ELECTRO SENSORS INC Revenue Disclosure

Revenue recognition

At contract inception, the Company assesses the goods and services to be provided to a customer and identifies a performance obligation for each distinct good or service.   The transaction price for each performance obligation is determined at contract inception.  Contracts, generally in the form of a purchase order, specify the product or service that is to be provided to the customer. The typical contract life is less than one month and contains a single performance obligation, to provide conforming goods or services to the customer.  Certain contracts have a second performance obligation, which typically is the initialization of the HazardPRO product.  For contracts with multiple performance obligations, the transaction price is allocated to each performance obligation using the relative stand-alone selling price.  Stand-alone selling prices are based on observable stand-alone prices charged to customers.  Product revenue is recognized at the point in time when control is transferred to the customer, which typically occurs upon shipment.  Service revenue is recognized when provided to the customer, and typically takes less than a week to provide.