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REVENUE RECOGNITION AND CONTRACTS WITH CUSTOMERS
 6 Months Ended
Jun. 30, 2019
Revenue from Contract with Customer [Abstract]  
Revenue from Contract with Customer [Text Block]
Note 7. Revenue Recognition and Contracts with Customers
 
Honeywell has a comprehensive offering of products and services, including software and technologies, that are sold to a variety of customers in multiple end markets. See the following table and related discussions by operating segment for details.
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Aerospace
 
 
 
 
 
 
 
Commercial Aviation Original Equipment
$
734

 
$
712

 
$
1,493

 
$
1,407

Commercial Aviation Aftermarket
1,421

 
1,326

 
2,782

 
2,594

Defense and Space
1,353

 
1,128

 
2,574

 
2,214

Transportation Systems
—

 
892

 
—

 
1,820

 
3,508

 
4,058

 
6,849

 
8,035

Honeywell Building Technologies
 
 
 
 
 
 
 
Homes Products and Software
—

 
514

 
—

 
1,033

Distribution (ADI)
—

 
676

 
—

 
1,314

Products
843

 
754

 
1,653

 
1,468

Building Solutions
607

 
602

 
1,186

 
1,164

 
1,450

 
2,546

 
2,839

 
4,979

Performance Materials and Technologies
 
 
 
 
 
 
 
UOP
703

 
678

 
1,313

 
1,290

Process Solutions
1,289

 
1,273

 
2,535

 
2,487

Specialty Products
265

 
291

 
534

 
568

Fluorine Products
478

 
456

 
925

 
887

 
2,735

 
2,698

 
5,307

 
5,232

Safety and Productivity Solutions
 
 
 
 
 
 
 
Safety and Retail
557

 
565

 
1,095

 
1,116

Productivity Products
267

 
359

 
538

 
688

Warehouse and Workflow Solutions
501

 
469

 
1,060

 
836

Sensing & Internet-of-Things (IoT)
225

 
224

 
439

 
425

 
1,550

 
1,617

 
3,132

 
3,065

Net sales
$
9,243

 
$
10,919

 
$
18,127

 
$
21,311


 
Aerospace – A global supplier of products, software and services for aircraft. Products include aircraft propulsion engines, auxiliary power units, environmental control systems, integrated avionics, electric power systems, hardware for engine controls, flight safety, communications and navigation, satellite and space components, aircraft wheels and brakes, and thermal systems. Software includes engine controls, flight safety, communications, navigation, radar and surveillance systems, internet connectivity and aircraft instrumentation. Services are provided to customers for the repair, overhaul, retrofit and modification of propulsion engines, auxiliary power units, avionics and mechanical systems and aircraft wheels and brakes.
 
Honeywell Building Technologies – A global provider of products, software, solutions and technologies for buildings. Products include controls and displays for heating, cooling, indoor air quality, ventilation, humidification, combustion, and lighting; sensors, switches, control systems and instruments for measuring pressure, air flow, temperature and electrical current; access control; video surveillance; fire detection; and installation, maintenance and
upgrades of systems that keep buildings safe, comfortable and productive. Software includes monitoring and managing heating, cooling, indoor air quality, ventilation, humidification, combustion, and lighting; advanced applications for building control and optimization; video surveillance; and remote patient monitoring systems. Installation, maintenance and upgrade services of products used in commercial building applications for heating, cooling, maintaining indoor air quality, ventilation, humidification, combustion, lighting, video surveillance and fire safety.
 
Performance Materials and Technologies – A global provider of products, software, solutions and technologies. Products include catalysts, absorbents, equipment and high-performance materials, devices for measurement, regulation, control and metering of gases and electricity, and metering and communications systems for water utilities and industries. Software is provided to support process technologies supporting automation and to monitor a variety of industrial processes used in industries such as oil and gas, chemicals, petrochemicals, metals, minerals and mining industries. Services are provided for installation and maintenance of products.
 
Safety and Productivity Solutions – A global provider of products, software and solutions. Products include personal protection equipment and footwear, gas detection devices, mobile computing, data collection and thermal printing devices, automation equipment for supply chain and warehouse automation and custom-engineered sensors, switches and controls. Software and solutions are provided to customers for supply chain and warehouse automation, to manage data and assets to drive productivity and for computing, data collection and thermal printing.
 
For a summary by disaggregated product and services sales for each segment, refer to Note 14 Segment Financial Data of Notes to Consolidated Financial Statements.
 
