CSX Corp. (CSX)
Analysis of Revenues
Accounting Policy on Revenue Recognition
CSX generates revenue from freight billings under contracts with customers generally on a rate per carload, container or ton-basis based on origin to destination and commodities carried. CSX’s performance obligation arises when it receives a bill of lading (“BOL”) to transport a customer’s commodities at a negotiated price contained in a transportation services agreement or a publicly disclosed tariff rate. Once a BOL is received, a contract is formed whereby the parties are committed to perform, collectability of consideration is probable and the rights of the parties, shipping terms and conditions, and payment terms are identified. A customer may submit several BOLs for transportation services at various times throughout a service agreement term but each shipment represents a distinct service that is a separately identified performance obligation.
The average transit time to complete a shipment is between 3 to 8 days and payments for transportation services are normally billed once a BOL is received and are generally due within 15 days after the invoice date. CSX recognizes revenue over transit time of freight as it moves from origin to destination. Revenue for services started but not completed at the reporting date is allocated based on the relative transit time in each reporting period, with the portion allocated for services subsequent to the reporting date considered remaining performance obligations.
The certain key estimates included in the recognition and measurement of revenue and related accounts receivable are as follows:
- Revenue associated with shipments in transit is recognized ratably over transit time and is based on average cycle times to move commodities and products from their origin to their final destination or interchange;
- Adjustments to revenue for billing corrections and billing discounts;
- Adjustments to revenue for overcharge claims filed by customers, which are based on historical payments to customers for rate overcharges as a percentage of total billing; and
- Incentive-based refunds to customers, which are primarily volume-related, are recorded as a reduction to revenue on the basis of the projected liability (this estimate is based on historical activity, current volume levels and forecasted future volume).
Revenue related to interline transportation services that involve the services of another party, such as another railroad, is reported on a net basis. The portion of the gross amount billed to customers that is remitted by CSX to another party is not reflected as revenue.
Other revenue, which includes revenue from regional subsidiary railroads, demurrage, switching and other incidental charges, is recorded upon completion of the service and accounted for 5%, 4%, and 3% of CSX’s total revenue for 2018, 2017 and 2016, respectfully. Revenue from regional subsidiary railroads includes shipments by railroads that CSX does not directly operate. Demurrage represents charges assessed when freight cars are held by a customer beyond a specified period of time. Switching revenue is primarily generated when CSX switches cars for a customer or another railroad.
During 2018, 2017 and 2016, revenue recognized from performance obligations related to prior periods (for example, due to changes in transaction price), was not material.
Source: 10-K (filing date: 2019-02-06).
Revenues as Reported
CSX Corp., Income Statement, Revenues
US$ in millions
|Revenue||Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss).||CSX Corp.’s revenue increased from 2016 to 2017 and from 2017 to 2018.|