ILMN » Topics » Revenue Recognition

These excerpts taken from the ILMN 10-K filed Feb 26, 2009.
Revenue Recognition
 
Our revenue is generated primarily from the sale of products and services. Product revenue consists of sales of arrays, reagents, flow cells, instrumentation, oligonucleotides (oligos) and associated freight charges. Service and other revenue consists of revenue received for performing genotyping and sequencing services, extended warranty sales and amounts earned under research agreements with government grants, which are recognized in the period during which the related costs are incurred.
 
We recognize revenue in accordance with the guidelines established by SEC Staff Accounting Bulletin (SAB) No. 104, Revenue Recognition. Under SAB No. 104, revenue cannot be recorded until all of the following criteria have been met: persuasive evidence of an arrangement exists; delivery has occurred or services have been rendered; the seller’s price to the buyer is fixed or determinable; and collectibility is reasonably assured. All revenue is recorded net of any applicable allowances for returns or discounts.
 
Revenue for product sales is recognized generally upon shipment and transfer of title to the customer, provided no significant obligations remain and collection of the receivables is reasonably assured. Revenue from the sale of instrumentation is recognized when earned, which is generally upon shipment. Revenue for genotyping and sequencing services is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is delivered to the customer.


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In order to assess whether the price is fixed and determinable, we ensure there are no refund rights. If payment terms are based on future performance or a right of return exists, we defer revenue recognition until the price becomes fixed and determinable. We assess collectibility based on a number of factors, including past transaction history with the customer and the creditworthiness of the customer. If we determine that collection of a payment is not reasonably assured, revenue recognition is deferred until the time collection becomes reasonably assured, which is generally upon receipt of payment. Changes in judgments and estimates regarding application of SAB No. 104 might result in a change in the timing or amount of revenue recognized.
 
Sales of instrumentation generally include a standard one-year warranty. We also sell separately priced maintenance (extended warranty) contracts, which are generally for one or two years, upon the expiration of the initial warranty. Revenue for extended warranty sales is recognized ratably over the term of the extended warranty period. Reserves are provided for estimated product warranty expenses at the time the associated revenue is recognized. If we were to experience an increase in warranty claims or if costs of servicing our warrantied products were greater than our estimates, gross margins could be adversely affected.
 
While the majority of our sales agreements contain standard terms and conditions, we do enter into agreements that contain multiple elements or non-standard terms and conditions. Emerging Issues Task Force (EITF) No. 00-21, Revenue Arrangements with Multiple Deliverables, provides guidance on accounting for arrangements that involve the delivery or performance of multiple products, services, or rights to use assets within contractually binding arrangements. Significant contract interpretation is sometimes required to determine the appropriate accounting, including whether the deliverables specified in a multiple element arrangement should be treated as separate units of accounting for revenue recognition purposes, and if so, how the price should be allocated among the deliverable elements, when to recognize revenue for each element, and the period over which revenue should be recognized. We recognize revenue for delivered elements only when we determine that the fair values of undelivered elements are known and there are no uncertainties regarding customer acceptance.
 
Revenue
Recognition



 



Our revenue is generated primarily from the sale of products and
services. Product revenue consists of sales of arrays, reagents,
flow cells, instrumentation, oligonucleotides (oligos) and
associated freight charges. Service and other revenue consists
of revenue received for performing genotyping and sequencing
services, extended warranty sales and amounts earned under
research agreements with government grants, which are recognized
in the period during which the related costs are incurred.


 



We recognize revenue in accordance with the guidelines
established by SEC Staff Accounting Bulletin (SAB) No. 104,
Revenue Recognition. Under SAB No. 104, revenue
cannot be recorded until all of the following criteria have been
met: persuasive evidence of an arrangement exists; delivery has
occurred or services have been rendered; the seller’s price
to the buyer is fixed or determinable; and collectibility is
reasonably assured. All revenue is recorded net of any
applicable allowances for returns or discounts.


 



Revenue for product sales is recognized generally upon shipment
and transfer of title to the customer, provided no significant
obligations remain and collection of the receivables is
reasonably assured. Revenue from the sale of instrumentation is
recognized when earned, which is generally upon shipment.
Revenue for genotyping and sequencing services is recognized
when earned, which is generally at the time the genotyping or
sequencing analysis data is delivered to the customer.





