Contract revenue

9 Months Ended

Sep. 30, 2022

Revenue from Contract with Customer [Abstract]

Contract revenue

Contract revenueFee and other revenue in the Securities Services, Market and Wealth Services and Investment and Wealth Management business segments is primarily variable, based on levels of assets under custody and/or administration, assets under management and the level of client-driven transactions, as specified in fee schedules. See Note 10 of the Notes to Consolidated Financial Statements in our 2021 Annual Report for information on the nature of our services and revenue recognition. See Note 24 of the Notes to Consolidated Financial Statements in our 2021 Annual Report for additional information on our principal business segments, Securities Services,

Market and Wealth Services and Investment and Wealth Management, and the primary services provided.

Disaggregation of contract revenue

Contract revenue is included in fee and other revenue on the consolidated income statement. The following tables present fee and other revenue related to contracts with customers, disaggregated by type of fee revenue, for each business segment. Business segment data has been determined on an internal management basis of accounting, rather than GAAP, which is used for consolidated financial reporting.

Disaggregation of contract revenue by business segment
	Quarter ended
	Sept. 30, 2022										Sept. 30, 2021
(in millions)	Securities Services		Market and Wealth Services		Investment and Wealth Management		Other		Total		Securities Services		Market and Wealth Services		Investment and Wealth Management		Other		Total
Fee and other revenue – contract revenue:
Investment services fees	$	1,233	$	903	$	26	$	(16)	$	2,146	$	1,260	$	810	$	26	$	(17)	$	2,079
Investment management and performance fees	—		5		800		(3)		802		—		5		901		(6)		900
Financing-related fees	7		3		—		1		11		4		12		—		—		16
Distribution and servicing fees	1		(23)		55		—		33		1		(2)		28		1		28
Investment and other revenue	56		49		(76)		(1)		28		35		3		(10)		—		28
Total fee and other revenue – contract revenue	1,297		937		805		(19)		3,020		1,300		828		945		(22)		3,051
Fee and other revenue – not in scope of Accounting Standards Codification (“ASC”) 606 (a)(b)	239		52		—		42		333		188		62		40		57		347
Total fee and other revenue	$	1,536	$	989	$	805	$	23	$	3,353	$	1,488	$	890	$	985	$	35	$	3,398

(a)    Primarily includes investment services fees, foreign exchange revenue, financing-related fees and investment and other revenue, all of which are accounted for using other accounting guidance.

(b)    The Investment and Wealth Management business segment is net of (loss) attributable to noncontrolling interests related to consolidated investment management funds of $— million in the third quarter of 2022 and $(4) million in the third quarter of 2021.

Disaggregation of contract revenue by business segment	Quarter ended
	June 30, 2022
(in millions)	Securities Services		Market and Wealth Services		Investment and Wealth Management		Other		Total
Fee and other revenue – contract revenue:
Investment services fees	$	1,294	$	898	$	24	$	(17)	$	2,199
Investment management and performance fees	—		6		822		(2)		826
Financing-related fees	11		4		—		—		15
Distribution and servicing fees	1		(17)		51		(1)		34
Investment and other revenue	54		38		(66)		1		27
Total fee and other revenue – contract revenue	1,360		929		831		(19)		3,101
Fee and other revenue – not in scope of ASC 606 (a)(b)	189		45		6		94		334
Total fee and other revenue	$	1,549	$	974	$	837	$	75	$	3,435

(a)    Primarily includes investment services fees, foreign exchange revenue, financing-related fees and investment and other revenue, all of which are accounted for using other accounting guidance.

(b)    The Investment and Wealth Management business segment is net of (loss) attributable to noncontrolling interests related to consolidated investment management funds of $(5) million in the second quarter of 2022.

