Revenue |
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| Revenue |
Note 12. Revenue We recognize revenue from product sales and services in accordance with ASC 606, Revenue from Contracts with Customers (“ASC 606”). We derive our revenues primarily from: 1) product sales of developed compostable resins based on polylactic acid (“PLA”), polyhydroxyalkanoates (“PHA”), and other renewable materials; and 2) research and development (“R&D”) services related to developing customized formulations of biodegradable resins based on PHA. We generally produce and sell finished products, for which we recognize revenue upon shipment. Due to the highly specialized nature of our products, returns are infrequent, and therefore we do not estimate amounts for sales returns and allowances. There are no forms of variable consideration such as discounts, rebates, or volume discounts that we estimate to reduce our transaction price. We defer certain contract fulfillment costs. These costs are amortized to cost of revenue on a per-pound basis as we sell the related product. During the quarter ended March 31, 2021, we charged $0.2 million of fulfillment costs to cost of revenue. At March 31, 2021 and December 31, 2020 we had $1.4 million and $1.5 million, respectively, of contract assets recorded related to these fulfillment costs. R&D service revenues generally involve milestone-based contracts under which we work with a customer to develop a PHA-based specific solution designed to the customer’s specifications, which may involve a single or multiple performance obligations. At the inception of our R&D services contracts, customers generally pay consideration at the commencement of the agreement and at milestones as outlined in the contracts. We recognize contract liabilities for such consideration initially, and then reduce each contract liability by recognizing revenue for our R&D services over time by measuring progress with an input method based on personnel hours incurred to date as a percentage of total estimated personnel hours for each performance obligation identified within each contract. The following table shows the significant changes in the contract liability balance for the quarters ended March 31, 2021 and 2020:
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