Blackberry 2005 Annual Report Download - page 27

25
Amortization expense with respect to licenses (a component of Intangible assets) is charged to Cost of sales
and was $16.5 million in fiscal 2005 compared to $18.7 million in fiscal 2004.
Total amortization expense with respect to Intangible assets was $19.7 million in fiscal 2005 compared to
$19.5 million in fiscal 2004. See also notes 1 (l) and 7 to the Consolidated Financial Statements and “Critical
Accounting Policies and Estimates – Valuation of long-lived assets, intangible assets and goodwill”.
Changes in Capital Assets Amortization
During fiscal 2005, the Company re-evaluated the estimated useful lives of certain of its information
technology assets and determined that the estimated useful lives should be reduced from five years to
periods of three to four years. The impact of this change was applied on a prospective basis commencing
in the first quarter of fiscal 2005. The impact of this change of accounting estimate resulted in incremental
amortization expense of $4.3 million for the year. Of this amount, $1.8 million was included in Cost of sales,
and $2.5 million was included in Amortization. See also note 1 (k) to the Consolidated Financial Statements.
During fiscal 2005, the Company also re-evaluated the estimated useful lives of capital assets used in
manufacturing, and research and development operations that resulted from the application of the 20%
declining balance amortization methodology. As a result of the plant capacity and capital asset utilizations
currently approaching 100%, versus much lower levels in prior fiscal years, the Company now believes that
the 20% declining balance method will not produce quarterly and annual depreciation expense and resulting
residual net book values that are consistent with the increased current and future capital asset usage. The
Company therefore revised its amortization method to a straight-line method and determined estimated useful
lives to be between five and eight years for such capital assets, on a prospective basis, effective the second
quarter of fiscal 2005. The impact of this change of method of accounting was insignificant for fiscal 2005.
See also note 2 (c) to the Consolidated Financial Statements.
Litigation
The Company is the defendant in a patent litigation matter brought by NTP alleging that the Company
infringed on eight of NTP’s patents. See also note 15 – Litigation to the Consolidated Financial Statements.
See also the discussion of the NTP matter in “Liquidity and Capital Resources – NTP Litigation Funding”.
The matter went to trial in 2002 in the United States District Court for the Eastern District of Virginia (the
“District Court”), and the jury issued a verdict in favour of NTP on November 21, 2002, finding that certain of
the products and services that the Company sells in the United States infringe on five of NTP’s patents. As a
result, the jury awarded damages based upon its assessment of the estimated income derived from certain of
the Company’s revenues that were considered “infringing revenues”.
On August 5, 2003, the District Court ruled on NTP’s request for an injunction with respect to RIM continuing
to sell BlackBerry handhelds, software and service in the United States and entered judgment with respect
to several previously announced monetary awards issued in favour of NTP. The District Court granted NTP
the injunction requested; however, the District Court then immediately granted RIM’s request to stay the
injunction sought by NTP pending the completion of RIM’s appeal. On June 7, 2004, the Company and NTP
each made oral submissions before the Court of Appeals for the Federal Circuit (the “Appeals Court”).
For the years ended February 26, 2005, February 28, 2004 and March 1, 2003