BACKLOG

12 Months Ended

Dec. 31, 2021

Revenue from Contract with Customer [Abstract]

BACKLOG

NOTE 6: CONTRACT ASSETS AND CONTRACT LIABILITIES

Contract assets include unbilled amounts typically resulting from revenue recognized exceeding amounts billed to customers for contracts utilizing the POC cost-to-cost revenue recognition method. We bill customers as work progresses in accordance with agreed-upon contractual terms, either at periodic intervals, upon achievement of contractual milestones or upon deliveries and, in certain arrangements, the customer may withhold payment of a small portion of the contract price until contract completion. Contract liabilities include advance payments and billings in excess of revenue recognized, including deferred revenue associated with extended product warranties. Contract assets and liabilities are reported on a contract-by-contract basis at the end of each reporting period.

Contract assets and liabilities in fiscal 2021 were impacted primarily by divestitures, accelerated progress payments due to the U.S. Government’s temporary increase in the progress payment rate from 80 percent to 90 percent and the timing of contractual billing milestones. The increase in contract assets from January 1, 2021 to December 31, 2021 is primarily attributable to a $323 million increase in unbilled contract receivables associated with an aircraft missionization program within our Integrated Mission Systems segment.

Contract assets and contract liabilities are summarized below:

(In millions)	December 31, 2021		January 1, 2021
Contract assets	$	3,021	$	2,437
Contract liabilities, current	(1,297)		(1,198)
Contract liabilities, non-current(1)	(107)		(73)
Net contract assets	$	1,617	$	1,166

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(1)The non-current portion of contract liabilities is included as a component of the “Other long-term liabilities” line item in our Consolidated Balance Sheet.

The components of contract assets are summarized below:

(In millions)	December 31, 2021		January 1, 2021
Unbilled contract receivables, gross	$	4,825	$	4,268
Unliquidated progress payments and advances	(1,804)		(1,831)
Contract assets	$	3,021	$	2,437

Impairment losses related to our contract assets were not material in fiscal 2021, fiscal 2020, the two quarters ended January 3, 2020, or fiscal 2019. In fiscal 2021, fiscal 2020, the two quarters ended January 3, 2020 and fiscal 2019, we recognized $930 million, $974 million, $776 million and $287 million, respectively, of revenue related to contract liabilities that were outstanding at the end of the respective prior fiscal year.

NOTE 23: BACKLOG

Backlog, which is the equivalent of our remaining performance obligations, represents the future revenue we expect to recognize as we perform on our current contracts. Backlog comprises both funded backlog (i.e., firm orders for which funding is authorized and appropriated) and unfunded backlog. Backlog excludes unexercised contract options and potential orders under ordering-type contracts, such as indefinite delivery, indefinite quantity contracts.

At December 31, 2021, our ending backlog was $21.1 billion. We expect to recognize approximately 50 percent of the revenue associated with this backlog by the end of 2022 and approximately 85 percent by the end of 2024, with the remainder to be recognized thereafter. At January 1, 2021, our ending backlog was $21.7 billion, including $1.5 billion of backlog associated with businesses that were divested during fiscal 2020.