Revenue Recognition and Deferred Revenue (Policies)

12 Months Ended

Dec. 31, 2020

Revenue Recognition and Deferred Revenue [Abstract]

Revenue from Contract with Customer

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 $4 billion and $4.2 billion of unearned revenue associated with outstanding contracts reported in Other liabilities and deferred revenue at December 31, 2018 and 2019, respectively. We recognized $1.1 billion and $1.2 billion of the unearned amounts as revenue during the years ended December 31, 2019 and 2020, respectively. At December 31, 2020, the unearned amount was $4.2 billion. We expect to recognize approximately $1.3 billion of the unearned amount in 2021, $1 billion in 2022, 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 $270 million and $283 million in deferred costs as of December 31, 2019 and 2020, respectively. We recognized $73 million, $74 million, and $79 million of amortization during the years ended December 31, 2018, 2019, and 2020, respectively.

Revenue, Transaction Price Measurement, Tax Exclusion

Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods or providing services. Sales, value-added, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue.