Contract liability, revenue recognized

  
NOTE 10

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| --- | --- | --- |
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| REVENUES |

Contract BalancesThe timing of revenue recognition, billings and cash collections results in the recognition of trade accounts receivable, unbilled receivables, contract assets, and customer advances and deposits (contract liabilities) on our consolidated balance sheets. Net trade accounts receivable was $2.4 billion and $1.7 billion as of December 31, 2021 and 2020, respectively. For contract manufacturing arrangements, revenue is primarily recognized throughout the production cycle, which typically lasts up to 90 days, resulting in the recognition of contract assets until the related services are completed and the customers are billed. Additionally, for arrangements containing a performance obligation to deliver software that can be used with medical devices, we recognize revenue upon delivery of the software, which results in the recognition of contract assets when customers are billed over time, generally over one to five years. For bundled contracts involving equipment delivered up-front and consumable medical products to be delivered over time, total contract revenue is allocated between the equipment and consumable medical products. In certain of those arrangements, a contract asset is created for the difference between the amount of equipment revenue recognized upon delivery and the amount of consideration initially receivable from the customer. In those arrangements, the contract asset becomes a trade account receivable as consumable medical products are provided and billed, generally over one to seven years. The following table summarizes our contract assets:

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| --- | --- | --- | --- | --- | --- | --- | --- | --- |
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| as of December 31 (in millions) | 2021 | 2020 |
| Contract manufacturing services | $ | 50  |  | $ | 47  |  |
| Software sales | 45  |  | 40  |  |
| Bundled equipment and consumable medical products contracts | 100  |  | 47  |  |
| Contract assets | $ | 195  |  | $ | 134  |  |

The following table summarizes the classification of contract assets and contract liabilities as reported in the consolidated balance sheet:

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| --- | --- | --- | --- | --- | --- | --- | --- | --- |
|  |  |  |  |  |  |  |  |  |
| as of December 31 (in millions) | 2021 | 2020 |
| Prepaid expenses and other current assets | $ | 84  |  | $ | 70  |  |
| Other non-current assets | 111  |  | 64  |  |
| Contract assets | $ | 195  |  | $ | 134  |  |
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| Accrued expenses and other current liabilities | $ | 162  |  | $ | 32  |  |
| Other non-current liabilities | 84  |  | 34  |  |
| Contract liabilities | $ | 246  |  | $ | 66  |  |

In 2021, $20 million of revenue was recognized that was included in contract liabilities as of December 31, 2020. In 2020 and 2019, the amount of revenue recognized that was included in contract liabilities as of December 31, 2019 and 2018 was not significant.Disaggregation of Net SalesBeginning in the first quarter of 2021, our product category net sales disclosures (previously referred to as global business units (GBUs)) separately present net sales from our BioPharma Solutions business, which was previously included within Other. Concurrent with that disaggregation of net sales from our BioPharma Solutions business, we have also allocated certain previously unallocated sales deductions from Other to various categories, primarily based on their respective net sales. Net sales for 2020 and 2019 have been recast to conform to this presentation. 82
