Revenue Recognition and Deferred Revenue (Policies)

12 Months Ended

Dec. 31, 2021

Revenue Recognition and Deferred Revenue [Abstract]

Revenue from Contract with Customer

Services and other revenue. We use an observable price to determine the stand-alone selling price for separate or stand-ready performance obligations that are included as part of the vehicle consideration received (e.g., free extended service contracts, vehicle connectivity, over-the-air updates), or a cost-plus margin approach when one is not available. We also sell separately priced service contracts that extend mechanical and maintenance coverages beyond our base warranty agreements to vehicle owners. We receive payment at contract inception and the contracts range from 12 to 120 months. We recognize revenue for vehicle service contracts that extend mechanical and maintenance coverages beyond our base warranties over the term of the agreement in proportion to the costs we expect to incur in satisfying the contract obligations. Revenue related to other future or stand-ready performance obligations is generally recognized on a straight-line basis over the period in which services are expected to be performed.

At December 31, 2019 and 2020, a balance of $4.2 billion of unearned revenue associated primarily with outstanding extended service contracts was reported in Other liabilities and deferred revenue. We recognized $1.2 billion and $1.3 billion of the unearned amounts as revenue during the years ended December 31, 2020 and 2021, respectively. At December 31, 2021, the unearned amount was $4.3 billion. We expect to recognize approximately $1.3 billion of the unearned amount in 2022, $1.1 billion in 2023, and $1.9 billion thereafter.

We record a premium deficiency reserve to the extent we estimate the future costs associated with extended service 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 $283 million and $309 million in deferred costs as of December 31, 2020 and 2021, respectively. We recognized $74 million, $79 million, and $81 million of amortization during the years ended December 31, 2019, 2020, and 2021, 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. For the majority of sales, this occurs when products are shipped from our manufacturing facilities. However, we defer a portion of the consideration received when there is a separate future or stand-ready performance obligation, such as extended service contracts or ongoing vehicle connectivity. Sales, value-added, and other taxes we collect concurrent with revenue-producing activities are excluded from revenue.