Revenue

12 Months Ended

Dec. 31, 2021

Revenue

Revenue

Note 3 — Revenue

Abbott’s revenues are derived primarily from the sale of a broad line of health care products under short-term receivable arrangements. Patent protection and licenses, technological and performance features, and inclusion of Abbott’s products under a contract most impact which products are sold; price controls, competition and rebates most impact the net selling prices of products; and foreign currency translation impacts the measurement of net sales and costs. Abbott’s products are generally sold directly to retailers, wholesalers, distributors, hospitals, health care facilities, laboratories, physicians’ offices and government agencies throughout the world. Abbott has four reportable segments: Established Pharmaceutical Products, Diagnostic Products, Nutritional Products, and Medical Devices.

Note 3 — Revenue (Continued)

The following tables provide detail by sales category:

	2021						2020						2019
(in millions)	U.S.		Int’l		Total		U.S.		Int’l		Total		U.S.		Int’l		Total
Established Pharmaceutical Products —
Key Emerging Markets	$	—	$	3,539	$	3,539	$	—	$	3,209	$	3,209	$	—	$	3,392	$	3,392
Other		—		1,179		1,179		—		1,094		1,094		—		1,094		1,094
Total		—		4,718		4,718		—		4,303		4,303		—		4,486		4,486
Nutritionals —
Pediatric Nutritionals		2,192		2,106		4,298		1,987		2,140		4,127		1,879		2,282		4,161
Adult Nutritionals		1,364		2,632		3,996		1,292		2,228		3,520		1,231		2,017		3,248
Total		3,556		4,738		8,294		3,279		4,368		7,647		3,110		4,299		7,409
Diagnostics —
Core Laboratory		1,145		3,983		5,128		1,166		3,309		4,475		1,086		3,570		4,656
Molecular		566		861		1,427		621		817		1,438		149		293		442
Point of Care		384		152		536		369		147		516		438		123		561
Rapid Diagnostics		5,034		3,519		8,553		2,618		1,758		4,376		1,214		840		2,054
Total		7,129		8,515		15,644		4,774		6,031		10,805		2,887		4,826		7,713
Medical Devices —
Rhythm Management		1,018		1,180		2,198		903		1,011		1,914		1,057		1,087		2,144
Electrophysiology		778		1,129		1,907		660		918		1,578		742		979		1,721
Heart Failure		654		235		889		547		193		740		574		195		769
Vascular		915		1,739		2,654		853		1,486		2,339		1,047		1,803		2,850
Structural Heart		730		880		1,610		540		707		1,247		616		784		1,400
Neuromodulation		616		165		781		564		138		702		660		171		831
Diabetes Care		1,212		3,116		4,328		864		2,403		3,267		678		1,846		2,524
Total		5,923		8,444		14,367		4,931		6,856		11,787		5,374		6,865		12,239
Other		34		18		52		38		28		66		27		30		57
Total	$	16,642	$	26,433	$	43,075	$	13,022	$	21,586	$	34,608	$	11,398	$	20,506	$	31,904

Abbott recognizes revenue from product sales upon the transfer of control, which is generally upon shipment or delivery, depending on the delivery terms set forth in the customer contract. For maintenance agreements that provide service beyond Abbott’s standard warranty and other service agreements, revenue is recognized ratably over the contract term. A time-based measure of progress appropriately reflects the transfer of services to the customer. Payment terms between Abbott and its customers vary by the type of customer, country of sale, and the products or services offered. The term between invoicing and the payment due date is not significant.

Management exercises judgment in estimating variable consideration. Provisions for discounts, rebates and sales incentives to customers, and returns and other adjustments are provided for in the period the related sales are recorded. Sales incentives to customers are not material. Historical data is readily available and reliable, and is used for estimating the amount of the reduction in gross sales. Abbott provides rebates to government agencies, wholesalers, group purchasing organizations and other private entities.

