Accounting policies (continued)
License revenue for intellectual property
If the license to Zealand Pharma\u2019s functional intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, Zealand Pharma recognizes revenues from non-refundable upfront fees allocated to the license at the point in time the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, Zealand Pharma utilizes judgement to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, upfront fees.
Royalties
Some of Zealand Pharma\u2019s license and collaboration agreements include sales-based royalties including commercial milestone payments based on the level of sales. The license has been deemed to be the predominant item to which the royalties relate under Zealand Pharma\u2019s license and collaboration agree-ments. As a result, Zealand Pharma recognizes revenue when the related sales occur.
Reimbursement revenue for R&D services
Zealand Pharma\u2019s research and development collaboration agreements include the provisions for reim-bursement or cost sharing for research and development services and payment for full-time equivalent employees (FTEs) at contractual rates. R&D services are performed over time given that the customer simultaneously receives and consumes the benefits provided by Zealand Pharma and revenue for research and development services is therefore recognized over time. Amount is recognized net of any passthrough cost incurred on behalf of the customer. The assessment of if a cost is incurred on behalf of the customer is made by evaluating the nature of its promise to the customer including whether the specified good or service to be provided to the customer is controlled by the Group before that good or service is transferred to the customer.
Product sales
Revenue from sale of goods is recognized at a point in time when control of the goods is transferred to the customer and recorded net of adjustments for rebates and chargebacks, all of which are estimated at the time of sale.