performance obligations to deliver energy products and services to customers which are satisfied over time as energy is delivered or services are provided. Our nonregulated energy revenue primarily relates to our renewable energy business. Energy revenues are equivalent to the amounts we have the right to invoice and correspond directly with the value to the customer of the performance to date and include billed and unbilled amounts. As of September 30, 2018 and December 31, 2017, trade receivables were approximately $2.2 billion and $2.0 billion, respectively, and were included in other assets of our railroad, utilities and energy businesses on the Consolidated Balance Sheets. Such amounts substantially relate to customer revenue and included unbilled revenue of $624 million as of September 30, 2018 and $665 million as of December 31, 2017. Payments from customers are generally due from the customer within 30 days of billing. Rates charged for energy products and services are established by regulators or contractual arrangements that establish the transaction price, as well as the allocation of price amongst the separate performance obligations. When preliminary regulated rates are permitted to be billed prior to final approval by the applicable regulator, certain revenue collected may be subject to refund and a liability for estimated refunds is accrued.

The primary performance obligation under our freight rail transportation service contracts is to move freight from a point of origin to a point of destination. The performance obligations are represented by bills of lading which create a series of distinct services that have a similar pattern of transfer to the customer. The revenues for each performance obligation are based on various factors including the product being shipped, the origin and destination pair, and contract incentives which are outlined in various private rate agreements, common carrier public tariffs, interline foreign road agreements and pricing quotes. The transaction price is generally a per car amount to transport railcars from a specified origin to a specified destination. Freight revenues are recognized over time as the service is performed because the customer simultaneously receives and consumes the benefits of the service. Revenues recognized represent the proportion of the service completed as of the balance sheet date. Receivables related to customer contracts were approximately $1.3 billion at September 30, 2018 and $1.2 billion at December 31, 2017 and were included in other assets of our railroad, utilities and energy businesses. Invoices for freight transportation services are generally issued to customers and paid within thirty days or less. Customer incentives, which are primarily provided for shipping a specified cumulative volume or shipping to/from specific locations, are recorded as a reduction to revenue on a pro-rata basis based on actual or projected future customer shipments.

Other service revenues derive from contracts with customers in which performance obligations are satisfied over time, where customers receive and consume benefits as we perform the services, or at a point in time when the services are provided. Other service revenues primarily derive from real estate brokerage, automotive repair, aircraft management, aviation training, franchising and news distribution services.

The following table summarizes customer contract revenues disaggregated by reportable segment and the source of the revenue for the three and nine months ending September 30, 2018 (in millions). Other revenues included in our consolidated revenues were primarily insurance premiums earned, interest, dividend and other investment income and lease income which are not within the scope of ASC 606.


	Manufacturing		McLane Company		Service and Retail		BNSF		Berkshire Hathaway Energy		Finance and Financial Products		Insurance, Corporate and other		Total
Three months ending September 30, 2018
Manufactured products:
Industrial and commercial products	$	6,384	$	—	$	47	$	—	$	—	$	82	$	—	$	6,513
Building products		3,473		—		—		—		—		4		—		3,477
Consumer products		2,838		—		—		—		—		1,170		—		4,008
Grocery and convenience store distribution		—		8,709		—		—		—		—		—		8,709
Food and beverage distribution		—		4,079		—		—		—		—		—		4,079
Auto sales		—		—		2,083		—		—		—		—		2,083
Other retail and wholesale distribution		521		—		3,117		—		—		23		—		3,661
Service		262		16		965		6,099		1,140		148		—		8,630
Electricity and natural gas		—		—		—		—		4,267		—		—		4,267

Total		13,478		12,804		6,212		6,099		5,407		1,427		—		45,427
Other revenue		51		18		743		13		299		1,004		15,895		18,023

	$	13,529	$	12,822	$	6,955	$	6,112	$	5,706	$	2,431	$	15,895	$	63,450


	Manufacturing		McLane Company		Service and Retail		BNSF		Berkshire Hathaway Energy		Finance and Financial Products		Insurance, Corporate and other		Total
Nine months ending September 30, 2018
Manufactured products:
Industrial and commercial products	$	19,306	$	—	$	155	$	—	$	—	$	503	$	—	$	19,964
Building products		9,817		—		—		—		—		11		—		9,828
Consumer products		8,734		—		—		—		—		3,124		—		11,858
Grocery and convenience store distribution		—		25,128		—		—		—		—		—		25,128
Food and beverage distribution		—		12,203		—		—		—		—		—		12,203
Auto sales		—		—		6,087		—		—		—		—		6,087
Other retail and wholesale distribution		1,533		—		8,734		—		—		65		—		10,332
Service		759		53		2,912		17,510		3,026		174		—		24,434
Electricity and natural gas		—		—		—		—		11,357		—		—		11,357

Total		40,149		37,384		17,888		17,510		14,383		3,877		—		131,191
Other revenue		132		54		2,664		37		885		2,980		46,180		52,932

	$	40,281	$	37,438	$	20,552	$	17,547	$	15,268	$	6,857	$	46,180	$	184,123

A summary of the transaction price allocated to the significant unsatisfied remaining performance obligations relating to contracts with expected durations in excess of one year as of September 30, 2018 follows (in millions).


	Performance obligations expected to be satisfied:

	Less than 12 months		Greater than 12 months		Total
Manufactured products:
Industrial and commercial products	$	50	$	2,549	$	2,599
Electricity and natural gas		1,011		5,879		6,890