Revenue Recognition

12 Months Ended

Dec. 31, 2019

The following tables disaggregate the Company’s revenue by major product type and geography (in thousands):



	For the Year Ended December 31, 2019
	ORV / Snowmobiles		Motorcycles		Global Adj. Markets		Aftermarket		Boats		Total
Revenue by product type
Wholegoods	$	3,463,135	$	502,090	$	373,914	—		$	621,353	$	4,960,492
PG&A	745,928		82,006		87,341		$	906,751	—		1,822,026
Total revenue	$	4,209,063	$	584,096	$	461,255	$	906,751	$	621,353	$	6,782,518

Revenue by geography
United States	$	3,470,141	$	375,977	$	232,626	$	867,052	$	605,910	$	5,551,706
Canada	304,020		31,129		4,612		39,699		15,443		394,903
EMEA	302,511		116,158		221,274		—		—		639,943
APLA	132,391		60,832		2,743		—		—		195,966
Total revenue	$	4,209,063	$	584,096	$	461,255	$	906,751	$	621,353	$	6,782,518

	For the Year Ended December 31, 2018
	ORV / Snowmobiles		Motorcycles		Global Adj. Markets		Aftermarket		Boats		Total
Revenue by product type
Wholegoods	$	3,237,463	$	465,269	$	366,103	—		$	279,656	$	4,348,491
PG&A	681,954		80,377		78,541		$	889,177	—		1,730,049
Total revenue	$	3,919,417	$	545,646	$	444,644	$	889,177	$	279,656	$	6,078,540

Revenue by geography
United States	$	3,178,104	$	371,483	$	212,653	$	847,293	$	274,274	$	4,883,807
Canada	293,269		31,150		18,539		41,884		5,382		390,224
EMEA	306,890		87,977		208,032		—		—		602,899
APLA	141,154		55,036		5,420		—		—		201,610
Total revenue	$	3,919,417	$	545,646	$	444,644	$	889,177	$	279,656	$	6,078,540

With respect to wholegood vehicles, boats, parts, garments and accessories, revenue is recognized when the Company transfers control of the product to the customer. With respect to services provided by the Company, revenue is recognized upon completion of the service or over the term of the service agreement in proportion to the costs expected to be incurred in satisfying the obligations over the term of the service period. Revenue is measured as the amount of consideration the Company expects to receive in exchange for transferring goods or providing services. Sales, value add, and other taxes the Company collects concurrent with revenue-producing activities are excluded from revenue. Incidental items that are immaterial in the context of the contract are recognized as expense. The expected costs associated with the Company’s limited warranties and field service bulletin actions are recognized as expense when the products are sold. The Company recognizes revenue for vehicle service contracts that extend mechanical and maintenance coverage beyond the Company’s limited warranties over the life of the contract. Revenue from goods and services transferred to customers at a point-in-time accounts for the majority of the Company’s revenue. Revenue from products or services transferred over time is discussed in the deferred revenue section.

ORV/Snowmobiles, Motorcycles and Global Adjacent Markets segments

Wholegood vehicles and parts, garments and accessories. For the majority of wholegood vehicles, parts, garments and accessories (PG&A), the Company transfers control and recognizes a sale when it ships the product from its manufacturing facility, distribution center, or vehicle holding center to its customer (primarily dealers and distributors). The amount of consideration the Company receives and revenue it recognizes varies with changes in marketing incentives and rebates it offers to its dealers and their customers. Sales returns are not material. The Company adjusts its

estimate of revenue at the earlier of when the most likely amount of consideration it expects to receive changes or when the consideration becomes fixed.

Depending on the terms of the arrangement, the Company may also defer the recognition of a portion of the consideration received because it has to satisfy a future obligation (e.g., free extended service contracts). The Company uses an observable price to determine the stand-alone selling price for separate performance obligations. The Company has elected to recognize the cost for freight and shipping when control over vehicles, parts, garments or accessories has transferred to the customer as an expense in cost of sales.

Extended Service Contracts. The Company sells separately-priced service contracts that extend mechanical and maintenance coverages beyond its base limited warranty agreements to vehicle owners. The separately priced service contracts range from 12 months to 84 months. The Company primarily receives payment at the inception of the contract and recognizes revenue over the term of the agreement in proportion to the costs expected to be incurred in satisfying the obligations under the contract.

Aftermarket segment

The Company’s Aftermarket products are sold through dealer, distributor, retail, and e-commerce channels. The Company transfers control and recognizes a sale when products are shipped or delivered to its customer. The amount of consideration the Company receives and revenue it recognizes varies with changes in marketing incentives and rebates rights it offers to its customers and their customers. When the Company gives its customers the right to return eligible parts and accessories, it estimates the expected returns based on an analysis of historical experience. The Company adjusts its estimate of revenue at the earlier of when the most likely amount of consideration it expects to receive changes or when the consideration becomes fixed.

Service revenue. The Company offers installation services for parts that it sells. Service revenues are recognized upon completion of the service.

Depending on the terms of the arrangement, the Company may also defer the recognition of a portion of the consideration received because it has to satisfy a future obligation (e.g., extended service contracts). The Company uses an observable price to determine the stand-alone selling price for separate performance obligations. The Company has elected to recognize the cost for freight and shipping when control over parts, garments or accessories has transferred to the customer as an expense in cost of sales.

Boats segment

Boats. The Company transfers control and recognizes a sale when it ships the product from its manufacturing facility or distribution center to its customer (primarily dealers). The amount of consideration the Company receives and revenue it recognizes varies with changes in marketing incentives and rebates it offers to its dealers and their customers. Sales returns are not material. The Company adjusts its estimate of revenue at the earlier of when the most likely amount of consideration it expects to receive changes or when the consideration becomes fixed. The Company has elected to recognize the cost for freight and shipping when control over boats has transferred to the customer as an expense in cost of sales.

Deferred revenue

The Company finances its self-insured risks related to extended service contracts (“ESCs”). The premiums for ESCs are primarily recognized in income in proportion to the costs expected to be incurred over the contract period. Warranty costs are recognized as incurred.

The Company expects to recognize approximately $34,254,000 of the unearned amount over the next 12 months and $47,301,000 thereafter. The activity in the deferred revenue reserve during the periods presented was as follows (in thousands):



	For the Years Ended December 31,
	2019			2018			2017
Balance at beginning of year	$	59,915		$	45,760		$	26,157
New contracts sold	49,565			35,610			31,617
Less: reductions for revenue recognized	(27,925		)	(21,455		)	(12,014		)
Balance at end of year ⁽¹⁾	$	81,555		$	59,915		$	45,760

(1) The unamortized ESC premiums (deferred revenue) recorded in other current liabilities totaled $34,254,000 and $25,777,000 at December 31, 2019 and 2018, respectively, while the amount recorded in other long-term liabilities totaled $47,301,000 and $34,138,000 at December 31, 2019 and 2018, respectively.