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In order to assess whether the price is fixed and determinable,
we ensure there are no refund rights. If payment terms are based
on future performance or a right of return exists, we defer
revenue recognition until the price becomes fixed and
determinable. We assess collectibility based on a number of
factors, including past transaction history with the customer
and the creditworthiness of the customer. If we determine that
collection of a payment is not reasonably assured, revenue
recognition is deferred until the time collection becomes
reasonably assured, which is generally upon receipt of payment.
Changes in judgments and estimates regarding application of
SAB No. 104 might result in a change in the timing or
amount of revenue recognized.


 



Sales of instrumentation generally include a standard one-year
warranty. We also sell separately priced maintenance (extended
warranty) contracts, which are generally for one or two years,
upon the expiration of the initial warranty. Revenue for
extended warranty sales is recognized ratably over the term of
the extended warranty period. Reserves are provided for
estimated product warranty expenses at the time the associated
revenue is recognized. If we were to experience an increase in
warranty claims or if costs of servicing our warrantied products
were greater than our estimates, gross margins could be
adversely affected.


 



While the majority of our sales agreements contain standard
terms and conditions, we do enter into agreements that contain
multiple elements or non-standard terms and conditions. Emerging
Issues Task Force (EITF)
No. 00-21,
Revenue Arrangements with Multiple Deliverables, provides
guidance on accounting for arrangements that involve the
delivery or performance of multiple products, services, or
rights to use assets within contractually binding arrangements.
Significant contract interpretation is sometimes required to
determine the appropriate accounting, including whether the
deliverables specified in a multiple element arrangement should
be treated as separate units of accounting for revenue
recognition purposes, and if so, how the price should be
allocated among the deliverable elements, when to recognize
revenue for each element, and the period over which revenue
should be recognized. We recognize revenue for delivered
elements only when we determine that the fair values of
undelivered elements are known and there are no uncertainties
regarding customer acceptance.


 




Revenue Recognition
 
The Company’s revenue is generated primarily from the sale of products and services. Product revenue consists of sales of arrays, reagents, flow cells, instrumentation, oligonucleotides (oligos) and associated freight charges. Service and other revenue consists of revenue received for performing genotyping and sequencing services, extended warranty sales and amounts earned under research agreements with government grants, which are recognized in the period during which the related costs are incurred.
 
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller’s price to the buyer is fixed or determinable and collectibility is reasonably assured. In instances where final acceptance of the product or system is required, revenue is deferred until all the acceptance criteria have been met. All revenue is recorded net of any applicable allowances for returns or discounts.
 
Revenue for product sales is recognized generally upon shipment and transfer of title to the customer, provided no significant obligations remain and collection of the receivables is reasonably assured. Revenue from the sale of instrumentation is recognized when earned, which is generally upon shipment. Revenue for genotyping and sequencing services is recognized when earned, which is generally at the time the genotyping or sequencing analysis data is delivered to the customer.
 
In order to assess whether the price is fixed and determinable, the Company ensures there are no refund rights. If payment terms are based on future performance, the Company defers revenue recognition until the price becomes fixed and determinable. The Company assesses collectibility based on a number of factors, including past transaction history with the customer and the creditworthiness of the customer. If the Company determines that collection of a payment is not reasonably assured, revenue recognition is deferred until the time collection becomes reasonably assured, which is generally upon receipt of payment.
 
Sales of instrumentation generally include a standard one-year warranty. The Company also sells separately priced maintenance (extended warranty) contracts, which are generally for one or two years, upon the expiration of the initial warranty. Revenue for extended warranty sales is recognized ratably over the term of the extended warranty period. Reserves are provided for estimated product warranty expenses at the time the associated revenue is recognized. If the Company were to experience an increase in warranty claims or if costs of servicing its warrantied products were greater than its estimates, gross margins could be adversely affected.
 
