Company: BKR
Filing Date: 2025-02-04
Form Type: 10-K
Source: 0001701605-25-000035
Chunk: 13

Company: Baker Hughes Co
Filing Date: 2025-02-04
Form: 10-K
Item: Item 8
Chunk 13
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 based on shipment of the equipment to the customer.Revenue from Sale of ServicesPerformance Obligations Satisfied Over TimeThe Company sells product services under long-term product maintenance or extended warranty agreements in the Industrial & Energy Technology ("IET") segment. These agreements require the Company to maintain the customers' assets over the service agreement contract terms, which generally range from 10 to 20 years. In general, these are contractual arrangements to provide services, repairs, and maintenance of a covered unit (gas turbines for mechanical drive or power generation, primarily on liquefied natural gas ("LNG") applications). These services are performed at various times during the life of the contract, thus the costs of performing services are incurred on an other than straight-line basis. The Company recognizes related sales based on the extent of its progress toward completion measured by actual costs incurred in relation to total expected costs. The Company provides for any loss that it expects to incur on any of these agreements when that loss becomes probable. The Company utilizes historical customer data, prior product performance data, statistical analysis, third-party data, and internal management estimates to calculate contract-specific margins. In certain contracts, the total transaction price is variable based on customer utilization, which is excluded from the contract margin until the period that the customer has utilized to appropriately reflect the revenue activity in the period earned. In addition, revenue for certain oilfield services is recognized on an over time basis as performed.The Company's billing terms for these contracts are generally based on asset utilization (i.e. usage per hour) or the occurrence of a major maintenance event within the contract. The differences between the timing of the Company's revenue recognized (based on costs incurred) and customer billings (based on contractual terms) results in changes to its contract asset or contract liability positions.

Baker Hughes Company 2024 Form 10-K | 61

Baker Hughes CompanyNotes to Consolidated Financial Statements

Performance Obligations Satisfied at a Point In TimeThe Company sells certain tangible products, largely spare equipment, through its services business. The Company recognizes revenue for this equipment at the point in time that the customer obtains control of the good, which is at the point in time the Company delivers the spare part to the customer. The Company's billing terms for these point in time service contracts vary, but are generally based on shipment of the equipment to the customer.Research and DevelopmentResearch and development costs are expensed as incurred and relate to the research and development of new products and services. Research and development costs were $643 million, $