Table:
|  | December 31, |  |
| --- | --- | --- |
|  | 2019 | 2018 |
| Contract assets | $3,208,206 | $2,759,315 |
| Contract liabilities | (3,887,685) | (2,486,111) |
| Net contract assets | $(679,479) | $273,204 |
Paragraphs:
Contract Balances
Our contract assets consist of unbilled amounts for technology development contracts as well as custom product contracts. Also included in contract assets are royalty revenue and carrying amounts of right of returned inventory. Long-term contract assets include the fee withholding on cost reimbursable contracts that will not be billed within a year. Contract liabilities include excess billings, subcontractor accruals, warranty expense, extended warranty revenue, right of return refund, and customer deposits. The net contract (liabilities)/assets changed by $1.0 million, due primarily to increased contract liabilities in addition to a slight increase in contract assets. The increase in contract liabilities is a result of the increased number of government research programs in addition to an increase in the number of our fixed-price contracts that have reached milestones as designated in their respective contracts, but revenue has not yet been recognized. The increase in contract assets is primarily driven by the unbilled fee required by our cost-reimbursable government contracts, which cannot be fully billed until after the specific contract is complete.
The following table shows the components of our contract balances as of December 31, 2019 and 2018:
Question:
What do contract assets consist of?
Answer: unbilled amounts for technology development contracts as well as custom product contracts.