| m. | Revenue from contracts with customers |
General
In November 2017, the Company signed an exclusive license agreement with NanoCarrier Co. Ltd (hereinafter – “The License Agreement”), for the development, commercialization, and supply of VB-111 in Japan (see note 8 for further details).
As of January 1, 2017, the Company early adopted IFRS 15, with full retrospective application. Since the Company has not generated revenues until 2017, the adoption of IFRS 15 did not have an effect on accumulated deficits as of January 1, 2015 nor on 2015’s and 2016’s comparatives.
IFRS 15 introduces a five-step model for recognizing revenue from contracts with customers, as follows:
| 1. | identify the contract with a customer; | |
| 2. | identify the performance obligations in the contract; | |
| 3. | determine the transaction price; | |
| 4. | allocate the transaction price to the performance obligations in the contract; | |
| 5. | recognize revenue when (or as) the entity satisfies a performance obligation. |
Revenues from licensing agreement
According to IFRS 15, performance obligation is a promise to provide a distinct good or service or a series of distinct goods or services. Goods and services that are not distinct are bundled with other goods or services in the contract until a bundle of goods or services that is distinct is created. A good or service promised to a customer is distinct if the customer can benefit from the good or service either on its own or together with other resources that are readily available to the customer and the entity’s promise to transfer the good or service to the customer is separately identifiable from other promises in the contract.
The Company has identified two performance obligations in The License Agreement: (1) Grant of the license and use of its IP; and (2) Company’s participation and consulting assistance services. In addition, there is a potential performance obligation regarding future manufacturing.
IFRS 15 defines the ‘Transaction Price’ as the amount of consideration to which the entity expects to be entitled in exchange for transferring the promised goods or services to a customer. The Company allocates the transaction price to each performance obligation identified based on the standalone selling prices of the goods or services being provided to the customer.
The Grant of the license and use of its IP performance obligation considered to be a right to use IP in accordance with IFRS 15. Therefore, revenue is recognized at a point in time, upon transfer of control over the license to the licensee.
The Company’s participation and consulting assistance services performance obligation is recognized as revenue over the service period, based on input method, which is costs incurred and labor hours expended.
Revenue from achieving additional milestones is recognized only when it is highly probable that a significant reversal of cumulative revenues will not occur, usually upon achievement of the specific milestone.
Sales-based royalties are not included in the transaction price. Rather, they are recognized as incurred, due to the specific exception of IFRS 15 for sales-based royalties in licensing of intellectual properties.