Revenue recognition – We recognize product revenue when control of tangible goods is transferred to our customers, typically upon shipment. We recognize service revenue primarily when services are performed. The amount of revenue recognized reflects the consideration we expect to receive, net of rebates, discounts, amortization of prepaid product discounts, and taxes collected on behalf of governmental authorities.
Product revenue is primarily generated by our Print segment. Shipping and handling activities performed after the customer obtains control of the product are accounted for as fulfillment activities, not as separate performance obligations. Amounts billed to customers for shipping and handling are included in revenue, while related costs are recorded in cost of products.
Service revenue is primarily generated by our Merchant Services, B2B Payments, and Data Solutions segments. Revenue within Merchant Services and B2B Payments is generally recognized over time as services are provided, based on transaction volumes, or ratably over the service period for treasury management maintenance and support services. Revenue within Data Solutions is generally recognized at the point in time when data-driven marketing services are complete. Certain contracts include variable consideration contingent on campaign performance. We estimate variable consideration using the most likely amount expected to be realized at the time the campaign mailing or other activities are completed, provided it is probable that a significant reversal will not occur. Estimates are updated quarterly, and final amounts are typically determined within three to four months. Contract assets, reported as revenue in excess of billings on the consolidated balance sheets, are recognized when revenue is recognized but not yet billed, and the right to payment is conditional. Unbilled receivables are recognized when the right to payment is unconditional.
For arrangements involving third parties, we assess whether we act as principal or agent. When we control the specified good or service before transfer to the customer, we recognize revenue on a gross basis. When another party controls the good or service, we recognize revenue on a net basis, limited to any fee or commission earned. For example, Merchant Services revenue is presented net of interchange fees retained by card-issuing financial institutions and payment network fees.
Payment terms vary by customer and offering, but the period between invoicing and payment is generally not significant. In some cases, customers pay in advance, primarily for treasury management solutions. Such payments are deferred and recognized as revenue as services are performed, typically within one year. Deferred revenue is included in accrued liabilities and other non-current liabilities on the consolidated balance sheets. We do not expect the amount of revenue from other unsatisfied performance obligations as of December 31, 2025 to be material to our annual consolidated revenue.
Sales commissions and other contract acquisition costs related to check supply, treasury management solutions, and merchant services contracts are capitalized as other non-current assets and amortized as SG&A expense on the straight-line basis over the expected period of benefit, generally ranging from two to five years. Contract acquisition costs with an amortization period of one year or less are expensed as incurred.