While the majority of its sales agreements contain standard terms and conditions, the Company does enter into agreements that contain multiple elements or non-standard terms and conditions. Emerging Issues Task Force (EITF) No. 00-21, Revenue Arrangements with Multiple Deliverables, provides guidance on accounting for arrangements that involve the delivery or performance of multiple products, services, or rights to use assets within contractually binding arrangements. For arrangements with multiple elements, revenue recognition is based on the individual units of accounting determined to exist in the arrangement. A delivered item is considered a separate unit of accounting when the delivered item has value to the customer on a stand-alone basis and there is objective and reliable evidence of the fair value of the undelivered items. Items are considered to have stand-alone value when they are sold separately by any vendor or when the customer could resell the item on a stand-alone basis. The fair value of an item is generally the price charged for the product, if the item is regularly sold on a stand-alone basis. When objective and reliable evidence of fair value exists for all units of accounting in an arrangement, the arrangement consideration is generally allocated to each unit


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ILLUMINA, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
of accounting based upon its relative fair value. In those instances when objective and reliable evidence of fair value exists for the undelivered items but not for the delivered items, the residual method is used to allocate the arrangement consideration. Under the residual method, the amount of arrangement consideration allocated to the delivered items equals the total arrangement consideration less the aggregate fair value of the undelivered items. When the Company is unable to establish stand-alone value for delivered items or when fair value of undelivered items has not been established, revenue is deferred until all elements are delivered and services have been performed, or until fair value can objectively be determined for any remaining undelivered elements. The Company recognizes revenue for delivered elements only when it determines that the fair values of undelivered elements are known and there are no uncertainties regarding customer acceptance.
 
Revenue
Recognition



 



The Company’s revenue is generated primarily from the sale
of products and services. Product revenue consists of sales of
arrays, reagents, flow cells, instrumentation, oligonucleotides
(oligos) and associated freight charges. Service and other
revenue consists of revenue received for performing genotyping
and sequencing services, extended warranty sales and amounts
earned under research agreements with government grants, which
are recognized in the period during which the related costs are
incurred.


 



The Company recognizes revenue when persuasive evidence of an
arrangement exists, delivery has occurred or services have been
rendered, the seller’s price to the buyer is fixed or
determinable and collectibility is reasonably assured. In
instances where final acceptance of the product or system is
required, revenue is deferred until all the acceptance criteria
have been met. All revenue is recorded net of any applicable
allowances for returns or discounts.


 



Revenue for product sales is recognized generally upon shipment
and transfer of title to the customer, provided no significant
obligations remain and collection of the receivables is
reasonably assured. Revenue from the sale of instrumentation is
recognized when earned, which is generally upon shipment.
Revenue for genotyping and sequencing services is recognized
when earned, which is generally at the time the genotyping or
sequencing analysis data is delivered to the customer.


 



In order to assess whether the price is fixed and determinable,
the Company ensures there are no refund rights. If payment terms
are based on future performance, the Company defers revenue
recognition until the price becomes fixed and determinable. The
Company assesses collectibility based on a number of factors,
including past transaction history with the customer and the
creditworthiness of the customer. If the Company determines that
collection of a payment is not reasonably assured, revenue
recognition is deferred until the time collection becomes
reasonably assured, which is generally upon receipt of payment.


 



Sales of instrumentation generally include a standard one-year
warranty. The Company also sells separately priced maintenance
(extended warranty) contracts, which are generally for one or
two years, upon the expiration of the initial warranty. Revenue
for extended warranty sales is recognized ratably over the term
of the extended warranty period. Reserves are provided for
estimated product warranty expenses at the time the associated
revenue is recognized. If the Company were to experience an
increase in warranty claims or if costs of servicing its
warrantied products were greater than its estimates, gross
margins could be adversely affected.


 



While the majority of its sales agreements contain standard
terms and conditions, the Company does enter into agreements
that contain multiple elements or non-standard terms and
conditions. Emerging Issues Task Force (EITF)
No. 00-21,
Revenue Arrangements with Multiple Deliverables, provides
guidance on accounting for arrangements that involve the
delivery or performance of multiple products, services, or
rights to use assets within contractually binding arrangements.
For arrangements with multiple elements, revenue recognition is
based on the individual units of accounting determined to exist
in the arrangement. A delivered item is considered a separate
unit of accounting when the delivered item has value to the
customer on a stand-alone basis and there is objective and
reliable evidence of the fair value of the undelivered items.
Items are considered to have stand-alone value when they are
sold separately by any vendor or when the customer could resell
the item on a stand-alone basis. The fair value of an item is
generally the price charged for the product, if the item is
regularly sold on a stand-alone basis. When objective and
reliable evidence of fair value exists for all units of
accounting in an arrangement, the arrangement consideration is
generally allocated to each unit





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Table of Contents






ILLUMINA, INC.


