Investor Presentaiton
1. China
2. USA
3. Germany
6
5
4. France C
5. Great Britain A
6. Italy w
7. Australia w
8. India w
9. Finland N
10. Canada N
CONSOLIDATED FINANCIAL STATEMENTS | NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | FINANCIAL PERFORMANCE
2.1 SALES
Due to KONE's business model, the nature of its operations
and its governance structure, KONE has one operating
segment.
Sales by customer
KONE's customer base consists of a large number of
customers in several market areas with no significant
customer concentration. In 2022 the single biggest customer,
residing in China, generated 0.9% of total revenue.
Sales by business
Jan 1-Dec 31,
MEUR
New equipment
Services
Maintenance
Modernization
Total
2022 %
5,399.3 50
5,507.4 50
3,890.4 36
1,616.9 15
10,906.7
Jan 1-Dec 31,
2021 %
5,637.7 54
4,876.4 46
3,450.6 33
1,425.9 14
10,514.1
Sales by geographical area
MEUR
EMEA)
Americas
Asia-Pacific
Total
Jan 1-Dec 31,
2022 %
4,237.7 39
2,239.8 21
4,429.2
41
Jan 1-Dec 31,
2021
10,906.7
%
4,036.9 38
1,902.9 18
4,574.3 44
10,514.1
EMEA = Europe, Middle East, Africa
Top 10 countries by sales, %
~31
17
Accounting principles
Revenue recognition
Revenue from contracts with KONE's customers is recognized
at an amount that reflects the consideration to which KONE
expects to be entitled to in exchange for delivering promised
goods or services to a customer.
KONE recognizes revenue when or as it satisfies a
performance obligation by transferring control on the promised
goods or services (performance obligation) to a customer.
A performance obligation is a distinct good or service
within a contract that a customer can benefit from on a stand-
alone basis. For KONE's new equipment and modernization
contracts, a performance obligation typically means delivery
and installation of a single unit, i.e. an elevator, an escalator or
other People Flow™ solution. For KONE's maintenance
contracts, maintenance of a single unit is considered as a
distinct performance obligation and for repairs business,
typically a service order is a performance obligation for KONE.
In new equipment and modernization contracts, KONE
transfers the control of a single unit to a customer over time
and, therefore, satisfies the performance obligation and
recognizes revenue over time.
The percentage of completion method requires accurate
estimates of future revenues and costs over the full term of
the contracts. These significant estimates form the basis for
the amount of revenue to be recognized and include the
latest updated estimate of total revenue and costs, adjusted
with risks based on historical experience on typical
estimation revisions for similar types of contracts. These
estimates may materially change due to the stage of
completion of the contract, changes in the contract scope,
cost estimates and customer's plans and other factors.
Revenues from the rendering of maintenance services and
repairs are recognized when the services have been
rendered or over the contract term when the work is being
carried out.
For maintenance contracts the performance obligation is
satisfied over time because the customer simultaneously
receives and consumes the benefits provided as KONE
performs the services.
Most of KONE's revenue is derived from fixed-price
contracts and, therefore, the amount of revenue to be earned
from each contract is determined by reference to those fixed
prices. KONE's customer contracts do not typically contain
any significant financing components. In new equipment and
modernization contracts payment terms are typically based
on either specific contractual milestones or progress of work
performed. In maintenance contracts customers generally
pay based on fixed payment schedules.
The transfer of control is initiated when ordered equipment
is delivered to a customer site as then the customer has the
ability to direct the use of, and obtain substantially all of the
remaining benefits from, a unit constructed by KONE. Upon
this milestone and onwards up to the project handover,
revenue is recognized under the percentage of completion
method using a cost-to-cost input method. Based on KONE's
assessment it best depicts the transfer of control on the
deliverable to the customer. Percentage of completion is
defined as the proportion of an individual performance
obligation's cost incurred to date from the total estimated costs prices. Where these are not directly observable, they are
for that particular performance obligation.
When customer contracts contain multiple performance
obligations, the transaction price is allocated to each
performance obligation based on the standalone selling
estimated based on estimated costs plus margin approach.
50
KONE ANNUAL REVIEW 2022View entire presentation