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VITAE PHARMACEUTICALS, INC filed this Form S-1 on 08/12/2014
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Vitae Pharmaceuticals, Inc.

Notes to the Financial Statements (Continued)

For the Years Ended December 31, 2013 and 2012

2. Summary of Significant Accounting Policies and Basis of Accounting (Continued)

price for a deliverable requires significant judgment and consideration of various factors including market conditions, items contemplated during agreement negotiation as well as internally developed net present value models.

        The Company typically receives upfront, nonrefundable payments when licensing its intellectual property. For intellectual property licenses that do not have stand-alone value from the other deliverables to be provided, revenue is recognized over the contractual or estimated performance period, which is typically the term of the research and development obligations. The periods over which revenue should be recognized are subject to estimates by management and may change over the course of the research and development agreement. Such a change could have a material impact on the amount of revenue the Company records in future periods.

        Payments or reimbursements resulting from the Company's research and development efforts are recognized as the services are performed and are presented on a gross basis so long as there is persuasive evidence of an arrangement, the fee is fixed or determinable, and collection of the related receivable is reasonably assured. Amounts received prior to satisfying the above revenue recognition criteria are recorded as deferred revenue.

        In accordance with ASU 2010-17, Vitae recognizes revenue from milestone payments when: (i) the milestone event is substantive and its achievability was not reasonably assured at the inception of the agreement, and (ii) Vitae does not have ongoing performance obligations related to the achievement of the milestone earned. Milestone payments are considered substantive if all of the following conditions are met: the milestone payment (a) is commensurate with either the Company's performance to achieve the milestone or the enhancement of the value of the delivered item or items as a result of a specific outcome resulting from the Company's performance to achieve the milestone, (b) relates solely to past performance, and (c) is reasonable relative to all of the deliverables and payment terms (including other potential milestone consideration) within the arrangement. The Company has concluded that the clinical and development and regulatory milestones pursuant to its research and development arrangements are substantive.

        The following table details the amount of collaborative revenue recognized for the years ended December 31, 2013 and 2012:

  Year Ended December 31,  
  2013   2012  

Amortization of upfront license fees

  $ 353,693   $ 1,921,307  

Collaborative research payments:


FTE funding

    3,108,000     3,436,000  

Research and development costs


Intellectual property costs

    1,050,990     970,465  

Total collaborative research payments

    4,158,990     4,426,520  

Milestone revenue

    18,000,000     16,000,000  

Total collaborative revenue

  $ 22,512,683   $ 22,347,827