 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)


 



of accounting based upon its relative fair value. In those
instances when objective and reliable evidence of fair value
exists for the undelivered items but not for the delivered
items, the residual method is used to allocate the arrangement
consideration. Under the residual method, the amount of
arrangement consideration allocated to the delivered items
equals the total arrangement consideration less the aggregate
fair value of the undelivered items. When the Company is unable
to establish stand-alone value for delivered items or when fair
value of undelivered items has not been established, revenue is
deferred until all elements are delivered and services have been
performed, or until fair value can objectively be determined for
any remaining undelivered elements. The Company recognizes
revenue for delivered elements only when it determines that the
fair values of undelivered elements are known and there are no
uncertainties regarding customer acceptance.


 




These excerpts taken from the ILMN 10-K filed Feb 26, 2008.
Revenue Recognition
 
The Company’s revenue is generated primarily from the sale of products and services. Product revenue consists of sales of arrays, reagents, flow cells, instrumentation, and oligonucleotides (oligos), which are short sequences of DNA. Service and other revenue consists of revenue received for performing genotyping and sequencing services, extended warranty sales and amounts earned under research agreements with government grants, which is recognized in the period during which the related costs are incurred.
 
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller’s price to the buyer is fixed or determinable and collectibility is reasonably assured. In instances where final acceptance of the product or system is required, revenue is deferred until all the acceptance criteria have been met. All revenue is recorded net of any applicable allowances for returns or discounts.
 
Revenue for product sales is recognized generally upon shipment and transfer of title to the customer, provided no significant obligations remain and collection of the receivables is reasonably assured. Revenue from the sale of instrumentation is recognized when earned, which is generally upon shipment. Revenue for genotyping and sequencing services is recognized when earned, which is generally at the time the genotyping and sequencing analysis data is delivered to the customer.
 
In order to assess whether the price is fixed and determinable, the Company ensures there are no refund rights. If payment terms are based on future performance, the Company defers revenue recognition until the price becomes fixed and determinable. The Company assesses collectibility based on a number of factors, including past transaction history with the customer and the creditworthiness of the customer. If the Company determines that collection of a payment is not reasonably assured, revenue recognition is deferred until the time collection becomes reasonably assured, which is generally upon receipt of payment.
 
Sales of instrumentation generally include a standard one-year warranty. The Company also sells separately priced maintenance (extended warranty) contracts, which are generally for one or two years, upon the expiration of the initial warranty. Revenue for extended warranty sales is recognized ratably over the term of the extended warranty period. Reserves are provided for estimated product warranty expenses at the time the associated revenue is recognized. If the Company were to experience an increase in warranty claims or if costs of servicing its warrantied products were greater than its estimates, gross margins could be adversely affected.
 
While the majority of its sales agreements contain standard terms and conditions, the Company does enter into agreements that contain multiple elements or non-standard terms and conditions. Emerging Issues Task Force (EITF) No. 00-21, Revenue Arrangements with Multiple Deliverables, provides guidance on accounting for arrangements that involve the delivery or performance of multiple products, services, or rights to use assets within contractually binding arrangements. For arrangements with multiple elements, revenue recognition is based on the individual units of accounting determined to exist in the arrangement. A delivered item is considered a separate unit of accounting when the delivered


F-10


Table of Contents

ILLUMINA, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
 
item has value to the customer on a stand-alone basis, there is objective and reliable evidence of the fair value of the undelivered items and, if the arrangement includes a general right of return relative to the delivered item, delivery or performance of the undelivered items is considered probable and substantially in the Company’s control. Items are considered to have stand-alone value when they are sold separately by any vendor or the customer could resell the item on a stand-alone basis. Fair value of an item is generally the price charged for the product when regularly sold on a stand-alone basis. When objective and reliable evidence of fair value exists for all units of accounting in an arrangement, arrangement consideration is generally allocated to each unit of accounting based upon their relative fair values. In those instances when objective and reliable evidence of fair value exists for the undelivered items but not for the delivered items, the residual method is used to allocate arrangement consideration. Under the residual method, the amount of arrangement consideration allocated to the delivered items equals the total arrangement consideration less the aggregate fair value of the undelivered items. When the Company is unable to establish stand-alone value for delivered items or when fair value of undelivered items has not been established, revenue is deferred until all elements are delivered and services have been performed, or until fair value can objectively be determined for any remaining undelivered elements. The Company recognizes revenue for delivered elements only when it determines that the fair values of undelivered elements are known and there are no uncertainties regarding customer acceptance.
 
