Blackberry 2007 Annual Report Download - page 70

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68
RESEARCH IN MOTION LIMITED
notes to the consolidated financial statements continued
For the Years Ended March 3, 2007, March 4, 2006 and February 26, 2005
In thousands of United States dollars, except share and per share data, and except as otherwise indicated
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 to income tax expense.
(p) 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.
Devices
Revenue from the sale of BlackBerry devices is recognized
when title is transferred to the customer and all significant
contractual obligations that affect the customer’s final
acceptance have been fulfilled. 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”).
Provisions are made at the time of sale for applicable
warranties, rebates, royalties and estimated product returns.
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 devices 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 in accordance with SOP 97-2.
When the fair value of a delivered element has not been
established, the Company uses the residual method to
recognize revenue if the fair value of undelivered elements
is determinable. 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.
Other
Revenue from the sale of accessories is recognized when
title is transferred to the customer and all significant
contractual obligations that affect the customer’s final
acceptance have been fulfilled. Technical support contracts
extending beyond the current period are recorded as
deferred revenue. Revenue from repair and maintenance
programs is recognized when the service is delivered which
is when the title is transferred to the customer and all
significant contractual obligations that affect the customer’s
final acceptance have been fulfilled. Revenue for non-
recurring engineering contracts is recognized as specific
contract milestones are met. The attainment of milestones
approximates actual performance.
Shipping and handling costs
Shipping and handling costs charged to earnings are
included in Cost of sales where they can be reasonably
attributed to certain revenue; otherwise they are included in
Selling, Marketing and Administration.
Multiple-element arrangements
The Company enters into transactions that represent
multiple-element arrangements which may include any
combination of hardware, service and software. These
multiple-element arrangements are assessed to determine
whether they can be separated into more than one unit
of accounting or element for the purpose of revenue
recognition. When the appropriate criteria for separating
revenue into more than one unit of accounting is met and
there is vendor specific objective evidence of fair value for
all units of accounting or elements in an arrangement, the
arrangement consideration is allocated to the separate units
of accounting or elements based on each unit’s relative fair
value. This vendor specific objective evidence of fair value
is established through prices charged for each revenue
element when that element is sold separately. The revenue
recognition policies described above are then applied to
each unit of accounting.