Blackberry 2010 Annual Report Download - page 17

realizable value. If circumstances related to specific customers change, the Company’s estimates of the
recoverability of accounts receivables balances could be further adjusted.
Inventories and Inventory Purchase Commitments
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 labor applied to the product and the applicable share of manufacturing overhead. Cost is determined
on a first-in-first-out basis.
The Company’s policy for the valuation of inventory, including the determination of obsolete or excess
inventory, requires management to estimate the future demand for the Company’s products within specific time
horizons. Inventory purchases and purchase commitments are based upon such forecasts of future demand
and scheduled rollout of new products. The business environment in which RIM operates is subject to rapid
changes in technology and customer demand. The Company performs an assessment of inventory during
each reporting period, which includes a review of, among other factors, demand requirements, component part
purchase commitments of the Company and certain key suppliers, product life cycle and development plans,
component cost trends, product pricing and quality issues. If customer demand subsequently differs from the
Company’s forecasts, requirements for inventory write-offs that differ from the Company’s estimates could
become necessary. If management believes that demand no longer allows the Company to sell inventories
above cost or at all, such inventory is written down to net realizable value or excess inventory is written off.
Furthermore, the Company records an accrual for estimated fees and vendor inventory liabilities related to
non-cancelable purchase commitments with contract manufacturers and suppliers for quantities in excess of
future demand forecasts.
For further details on the carrying value of inventory as at February 27, 2010, refer to Note 6 to the
Consolidated Financial Statements, and for further details on the vendor inventory liabilities refer to Note 16 to
the Consolidated Financial Statements.
Intangible Assets and Goodwill
Intangible assets are stated at cost less accumulated amortization and are comprised of acquired technology,
licenses and patents.
In connection with business acquisitions completed by the Company, the Company identifies and estimates
the fair value of (i) acquired technology, which is subsequently amortized straight-line over two to five years
and, (ii) net assets acquired, including certain identifiable intangible assets other than goodwill and liabilities
assumed in the acquisitions. Any excess of the purchase price over the estimated fair value of the net assets
acquired is assigned to goodwill.
Under certain license agreements, the Company is committed to current and future royalty payments based
on the sales of products using certain licensed technologies. License agreements involving up-front lump sum
payments are capitalized as part of intangible assets and are then amortized straight-line over the terms of
the license agreements or on a per unit basis based upon the anticipated number of units sold during the
terms, subject to a maximum of five years.
Patents include trademarks, internally developed patents, as well as individual patents or portfolios of patents
acquired from third parties or through the acquisition of third parties. Costs capitalized and subsequently
amortized include all costs necessary to acquire intellectual property, as well as legal costs arising out of the
defense of any Company-owned patents. Patents are amortized straight-line over 17 years or over their
estimated useful life.
The Company assesses the impairment of intangible assets and goodwill whenever events or changes in
circumstances indicate that the carrying amount may not be recoverable. In addition, goodwill is assessed for
impairment on an annual basis. Unforeseen and adverse events, changes in circumstances and market
conditions and adverse legal factors are potential indicators that the carrying amount of intangible assets
and goodwill may not be recoverable and may require an impairment charge.
The useful lives of intangible assets are evaluated quarterly to determine if events or circumstances warrant a
revision to their remaining period of amortization. Legal, regulatory and contractual factors, the effects of
obsolescence, demand, competition and other economic factors are potential indicators that the useful life of
an intangible asset may be revised.
MD&A
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