Blackberry 2003 Annual Report Download - page 12

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
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Inventory
Raw฀materials฀are฀stated฀at฀the฀lower฀of฀cost฀and฀replacement฀cost.฀Work฀in฀process฀and฀nished฀goods฀
inventories฀are฀stated฀at฀the฀lower฀of฀cost฀and฀net฀realizable฀value.฀Cost฀includes฀the฀cost฀of฀materials฀
plus฀direct฀labour฀applied฀to฀the฀product฀and฀the฀applicable฀share฀of฀manufacturing฀overhead.฀Cost฀is฀
determined฀on฀a฀rst-in-rst-out฀basis.฀
The฀Company’s฀policy฀for฀the฀valuation฀of฀inventory,฀including฀the฀determination฀of฀obsolete฀or฀excess฀
inventory,฀requires฀management฀to฀estimate฀the฀future฀demand฀for฀the฀Company’s฀products฀within฀
specic฀time฀horizons.฀Inventory฀purchases฀and฀purchase฀commitments฀are฀based฀upon฀such฀forecasts฀
of฀future฀demand฀and฀scheduled฀roll-out฀of฀new฀product.฀The฀business฀environment฀in฀which฀RIM฀operates฀
is฀subject฀to฀rapid฀changes฀in฀technology฀and฀customer฀demand.฀The฀Company฀performs฀a฀detailed฀
assessment฀of฀inventory฀each฀reporting฀period,฀which฀includes฀a฀review฀of,฀among฀other฀factors,฀demand฀
requirements,฀component฀part฀purchase฀commitments,฀product฀life฀cycle฀and฀development฀plans,฀
component฀cost฀trends,฀product฀pricing฀and฀quality฀issues.฀If฀customer฀demand฀subsequently฀differs฀from฀
the฀Company’s฀forecasts,฀requirements฀for฀inventory฀write-offs฀could฀differ฀from฀the฀Company’s฀estimates.฀
If฀management฀believes฀that฀demand฀no฀longer฀allows฀the฀Company฀to฀sell฀inventories฀above฀that฀cost฀
or฀at฀all,฀such฀inventory฀is฀written฀down฀to฀net฀realizable฀value฀or฀excess฀inventory฀is฀written฀off.
Valuation฀of฀long-lived฀assets,฀intangible฀assets฀and฀goodwill
In฀connection฀with฀the฀business฀acquisitions฀completed฀in฀scal฀2002฀and฀2003,฀the฀Company฀identied฀
and฀estimated฀the฀fair฀value฀of฀assets฀acquired฀including฀certain฀identiable฀intangible฀assets฀other฀than฀
goodwill฀and฀liabilities฀assumed฀in฀the฀combinations.฀Any฀excess฀of฀the฀purchase฀price฀over฀the฀estimated฀
fair฀value฀of฀the฀identied฀net฀assets฀was฀assigned฀to฀goodwill.฀The฀determination฀of฀estimated฀lives฀for฀
long-lived฀and฀intangible฀assets฀involves฀signicant฀judgement.
The฀Company฀assesses฀the฀impairment฀of฀identiable฀intangibles,฀long-lived฀assets฀and฀goodwill฀
whenever฀events฀or฀changes฀in฀circumstances฀indicate฀that฀the฀carrying฀value฀may฀not฀be฀recoverable.฀
Unforeseen฀events฀and฀changes฀in฀circumstances฀and฀market฀conditions฀and฀material฀differences฀in฀the฀
value฀of฀long-lived฀and฀intangible฀assets฀and฀goodwill฀due฀to฀changes฀in฀estimates฀of฀future฀cash฀ows฀
could฀affect฀the฀fair฀value฀of฀the฀Company’s฀assets฀and฀require฀an฀impairment฀charge.
Effective฀March฀3,฀2002,฀the฀Company฀adopted฀the฀new฀recommendations฀of฀Section฀3063฀of฀the฀
Canadian฀Institute฀of฀Chartered฀Accountants฀(“CICA”)฀Handbook฀(“CICA฀3063”)฀with฀regards฀to฀the฀impair-
ment฀of฀long-lived฀assets฀and฀accordingly,฀long-lived฀assets฀are฀tested฀for฀recoverability฀when฀events฀or฀
changes฀in฀circumstances฀indicate฀that฀their฀carrying฀amount฀may฀not฀be฀recoverable.฀If฀such฀an฀event฀
occurs,฀the฀affected฀asset฀is฀written฀down฀to฀its฀fair฀value.฀There฀was฀no฀impact฀to฀retained฀earnings฀as฀a฀
result฀of฀the฀adoption฀of฀this฀recommendation.
Effective฀March฀3,฀2002,฀the฀Company฀adopted฀the฀new฀recommendations฀of฀Section฀3062฀of฀the฀CICA฀
Handbook฀(“CICA฀3062”)฀with฀regards฀to฀goodwill฀and฀intangible฀assets฀and฀accordingly,฀goodwill฀is฀
no฀longer฀amortized฀to฀earnings,฀but฀periodically฀tested฀for฀impairment.฀Upon฀adoption฀of฀these฀new฀
recommendations,฀goodwill฀was฀required฀to฀be฀tested฀for฀impairment.฀The฀Company฀performed฀the฀
required฀impairment฀tests฀of฀goodwill฀as฀at฀March฀1,฀2003฀and฀March฀3,฀2002฀and฀concluded฀that฀the฀
existing฀goodwill฀was฀not฀impaired.฀The฀Company฀did฀not฀have฀any฀goodwill฀prior฀to฀the฀adoption฀of฀
the฀new฀recommendation,฀therefore,฀there฀was฀no฀impact฀to฀prior฀year’s฀earnings฀upon฀its฀adoption.
Income฀taxes
The฀Company’s฀future฀tax฀asset฀balance฀represents฀temporary฀differences฀between฀the฀nancial฀
reporting฀and฀tax฀bases฀of฀assets฀and฀liabilities฀including฀research฀and฀development฀costs฀and฀incentives,฀
nancing฀costs,฀capital฀assets,฀non-deductible฀reserves,฀as฀well฀as฀operating฀loss฀carryforwards฀and฀capital฀
loss฀carryforwards,฀net฀of฀valuation฀allowances.฀The฀Company฀evaluates฀its฀future฀tax฀assets฀based฀upon฀
estimates฀of฀projected฀future฀taxable฀income฀streams฀during฀periods฀in฀which฀temporary฀differences฀
become฀deductible฀and฀tax฀planning฀strategies.฀The฀Company฀records฀a฀valuation฀allowance฀to฀reduce฀
future฀income฀tax฀assets฀to฀the฀amount฀that฀is฀more฀likely฀than฀not฀to฀be฀realized.฀As฀a฀result฀of฀the฀
current฀operating฀losses฀incurred,฀as฀well฀as฀forecasted฀near฀term฀operating฀losses,฀the฀Company฀has฀