REVENUE

On December 28, 2017 we adopted ASU 2014-09, Revenue from Contracts with Customers (Topic 606), using the modified retrospective method applied to those contracts which were not completed as of December 28, 2017. We elected a practical expedient to aggregate the effect of all contract modifications that occurred before the adoption date, which did not have a material impact to our consolidated financial statements. Results for reporting periods beginning on or after December 28, 2017 are presented under Accounting Standards Codification Topic 606 ("ASC 606"). Prior period amounts were not revised and continue to be reported in accordance with ASC Topic 605 ("ASC 605"), the accounting standard then in effect.

Upon transition, on December 28, 2017, we recorded a decrease to opening equity of $1,574, net of tax, of which $1,135 was recognized in retained earnings and accumulated other comprehensive income (loss) and $439 in non-controlling interest, with a corresponding increase of $1,769 in other long-term liabilities, a decrease of $68 in other current liabilities and an increase of $100 to accounts receivable.

Revenue Recognition

Revenue consists of Shack sales and licensing revenue. Generally, revenue is recognized as promised goods or services transfer to the guest or customer in an amount that reflects the consideration we expect to be entitled in exchange for those goods or services.

Revenue from Shack sales is presented net of discounts and recognized when food, beverage and retail products are sold. Sales tax collected from customers is excluded from Shack sales and the obligation is included in sales tax payable until the taxes are remitted to the appropriate taxing authorities. Revenue from our gift cards is deferred and recognized upon redemption.

Licensing revenues include initial territory fees, Shack opening fees and ongoing sales-based royalty fees from licensed Shacks. Generally, the licenses granted to develop, open and operate each Shack in a specified territory are the predominant goods or services transferred to the licensee in our contracts, and represent distinct performance obligations. Ancillary promised services, such as training and assistance during the initial opening of a Shack, are typically combined with the licenses and considered as one performance obligation per Shack. We determine the transaction price for each contract, which is comprised of the initial territory fee and an estimate of the total Shack opening fees we expect to be entitled to. The calculation of total Shack opening fees included in the transaction price requires judgment, as it is based on an estimate of the number of Shacks we expect the licensee to open. The transaction price is then allocated equally to each Shack expected to open. The performance obligations are satisfied over time, starting when a Shack opens, through the end of the term of the license granted to the Shack. Because we are transferring licenses to access our intellectual property during a contractual term, revenue is recognized on a straight-line basis over the license term. Generally, payment for the initial territory fee is received upon execution of the licensing agreement and payment for the restaurant opening fees are received either in advance of or upon opening the related restaurant. These payments are initially deferred and recognized as revenue as the performance obligations are satisfied, which occurs over a long-term period.

Revenue from sales-based royalties is recognized as the related sales occur.

Prior to the adoption of ASC 606, Shack opening fees were recorded as deferred revenue when received and proportionate amounts were recognized as revenue when a licensed Shack opened and all material services and conditions related to the fee were substantially performed. Territory fees were recorded as deferred revenue when received and recognized as revenue on a straight-line basis over the term of the license agreement, which generally began upon execution of the contract.

Revenue recognized during fiscal 2018 under ASC 606 and revenue that would have been recognized during fiscal 2018 had ASC 605 been applied is as follows:



	As reported under ASC 606		If reported under ASC 605		Increase (decrease)
Shack sales	$	445,589	$	445,589	$	—
Licensing revenue	13,721		14,389		(668		)
Total revenue	$	459,310	$	459,978	$	(668	)

Revenue recognized during fiscal 2018 (under ASC 606) and fiscal 2017 and 2016 (under ASC 605) disaggregated by type is as follows:



	December 26 2018		December 27 2017		December 28 2016
Shack sales	$	445,589	$	346,388	$	259,350
Licensing revenue:
Sales-based royalties	13,422		11,633		8,765
Initial territory and opening fees	299		789		360
Total revenue	$	459,310	$	358,810	$	268,475

The aggregate amount of the transaction price allocated to performance obligations that are unsatisfied (or partially unsatisfied) as of December 26, 2018 is $15,333. We expect to recognize this amount as revenue over a long-term period, as the license term for each Shack ranges from 5 to 20 years. This amount excludes any variable consideration related to sales-based royalties.

Contract Balances

Opening and closing balances of contract liabilities and receivables from contracts with customers for fiscal 2018 is as follows:



	December 26 2018		December 28 2017
Shack sales receivables	$	2,550	$	2,184
Licensing receivables	2,616		1,522
Gift card liability	1,796		1,472
Deferred revenue, current	307		265
Deferred revenue, long-term	10,026		3,742

Revenue recognized during fiscal 2018 that was included in the balances of gift card liability and deferred revenue, current, at the beginning of the period is $506 and $253, respectively.