Global Water Resources Inc

4. REVENUE RECOGNITION

Regulated Revenue

Operating revenue is substantially derived from contracts with customers to provide regulated water, wastewater, and recycled water service based upon tariff rates approved by the ACC. The Company’s customers are the recipients of its utility service, and the tariff rates represent a contract with those customers, both of which meet their respective definitions under ASC Topic 606, Revenue from Contracts with Customers(“ASC 606”) and create enforceable rights and obligations. Regulated service revenue consists of amounts billed to customers based on approved fixed monthly fees and consumption based fees, as well as unbilled revenue, which is estimated revenue from the last meter reading date to the end of the accounting period utilizing historical customer data recorded. The measurement of sales to customers is generally based on the reading of their meters, which occurs on a systematic basis throughout the month. At the end of each month, the Company estimates consumption since the date of the last meter reading and a corresponding unbilled revenue is recognized. The unbilled revenue estimate is based upon the number of unbilled days that month and the average daily customer billing rate from the previous month (which fluctuates based upon customer usage). The Company applies the invoice practical expedient and recognizes revenue from contracts with customers in the amount for which the Company has a right to invoice. The Company has the right to invoice for the volume of consumption, service charge, and other authorized charges.

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The Company satisfies its performance obligation to provide water, wastewater, and recycled water service over time as service is rendered. Regulated water and wastewater service may be terminated by the customers at will, and, as a result, no separate financing component is recognized for the Company’s collections from customers, which generally require payment within 15 days of billing. The Company applies judgment, based principally on historical payment experience, in estimating its customers’ ability to pay.

Total revenue does not include sales tax as the Company considers itself a pass-through conduit for collecting and remitting sales taxes.

Unregulated Revenue

Unregulated revenue represents revenue that is not subject to the ratemaking process of the ACC and is primarily related to the revenue recognized on a portion of ICFA funds received. Under the terms of ASC 606, each ICFA is a contract, and the counterparty (typically a developer or homebuilder) to the ICFA is the Company’s customer. Revenue is recognized when (1) the Company has planned, coordinated, and financed the infrastructure as specified in the ICFA contract; (2) the Company has sufficient capacity in place within the infrastructure to provide water/wastewater services to the developer, and (3) based on the totality of the circumstances regarding the entitlement and development of the land, it is more likely than not that the landowner will move forward with construction of residential, commercial, or industrial development within the next twenty-four months.

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Disaggregated Revenue

For the years ended December 31, 2024 and 2023, disaggregated revenue from contracts with customers by major source and customer class are as follows (in thousands):

Contract Balances

The Company’s contract assets and liabilities consist of the following (in thousands):

Remaining Performance Obligations

Revenue allocated to remaining performance obligations represents contracted revenue that has not yet been recognized, which includes deferred revenue and amounts that will be invoiced and recognized as revenue in future periods. Deferred revenue - ICFA is recognized as revenue once the obligations specified within the applicable ICFA are met, including construction of sufficient operating capacity to serve the customers for which revenue was deferred. Due to the uncertainty of future events, the Company is unable to estimate when to expect recognition of deferred revenue - ICFA.

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Accounts Receivable and Allowance for Credit Losses

Accounts receivable as of December 31, 2024 and 2023 consist of the following (in thousands):

The following table summarizes the allowance for credit loss activity for the years ended December 31, 2024 and 2023 (in thousands):