Blackberry 2005 Annual Report Download - page 50

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In the event that the fair value of the reporting unit, including goodwill, is less than the carrying value, the
implied fair value of the reporting unit’s goodwill is compared with its carrying amount to measure the amount
of the impairment loss, if any. The implied fair value of goodwill is determined in the same manner as the
value of goodwill is determined in a business combination using the fair value of the reporting unit as if it was
the purchase price. When the carrying amount of the reporting unit goodwill exceeds the implied fair value of
the goodwill, an impairment loss is recognized in an amount equal to the excess and is presented as a
separate line item in the consolidated statements of operations.
The Company has one reporting unit, which is the consolidated Company.
(n) Income taxes
The liability method of tax allocation is used to account for income taxes. Under this method, deferred income
tax assets and liabilities are determined based upon differences between the financial reporting and tax bases
of assets and liabilities, and measured using enacted tax rates and laws that will be in effect when the
differences are expected to reverse.
The Company continues to assess, on an on-going basis, the degree of certainty regarding the realization of
deferred tax assets, and whether a valuation allowance is required.
The Company has used the flow-through method to account for investment tax credits earned on eligible
scientific research and development expenditures. Under this method, the investment tax credits are
recognized as a reduction in income tax expense.
(o) 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 fixed or determinable and
collectibility is reasonably assured. In addition to this general policy, the following paragraphs describe the
specific revenue recognition policies for each major category of revenue.
Hardware
Revenue from the sale of BlackBerry handhelds is recognized when title is transferred to the customer and
all significant contractual obligations that affect the customer’s final acceptance have been fulfilled. 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 Certified 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 reflect future returns,
these estimates could be revised. Future returns, if they were higher than estimated, would result in a
reduction of revenue. To date, returns of handhelds and other products have been negligible. As a result,
the Company’s accrual with respect to such product returns is not significant.
Service
Revenue from service 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 prebilling is recorded as deferred revenue.
Software
Revenue from licensed software is recognized at the inception of the license term and in accordance with
SOP 97-2. Revenue from software maintenance, unspecified upgrades and technical support contracts is
recognized over the period that such items are delivered or that services are provided.
Research In Motion Limited •Incorporated Under the Laws of Ontario (In thousands of United States dollars, except per share data, and except as otherwise indicated)