Note 3 — Revenue (Continued)

Rebate amounts are usually based upon the volume of purchases using contractual or statutory prices for a product. Factors used in the rebate calculations include the identification of which products have been sold subject to a rebate, which customer or government agency price terms apply, and the estimated lag time between sale and payment of a rebate. Using historical trends, adjusted for current changes, Abbott estimates the amount of the rebate that will be paid, and records the liability as a reduction of gross sales when Abbott records its sale of the product. Settlement of the rebate generally occurs from one to six months after sale. Abbott regularly analyzes the historical rebate trends and makes adjustments to reserves for changes in trends and terms of rebate programs. Historically, adjustments to prior years’ rebate accruals have not been material to net income.

Other allowances charged against gross sales include cash discounts and returns, which are not significant. Cash discounts are known within 15 to 30 days of sale, and therefore can be reliably estimated. Returns can be reliably estimated because Abbott’s historical returns are low, and because sales return terms and other sales terms have remained relatively unchanged for several periods. Product warranties are also not significant.

Abbott also applies judgment in determining the timing of revenue recognition related to contracts that include multiple performance obligations. The total transaction price of the contract is allocated to each performance obligation in an amount based on the estimated relative standalone selling prices of the promised goods or services underlying each performance obligation. For goods or services for which observable standalone selling prices are not available, Abbott uses an expected cost plus a margin approach to estimate the standalone selling price of each performance obligation.

Remaining Performance Obligations

As of December 31, 2021, the estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied (or partially unsatisfied) was approximately $4 billion in the Diagnostic Products segment and approximately $435 million in the Medical Devices segment. Abbott expects to recognize revenue on approximately 60 percent of these remaining performance obligations over the next 24 months, approximately 16 percent over the subsequent 12 months and the remainder thereafter.

These performance obligations primarily reflect the future sale of reagents/consumables in contracts with minimum purchase obligations, extended warranty or service obligations related to previously sold equipment, and remote monitoring services related to previously implanted devices. Abbott has applied the practical expedient described in ASC 606-10-50-14 and has not included remaining performance obligations related to contracts with original expected durations of one year or less in the amounts above.

Assets Recognized for Costs to Obtain a Contract with a Customer

Abbott has applied the practical expedient in ASC 340-40-25-4 and records as an expense the incremental costs of obtaining contracts with customers in the period of occurrence when the amortization period of the asset that Abbott otherwise would have recognized is one year or less. Upfront commission fees paid to sales personnel as a result of obtaining or renewing contracts with customers are incremental to obtaining the contract. Abbott capitalizes these amounts as contract costs. Capitalized commission fees are amortized based on the contract duration to which the assets relate which ranges from two to ten years. The amounts as of December 31, 2021 and 2020 were not significant.

Additionally, the cost of transmitters provided to customers that use Abbott’s remote monitoring service with respect to certain medical devices are capitalized as contract costs. Capitalized transmitter costs are amortized based on the timing of the transfer of services to which the assets relate, which typically ranges from eight to ten years. The amounts as of December 31, 2021 and 2020 were not significant.

Other Contract Assets and Liabilities

Abbott discloses Trade receivables separately in the Consolidated Balance Sheet at the net amount expected to be collected. Contract assets primarily relate to Abbott’s conditional right to consideration for work completed but not billed at the reporting date. Contract assets at the beginning and end of the period, as well as the changes in the balance, were not significant.

Note 3 — Revenue (Continued)

Contract liabilities primarily relate to payments received from customers in advance of performance under the contract. Abbott’s contract liabilities arise primarily in the Medical Devices reportable segment when payment is received upfront for various multi-period extended service arrangements. Changes in the contract liabilities during the period are as follows:

(in millions)
Contract Liabilities:
Balance at December 31, 2019	$	294
Unearned revenue from cash received during the period		505
Revenue recognized related to contract liability balance		(394)
Balance at December 31, 2020		405
Unearned revenue from cash received during the period		615
Revenue recognized related to contract liability balance		(500)
Balance at December 31, 2021	$	520