Revenue

9 Months Ended

Jun. 30, 2019

Revenue from Contract with Customer [Abstract]

Revenue is measured based on the consideration to which the company expects to be entitled, and is presented net of any estimates of customer sales allowances, incentives, rebates, and returns. The company recognizes revenue when it satisfies a performance obligation by transferring control over a product or service to a customer.

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the company from a customer, are excluded from revenue.

Shipping and handling costs associated with outbound freight after control of a product has transferred to a customer are accounted for as a fulfillment cost, as opposed to a distinct performance obligation, and are included in cost of sales.

Nature of goods and services

The following is a description of principal activities - separated by reportable segments - from which the company generates its revenue.

The Commercial Truck segment supplies drivetrain systems and components, including axles, drivelines and braking and suspension systems, primarily for medium- and heavy-duty trucks and other applications in North America, South America, Europe and Asia Pacific. This segment also includes the company's aftermarket businesses in Asia Pacific and South America.

The Aftermarket, Industrial and Trailer segment supplies axles, brakes, drivelines, suspension parts and other replacement parts to commercial vehicle and industrial aftermarket customers, primarily in North America and Europe. In addition, this segment supplies drivetrain systems and certain components, including axles, drivelines, brakes and suspension systems for military, construction, bus and coach, fire and emergency and other applications in North America and Europe. It also supplies a variety of undercarriage products and systems for trailer applications in North America.

Although the company may enter into long-term supply arrangements with its major customers, the prices and volumes are not fixed over the term of the arrangements and a contract does not exist under the scope of Topic 606 until prices and volumes are known. As such, individual customer releases or purchase orders represent the contract with the customer.

The company accounts for individual products and services separately if they are distinct (i.e., if a product or service is separately identifiable from other items and if a customer can benefit from it on its own or with other resources that are readily available to the customer). The company has identified certain performance obligations related to brake pad fitting and axle dressing where it is acting as an agent and, therefore, recognizes revenue on a net basis for satisfaction of those performance obligations.

The company recognizes revenue for the sale of goods at the point in time when the customer takes control of the goods. As such, revenue is recognized upon shipment of product and transfer of ownership to the customer. The amount of revenue recognized is based on the purchase order price and adjusted for variable consideration (i.e., customer sales allowances, incentives, rebates, and returns). Provisions for customer sales allowances, incentives, rebates, and returns are recorded as a reduction of sales at the time of revenue recognition based primarily on historical experience. The company’s payment terms with customers are customary and vary by customer and geography but typically range from 30 to 90 days.

The company provides warranties on some of its products. The company records estimated product warranty costs at the time of shipment of products to customers (see Note 16 and Note 17).

Disaggregation of revenue

In the following tables, revenue is disaggregated for each of our operating segments by primary geographical market for the three and nine months ended June 30, 2019.



	Three Months Ended June 30, 2019
Primary Geographical Market	Commercial Truck		Aftermarket, Industrial and Trailer		Total
U.S.	$	419	$	278	$	697
Canada	—		18		18
Mexico	54		12		66
Total North America	473		308		781
Sweden	75		—		75
Italy	62		4		66
United Kingdom	40		3		43
Other Europe	3		16		19
Total Europe	180		23		203
Brazil	67		—		67
China	44		—		44
India	53		—		53
Other Asia-Pacific	18		—		18
Total sales	$	835	$	331	$	1,166



	Nine Months Ended June 30, 2019
Primary Geographical Market	Commercial Truck		Aftermarket, Industrial and Trailer		Total
U.S.	$	1,182	$	781	$	1,963
Canada	—		53		53
Mexico	151		35		186
Total North America	1,333		869		2,202
Sweden	223		—		223
Italy	178		13		191
United Kingdom	126		8		134
Other Europe	9		54		63
Total Europe	536		75		611
Brazil	180		—		180
China	129		—		129
India	172		—		172
Other Asia-Pacific	66		—		66
Total sales	$	2,416	$	944	$	3,360

Contract balances

As of June 30, 2019 and September 30, 2018, Trade receivables, net, which are included in Receivables, trade and other, net, on the Condensed Consolidated Balance Sheet, were $611 million and $566 million, respectively.

For the nine months ended June 30, 2019, the company had no material bad-debt expense and there were no material contract

assets, contract liabilities or deferred contract costs recorded on the Condensed Consolidated Balance Sheet as of June 30, 2019.

Contract costs

The company applies the practical expedient provided in Topic 606 and recognizes the incremental costs of obtaining contracts as an expense when incurred if the amortization period of the assets that the company otherwise would have recognized is one year or less. The costs which are not capitalized are included in cost of sales.