Revenue

The Company's revenues are principally derived from device-based medical therapies and services related to cardiac rhythm disorders, cardiovascular disease, renal disease, neurological disorders and diseases, spinal conditions and musculoskeletal trauma, chronic pain, urological and digestive disorders, ear, nose, and throat conditions, and diabetes conditions as well as advanced and general surgical care products, respiratory and monitoring solutions, and neurological surgery technologies. The Company's primary customers include hospitals, clinics, third-party health care providers, distributors, and other institutions, including governmental health care programs and group purchasing organizations.

The table below illustrates net sales by segment and division for the three months ended July 27, 2018 and July 28, 2017:



	Three months ended
(in millions)	July 27, 2018		July 28, 2017
Cardiac Rhythm & Heart Failure	$	1,426	$	1,390
Coronary & Structural Heart	917		817
Aortic, Peripheral & Venous	468		439
Cardiac and Vascular Group	2,811		2,646
Surgical Innovations	1,397		1,306
Respiratory, Gastrointestinal, & Renal	655		1,180
Minimally Invasive Therapies Group	2,052		2,486
Spine	652		649
Brain Therapies	599		522
Specialty Therapies	384		369
Pain Therapies	314		269
Restorative Therapies Group	1,949		1,809
Diabetes Group	572		449
Total	$	7,384	$	7,390

The table below illustrates net sales by market geography for each of our segments for the three months ended July 27, 2018 and July 28, 2017:



	U.S.⁽¹⁾				Non-U.S. Developed Markets⁽²⁾				Emerging Markets⁽³⁾
	Three months ended				Three months ended				Three months ended
(in millions)	July 27, 2018		July 28, 2017		July 27, 2018		July 28, 2017		July 27, 2018		July 28, 2017
Cardiac and Vascular Group	$	1,389	$	1,333	$	947	$	887	$	475	$	426
Minimally Invasive Therapies Group	857		1,245		828		865		367		376
Restorative Therapies Group	1,294		1,221		428		394		227		194
Diabetes Group	324		243		203		167		45		39
Total	$	3,864	$	4,042	$	2,406	$	2,313	$	1,114	$	1,035


(1)	U.S. includes the United States and U.S. territories.


(2)	Non-U.S. developed markets include Japan, Australia, New Zealand, Korea, Canada, and the countries of Western Europe.


(3)	Emerging markets include the countries of the Middle East, Africa, Latin America, Eastern Europe, and the countries of Asia that are not included in the non-U.S. developed markets, as defined above.

The Company sells its products through direct sales representatives and independent distributors. Additionally, a portion of the Company's revenue is generated from consignment inventory maintained at hospitals. The Company recognizes revenue when control is transferred to the customer. For products sold through direct sales representatives and independent distributors, control is transferred upon shipment or upon delivery, based on the contract terms and legal requirements. For consignment inventory, control is transferred when the product is used or implanted. Payment terms vary depending on the country of sale, type of customer, and type of product.

If a contract contains more than one performance obligation, the transaction price is allocated to each performance obligation based on relative standalone selling price. Shipping and handling is treated as a fulfillment activity rather than a promised service, and therefore, is not considered a performance obligation. Taxes assessed by a governmental authority that are both imposed on, and concurrent with, a specific revenue producing transaction and collected by the Company from customers (for example, sales, use, value added, and some excise taxes) are not included in revenue. For contracts that have an original duration of one year or less, the Company uses the practical expedient applicable to such contracts and does not adjust the transaction price for the time value of money.

The amount of revenue recognized reflects sales rebates and returns, which are estimated based on sales terms, historical experience, and trend analysis. In estimating rebates, the Company considers the lag time between the point of sale and the payment of the rebate claim, the stated rebate rates, and other relevant information. The Company records adjustments to rebates and returns reserves as increases or decreases of revenue. At July 27, 2018, $646 million of rebates were classified as other accrued expenses and $444 million of rebates were classified as a reduction of accounts receivable in the consolidated balance sheets. At April 27, 2018, $614 million of rebates were classified as other accrued expenses and $376 million of rebates were classified as a reduction of accounts receivable in the consolidated balance sheets. The Company includes obligations for returns in other accrued expenses in the consolidated balance sheets and the right-of-return asset in other current assets in the consolidated balance sheets. The right-of-return asset at July 27, 2018 and right-of-return liability at July 27, 2018 and April 27, 2018 were not material. There was no right-of-return asset at April 27, 2018 as the liability was recorded net of the asset under previous guidance. For the three months ended July 27, 2018, adjustments to rebate and return reserves recognized in revenue that were included in the rebate and return reserves at the beginning of the period were not material.

The Company offers warranties on various products. For standard, assurance-type warranties, the Company estimates the costs that may be incurred under its warranties and records a liability in the amount of such costs at the time the product is sold. The amount of the reserve is equal to the net costs to repair or otherwise satisfy the obligation. The Company includes the warranty obligation in other accrued expenses and other liabilities in the consolidated balance sheets. For extended, service-type warranties, a portion of the transaction price is allocated to the performance obligation. Warranty obligations at July 27, 2018 and April 27, 2018 were not material.

Deferred Revenue and Remaining Performance Obligations

The Company records a deferred revenue liability if a customer pays consideration before the Company transfers a good or service to the customer. Deferred revenue primarily represents remote monitoring services and equipment maintenance, for which consideration is received at the same time as consideration for the device or equipment. Deferred revenue also includes extended, service-type warranties. Revenue related to remote monitoring services, equipment maintenance, and service-type warranties is recognized over the service period as time elapses.

Deferred revenue at July 27, 2018 and April 27, 2018 was $288 million and $289 million, respectively. At July 27, 2018 and April 27, 2018, $195 million and $196 million was included in other accrued expenses, respectively, and $93 million was included in other liabilities. During the three months ended July 27, 2018, the Company recognized $74 million of revenue that was included in deferred revenue as of April 27, 2018.

Remaining performance obligations include deferred revenue and amounts the Company expects to receive for goods and services that have not yet been delivered or provided under existing, noncancellable contracts with minimum purchase commitments, primarily related to consumables for previously sold equipment as well as remote monitoring services and equipment maintenance. For contracts that have an original duration of one year or less, the Company has elected the practical expedient applicable to such contracts and does not disclose the transaction price for remaining performance obligations at the end of each reporting period and when the Company expects to recognize this revenue. At July 27, 2018, the estimated revenue expected to be recognized in future periods related to performance obligations that are unsatisfied for executed contracts with an original duration of one year or more was approximately $600 million. The Company expects to recognize revenue on the majority of these remaining performance obligations over the next three years.