Blackberry 2008 Annual Report Download - page 58

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56
RESEARCH IN MOTION LIMITED
notes to the consolidated financial statements continued
In thousands of United States dollars, except share and per share data, and except as otherwise indicated
Software Revenue Recognition (“SOP 97-2”). The Company
records reductions to revenue for estimated commitments
related to price protection and for customer incentive
programs, including reseller and end-user rebates. The
estimated cost of the incentive programs are accrued, based
on historical experience, as a reduction to revenue in the
period the Company has sold the product and committed
to a plan. Price protection is accrued as a reduction to
revenue based on estimates of future price reductions and
certain agreed customer inventories at the date of the price
adjustment.
Provisions are made at the time of sale for warranties,
royalties, price protection, rebates 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. If future returns are higher
than estimated, they 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-
that evidence, a valuation allowance is required. Judgment
is required in considering the relative impact of negative
and positive evidence. The Company records a valuation
allowance to reduce deferred income tax assets to the
amount that is more likely than not to be realized. If the
Company determines that it is more likely than not that it will
not be able to realize all or part of its deferred income tax
assets in future fiscal periods, the valuation allowance would
be increased, resulting in a decrease to net income in the
reporting periods when such determinations are made.
The Company uses the flow-through method to account
for investment tax credits (“ITCs”) earned on eligible
scientific research and experimental development (“SR&ED”)
expenditures. Under this method, the ITCs are recognized as
a reduction to income tax expense.
Significant judgment is required in evaluating the
Company’s uncertain tax positions and provision for income
taxes. Effective March 4, 2007 the Company adopted
Financial Accounting Standards Board (“FASB”) Interpretation
No. 48, Accounting for Uncertainty in Income Taxes (“FIN
48”). FIN 48 clarifies the accounting for uncertainty in income
taxes recognized in an enterprise’s financial statements in
accordance with SFAS 109, and prescribes a recognition
threshold of more likely than not to be sustained upon
examination. In addition, FIN 48 provides guidance on
derecognition, measurement, classification, interest and
penalties, accounting in interim periods and disclosure and
transitions.
(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 sales 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 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,