Revenue
Recognition



 



The Company’s revenue is generated primarily from the sale
of products and services. Product revenue consists of sales of
arrays, reagents, flow cells, instrumentation, and
oligonucleotides (oligos), which are short sequences of DNA.
Service and other revenue consists of revenue received for
performing genotyping and sequencing services, extended warranty
sales and amounts earned under research agreements with
government grants, which is recognized in the period during
which the related costs are incurred.


 



The Company recognizes revenue when persuasive evidence of an
arrangement exists, delivery has occurred or services have been
rendered, the seller’s price to the buyer is fixed or
determinable and collectibility is reasonably assured. In
instances where final acceptance of the product or system is
required, revenue is deferred until all the acceptance criteria
have been met. All revenue is recorded net of any applicable
allowances for returns or discounts.


 



Revenue for product sales is recognized generally upon shipment
and transfer of title to the customer, provided no significant
obligations remain and collection of the receivables is
reasonably assured. Revenue from the sale of instrumentation is
recognized when earned, which is generally upon shipment.
Revenue for genotyping and sequencing services is recognized
when earned, which is generally at the time the genotyping and
sequencing analysis data is delivered to the customer.


 



In order to assess whether the price is fixed and determinable,
the Company ensures there are no refund rights. If payment terms
are based on future performance, the Company defers revenue
recognition until the price becomes fixed and determinable. The
Company assesses collectibility based on a number of factors,
including past transaction history with the customer and the
creditworthiness of the customer. If the Company determines that
collection of a payment is not reasonably assured, revenue
recognition is deferred until the time collection becomes
reasonably assured, which is generally upon receipt of payment.


 



Sales of instrumentation generally include a standard one-year
warranty. The Company also sells separately priced maintenance
(extended warranty) contracts, which are generally for one or
two years, upon the expiration of the initial warranty. Revenue
for extended warranty sales is recognized ratably over the term
of the extended warranty period. Reserves are provided for
estimated product warranty expenses at the time the associated
revenue is recognized. If the Company were to experience an
increase in warranty claims or if costs of servicing its
warrantied products were greater than its estimates, gross
margins could be adversely affected.


 



While the majority of its sales agreements contain standard
terms and conditions, the Company does enter into agreements
that contain multiple elements or non-standard terms and
conditions. Emerging Issues Task Force (EITF)
No. 00-21,
Revenue Arrangements with Multiple Deliverables, provides
guidance on accounting for arrangements that involve the
delivery or performance of multiple products, services, or
rights to use assets within contractually binding arrangements.
For arrangements with multiple elements, revenue recognition is
based on the individual units of accounting determined to exist
in the arrangement. A delivered item is considered a separate
unit of accounting when the delivered





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Table of Contents






ILLUMINA, INC.


 



NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)


 



item has value to the customer on a stand-alone basis, there is
objective and reliable evidence of the fair value of the
undelivered items and, if the arrangement includes a general
right of return relative to the delivered item, delivery or
performance of the undelivered items is considered probable and
substantially in the Company’s control. Items are
considered to have stand-alone value when they are sold
separately by any vendor or the customer could resell the item
on a stand-alone basis. Fair value of an item is generally the
price charged for the product when regularly sold on a
stand-alone basis. When objective and reliable evidence of fair
value exists for all units of accounting in an arrangement,
arrangement consideration is generally allocated to each unit of
accounting based upon their relative fair values. In those
instances when objective and reliable evidence of fair value
exists for the undelivered items but not for the delivered
items, the residual method is used to allocate arrangement
consideration. Under the residual method, the amount of
arrangement consideration allocated to the delivered items
equals the total arrangement consideration less the aggregate
fair value of the undelivered items. When the Company is unable
to establish stand-alone value for delivered items or when fair
value of undelivered items has not been established, revenue is
deferred until all elements are delivered and services have been
performed, or until fair value can objectively be determined for
any remaining undelivered elements. The Company recognizes
revenue for delivered elements only when it determines that the
fair values of undelivered elements are known and there are no
uncertainties regarding customer acceptance.


