Revenue from Contract with Customer [Text Block] | 3. REVENUE Revenue Recognition Revenue is recognized upon transfer of control of the promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. We primarily generate revenue from the sale of products (hardware and/or software), services, or a combination thereof. We enter into contracts that may involve multiple performance obligations, and we allocate the transaction price between each performance obligation on the basis of relative standalone selling price. Revenue is recognized net of allowances for returns and any taxes collected from customers, which are subsequently remitted to governmental authorities. Nature of Goods and Services Product revenues are generated predominantly from the sales of various types of design and test hardware and associated software. Products consist of hardware, generally installed with basic software and software licenses that consist of perpetual and term-based licenses for optional software. Our hardware products generally do not have any substantive acceptance terms that would otherwise preclude the transfer of control. Performance obligations related to our software licenses, including the license portion of our software subscriptions, grant the customer the right to use our software via electronic delivery. Service revenues consist of repair and calibration services, extended warranties, technical support for hardware and software, when-and-if available software updates and upgrades, and professional services, including installation and implementation, consulting, and training. Repair and calibration services for hardware products are sold both as per-incident customer services and as customer agreements to provide such services over the contractual period. Extended warranties are optional to the customer and provide warranty on hardware products for additional years beyond the standard one-year warranty. Technical support for software and when-and-if available software updates and upgrades are sold either together with our software licenses and software subscriptions, or separately as part of our customer support programs. These are considered stand-ready performance obligations where customers benefit from the services evenly throughout the license or service period. These performance obligations provide the customer access evenly over the contract period. Our professional services may be sold on a time and material basis (e.g., consulting) or on a fixed-fee basis (e.g., non-recurring engineering). We also generate revenues from a combination of products and services ("custom solutions"), including combinations of hardware, software, installation or other start-up services, software subscriptions, and/or software support services. Custom solutions provide the customer with a combination of hardware, software and professional services to meet customers' unique specifications. For our contracts with customers, we account for individual performance obligations separately if they are distinct. Our standard payment terms are net 30 to 90 days, and we generally do not offer extended payment terms beyond one year. Our contracts typically contain various forms of variable consideration, including trade discounts, trade-in credits, rebates, and rights of return. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. Standalone selling prices for a majority of our products and services are estimated based on our established pricing practices and maximize the use of observable inputs. We have elected to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by Keysight from a customer (e.g., sales, use, value added, and some excise taxes). We have also elected to account for shipping and handling activities that occur after control of the related good transfers as fulfillment activities instead of assessing such activities as performance obligations. Our typical performance obligations include the following: Performance Obligation When performance obligation is typically satisfied When payment is typically due How standalone selling price is typically determined Product Revenues Hardware When customer obtains control of the product, typically at delivery (point in time) Within 30-90 days of shipment Estimated based on established pricing practices or observable based on standalone sales for certain hardware products Software licenses Upon electronic delivery of the software, and the applicable license period has begun (point in time) Within 30-90 days of the beginning of license period Estimated based on established pricing practices or observable based on standalone sales for certain software products Threat intelligence solutions Ratably over the subscription period (over time) Within 30-90 days of the beginning of subscription period Estimated based on established pricing practices Service Revenues Calibration contracts Ratably over the service contract period (over time) Within 30-90 days of the beginning of service contract period Estimated based on established pricing practices Repair and calibration (per- incident) As services are performed (point in time) Within 30-90 days of invoicing for services rendered Estimated