We offer sales promotions through various regional and national programs to our customers. These programs include in-store discounts, as well as product coupons offered directly to consumers, which may be redeemed at the point of sale. Customary allowances for early invoice payment and shrinkage are also applied by our customers. The costs associated with these programs are accounted for as variable consideration as defined under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers (“ASC 606”), and are reductions to the transaction price of the products. Depending on the specific type of sales incentive and other promotional program, we use the most likely amount approach to determine the variable consideration. The “expected value” represents the sum of the probability-weighted potential outcomes of the consideration. We believe this to be the most accurate representation of the impact of variable consideration on the transaction price to the extent that it is probable that a significant reversal of cumulative revenue recognized will not occur once the uncertainty underlying the variable consideration (future event) is resolved. We review and update our estimates and related accruals of variable consideration each period based on the terms of our agreements, historical experience, and expected levels of performance of the trade promotion or other programs. Any uncertainties in the ultimate resolution of variable consideration due to factors outside our influence are typically resolved within a short timeframe, and therefore do not require additional constraint on the variable consideration. We also offer compensation to our customers for access to shelf space in stores, and associated payments are recognized as reductions to the transaction price received from the customer upon the sale of associated products. Inventories Inventories are stated at the lower of cost or net realizable value. We record sales and other reductions in inventory through cost of sales using the first-in, first-out method. The cost of finished goods inventories includes ingredients, direct labor, freight-in for ingredients, and indirect production and overhead costs. We monitor our inventories to identify any excess or obsolete items on hand. We write-down inventories for estimated excess and obsolescence in an amount equal to the difference between the cost of inventories and estimated net realizable value. These estimates are based on management’s judgment about future demand and market conditions, relative to inventory on hand. Once established, these adjustments are considered permanent and are not revised until the related inventory is sold or disposed of. Reductions in inventory are recorded as a component of costs of sales in the applicable period. Contingent Consideration Contingent consideration in a business combination is included as part of the purchase consideration and is recognized at fair value as of the acquisition date. For contingent consideration, we are responsible for determining the appropriate valuation model and estimated fair value, and in doing so, considers a number of factors, including information provided by valuation advisors. Contingent consideration liabilities are reported at their estimated fair values based on probability-adjusted present values of the consideration expected to be paid, using significant inputs and estimates such as discount rates and duration. Key assumptions used in these estimates include probability assessments with respect to the likelihood of achieving certain milestones and discount rates consistent with the level of risk of achievement. The fair value of these contingent consideration liabilities are remeasured each reporting period, with changes in the fair value included in current operations. The remeasured liability amount could be significantly different from the amount at the acquisition date, resulting in material charges or credits in future reporting periods. Equity-Based Compensation Equity-based compensation for the years ended December 31, 2022 and 2021 includes restricted stock units (“RSU”) awarded to certain employees and directors. We measure equity-based compensation expense at the grant date based on the fair value of the award and recognize the expense on a straight line basis over the requisite vesting period. The fair value of the RSUs is based on the closing price of our stock on the date of grant. 47
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