Joint Venture	3 Months Ended
Dec. 31, 2018
Joint Venture
Joint Venture	Note 6. Joint venture On January 4, 2016, Woodward and General Electric Company (“GE”), acting through its GE Aviation business unit, consummated the formation of a strategic joint venture between Woodward and GE (the “JV”) to develop, manufacture and support fuel systems for specified existing and all future GE commercial aircraft engines that produce thrust in excess of fifty thousand pounds. As part of the JV formation, Woodward contributed to the JV certain contractual rights and intellectual property applicable to the existing GE commercial aircraft engine programs within the scope of the JV. Woodward had no initial cost basis in the JV because Woodward had no cost basis in the contractual rights and intellectual property contributed to the JV. GE purchased from Woodward a 50% ownership interest in the JV for a $250,000 cash payment to Woodward. In addition, GE will pay contingent consideration to Woodward consisting of fifteen annual payments of $4,894 per year, which began on January 4, 2017, subject to certain claw-back conditions. Woodward records annual payments received as deferred income and includes them in Net cash provided by operating activities on the Condensed Consolidated Statement of Cash Flows. Neither Woodward nor GE contributed any tangible assets to the JV. Under previous accounting guidance, Woodward concluded that the formation of the JV was not the culmination of an earnings event and deferred recognition of the consideration paid until earned in the future. Under ASC 606, Woodward also concluded the formation of the JV was not a culmination of an earnings event and has further concluded that the consideration paid or receivable from GE represents a material right. Accordingly, under both ASC 606 and the previous standard, Woodward concluded it was appropriate to defer the consideration received as a liability and recognized it as an increase to net sales in proportion to revenue realized on sales of applicable fuel systems within the scope of the JV. Recognition to net sales in a particular period is determined as a percentage of total revenue expected to be realized by Woodward over the estimated remaining lives of the underlying commercial aircraft engine programs assigned to the JV. Unamortized deferred revenue from material rights in connection with the JV formation included accrued liabilities of $6,988 as of December 31, 2018 and $7,087 as of September 30, 2018, and other liabilities of $232,897 as of December 31, 2018 and $235,300 as of September 30, 2018. Amortization of the deferred income (material right) recognized as an increase to sales was $1,777 for the three-months ended December 31, 2018 and $1,053 for the three-months ended December 31, 2017. Woodward and GE jointly manage the JV and any significant decisions and/or actions of the JV require the mutual consent of both parties. Neither Woodward nor GE has a controlling financial interest in the JV, but both Woodward and GE do have the ability to significantly influence the operating and financial decisions of the JV. Therefore, Woodward is accounting for its 50% ownership interest in the JV using the equity method of accounting. The JV is a related party to Woodward. Other income includes income of $1,465 for the three-months ended December 31, 2018 and income of $596 for the three-months ended December 31, 2017 related to Woodward’s equity interest in the earnings of the JV. During the three-months ended December 31, 2018, Woodward received a $4,500 cash distribution from the JV, which is included in Net cash provided by operating activities on the Condensed Consolidated Statement of Cash Flows. Woodward received no cash distributions from the JV during the three-months ended December 31, 2017. Woodward’s net investment in the JV, which is included in other assets, was $6,576 as of December 31, 2018 and $9,611 as of September 30, 2018. Woodward’s net sales include $12,833 for the three-months ended December 31, 2018 of sales to the JV, compared to $12,975 for the three-months ended December 31, 2017. Woodward recorded a reduction to sales of $9,182 for the three-months ended December 31, 2018 related to royalties paid to the JV by Woodward on sales by Woodward directly to third party aftermarket customers, compared to $5,408 for the three-months ended December 31, 2017. The Condensed Consolidated Balance Sheets include “Accounts receivable” of $6,916 at December 31, 2018, and $10,499 at September 30, 2018, related to amounts the JV owed Woodward, and include “Accounts payable” of $3,063 at December 31, 2018, and $2,944 at September 30, 2018, related to amounts Woodward owed the JV. Upon the October 1, 2018 adoption of ASC 606, Woodward recorded $57,529 of revenue recognized in prior periods for the JV’s engineering and development projects as an increase to contract liabilities in “Other liabilities” and $57,529 of costs recognized in prior periods as costs to fulfill a contract in “Other assets.” During the quarter ended December 31, 2018, Woodward recognized an additional $4,428 of contract liabilities in “Other liabilities” and $4,428 of additional costs to fulfill a contract in “Other assets.”

