5. Revenue Recognition

On January 1, 2018, the Company adopted the accounting standard ASU 2014-09, Revenue from Contracts with Customers and all related amendments (Topic 606), applying the modified retrospective transition method to all contracts that were not completed as of January 1, 2018. Results for reporting periods beginning after December 31, 2017 are presented under ASU 2014-09, while prior period amounts are not adjusted and continue to be reported under the accounting standards in effect for the prior period. The Company recorded a net increase to beginning retained earnings of $1.6 million as of January 1, 2018 due to the cumulative impact of adopting ASU 2014-09. The impact to revenues for the three months ended March 31, 2018 was immaterial as a result of adopting ASU 2014-09.

Revenue is recognized when control of the promised goods or services is transferred to our customers in an amount reflective of the consideration we expect to be receive in exchange for those goods or services. Taxes we collect concurrent with revenue producing activities are excluded from revenue. Incidental items incurred that are immaterial in the context of the contract are expensed. We have elected the practical expedient to not disclose contracts that have a term of 1 year or less.

Performance Obligations

At the inception of each contract, the Company assesses the products and services promised and identifies each distinct performance obligation. To identify the performance obligations, the Company considers all products and services promised regardless of whether they are explicitly stated or implied within the contract or by standard business practices.

Freight and distribution activities performed before the customer obtains control of the goods are not considered promised services under customer contracts and therefore are not distinct performance obligations. The Company has chosen to make an accounting policy election to account for shipping and handling activities that occur after the customer obtains control of the goods as a fulfillment activity, and therefore accrues the expense of freight and distribution in Cost of products sold when product is shipped.

Nature of our Products and Services

Products: For our products, we transfer control and recognize a sale when we either ship the product from our manufacturing facility or distribution center, procure the product from one of our vendors or upon delivery to a customer specified location depending upon the terms in the customer agreement. For consignment arrangements, revenue is not recognized until the products are sold to the end customer. The amount of consideration we receive and revenue we recognize is impacted by incentives ("Customer Program Costs"), including sales rebates; which are generally tied to achievement of certain sales volume levels, in-store promotional allowances, shared media and customer catalog allowances and other cooperative advertising arrangements; and freight allowance programs, offered to our customers; and allowance for returns and discounts. We generally recognize Customer Program Costs as a deduction to gross sales at the time that the associated revenue is recognized. We estimate discounts based upon an analysis of historical trends and record as reductions to "Net sales" and "Accounts receivable, net". We estimate and record a returns reserve, on a gross basis, as a reduction to "Net sales" and "Cost of products sold" with increases to "Other current liabilities" and "Inventories." We adjust our estimate of revenue when the most likely amount of consideration we expect to receive changes.

Service or Extended Maintenance Agreements ("EMAs"): Depending on the terms of a customer agreement, we may defer recognition of a portion of the consideration received because we have to satisfy a future obligation (e.g. EMAs). We use an observable price to determine the stand-alone selling price for separate performance obligations or a cost plus margin approach, for our separately priced service/maintenance agreements that extend mechanical and maintenance coverage beyond our base warranty coverage to our Print Finishing Solutions ("PFS") customers. These agreements range in duration from three months to 60 months, but are primarily one year or less. We receive payment at inception of the EMAs and recognize revenue over the term of the agreement on a straight line basis or bill on a monthly/quarterly basis. As of January 1, 2018, $5.2 million of unearned revenue associated with outstanding contracts was primarily reported in "Other current liabilities". $3.9 million of unearned revenue was recognized during the three months ended March 31, 2018. As of March 31, 2018, the amount of unearned revenue was $5.0 million. We expect to recognize approximately $4.3 million of the unearned amount in the next 12 months and $0.7 million in future periods beyond the next 12 months.

Disaggregation of Revenues

In accordance with ASU 2014-09, the following table disaggregates revenue from contracts with customers into regional geographies. The Company has determined that disaggregating revenue into these categories provides appropriate disclosure and achieves associated objectives to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.

The following table presents our revenue disaggregated by regional geography⁽¹⁾, based upon our reporting segments for the three months ended March 31, 2018 and 2017:



	Three Months Ended March 31,
(in millions of dollars)	2018		2017
United States	$	144.4	$	154.7
Canada	21.2		20.2
ACCO Brands North America	165.6		174.9

ACCO Brands EMEA⁽²⁾	154.5		96.5

Australia/N.Z.	39.8		43.2
Latin America	33.5		33.2
Asia-Pacific	12.4		12.0
ACCO Brands International	85.7		88.4
Net sales	$	405.8	$	359.8

(1) Net sales are attributed to geographic areas based on the location of the selling subsidiaries.

(2) ACCO Brands EMEA is comprised largely of Europe, but also includes export sales to the Middle East and Africa.

The following table presents our revenue disaggregated by the timing of revenue recognition for the three months ended March 31, 2018:



	Three Months Ended March 31,
(in millions of dollars)	2018
Product and Services transferred at a point in time	$	391.4
Product and Services transferred over time	14.4
Net sales	$	405.8