Blackberry 2007 Annual Report Download - page 69

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67
(j) Inventories
Raw materials are stated at the lower of cost and replacement
cost. Work in process and finished 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 first-in-first-out basis.
(k) Capital assets
Capital assets are stated at cost less accumulated
amortization. No amortization is provided for construction
in progress until the assets are ready for use. Amortization is
provided using the following rates and methods:
Buildings, leaseholds and other Straight-line over terms between
5 and 40 years
BlackBerry operations and other
information technology
Straight-line over terms between
3 and 5 years
Manufacturing equipment, research
and development equipment, and
tooling
Straight-line over terms between
2 and 8 years
Furniture and fixtures 20% per annum declining balance
(l) Intangible assets
Intangible assets are stated at cost less accumulated
amortization and are comprised of licenses, patents
and acquired technology. Licenses include licenses or
agreements that the Company has negotiated with third
parties upon use of third parties’ technology. Patents
include all costs necessary to acquire intellectual property
such as patents and trademarks, as well as legal defense
costs arising out of the assertion of any Company-owned
patents. Acquired technology consists of purchased
developed technology arising from the Company’s corporate
acquisitions.
Intangible assets are amortized as follows:
Acquired technology Straight-line over 2 to 5 years
Licenses Lesser of 5 years or on a per unit basis based
upon the anticipated number of units sold
during the terms of the license agreements
Patents Straight-line over 17 years
(m) Impairment of long-lived assets
The Company reviews long-lived assets such as property,
plant and equipment and intangible assets with finite
useful lives for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. If the total of the expected undiscounted future
cash flows is less than the carrying amount of the asset, a loss
is recognized for the excess of the carrying amount over the
fair value of the asset.
(n) Goodwill
Goodwill represents the excess of the purchase price of
business acquisitions over the fair value of identifiable net
assets acquired in such acquisitions. Goodwill is allocated
as at the date of the business combination. Goodwill is not
amortized, but is tested for impairment annually, or more
frequently if events or changes in circumstances indicate the
asset might be impaired.
The impairment test is carried out in two steps. In the
first step, the carrying amount of the reporting unit including
goodwill is compared with its fair value. When the fair value
of a reporting unit exceeds its carrying amount, goodwill of
the reporting unit is considered not to be impaired, and the
second step is unnecessary.
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 were 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.
(o) Income taxes
In accordance with SFAS 109, the Company uses the liability
method of tax allocation 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 are
measured using enacted income 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
income tax assets and whether a valuation allowance is
required.