Note 6. Joint venture

On January 4, 2016, Woodward and General Electric Company (“GE”), acting through its GE Aviation business unit, consummated the formation of a strategic joint venture between Woodward and GE (the “JV”) to develop, manufacture and support fuel systems for specified existing and all future GE commercial aircraft engines that produce thrust in excess of fifty thousand pounds.

As part of the JV formation, Woodward contributed to the JV certain contractual rights and intellectual property applicable to the existing GE commercial aircraft engine programs within the scope of the JV. Woodward had no initial cost basis in the JV because Woodward had no cost basis in the contractual rights and intellectual property contributed to the JV. GE purchased from Woodward a 50% ownership interest in the JV for a $250,000 cash payment to Woodward. In addition, GE will pay contingent consideration to Woodward consisting of fifteen annual payments of $4,894 per year, which began on January 4, 2017, subject to certain claw-back conditions. Woodward records annual payments received as deferred income and includes them in Net cash provided by operating activities on the Condensed Consolidated Statement of Cash Flows. Neither Woodward nor GE contributed any tangible assets to the JV.

Under previous accounting guidance, Woodward concluded that the formation of the JV was not the culmination of an earnings event and deferred recognition of the consideration paid until earned in the future. Under ASC 606, Woodward also concluded the formation of the JV was not a culmination of an earnings event and has further concluded that the consideration paid or receivable from GE represents a material right. Accordingly, under both ASC 606 and the previous standard, Woodward concluded it was appropriate to defer the consideration received as a liability and recognized it as an increase to net sales in proportion to revenue realized on sales of applicable fuel systems within the scope of the JV. Recognition to net sales in a particular period is determined as a percentage of total revenue expected to be realized by Woodward over the estimated remaining lives of the underlying commercial aircraft engine programs assigned to the JV. Unamortized deferred revenue from material rights in connection with the JV formation included accrued liabilities of $6,988 as of December 31, 2018 and $7,087 as of September 30, 2018, and other liabilities of $232,897 as of December 31, 2018 and $235,300 as of September 30, 2018. Amortization of the deferred income (material right) recognized as an increase to sales was $1,777 for the three-months ended December 31, 2018 and $1,053 for the three-months ended December 31, 2017.

Woodward and GE jointly manage the JV and any significant decisions and/or actions of the JV require the mutual consent of both parties. Neither Woodward nor GE has a controlling financial interest in the JV, but both Woodward and GE do have the ability to significantly influence the operating and financial decisions of the JV. Therefore, Woodward is accounting for its 50% ownership interest in the JV using the equity method of accounting. The JV is a related party to Woodward. Other income includes income of $1,465 for the three-months ended December 31, 2018 and income of $596 for the three-months ended December 31, 2017 related to Woodward’s equity interest in the earnings of the JV. During the three-months ended December 31, 2018, Woodward received a $4,500 cash distribution from the JV, which is included in Net cash provided by operating activities on the Condensed Consolidated Statement of Cash Flows. Woodward received no cash distributions from the JV during the three-months ended December 31, 2017. Woodward’s net investment in the JV, which is included in other assets, was $6,576 as of December 31, 2018 and $9,611 as of September 30, 2018.

Woodward’s net sales include $12,833 for the three-months ended December 31, 2018 of sales to the JV, compared to $12,975 for the three-months ended December 31, 2017. Woodward recorded a reduction to sales of $9,182 for the three-months ended December 31, 2018 related to royalties paid to the JV by Woodward on sales by Woodward directly to third party aftermarket customers, compared to $5,408 for the three-months ended December 31, 2017. The Condensed Consolidated Balance Sheets include “Accounts receivable” of $6,916 at December 31, 2018, and $10,499 at September 30, 2018, related to amounts the JV owed Woodward, and include “Accounts payable” of $3,063 at December 31, 2018, and $2,944 at September 30, 2018, related to amounts Woodward owed the JV.

Upon the October 1, 2018 adoption of ASC 606, Woodward recorded $57,529 of revenue recognized in prior periods for the JV’s engineering and development projects as an increase to contract liabilities in “Other liabilities” and $57,529 of costs recognized in prior periods as costs to fulfill a contract in “Other assets.” During the quarter ended December 31, 2018, Woodward recognized an additional $4,428 of contract liabilities in “Other liabilities” and $4,428 of additional costs to fulfill a contract in “Other assets.”