Revenue Recognition (Notes)

3 Months Ended

Mar. 31, 2020

Revenue Recognition, Sales of Goods [Policy Text Block]

Note 2. Revenue Recognition

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



	Three months ended March 31, 2020
	ORV / Snowmobiles		Motorcycles		Global Adj. Markets		Aftermarket		Boats		Total
Revenue by product type
Wholegoods	$	644.7	$	109.8	$	77.4	—		$	154.5	$	986.4
PG&A	179.0		16.8		20.9		$	202.1	—		418.8
Total revenue	$	823.7	$	126.6	$	98.3	$	202.1	$	154.5	$	1,405.2

Revenue by geography
United States	$	682.7	$	77.8	$	48.5	$	194.0	$	151.4	$	1,154.4
Canada	52.0		4.6		1.5		8.1		3.1		69.3
EMEA	62.0		29.4		47.7		—		—		139.1
APLA	27.0		14.8		0.6		—		—		42.4
Total revenue	$	823.7	$	126.6	$	98.3	$	202.1	$	154.5	$	1,405.2

	Three months ended March 31, 2019
	ORV / Snowmobiles		Motorcycles		Global Adj. Markets		Aftermarket		Boats		Total
Revenue by product type
Wholegoods	$	700.9	$	102.3	$	84.7	—		$	184.8	$	1,072.7
PG&A	166.6		15.6		20.3		$	220.5	—		423.0
Total revenue	$	867.5	$	117.9	$	105.0	$	220.5	$	184.8	$	1,495.7

Revenue by geography
United States	$	708.9	$	67.9	$	51.7	$	211.6	$	180.8	$	1,220.9
Canada	51.6		6.0		1.1		8.9		4.0		71.6
EMEA	78.7		30.7		51.4		—		—		160.8
APLA	28.3		13.3		0.8		—		—		42.4
Total revenue	$	867.5	$	117.9	$	105.0	$	220.5	$	184.8	$	1,495.7

With respect to wholegood vehicles, boats, parts, garments and accessories, revenue is recognized when the Company transfers control of the product to the customer (or distributor). 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 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 $35.8 million of the unearned amount over the next 12 months and $49.8 million thereafter. The activity in the deferred revenue reserve during the periods presented was as follows (in millions):



	Three months ended March 31,
	2020			2019
Balance at beginning of period	$	81.6		$	59.9
New contracts sold	13.2			9.9
Less: reductions for revenue recognized	(9.2		)	(6.3		)
Balance at end of period ⁽¹⁾	$	85.6		$	63.5

(1) The unamortized ESC premiums (deferred revenue) recorded in other current liabilities totaled $35.8 million and $27.2 million at March 31, 2020 and 2019, respectively, while the amount recorded in other long-term liabilities totaled $49.8 million and $36.3 million at March 31, 2020 and 2019, respectively.