Revenue Recognition (Notes)

3 Months Ended

Jun. 30, 2022

Revenue from Contract with Customer [Abstract]

Revenue from Contract with Customer [Text Block]

Revenue Recognition

Disaggregated Revenue

The following tables present the Company's revenues disaggregated by segment and by Products & Systems and Services revenue (in millions):

	Three Months Ended June 30,
	2022						2021
	Products & Systems		Services		Total		Products & Systems		Services		Total
Building Solutions North America	$	1,481	$	945	$	2,426	$	1,355	$	857	$	2,212
Building Solutions EMEA/LA	537		415		952		507		494		1,001
Building Solutions Asia Pacific	493		172		665		413		290		703
Global Products	2,571		—		2,571		2,425		—		2,425
Total	$	5,082	$	1,532	$	6,614	$	4,700	$	1,641	$	6,341

	Nine Months Ended June 30,
	2022						2021
	Products & Systems		Services		Total		Products & Systems		Services		Total
Building Solutions North America	$	4,123	$	2,682	$	6,805	$	3,869	$	2,469	$	6,338
Building Solutions EMEA/LA	1,617		1,252		2,869		1,441		1,442		2,883
Building Solutions Asia Pacific	1,442		521		1,963		1,067		834		1,901
Global Products	6,937		—		6,937		6,154		—		6,154
Total	$	14,119	$	4,455	$	18,574	$	12,531	$	4,745	$	17,276

The following table presents further disaggregation of Global Products segment revenues by product type (in millions):

	Three Months Ended June 30,				Nine Months Ended June 30,
	2022		2021		2022		2021
HVAC	$	1,889	$	1,781	$	5,030	$	4,373
Fire & Security	610		580		1,732		1,605
Industrial Refrigeration	72		64		175		176
Total	$	2,571	$	2,425	$	6,937	$	6,154

Contract Balances

Contract assets relate to the Company’s right to consideration for performance obligations satisfied but not billed and consist of unbilled receivables and costs in excess of billings. Contract liabilities relate to customer payments received in advance of satisfaction of performance obligations under the contract. Contract balances are classified as assets or liabilities on a contract-by-contract basis at the end of each reporting period. 

The following table presents the location and amount of contract balances in the Company's consolidated statements of financial position (in millions):

	Location of contract balances	June 30, 2022		September 30, 2021
Contract assets - current	Accounts receivable - net	$	1,951	$	1,718
Contract assets - noncurrent	Other noncurrent assets	104		99
Contract liabilities - current	Deferred revenue	(1,846)		(1,637)
Contract liabilities - noncurrent	Other noncurrent liabilities	(278)		(269)

For the three months ended June 30, 2022 and 2021, the Company recognized revenue of $193 million and $149 million, respectively, that was included in the beginning of period contract liability balance. For the nine months ended June 30, 2022 and 2021, the Company recognized revenue of $1,252 million and $1,084 million, respectively, that was included in the beginning of period contract liability balance.

Performance Obligations

A performance obligation is a distinct good, service, or a bundle of goods and services promised in a contract. 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 contracts with customers require significant and complex integration, contain goods or services which are highly interdependent or interrelated, or are goods or services which significantly modify or customize other promises in the contracts and, therefore, are not distinct, then the entire contract is accounted for as a single performance obligation. For any contracts with multiple performance obligations, the contract’s transaction price is allocated 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.

Performance obligations are satisfied as of a point in time or over time. The timing of satisfying the performance obligation is typically indicated by the terms of the contract. As of June 30, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $17.5 billion, of which approximately 65% is expected to be recognized as revenue over the next two years. The remaining performance obligations expected to be recognized in revenue beyond two years primarily relate to large, multi-purpose contracts to construct hospitals, schools and other governmental buildings, which include services to be performed over the building's lifetime, with initial contract terms of 25 to 35 years. Future contract modifications could affect both the timing and the amount of the remaining performance obligations. The Company excludes the value of remaining performance obligations for contracts with an original expected duration of one year or less.

Costs to Obtain or Fulfill a Contract

The Company recognizes the incremental costs incurred to obtain or fulfill a contract with a customer as an asset when these costs are recoverable. These costs consist primarily of sales commissions and bid/proposal costs. Costs to obtain or fulfill a contract are capitalized and amortized to revenue over the period of contract performance.

The following table presents the location and amount of costs to obtain or fulfill a contract recorded in the Company's consolidated statements of financial position (in millions):

	June 30, 2022		September 30, 2021
Other current assets	$	169	$	149
Other noncurrent assets	122		117
Total	$	291	$	266

During both the three months ended June 30, 2022 and 2021, the Company recognized amortization expense of $48 million, related to costs to obtain or fulfill a contract. During the nine months ended June 30, 2022 and 2021, the Company

recognized amortization expense of $145 million and $136 million, respectively, related to costs to obtain or fulfill a contract. There were no impairment losses recognized in the three and nine months ended June 30, 2022 and 2021.