We recognize revenue arising from performance obligations outlined in contracts with our customers that are satisfied at a point in time and over time. The disaggregation of our revenue based off timing of recognition is as follows:
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2019
 
2018
 
2019
 
2018
Products, transferred point in time
61
%
 
69
%
 
61
%
 
69
%
Products, transferred over time
14

 
11

 
15

 
11

Net product sales
75

 
80

 
76

 
80

Services, transferred point in time
8

 
6

 
8

 
6

Services, transferred over time
17

 
14

 
16

 
14

Net service sales
25

 
20

 
24

 
20

Net sales
100
%
 
100
%
 
100
%
 
100
%

 
Contract Balances
 
Progress on satisfying performance obligations under contracts with customers and the related billings and cash collections are recorded on the Consolidated Balance Sheet in Accounts receivable - net and Other assets (the current and noncurrent portions, respectively, of unbilled receivables (contract assets) and billed receivables) and Accrued liabilities and Other liabilities (the current and noncurrent portions, respectively, of customer advances and deposits (contract liabilities)). Unbilled receivables (contract assets) arise when the timing of cash collected from customers differs from the timing of revenue recognition, such as when contract provisions require specific milestones to be met before a customer can be billed. Those assets are recognized when the revenue associated with the contract is recognized prior to billing and derecognized when billed in accordance with the terms of the contract. Contract liabilities are recorded when customers remit contractual cash payments in advance of us satisfying performance obligations under contractual arrangements, including those with performance obligations to be satisfied over a period of time. Contract liabilities are derecognized when revenue is recorded, either when a milestone is met triggering the contractual right to bill or when the performance obligation is satisfied.
 
Contract balances are classified as assets or liabilities on a contract-by-contract basis at the end of each reporting period.
 
The following table summarizes our contract assets and liabilities balances: 
 
2019
 
2018
Contract assets - Beginning period
$
1,548

 
$
1,721

Contract assets - June 30,
1,777

 
1,650

Change in contract assets - increase (decrease)
$
229

 
$
(71
)
 
 
 
 
Contract liabilities - Beginning period
$
(3,378
)
 
$
(2,973
)
Contract liabilities - June 30,
(3,237
)
 
(3,109
)
Change in contract liabilities - (increase) decrease
$
141

 
$
(136
)
 
 
 
 
Net change
$
370

 
$
(207
)

 
The net change for the six months ended June 30, 2019 was primarily driven by the recognition of revenue as performance obligations were satisfied prior to billing and exceeded receipt of advance payments from customers. The net change for the six months ended June 30, 2018 was primarily driven by the receipt of advance payments from customers exceeding reductions from recognition of revenue as performance obligations were satisfied and related billings.

For the three and six months ended June 30, 2019, we recognized revenue of $260 million and $980 million that was previously included in the beginning balance of contract liabilities. For the three and six months ended June 30, 2018, we recognized revenue of $320 million and $901 million that was previously included in the beginning balance of contract liabilities.
 
When contracts are modified to account for changes in contract specifications and requirements, we consider whether the modification either creates new or changes the existing enforceable rights and obligations. Contract modifications that are for goods or services that are not distinct from the existing contract, due to the significant integration with the original good or service provided, are accounted for as if they were part of that existing contract. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) on a cumulative catch-up basis. When the modifications include additional performance obligations that are distinct and at relative stand-alone selling price, they are accounted for as a new contract and performance obligation, which are recognized prospectively.
 
Performance Obligations
 
A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is defined as the unit of account. A contract’s transaction price is allocated to each distinct performance obligation and recognized as revenue when, or as, the performance obligation is satisfied. When our contracts with customers require highly complex integration or manufacturing services that are not separately identifiable from other promises in the contracts and, therefore, not distinct, then the entire contract is accounted for as a single performance obligation. In situations when our contract includes distinct goods or services that are substantially the same and have the same pattern of transfer to the customer over time, they are recognized as a series of distinct goods or services. For any contracts with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation based on the estimated relative standalone selling price of each distinct good or service in the contract. For product sales, each product sold to a customer typically represents a distinct performance obligation. In such cases, the observable standalone sales are used to determine the stand alone selling price.
 
Performance obligations are satisfied as of a point in time or over time. Performance obligations are supported by contracts with customers, providing a framework for the nature of the distinct goods, services or bundle of goods and services. The timing of satisfying the performance obligation is typically indicated by the terms of the contract. The following table outlines our performance obligations disaggregated by segment.
 
 
June 30, 2019
Aerospace
$
10,869

Honeywell Building Technologies
5,682

Performance Materials and Technologies
6,295

Safety and Productivity Solutions
1,615

 
$
24,461


 
Performance obligations recognized as of June 30, 2019 will be satisfied over the course of future periods. Our disclosure of the timing for satisfying the performance obligation is based on the requirements of contracts with customers. However, from time to time, these contracts may be subject to modifications, impacting the timing of satisfying the performance obligations. Performance obligations expected to be satisfied within one year and greater than one year are 56% and 44%, respectively.
 
The timing of satisfaction of our performance obligations does not significantly vary from the typical timing of payment. Typical payment terms of our fixed-price over time contracts include progress payments based on specified events or milestones, or based on project progress. For some contracts we may be entitled to receive an advance payment.
 
We have applied the practical expedient for certain revenue streams to exclude the value of remaining performance obligations for (i) contracts with an original expected term of one year or less or (ii) contracts for which we recognize revenue in proportion to the amount we have the right to invoice for services performed.