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REVENUES FROM CONTRACTS WITH CUSTOMERS
 9 Months Ended
Sep. 30, 2023
Revenue from Contract with Customer [Abstract]  
REVENUES FROM CONTRACTS WITH CUSTOMERS REVENUES FROM CONTRACTS WITH CUSTOMERS
Summary of Accounting Policies on Revenue Recognition
Revenue is recognized upon the transfer of control of promised products or services to the customers in an amount that reflects the consideration the Company expects to receive in exchange for those products and services.
Performance Obligations
The Company's performance obligations consist mainly of transferring control of goods and services identified in the contracts, purchase orders, or invoices. The Company has no significant multi-element contracts with customers.
Significant Estimates
Usage-based royalties and licenses are estimated based on the provisions of contracts with customers and recognized in the same period that the royalty-based products are sold by the Company's strategic partners. The Company estimates and recognizes royalty revenue based upon communication with licensees, historical information, and expected sales trends. Differences between actual reported licensee sales and those that were estimated are adjusted in the period in which they become known, which is typically the following quarter. Historically, such adjustments have not been significant.
The Company estimates returns, price concessions, and discount allowances using the expected value method based on historical trends and other known factors. Rebate allowances are estimated using the most likely method based on each customer contract.
The Company's return policy, as set forth in its product catalogs and sales invoices, requires review and authorization in advance prior to the return of product. Upon the authorization, a credit will be issued for the goods returned within a set amount of days from the shipment, which is generally 90 days.
Due to the voluntary recall of all products manufactured at the Boston facility, including Primatrix®, Surgimend®, Revize™, and TissueMend™ ("The Boston recall") the Company recorded a total of $6.8 million and $19.7 million provision for product returns, as a reduction of net revenue during the three and nine months ended September 30, 2023, respectively. Additionally, the Company has credited $8.3 million and $9.0 million to customers during the three and nine months ended September 30, 2023, respectively. As of September 30, 2023, the return reserve was $10.7 million.
The Company disregards the effects of a financing component if the Company expects, at contract inception, that the period between the transfer and customer payment for the goods or services will be one year or less. The Company has no significant revenues recognized on payments expected to be received more than one year after the transfer of control of products or services to customers.
Contract Asset and Liability
Revenues recognized from the Company's private label business that are not invoiced to the customers as a result of recognizing revenue over time are recorded as a contract asset included in the prepaid expenses and other current assets account in the consolidated balance sheets.
Other operating revenues may include fees received under service agreements. Non-refundable fees received under multiple-period service agreements are recognized as revenue as the Company satisfies the performance obligations to the other party. A portion of the transaction price allocated to the performance obligations to be satisfied in the future periods is recognized as contract liability.
The following table summarizes the changes in the contract asset and liability balances for the nine months ended September 30, 2023:
Dollars in thousandsTotal
Contract Asset
Contract asset, January 1, 2023
$10,122 
Transferred to trade receivable from contract asset included in beginning of the year contract asset(7,743)
Written off from beginning of the year contract asset due to Boston recall(2,379)
Contract asset, net of transferred to trade receivables on contracts during the period10,392 
Contract asset, September 30, 2023
$10,392 
Contract Liability
Contract liability, January 1, 2023
$16,127 
Recognition of revenue included in beginning of year contract liability$(6,159)
Contract liability, net of revenue recognized on contracts during the period6,282 
Foreign currency translation(51)
Contract liability, September 30, 2023
$16,199 
At September 30, 2023, the short-term portion of the contract liability of $8.1 million and the long-term portion of $8.1 million are included in current liabilities and other liabilities, respectively, in the consolidated balance sheets.
As of September 30, 2023, the Company is expected to recognize revenue of approximately 50% of unsatisfied (or partially unsatisfied) performance obligations as revenue within 12 months, with the remaining balance to be recognized thereafter.
Shipping and Handling Fees
The Company elected to account for shipping and handling activities as a fulfillment cost rather than a separate performance obligation. Amounts billed to customers for shipping and handling are included as part of the transaction price and recognized as revenue when control of underlying products is transferred to the customer. The related shipping and freight charges incurred by the Company are included in the cost of goods sold.
Product Warranties
Certain of the Company's medical devices, including monitoring systems and neurosurgical systems, are designed to operate over long periods of time. These products are sold with warranties which may extend for up to two years from the date of purchase. The warranties are not considered a separate performance obligation. The Company estimates its product warranties using the expected value method based on historical trends and other known factors. The Company includes them in accrued expenses and other current liabilities in the consolidated balance sheet.
Taxes Collected from Customers
The Company elected to exclude from the measurement of the transaction price all taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction and collected by the entity from a customer.
Disaggregated Revenue
The following table presents revenues disaggregated by the major sources of revenues for the three and nine months ended September 30, 2023 and 2022 (dollar amounts in thousands):
Three Months Ended September 30, 2023Three Months Ended September 30, 2022Nine Months Ended September 30, 2023Nine Months Ended September 30, 2022
Neurosurgery$209,229 $193,848 $607,902 $588,818 
Instruments58,976 55,948 179,469 166,149 
Total Codman Specialty Surgical268,205 249,796 787,371 754,967 
Wound Reconstruction and Care88,071 104,625 280,129 304,149 
Private Label26,145 30,770 77,034 100,528 
Total Tissue Technologies114,216 135,395 357,163 404,677 
Total revenue$382,421 $385,191 $1,144,534 $1,159,644 
See Note 15, Segment and Geographical Information, for details of revenues based on the location of the customer.