Note 13. Revenue Recognition

On January 1, 2018, we adopted the Accounting Standards Codification ("ASC") 606, "Revenue from Contracts with Customers" and all the related amendments (the "new revenue standard") for all of our revenue contracts, using the modified retrospective method. We recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of Accumulated deficit. The adoption of ASC 606 did not have a material impact on our consolidated financial statements at January 1, 2018 or for the year ended December 31, 2018.

The following table disaggregates our Sales by major source (in thousands):



	Year Ended December 31, 2019
	Beer Related⁽¹⁾		Brewpubs		Total
Product sold through distributor agreements⁽²⁾	$	173,575	$	—	$	173,575
Alternating proprietorship and contract brewing fees⁽³⁾	1,931		—		1,931
International distribution fees	3,248		—		3,248
Brewpubs⁽⁴⁾	—		23,696		23,696
Other⁽⁵⁾	2,184				2,184
	$	180,938	$	23,696	$	204,634



	Year Ended December 31, 2018
	Beer Related⁽¹⁾		Brewpubs		Total
Product sold through distributor agreements⁽²⁾	$	176,265	$	—	$	176,265
Alternating proprietorship and contract brewing fees⁽³⁾	10,612		—		10,612
International distribution fees	3,400		—		3,400
Brewpubs⁽⁴⁾	—		24,023		24,023
Other⁽⁵⁾	2,969		—		2,969
	$	193,246	$	24,023	$	217,269


(1)	Beer Related sales include sales to Anheuser-Busch, LLC ("A-B") subsidiaries including Ambev, Anheuser-Busch Worldwide Investments, LLC (“ABWI”) and Anheuser-Busch Companies, LLC (“ABC”). Sales to wholesalers through the A-B distributor agreement in 2019 and 2018 represented 80.0% and 77.2%, of our Sales, respectively.


(2)	Product sold through distributor agreements included domestic and international sales of owned and non-owned brands pursuant to terms in our distributor agreements.


(3)	Alternating proprietorship fees ceased in the fourth quarter of 2018.


(4)	Brewpub sales include sales of promotional merchandise and sales of beer directly to customers.


(5)	Other sales include sales of beer related merchandise, hops and spent grain.

Revenue is recognized when obligations under the terms of a contract with our customers are satisfied; generally this occurs when the product arrives at distribution centers or when the wholesaler takes possession. Revenue is measured as the amount of consideration we expect to receive in exchange for transferring goods. We consider customer purchase orders, which in some cases are governed by a master agreement, to be the contract with a customer. For each contract related to the production of beer, we consider the promise to transfer products, each of which is distinct, to be the identified performance obligation. The transaction price for each performance obligation is specifically identified within the contract with our customer and represents the standalone selling price. Discounts are recognized as a reduction to Sales at the time we recognize the revenue. We generally do not grant return privileges, except in limited and specific circumstances.

As of December 31, 2019, we had receivables related to contracts with customers of $17.5 million, net of the allowance for doubtful accounts of $25,000. As of December 31, 2018, we had receivables related to contracts with customers of $30.0 million, net of the allowance for doubtful accounts of $25,000.

As of December 31, 2019 and December 31, 2018, contract liabilities, which consisted of obligations associated with our gift card programs, were $0.2 million and $0.4 million, respectively, and were included in Other accrued expenses on the Consolidated Balance Sheets.

A performance obligation is a promise in a contract to transfer a distinct good or service to the customer, and is the unit of accounting pursuant to ASC 606. In contracts with multiple performance obligations, we identify each performance obligation and evaluate whether the performance obligation is distinct within the context of the contract at contract inception. Performance obligations that are not distinct at contract inception are combined.

We entered into an International Distribution Agreement ("IDA") with A-B for the rights to serve as our exclusive distributor in international territories defined by the IDA for an approximate 10-year period. The IDA represents a single international license to all territories defined in the IDA. Revenue is recognized on a straight-line basis over the approximate 10-year term of the agreement. In accordance with ASC 606, we evaluate the factors used in our estimates of variable consideration to be received under contracts on a quarterly basis. We estimate variable consideration as the most likely amount to which we expect to be entitled. During the third quarter of 2019, we received the final $20.0 million payment under the IDA which resulted in total consideration received of $34.0 million. We consider the 10-year contractual term of the IDA as the most likely term of the agreement and will recognize the revenue from these payments over that period. We believe that the possibility of a significant reversal of cumulative revenue recognized from this agreement under this conclusion is remote. Under the IDA, A-B has the right to issue purchase orders to distribute product in international territories defined by the IDA. Each purchase order placed under the IDA is a distinct performance obligation. The transaction price for each performance obligation is a sales-based royalty, which is recognized as revenue in accordance with the sales-based royalty exception. Accordingly, royalty revenue is recognized as the variability associated with the royalty is resolved, which is upon A-B's subsequent sale of our product.

In cases where all conditions to a sale are not met at the time of sale, revenue recognition is deferred until all conditions are met. As of December 31, 2018, Deferred revenue on our Consolidated Balance Sheets included $6.0 million related to the IDA. On August 23, 2019, ABC announced it would not make a Qualifying Offer and we received a one-time incentive payment in the amount of $20.0 million on that date as required by the terms of the IDA. During 2019, we recognized $3.2 million as Sales, resulting in Deferred revenue of $22.7 million at December 31, 2019. We expect to recognize an additional $3.2 million of Deferred revenue as Sales in 2020, $3.2 million in 2021, $3.2 million in 2022 and $13.0 million thereafter.