Contract with customer, liability, revenue recognized

[Table of Contents](#i329aa562213e420593df15cade55885b_7)             performs work under a contract, or if the product being produced for the customer has no alternative use and the Company has a contractual right to payment.   
Sales disaggregated by product and service are as follows:  


|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  |  |  |
|  |  |  Three Months Ended September 30, |  | Nine Months Ended September 30, |
| (In millions) |  | 2022 |  | 2021 |  | 2022 |  | 2021 |
| Sales Type |  |  |  |  |  |  |  |  |
| Product |  | $ | 3,330  |  |  | $ | 2,702  |  |  | $ | 8,974  |  |  | $ | 7,606  |  |
| Service |  | 404  |  |  | 352  |  |  | 1,118  |  |  | 1,054  |  |
| HVAC sales |  | 3,734  |  |  | 3,054  |  |  | 10,092  |  |  | 8,660  |  |
|  |  |  |  |  |  |  |  |  |
| Product |  | 811  |  |  | 894  |  |  | 2,603  |  |  | 2,701  |  |
| Service |  | 112  |  |  | 117  |  |  | 337  |  |  | 336  |  |
| Refrigeration sales |  | 923  |  |  | 1,011  |  |  | 2,940  |  |  | 3,037  |  |
|  |  |  |  |  |  |  |  |  |
| Product |  | 859  |  |  | 1,012  |  |  | 2,468  |  |  | 2,943  |  |
| Service |  | 46  |  |  | 365  |  |  | 142  |  |  | 1,141  |  |
| Fire & Security sales |  | 905  |  |  | 1,377  |  |  | 2,610  |  |  | 4,084  |  |
|  |  |  |  |  |  |  |  |  |
| Total segment sales |  | 5,562  |  |  | 5,442  |  |  | 15,642  |  |  | 15,781  |  |
| Eliminations and other |  | (111) |  |  | (101) |  |  | (326) |  |  | (301) |  |
| Net sales |  | $ | 5,451  |  |  | $ | 5,341  |  |  | $ | 15,316  |  |  | $ | 15,480  |  |

  
Contract BalancesTotal contract assets and contract liabilities consisted of the following:  


|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| (In millions) |  | September 30, 2022 |  | December 31, 2021 |
| Contract assets, current |  | $ | 666  |  |  | $ | 503  |  |
| Contract assets, non-current (included within Other assets) |  | 7  |  |  | 70  |  |
| Total contract assets |  | 673  |  |  | 573  |  |
|  |  |  |  |  |
| Contract liabilities, current |  | (440) |  |  | (415) |  |
| Contract liabilities, non-current (included within Other long-term liabilities) |  | (167) |  |  | (165) |  |
| Total contract liabilities  |  | (607) |  |  | (580) |  |
| Net contract assets |  | $ | 66  |  |  | $ | (7) |  |

  
The timing of revenue recognition, billings and cash collections results in contract assets and contract liabilities. Contract assets relate to the conditional right to consideration for any completed performance under a contract when costs are incurred in excess of billings under the percentage-of-completion methodology. Contract liabilities relate to payments received in advance of performance under a contract or when the Company has a right to consideration that is conditioned upon transfer of a good or service to a customer. Contract liabilities are recognized as revenue as (or when) the Company performs under the contract.   
The Company recognized revenue of $289 million during the nine months ended September 30, 2022 that related to contract liabilities as of January 1, 2022. The Company expects a majority of its current contract liabilities at the end of the period to be recognized as revenue in the next 12 months.   
18
