29	Revenue

(i) Revenue streams

The Group generates revenue primarily from the sale of contemporary traditional leather and fabric upholstered furniture and home furnishing accessories to its customers. Other sources of revenue include sale of polyurethane foam, sale of leather-by products, sale of Natuzzi Display System and sale of Service Type Warranty.

Therefore, all the Group’s revenue is related to revenue from contracts with customers.

(ii) Disaggregation of revenue from contracts with customers

In the following table, revenue from contracts with customers is disaggregated by types of goods, primary geographical markets, geographical location of customers, distribution channels, brands and timing of revenue recognition.


	2018		2017
Types of goods
Sale of upholstery furniture		365,346		389,528
Sale of home furnishing accessories		41,733		33,560
Sale of polyurethane foam		14,958		15,501
Sale of other goods		6,502		10,291

		428,539		448,880

The sale of upholstery furniture includes the following categories: stationary furniture (sofas, loveseats and armchairs), sectional furniture, motion furniture, sofa beds and occasional chairs, including recliners and massage chairs.


	2018		2017
Geographical markets
Europe, Middle East and Africa		212,481		218,896
Americas		137,452		153,647
Asia-Pacific		78,606		76,337

		428,539		448,880


	2018		2017
Geographical location of customers
United States of America		94,393		107,262
Italy		53,261		55,379
China		47,099		41,369
United Kingdom		43,501		48,266
Canada		17,371		20,030
Spain		17,334		17,077
Brazil		16,332		16,182
Germany		11,455		12,462
France		11,179		9,999
Australia		9,903		9,738
Belgium		8,682		8,214
Korea		8,232		9,847
Other countries (none greater than 5%)		89,797		93,055

Total		428,539		448,880


	2018		2017
Distribution channels
Wholesale		365,499		392,332
Retail		63,040		56,548

		428,539		448,880


	2018		2017
Brands
Natuzzi Editions		167,925		183,838
Natuzzi Italia		144,953		134,740
Softaly		94,201		104,509
Unbranded		21,460		25,793

		428,539		448,880


	2018		2017
Timing of revenue recognition
Goods transferred at a point in time		427,493		448,206
Goods and services transferred over time		1,046		674

Subtotal		428,539		448,880

(iii) Contract balances

The following table provides information about receivables and contract liabilities from contracts with customers.


	31/12/18		31/12/17

Trade receivables		40,967		37,549
Contract liabilities		22,099		15,533

Reference should be made to note 14 “Trade receivables” and note 20 “Contract liabilities (non current and current) for details about such contract balances.

(iv) Performance obligations and revenue recognition policies

Revenue is measured based on the consideration specified in the customer contract. The Group recognizes revenue when it transfers control over a good or service to a customer at an amount that reflects the consideration to which the Group expects to be entitled in exchange for goods or services. The Group has generally concluded that it is the principal in its revenue arrangements, because it controls the goods or services before transferring them to the customer.

In determining the transaction price for its contracts with customers, the Group considers the effects of variable consideration and the existence of significant financing components.

The Group considers whether there are other promises in the contract that are separate performance obligations to which a portion of the transaction price needs to be allocated. The allocation of the transaction price to the Group’s performance obligation is performed using the relative stand-alone selling price method.

For information about the nature and timing of the satisfaction of performance obligations in contracts with customers, including significant payment terms, and the related revenue recognition policies see note 4(t).

The transaction price allocated to the remaining performance obligations (partially unsatisfied) as at December 31, 2018 and 2017 as follows:


	31/12/18		31/12/17
Sale of Natuzzi Display System
Within a year		1,138		758
More than a year		2,261		1,878

Total		3,399		2,636

Sale of Service-Type Warranties
Within a year		332		278
More than a year		565		682

Total		897		960

Sale of the licence-for Natuzzi trademarks
Within a year		383		—
More than a year		7,108		—

Total		7,491		—

(v) Variable considerations

If the consideration in a contract includes a variable amount, the Group estimates the amount of consideration to which it will be entitled in exchange for transferring the goods to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable consideration is subsequently resolved. Some contracts for the sale of furniture provide customers with volume rebates, which give rise to variable consideration.

In particular, the Group provides retrospective volume rebates to certain customers once the quantity of products purchased during the period exceeds a threshold specified in the contract. Rebates are offset against amounts payable by the customer. Accumulated experience is used to estimate and provide for the rebates, using the expected value method. A refund liability (included in other payables) is recognised for expected volume discounts payable to customers in relation to sales made until the end of the reporting period.

(vi) Financing components

For information about financing components, reference should be made to note 4(r).

(vii) Warranty obligations

The Group typically provides warranties for general repairs of defects that existed at the time of sale, as required by law. These assurance-type warranties are accounted for under IAS 37. Refer to the accounting policy on warranty provisions in note 4(r).

Customers who purchase the Group’s upholstered furniture may require a service type warranty. As disclosed in note 4(r), the Group allocates a portion of the consideration received to the service type warranty, based on the relative stand-alone selling price. The amount allocated to the service type warranty is deferred, and is recognised as revenue over the time based on the validity period of such warranty.

(viii) Cost to obtain a contract

The Group pays sales commission to its agents for each contract that they obtain. For information about the accounting policy elected by the Group on sales commissions, reference should be made to note 4(x).