based on established pricing practices Extended hardware warranty Ratably over the warranty period (over time) Within 30-90 days of the beginning of warranty period Estimated based on established pricing practices or observable based on standalone sales of certain hardware warranty contracts Technical support and when-and-if-available software updates Ratably over the license service contract period (over time) Within 30-90 days of the beginning of license or service contract period Estimated based on established pricing practices or observable based on standalone sales for certain support contracts Professional services As services are performed based on measures of progress (over time) or at a point in time Within 30-90 days invoicing for services rendered Estimated based on established pricing practices Custom Solutions Custom solutions (milestone-based) As milestones are achieved based on transfer of control to customer (over time) Within 30-90 days of milestone achievement Transaction price, as pricing is custom and can vary significantly from contract to contract Custom solutions (point in time) When customer obtains control of the solution, typically at delivery (point in time) Within 30-90 days of delivery of solution Transaction price, as pricing is custom and can vary significantly from contract to contract Significant Judgments Judgment is required to determine the standalone selling price for each distinct performance obligation. As most of our products and services are not sold on a standalone basis, we typically estimate the standalone selling price. In doing so, we consider our internal price list for each product and service, which reflects our desired profitability, based on an expected level of sales, and adjust for factors such as competition, customer relationship, discount provided in the contract, geographic location, and the products and services purchased in the arrangement. We use a range based on actual historical sales to determine whether the calculated standalone selling price for a product or service is a fair representation of the standalone selling price. For capitalized contract costs, we use judgment in determining the capitalized amount. Our products are generally sold with a right of return and we may provide other credits, discounts, or incentives, which are accounted for as variable consideration when estimating the amount of revenue to recognize. Returns, credits, and discounts are estimated at contract inception and updated at the end of each reporting period as additional information becomes available to the extent that it is probable a significant reversal of the cumulative amount of revenue recognized will not occur once the variability is subsequently resolved. Disaggregation of Revenue We disaggregate our revenue from contracts with customers by geographic region, end market, and timing of transfer of products and services to customers, as we believe these categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. Disaggregated revenue is presented for each of our three reportable segments. Three Months Ended April 30, 2019 Communications Solutions Group Electronic Industrial Solutions Group Ixia Solutions Group Total (in millions) Region Americas $ 294 $ 66 $ 65 $ 425 Europe 90 71 18 179 Asia Pacific 292 162 32 486 Total net revenue $ 676 $ 299 $ 115 $ 1,090 End Market Aerospace, Defense & Government $ 245 $ — $ — $ 245 Commercial Communications 431 — — 431 Electronic Industrial — 299 — 299 Ixia Solutions — — 115 115 Total net revenue $ 676 $ 299 $ 115 $ 1,090 Timing of Revenue Recognition Revenue recognized at a point in time $ 619 $ 274 $ 68 $ 961 Revenue recognized over time 57 25 47 129 Total net revenue $ 676 $ 299 $ 115 $ 1,090 Six Months Ended April 30, 2019 Communications Solutions Group Electronic Industrial Solutions Group Ixia Solutions Group Total (in millions) Region Americas $ 566 $ 123 $ 139 $ 828 Europe 186 134 38 358 Asia Pacific 547 299 64 910 Total net revenue $ 1,299 $ 556 $ 241 $ 2,096 End Market Aerospace, Defense & Government $ 468 $ — $ — $ 468 Commercial Communications 831 — — 831 Electronic Industrial — 556 — 556 Ixia Solutions — — 241 241 Total net revenue $ 1,299 $ 556 $ 241 $ 2,096 Timing of Revenue Recognition Revenue recognized at a point in time $ 1,189 $ 509 $ 150 $ 1,848 Revenue recognized over time 110 47 91 248 Total net revenue $ 1,299 $ 556 $ 241 $ 2,096 Contract Balances The timing of revenue recognition, billings and cash collections results in billed accounts receivable, unbilled receivables (contract assets) and deferred revenue (contract liabilities) on our condensed consolidated balance sheet. In addition, we defer and capitalize certain costs incurred to obtain a contract (contract costs). Contract assets - Contract assets represent unbilled amounts from arrangements for which we have performed by transferring goods or services to the customer in advance of receiving all or partial consideration for such goods and services from the customer. Contract assets arise primarily from service agreements and products delivered pending a formal customer acceptance, which generally occurs within 30 days. The contract