Blackberry 2009 Annual Report Download - page 60

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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
(v) Advertising costs
The Company expenses all advertising costs as incurred.
These costs are included in Selling, marketing and
administration.
2. ADOPTION OF ACCOUNTING POLICIES
The Fair Value Option for Financial Assets and Financial
Liabilities - Including an amendment of SFAS 115
In February 2007, the Financial Accounting Standards Board
(“FASB”) issued Statement of Financial Accounting Standards
(“SFAS”) 159 The Fair Value Option for Financial Assets and
Financial Liabilities - Including an amendment of SFAS 115
(“SFAS 159”). SFAS 159 permits entities to measure many
financial instruments and certain other items at fair value
that currently are not required to be measured at fair value.
If elected, unrealized gains or losses on certain items will be
reported in earnings at each subsequent reporting period.
SFAS 159 is effective for the Company as of the beginning of
its 2009 fiscal year. The Company did not adopt the fair value
measurement provisions of this statement.
Fair Value Measurements
In September 2006, the FASB issued SFAS 157 Fair Value
Measurements (“SFAS 157”). SFAS 157 clarifies the definition
of fair value, establishes a framework for measurement
of fair value, and expands disclosure about fair value
measurements. SFAS 157 is effective for fiscal years
beginning after November 15, 2007, except as amended by
FASB Staff Position (“FSP”) SFAS 157-1 and FSP SFAS 157-2
which is effective for fiscal years beginning after November
15, 2008. FSP SFAS 157-1 and FSP SFAS 157-2 allow partial
adoption relating to fair value measurements for non-financial
assets and liabilities that are not measured at fair value on
a recurring basis. Effective March 2, 2008, the Company
adopted SFAS 157, except as it applies to the nonfinancial
assets and nonfinancial liabilities subject to FSP SFAS 157-2,
with the impact described in note 4. The Company will adopt
the remaining portion of SFAS 157 in the first quarter of fiscal
2010 and does not expect the adoption to have a material
impact on the Company’s results of operations and financial
condition.
Disclosures about Derivative Instruments and Hedging
Activities – an amendment of FASB Statement No. 133
In March 2008, the FASB issued SFAS 161 Disclosures
about Derivative Instruments and Hedging Activities – an
amendment of FASB Statement No. 133 (“SFAS 161”). SFAS
161 enhances the current disclosure framework in SFAS 133
established by the Company. The Company has classified the
RSUs as equity instruments as the Company has the ability
and intent on settling the awards in shares. The compensation
expense is calculated based on the fair value of the award as
defined in SFAS 123(R) and the amount is recognized over the
vesting period of the RSU.
The Company has a Deferred Share Unit Plan (the “DSU
Plan”) adopted by the Board of Directors on December 20,
2007, under which each independent director will be credited
with Deferred Share Units (“DSUs”) in satisfaction of all or
a portion of the cash fees otherwise payable to them for
serving as a director of the Company. Grants under the DSU
plan replace the stock option awards that were historically
granted to independent members of the Board of Directors.
At a minimum, 50% of each independent director’s annual
retainer will be satisfied in the form of DSUs. The director
can elect to receive the remaining 50% in any combination of
cash and DSUs. Within a specified period after such a director
ceases to be a director, DSUs will be redeemed for cash with
the redemption value of each DSU equal to the weighted
average trading price of the Company’s shares over the five
trading days preceding the redemption date. Alternatively,
subject to receipt of shareholder approval, the Company may
elect to redeem DSUs by way of shares purchased on the
open market or issued by the Company.
DSUs are accounted for as liability-classified awards under
the provisions of SFAS 123(R). These awards are measured at
their fair value on the date of issuance, and remeasured at
each reporting period, until settlement. DSUs are awarded on
a quarterly basis.
(u) Warranty
The Company provides for the estimated costs of product
warranties at the time revenue is recognized. BlackBerry
devices are generally covered by a time-limited warranty for
varying periods of time. The Company’s warranty obligation
is affected by product failure rates, differences in warranty
periods, regulatory developments with respect to warranty
obligations in the countries in which the Company carries
on business, freight expense, and material usage and other
related repair costs.
The Company’s estimates of costs are based upon
historical experience and expectations of future return rates
and unit warranty repair cost. If the Company experiences
increased or decreased warranty activity, or increased or
decreased costs associated with servicing those obligations,
revisions to the estimated warranty liability would be
recognized in the reporting period when such revisions
are made.