Blackberry 2003 Annual Report Download - page 11

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Research฀In฀Motion฀Limited฀฀|฀฀Incorporated฀Under฀the฀Laws฀of฀Ontario฀(United฀States฀dollars,฀in฀thousands฀except฀per฀share฀data฀or฀as฀otherwise฀indicated)
For฀the฀years฀ended฀March฀1,฀2003,฀March฀2,฀2002฀and฀February฀28,฀2001
9
determining฀the฀allowance฀for฀doubtful฀accounts฀and฀sales฀returns,฀provisions฀for฀excess฀and฀obsolete฀
inventory,฀useful฀lives฀of฀long-lived฀assets,฀valuation฀of฀goodwill,฀realization฀of฀future฀tax฀assets,฀provision฀
for฀warranty฀and฀provision฀for฀litigation฀contingencies.฀These฀estimates฀are฀based฀upon฀management’s฀
historical฀experience฀and฀various฀other฀assumptions฀that฀are฀believed฀by฀management฀to฀be฀reason-
able฀under฀the฀circumstances.฀Such฀assumptions฀and฀estimates฀are฀evaluated฀on฀an฀ongoing฀basis฀and฀
form฀the฀basis฀for฀making฀judgments฀about฀the฀carrying฀values฀of฀assets฀and฀liabilities฀that฀are฀
not฀readily฀apparent฀from฀other฀sources.฀Actual฀results฀could฀differ฀from฀these฀estimates.฀
The฀Company’s฀Critical฀Accounting฀Policies฀have฀been฀reviewed฀and฀discussed฀with฀the฀Audit฀Committee.
Management฀believes฀the฀following฀critical฀accounting฀policies฀affect฀its฀more฀signicant฀estimates฀
and฀assumptions฀used฀in฀the฀preparation฀of฀its฀consolidated฀nancial฀statements.
Revenue฀recognition
The฀Company฀recognizes฀revenue฀when฀it฀is฀realized฀or฀realizable฀and฀earned.฀The฀Company฀considers฀
revenue฀realized฀or฀realizable฀and฀earned฀when฀it฀has฀persuasive฀evidence฀of฀an฀arrangement,฀the฀
product฀has฀been฀delivered฀or฀the฀services฀have฀been฀provided฀to฀the฀customer,฀the฀sales฀price฀is฀xed฀
or฀determinable฀and฀collectibility฀is฀reasonably฀assured.฀In฀addition฀to฀this฀general฀policy,฀the฀following฀
are฀the฀specic฀revenue฀recognition฀policies฀for฀each฀major฀category฀of฀revenue.฀
Handheld฀and฀other฀hardware฀products
Revenue฀from฀the฀sale฀of฀hardware,฀original฀equipment฀manufacturer฀(“OEM”)฀radios฀and฀accessories฀
is฀recognized฀when฀title฀is฀transferred฀to฀the฀customer฀and฀all฀signicant฀contractual฀obligations฀that฀
affect฀the฀customer’s฀nal฀acceptance฀have฀been฀fullled.฀Provisions฀are฀made฀at฀the฀time฀of฀sale฀for฀
warranties,฀royalties฀and฀estimated฀product฀returns.฀For฀hardware฀products฀for฀which฀the฀software฀is฀
deemed฀not฀to฀be฀incidental,฀the฀Company฀recognizes฀revenue฀in฀accordance฀with฀the฀American฀
Institute฀of฀Certied฀Public฀Accountants฀Statement฀of฀Position฀97-2,฀Software฀Revenue฀Recognition฀(“SOP฀
97-2”).฀If฀the฀historical฀data฀the฀Company฀uses฀to฀estimate฀product฀returns฀does฀not฀properly฀reect฀
future฀returns,฀these฀estimates฀could฀be฀revised.
Service
Revenue฀is฀recognized฀rateably฀on฀a฀monthly฀basis฀when฀the฀service฀is฀provided.฀In฀instances฀where฀
the฀Company฀bills฀the฀customer฀prior฀to฀performing฀the฀service,฀the฀prepayment฀is฀recorded฀as฀
deferred฀revenue.
Software
Revenue฀from฀licensed฀software฀is฀recognized฀at฀the฀inception฀of฀the฀licence฀term฀and฀in฀accordance฀
with฀SOP฀97-2.฀Revenue฀from฀software฀maintenance,฀unspecied฀upgrades฀and฀technical฀support฀
contracts฀is฀recognized฀over฀the฀period฀that฀such฀items฀are฀delivered฀or฀that฀services฀are฀provided.฀
Technical฀support฀contracts฀extending฀beyond฀the฀current฀period฀are฀recorded฀as฀deferred฀revenue.฀
Non-recurring฀engineering฀(“NRE”)฀contracts
Revenue฀is฀recognized฀as฀specic฀contract฀milestones฀are฀met.฀The฀attainment฀of฀milestones฀approxi-
mates฀actual฀performance.
Allowance฀for฀Doubtful฀Accounts฀and฀Bad฀Debts฀Expense
The฀Company฀evaluates฀the฀collectibility฀of฀its฀trade฀receivables฀based฀upon฀a฀combination฀of฀factors.฀
RIM฀regularly฀reviews฀and฀updates฀its฀information฀with฀respect฀to฀signicant฀receivable฀balances.฀When฀
it฀becomes฀aware฀of฀a฀specic฀customer’s฀inability฀to฀meet฀its฀nancial฀obligations฀to฀the฀Company,฀
such฀as฀in฀the฀case฀of฀bankruptcy฀lings฀or฀material฀deterioration฀in฀the฀customer’s฀operating฀results฀or฀
nancial฀position,฀RIM฀records฀a฀specic฀bad฀debt฀reserve฀to฀reduce฀the฀customer’s฀related฀trade฀receiv-
able฀to฀its฀estimated฀net฀realizable฀value.฀The฀Company฀also฀records฀bad฀debt฀reserves฀for฀all฀other฀
customers฀based฀upon฀a฀variety฀of฀factors฀including฀the฀ageing฀of฀the฀account,฀the฀nancial฀health฀of฀
the฀customer,฀macroeconomic฀considerations฀and฀historical฀experience.฀If฀circumstances฀related฀to฀
specic฀customers฀change,฀the฀Company’s฀estimates฀of฀the฀recoverability฀of฀trade฀receivables฀could฀be฀
further฀adjusted.