Revenue Revenue (Notes)

12 Months Ended

Dec. 31, 2019

Revenue from Contract with Customer [Abstract]

The following tables disaggregate our revenue by major source for the years ended December 31 (in millions):



	2017
	Automotive		Mobility		Ford Credit		Consolidated
Vehicles, parts, and accessories	$	140,171	$	—	$	—	$	140,171
Used vehicles	2,956		—		—		2,956
Extended service contracts	1,236		—		—		1,236
Other revenue	815		10		219		1,044
Revenues from sales and services	145,178		10		219		145,407

Leasing income	475		—		5,552		6,027
Financing income	—		—		5,184		5,184
Insurance income	—		—		158		158
Total revenues	$	145,653	$	10	$	11,113	$	156,776



	2018
	Automotive		Mobility		Ford Credit		Consolidated
Vehicles, parts, and accessories	$	142,532	$	—	$	—	$	142,532
Used vehicles	3,022		—		—		3,022
Extended service contracts	1,323		—		—		1,323
Other revenue	879		26		218		1,123
Revenues from sales and services	147,756		26		218		148,000

Leasing income	538		—		5,795		6,333
Financing income	—		—		5,841		5,841
Insurance income	—		—		164		164
Total revenues	$	148,294	$	26	$	12,018	$	160,338



	2019
	Automotive		Mobility		Ford Credit		Consolidated
Vehicles, parts, and accessories	$	137,659	$	—	$	—	$	137,659
Used vehicles	3,307		—		—		3,307
Extended service contracts	1,376		—		—		1,376
Other revenue	811		41		204		1,056
Revenues from sales and services	143,153		41		204		143,398

Leasing income	446		—		5,899		6,345
Financing income	—		—		5,996		5,996
Insurance income	—		—		161		161
Total revenues	$	143,599	$	41	$	12,260	$	155,900

Revenue is recognized when obligations under the terms of a contract with our customer are satisfied; generally this occurs with the transfer of control of our vehicles, parts, accessories, or services. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Sales, value add, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. The expected costs associated with our base warranties and field service actions continue to be recognized as expense when the products are sold (see Note 27). We recognize revenue for vehicle service contracts that extend mechanical and maintenance coverages beyond our base warranties over the life of the contract. We do not have any material significant payment terms as payment is received at or shortly after the point of sale.

NOTE 4. REVENUE (Continued)

Automotive Segment

Vehicles, Parts, and Accessories. For the majority of vehicles, parts, and accessories, we transfer control and recognize a sale when we ship the product from our manufacturing facility to our customer (dealers and distributors). We receive cash equal to the invoice price for most vehicle sales at the time of wholesale. When the vehicle sale is financed by our wholly-owned subsidiary Ford Credit, the dealer pays Ford Credit when it sells the vehicle to the retail customer (see Note 10). Payment terms on part sales to dealers, distributors, and retailers range from 30 to 120 days. The amount of consideration we receive and revenue we recognize varies with changes in return rights and marketing incentives we offer to our customers and their customers. When we give our dealers the right to return eligible parts and accessories, we estimate the expected returns based on an analysis of historical experience. Estimates of marketing incentives are based on expected retail and fleet sales volumes, mix of products to be sold, and incentive programs to be offered. Customer acceptance of products and programs, as well as other market conditions, will impact these estimates. We adjust our estimate of revenue at the earlier of when the value of consideration we expect to receive changes or when the consideration becomes fixed. As a result of changes in our estimate of marketing incentives, during 2017, 2018, and 2019 we recorded a decrease of $887 million, $903 million, and $844 million, respectively, related to revenue recognized in prior annual periods.

Depending on the terms of the arrangement, we may also defer the recognition of a portion of the consideration received because we have to satisfy a future obligation (e.g., free extended service contracts). We use an observable price to determine the stand-alone selling price for separate performance obligations or a cost plus margin approach when one is not available. We have elected to recognize the cost for freight and shipping when control over vehicles, parts, or accessories have transferred to the customer as an expense in Cost of sales.