Disaggregation of contract revenue by business segment
	Year-to-date
	Sept. 30, 2022										Sept. 30, 2021
(in millions)	Securities Services		Market and Wealth Services		Investment and Wealth Management		Other		Total		Securities Services		Market and Wealth Services		Investment and Wealth Management		Other		Total
Fee and other revenue – contract revenue:
Investment services fees	$	3,657	$	2,647	$	75	$	(50)	$	6,329	$	3,685	$	2,474	$	75	$	(51)	$	6,183
Investment management and performance fees	—		17		2,509		(11)		2,515		—		13		2,654		(15)		2,652
Financing-related fees	21		21		—		1		43		13		39		—		—		52
Distribution and servicing fees	3		(44)		138		—		97		4		(4)		84		—		84
Investment and other revenue	157		96		(169)		(1)		83		100		6		(28)		—		78
Total fee and other revenue – contract revenue	3,838		2,737		2,553		(61)		9,067		3,802		2,528		2,785		(66)		9,049
Fee and other revenue – not in scope of ASC 606 (a)(b)	650		132		(4)		179		957		550		179		95		96		920
Total fee and other revenue	$	4,488	$	2,869	$	2,549	$	118	$	10,024	$	4,352	$	2,707	$	2,880	$	30	$	9,969

(a)    Primarily includes investment services fees, foreign exchange revenue, financing-related fees and investment and other revenue, all of which are accounted for using other accounting guidance.

(b)    The Investment and Wealth Management business segment is net of (loss) income attributable to noncontrolling interests related to consolidated investment management funds of $(13) million in the first nine months of 2022 and $6 million in the first nine months of 2021.

Contract balances

Our clients are billed based on fee schedules that are agreed upon in each customer contract. Receivables from customers were $2.5 billion at Sept. 30, 2022 and Dec. 31, 2021.

Contract assets represent accrued revenues that have not yet been billed to the customers due to certain contractual terms other than the passage of time and were $68 million at Sept. 30, 2022 and $42 million at Dec. 31, 2021. Accrued revenues recorded as contract assets are usually billed on an annual basis.

Both receivables from customers and contract assets are included in other assets on the consolidated balance sheet.

Contract liabilities represent payments received in advance of providing services under certain contracts and were $182 million at Sept. 30, 2022 and $163 million at Dec. 31, 2021. Contract liabilities are included in other liabilities on the consolidated balance sheet. Revenue recognized in the third quarter of 2022 relating to contract liabilities as of June 30, 2022 was $71 million. Revenue recognized in the first nine months of 2022 relating to contract liabilities as of Dec. 31, 2021 was $106 million.

Changes in contract assets and liabilities primarily relate to either party’s performance under the contracts.

Contract costs

Incremental costs for obtaining contracts that are deemed recoverable are capitalized as contract costs. Such costs result from the payment of sales incentives, primarily in the Wealth Management business, and totaled $57 million at Sept. 30, 2022 and $64 million at Dec. 31, 2021. Capitalized sales incentives are amortized based on the transfer of goods or services to which the assets relate and typically average nine years. The amortization of capitalized sales incentives, which is primarily included in staff expense on the consolidated income statement, totaled $5 million in the third quarter of 2022 and third quarter of 2021, $4 million in the second quarter of 2022, $14 million in the first nine months of 2022 and $15 million in the first nine months of 2021.

Costs to fulfill a contract are capitalized when they relate directly to an existing contract or a specific anticipated contract, generate or enhance resources that will be used to fulfill performance obligations, and are recoverable. Such costs generally represent set-up costs, which include any direct cost incurred at the inception of a contract which enables the fulfillment of the performance obligation, and totaled $25 million at Sept. 30, 2022 and $23 million at Dec. 31, 2021. These capitalized costs are amortized on a straight-line basis over the expected contract period, which generally ranges from seven to nine years. The amortization is included in professional, legal and other purchased services and other expenses on the

consolidated income statement and totaled less than $1 million in the third quarter of 2022, third quarter of 2021 and second quarter of 2022 and $1 million in the first nine months of 2022 and first nine months of 2021.

Unsatisfied performance obligations

We do not have any unsatisfied performance obligations other than those that are subject to a

practical expedient election under ASC 606, Revenue From Contracts With Customers. The practical expedient election applies to (i) contracts with an original expected length of one year or less, and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.