TYRATECH • ANNUAL REPORT 2014 • PAGE 30
N o t e s t o C o n s o l i d at e d F i n a n c i a l
S t at e m e n t s ( c o n t ' d )
Collaborative Revenue
Non-refundable license fees are recognised as collaborative
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 analysed 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 recognises 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 stand alone 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 recognised 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 recognised. Revenue
will be recognised using a proportional performance method.
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 proportional
performance method, as of each reporting period.
If the Company cannot reasonably determine 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.
Significant management judgment is required in determining the
level of effort required under an arrangement and the period over
which the Company is expected to complete its performance
obligations under an arrangement. In addition, if the Company
is involved in a steering committee as part of a multiple element
arrangement that is accounted for as a single unit of accounting,
the Company assesses whether its involvement constitutes
a performance obligation or a right to participate. Steering
committee services that are not inconsequential or perfunctory
and that are determined to be performance obligations
are combined with other research services or performance
obligations required under an arrangement, if any, in determining
the level of effort required in an arrangement and the period
over which the Company expects to complete its aggregate
performance obligations.
Deferred Revenue
Amounts received prior to satisfying the above revenue
recognition criteria are recorded as deferred revenue in the
accompanying consolidated balance sheets. Amounts not
expected to be recognised during the year ending 31 December
2015 are classified in long term liabilities. As of 31 December 2014,
the Company has short-term deferred revenue of $0.1 million,
(2013: $0.5 million) and long-term deferred revenue of $0.1 million
(2013: $1.4 million) related to its collaborative revenue.
Customer Concentrations
The Company had $2.8 million of gross product revenue during
the year (2013: $0 million). Two customers represented 84% and
14% of gross product revenue, respectively. These customers
represented 97% and 1% of accounts receivable at 31 December
2014.
(l) Equity Based Compensation
Subsequent to 1 January 2006 stock based compensation cost is
measured at the grant date based on the fair value of the award
and is recognised as an expense on a straight-line basis over the
vesting period. Compensation expense is recognised only for