 




This excerpt taken from the ILMN 10-K filed Feb 28, 2007.
Revenue Recognition
 
The Company’s revenue is generated primarily from the sale of products and services. Product revenue consists of sales of arrays, reagents, instrumentation, and oligos. Service and other revenue consists of revenue received for performing genotyping services, extended warranty sales and revenue earned from milestone payments.
 
The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the seller’s price to the buyer is fixed or determinable and collectibility is reasonably assured. In instances where final acceptance of the product or system is required, revenue is deferred until all the acceptance criteria have been met. All revenue is recorded net of any applicable allowances for returns or discounts.
 
Revenue for product sales is recognized generally upon shipment and transfer of title to the customer, provided no significant obligations remain and collection of the receivables is reasonably assured. Revenue from the sale of instrumentation is recognized when earned, which is generally upon shipment. However, in the case of BeadLabs, revenue is recognized upon the completion of installation, training and the receipt of customer acceptance. Revenue for genotyping services is recognized when earned, which is generally at the time the genotyping analysis data is delivered to the customer or as specific milestones are achieved.
 
In order to assess whether the price is fixed and determinable, the Company ensures there are no refund rights. If payment terms are based on future performance, the Company defers revenue recognition until the price becomes fixed and determinable. The Company assesses collectibility based on a number of factors, including past transaction history with the customer and the creditworthiness of the customer. If the Company determines that collection of a payment is not reasonably assured, revenue recognition is deferred until the time collection becomes reasonably assured, which is generally upon receipt of payment.
 
Sales of instrumentation generally include a standard one-year warranty. The Company also sells separately priced maintenance (extended warranty) contracts, which are generally for one or two years, upon the expiration of the initial warranty. Revenue for extended warranty sales is recognized ratably over the term of the extended warranty period. Reserves are provided for estimated product warranty expenses at the time the associated revenue is recognized. If the Company were to experience an increase in warranty claims or if costs of servicing its warrantied products were greater than its estimates, gross margins could be adversely affected.


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Table of Contents

ILLUMINA, INC.
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 
While the majority of its sales agreements contain standard terms and conditions, the Company does enter into agreements that contain multiple elements or non-standard terms and conditions. Emerging Issues Task Force (EITF) No. 00-21, Revenue Arrangements with Multiple Deliverables, provides guidance on accounting for arrangements that involve the delivery or performance of multiple products, services, or rights to use assets within contractually binding arrangements. Significant contract interpretation is sometimes required to determine the appropriate accounting, including whether the deliverables specified in a multiple element arrangement should be treated as separate units of accounting for revenue recognition purposes, and if so, how the price should be allocated among the deliverable elements, when to recognize revenue for each element, and the period over which revenue should be recognized. The Company recognizes revenue for delivered elements only when it determines that the fair values of undelivered elements are known and there are no uncertainties regarding customer acceptance.
 
Some of the Company’s agreements contain multiple elements that include milestone payments. Revenue from a milestone achievement is recognized when earned, as evidenced by acknowledgement from the Company’s collaborator, provided that (i) the milestone event is substantive and its achievability was not reasonably assured at the inception of the agreement, (ii) the milestone represents the culmination of an earnings process, (iii) the milestone payment is non-refundable and (iv) the performance obligations for both the Company and its collaborators after the milestone achievement will continue at a level comparable to the level before the milestone achievement. If all of these criteria are not met, the milestone achievement is recognized over the remaining minimum period of the Company’s performance obligations under the agreement. The Company defers non-refundable upfront fees received under its collaborations and recognizes them over the period the related services are provided or over the estimated collaboration term using various factors specific to the collaboration. Advance payments received in excess of amounts earned are classified as deferred revenue until earned.
 
A third source of revenue, research revenue, consists of amounts earned under research agreements with government grants, which is recognized in the period during which the related costs are incurred. All revenue is recorded net of any applicable allowances for returns or discounts.
 
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