Management periodically reviews long-lived assets to be held
and used in operations for impairment whenever events or
changes in circumstances indicate the carrying value of an
asset may not be recoverable. An impairment loss is recognized
when the estimated future cash flows from the asset
are less than the carrying value of the assets. Assets to be
disposed of are reported at the lower of their carrying
amounts or fair value less costs to sell. Management is of the
opinion that the carrying amount of its long-lived assets does
not exceed the estimated recoverable amount.
(g) Revenue Recognition
The Company's business strategy includes entering into collaborative
license and development agreements with agricultural,
insecticide and human and animal food companies for
the development and commercialization of the Company's
product candidates. The terms of the agreements typically
include non-refundable license fees, funding of research and
development, payments based upon achievement of development
milestones and royalties on product sales.
Product Sales
Revenue is recognized for product sales when persuasive
evidence of an arrangement exists, delivery has occurred or
services have been rendered, the risks and rewards of ownership
have been transferred to the customer, the amount of
revenue can be measured reliably and collection of the related
receivable is reasonably assured. If product sales are subject
to customer acceptance, revenues are not recognized until
customer acceptance occurs. Sales/use tax, when required, is
included in sales invoices but not in the reported revenue,
recorded as sales tax payable, and remitted monthly to the
appropriate state revenue departments.
License Fees and Multiple Element Arrangements
Non-refundable license fees are recognized as revenue when
the Company has a contractual right to receive such payment,
the contract price is fixed or determinable, the collection of
the resulting receivable is reasonably assured and the
Company has no further performance obligations under the
license agreement. Multiple element arrangements, such
as license and development arrangements, are analyzed to
determine whether the deliverables, which often include a
license and performance obligations such as research and
steering committee services, can be separated or whether
they must be accounted for as a single unit of accounting. The
Company recognizes up-front license payments as revenue
upon delivery of the license only if the license has stand-alone
value and the fair value of the undelivered performance
obligations, typically including research and/or steering committee
services, can be determined. If the fair value of the
undelivered performance obligations can be determined, such
obligations would then be accounted for separately as performed.
If the license is considered to either (i) not have standalone
value or (ii) have stand-alone value but the fair value of
any of the undelivered performance obligations cannot be
determined, the arrangement would then be accounted for
as a single unit of accounting and the license payments and
payments for performance obligations are recognized as revenue
over the estimated period of when the performance
obligations are performed.
Whenever the Company determines that an arrangement
should be accounted for as a single unit of accounting, it must
determine the period over which the performance obligations
will be performed and revenue will be recognized. Revenue
will be recognized using a relative method. The Company
recognizes revenue using the relative performance method
provided that the Company can reasonably estimate the level
of effort required to complete its performance obligations
under an arrangement and such performance obligations are
provided on a best-efforts basis. Revenue recognized under
the relative performance method would be determined by
multiplying the total payments under the contract by the ratio
of level of effort incurred to date to estimated total level of
effort required to complete the Company's performance obligations
under the arrangement. Revenue is limited to the
lesser of the cumulative amount of non-refundable payments
received or the cumulative amount of revenue earned, as
determined using the relative performance method, as of
each reporting period.
If the Company cannot reasonably estimate the estimated
level of effort required to complete its performance obligation,
then revenue is deferred until the Company can reasonably
estimate its level of effort or the performance obligation
ceases or becomes inconsequential.
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