Revenue Recognition

9 Months Ended

Jun. 30, 2023

Revenue from Contract with Customer [Abstract]

Revenue Recognition

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,
	2023						2022
	Products & Systems		Services		Total		Products & Systems		Services		Total
Building Solutions North America	$	1,636	$	1,029	$	2,665	$	1,481	$	945	$	2,426
Building Solutions EMEA/LA	571		474		1,045		537		415		952
Building Solutions Asia Pacific	537		199		736		493		172		665
Global Products	2,687		—		2,687		2,571		—		2,571
Total	$	5,431	$	1,702	$	7,133	$	5,082	$	1,532	$	6,614

	Nine Months Ended June 30,
	2023						2022
	Products & Systems		Services		Total		Products & Systems		Services		Total
Building Solutions North America	$	4,641	$	2,911	$	7,552	$	4,123	$	2,682	$	6,805
Building Solutions EMEA/LA	1,705		1,346		3,051		1,617		1,252		2,869
Building Solutions Asia Pacific	1,489		560		2,049		1,442		521		1,963
Global Products	7,235		—		7,235		6,937		—		6,937
Total	$	15,070	$	4,817	$	19,887	$	14,119	$	4,455	$	18,574

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,
	2023		2022		2023		2022
HVAC	$	1,973	$	1,889	$	5,170	$	5,030
Fire & Security	626		610		1,819		1,732
Industrial Refrigeration	88		72		246		175
Total	$	2,687	$	2,571	$	7,235	$	6,937

Contract Balances

Contract assets relate to the Company’s right to consideration for performance obligations satisfied but not billed. 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, 2023		September 30, 2022
Contract assets - current	Accounts receivable - net	$	2,080	$	2,067
Contract assets - noncurrent	Other noncurrent assets	79		79
Contract liabilities - current	Deferred revenue	1,918		1,804
Contract liabilities - noncurrent	Other noncurrent liabilities	292		282

For the three months ended June 30, 2023 and 2022, the Company recognized revenue of $222 million and $193 million, respectively, that was included in the beginning of period contract liability balance. For the nine months ended June 30, 2023 and 2022, the Company recognized revenue of $1,387 million and $1,252 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 at a point in time or over time. The timing of satisfying the performance obligation is typically stipulated by the terms of the contract. As of June 30, 2023, the aggregate amount of the transaction price allocated to remaining performance obligations was approximately $19.2 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 service 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 design costs that relate to a contract or an anticipated contract that we expect to recover. Costs to obtain or fulfill a contract are capitalized and amortized 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, 2023		September 30, 2022
Other current assets	$	159	$	139
Other noncurrent assets	212		174
Total	$	371	$	313

During the three months ended June 30, 2023 and 2022, the Company recognized amortization expense of $66 million and $48 million, respectively, related to costs to obtain or fulfill a contract. During the nine months ended June 30, 2023 and 2022, the Company recognized amortization expense of $188 million and $145 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, 2023 and 2022.