assets balance was $16 million at April 30, 2019 and is included in "accounts receivables, net" in our condensed consolidated balance sheet. Contract costs - We recognize an asset for the incremental costs of obtaining a contract with a customer. We have determined that certain employee and third-party representative commissions programs meet the requirements to be capitalized. Employee commissions are based on the achievement of order volume compared to a sales target. Third-party representative commission costs relate directly to a customer contract as the commission is tied to orders contracted through and contracts arranged by our third-party representatives. Without obtaining the contracts, the commissions would not be paid and, as such, are determined to be an incremental cost to obtaining a contract. We only defer these costs when we have determined the commissions are, in fact, incremental and would not have been incurred absent the customer contract. Capitalized incremental costs are allocated to the individual performance obligations in proportion to the transaction price allocated to each performance obligation and amortized based on the pattern of performance for the underlying performance obligation. Contract costs related to initial contracts and renewals are amortized over the same period because the commissions paid on both the initial contract and renewals are commensurate with one another. The following table provides a roll-forward of our capitalized contract costs, current and non-current: Six Months Ended April 30, 2019 (in millions) Balance at October 31, 2018 $ — Costs capitalized on November 1, 2018 due to ASC 606 adoption 29 Costs capitalized during the period 33 Costs amortized during the period (36 ) Balance at April 30, 2019 $ 26 Contract liabilities - Our contract liabilities consist of deferred revenue that arises when we receive consideration in advance of providing the goods or services promised in the contract. Contract liabilities are primarily generated from customer deposits received in advance of shipments for products or rendering of services and are recognized as revenue when services are provided to the customer. We classify deferred revenue as current or non-current based on the timing of when we expect to recognize revenue. Contract liabilities are recognized as revenue when services are provided to the customer. Changes in contract liabilities, current and non-current, during the six months ended April 30, 2019 were as follows: Contract Liabilities (in millions) Balance at October 31, 2018 $ 461 Impact of adopting new revenue standard (64 ) Balance at November 1, 2018 397 Deferral of revenue billed in current period, net of recognition 276 Revenue recognized that was deferred as of the beginning of the period (191 ) Foreign currency translation impact 1 Balance at April 30, 2019 $ 483 Remaining Performance Obligations Revenue expected to be recognized in any future period related to remaining performance obligations, excluding revenue pertaining to contracts that have an original expected duration of one year or less, was approximately $280 million as of April 30, 2019 , and represents the company’s obligation to deliver products and services and obtain customer acceptance on delivered products. Since we typically invoice customers at contract inception, this amount is included in our current and long-term deferred revenue balances. As of April 30, 2019 , we expect to recognize approximately 26% of the revenue related to these unsatisfied performance obligations during the remainder of 2019, 37% during 2020, and 37% thereafter. Practical Expedients As discussed in Note 2, "New Accounting Pronouncements," and previously in this note, we have elected the following practical expedients in accordance with ASC 606: • We do not disclose the value of remaining performance obligations for contracts with an original expected length of one year or less. • We determine incremental costs of obtaining a contract for a portfolio of contracts with similar characteristics as we reasonably expect that the effects on the financial statements of applying this guidance to the portfolio would not differ materially from applying this guidance to the individual contracts within that portfolio. • We exclude from the transaction price certain taxes (e.g., sales, use, value added, and some excise taxes). • We do not adjust the promised amount of consideration for the effects of a significant financing component if we expect, at contract inception, that the period between when we transfer a promised good or service to a customer and when the customer pays for that good or service will be one year or less. • We treat shipping and handling costs associated with outbound freight after control of a product has transferred to a customer as a fulfillment cost, included in cost of products. • We have applied the guidance only to contracts that have not been completed as of the date of adoption (November 1, 2018). • We did not evaluate individual modifications for those periods prior to the adoption date, but rather evaluated the aggregate effect of all modifications as of the adoption date. |