On January 1, 2018, the Company adopted ASC 606 using the modified retrospective method, applied to those contracts for which all performance obligations were not completed as of that date. Under the modified retrospective method, results for reporting periods beginning after January 1, 2018 are presented using the guidance of ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with the previous guidance provided in ASC Topic 605, Revenue Recognition.

The effects of adjustments to the December 31, 2017 consolidated balance sheet for the adoption of ASC 606 were as follows:

Balance at December 31, 2017

ASC 606 Adjustments

Opening Balance January 1, 2018

Trade accounts payable and accrued expenses

$

32,422

$

(4,000

)

$

28,422

Deferred revenue from contracts with customers

—

6,950

6,950

Deferred taxes

1,402

(723

)

679

Retained earnings

$

321,323

$

(2,227

)

$

319,096

At December 31, 2017, the Company had accrued $4.0 million related to certain of its sales promotion activities that included the shipment of no charge firearms. Using the new accounting guidance, a deferred contract liability of $6.9 million was required at December 31, 2017 and an entry for $6.9 million to increase the deferred contract liability, a decrease to accounts payable and accrued expenses by $4.0 million, an increase to deferred tax assets by $0.7 million, and a reduction to beginning retained earnings of $2.2 million was recorded on January 1, 2018 (the “transition entry”).

The impact of the adoption of ASC 606 on revenue recognized during the years ended December 31, 2019 and December 31, 2018 is as follows:

2019

2018

Contract liabilities with customers at January 1,

$

7,477

$

6,950

Revenue recognized

(16,352

)

(20,653

)

Revenue deferred

18,498

21,180

Contract liabilities with customers at December 31,

$

9,623

$

7,477

During the year ended December 31, 2019, the Company deferred $18.5 million of revenue, offset by the recognition of $16.4 million of revenue previously deferred as the performance obligations relating to the shipment of free products were satisfied. This resulted in a net decrease in firearms sales for the year ended December 31, 2019 of $2.1 million and a deferred contract revenue liability at December 31, 2019 of $9.6 million. The Company estimates that revenue from this deferred contract liability will be recognized in the first two quarters of 2020.

During the year ended December 31, 2018, the Company deferred $21.2 million of revenue, offset by the recognition of $20.7 million of revenue previously deferred as the performance obligations relating to the shipment of free products were satisfied. This resulted in a net decrease in firearms sales for the year ended December 31, 2018 of $0.5 million and a deferred contract revenue liability at December 31, 2018 of $7.4 million.

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As a result, approximately $9.6 million and $12.1 million of promotional expenses that had been classified as selling expenses in prior years were recorded as cost of products sold in 2019 and 2018, respectively.

As a result of the adoption of ASC 606, for the years ended December 31, 2019 and 2018, the gross margin percentage was reduced by 3% and 3%, respectively, and earnings per share decreased by approximately 4¢ and 1¢, respectively, as compared with the revenue recognition methodology used in earlier comparable reporting periods.

Practical Expedients and Exemptions

The Company has elected to account for shipping and handling activities that occur after control of the related product transfers to the customer as fulfillment activities that are recognized upon shipment of the goods.