We sell vehicles to daily rental companies and guarantee that we will pay them the difference between an agreed amount and the value they are able to realize upon resale. At the time of transfer of vehicles to the daily rental companies, we record the probable amount we will pay under the guarantee to Other liabilities and deferred revenue (see Note 27).

Used Vehicles. We sell used vehicles both at auction and through our consolidated dealerships. Proceeds from the sale of these vehicles are recognized in Automotive revenues upon transfer of control of the vehicle to the customer and the related vehicle carrying value is recognized in Cost of sales.

Extended Service Contracts. We sell separately priced service contracts that extend mechanical and maintenance coverages beyond our base warranty agreements to vehicle owners. The separately priced service contracts range from 12 to 120 months. We receive payment at contract inception and recognize revenue over the term of the agreement in proportion to the costs we expect to incur in satisfying the contract obligations. We had a balance of $3.8 billion and $4 billion of unearned revenue associated with outstanding contracts reported in Other liabilities and deferred revenue at December 31, 2017 and 2018, respectively. We recognized $1.1 billion of the unearned amounts as revenue during each of the years ended December 31, 2018 and 2019. At December 31, 2019, the unearned amount was $4.2 billion. We expect to recognize approximately $1.2 billion of the unearned amount in 2020, $1.1 billion in 2021, and $1.9 billion thereafter.

We record a premium deficiency reserve to the extent we estimate the future costs associated with these contracts exceed the unrecognized revenue. Amounts paid to dealers to obtain these contracts are deferred and recorded as Other assets. These costs are amortized to expense consistent with how the related revenue is recognized. We had a balance of $247 million and $270 million in deferred costs as of December 31, 2018 and 2019, respectively. We recognized $63 million, $73 million, and $74 million of amortization during the years ended December 31, 2017, 2018, and 2019, respectively.

Other Revenue. Other revenue consists primarily of net commissions received for serving as the agent in facilitating the sale of a third party’s products or services to our customers, payments for vehicle-related design and testing services we perform for others, and revenue associated with various Mobility operations. We have applied the practical expedient to recognize Automotive revenues for vehicle-related design and testing services over the two to three year term of these agreements in proportion to the amount we have the right to invoice.

NOTE 4. REVENUE (Continued)

Leasing Income. We sell vehicles to daily rental companies with an obligation to repurchase the vehicles for a guaranteed amount, exercisable at the option of the customer. The transactions are accounted for as operating leases. Upon the transfer of vehicles to the daily rental companies, we record proceeds received in Other liabilities and deferred revenue. The difference between the proceeds received and the guaranteed repurchase amount is recorded in Automotive revenues over the term of the lease using a straight-line method. The cost of the vehicle is recorded in Net investment in operating leases on our consolidated balance sheet and the difference between the cost of the vehicle and the estimated auction value is depreciated in Cost of sales over the term of the lease.

Ford Credit Segment

Leasing Income. Ford Credit offers leasing plans to retail consumers through Ford and Lincoln brand dealers who originate the leases. Ford Credit records an operating lease upon purchase of a vehicle subject to a lease from the dealer. The retail consumer makes lease payments representing the difference between Ford Credit’s purchase price of the vehicle and the contractual residual value of the vehicle, plus lease fees that we recognize on a straight-line basis over the term of the lease agreement. Depreciation and the gain or loss upon disposition of the vehicle is recorded in Ford Credit interest, operating, and other expenses.

Financing Income. Ford Credit originates and purchases finance installment contracts. Financing income represents interest earned on the finance receivables (including sales-type and direct financing leases). Interest is recognized using the interest method and includes the amortization of certain direct origination costs.

Insurance Income. Income from insurance contracts is recognized evenly over the term of the agreement. Insurance commission revenue is recognized on a net basis at the time of sale of the third party’s product or service to our customer.