Blackberry 2010 Annual Report Download - page 71

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Research and development
Research costs are expensed as incurred. Development costs for BlackBerry devices and licensed software to be sold,
leased or otherwise marketed are subject to capitalization beginning when a product’s technological feasibility has been
established and ending when a product is available for general release to customers. The Company’s products are
generally released soon after technological feasibility has been established and therefore costs incurred subsequent to
achievement of technological feasibility are not significant and have been expensed as incurred.
Comprehensive income (loss)
Comprehensive income (loss) is defined as the change in net assets of a business enterprise during a period from
transactions and other events and circumstances from non-owner sources and includes all changes in equity during a
period except those resulting from investments by owners and distributions to owners. The Company’s reportable items of
comprehensive income are cash flow hedges as described in note 17 and changes in the fair value of available-for-sale
investments as described in note 5. Realized gains or losses on available-for-sale investments are reclassified into
investment income using the specific identification basis.
Earnings per share
Earnings per share is calculated based on the weighted-average number of shares outstanding during the year. The
treasury stock method is used for the calculation of the dilutive effect of stock options.
Stock-based compensation plans
The Company has stock-based compensation plans, which are described in note 11(b).
The Company has an incentive stock option plan for officers and employees of the Company or its subsidiaries. Under the
terms of the plan, as revised in fiscal 2008, no stock options may be granted to independent directors. Prior to fiscal 2007,
the Company accounted for stock-based compensation expense based on the grant-date fair value as determined under
the intrinsic value method. Beginning in fiscal 2007, the Company adopted the modified prospective transition (“MPT”)
method to record stock-based compensation expense. Stock-based compensation expense calculated using the MPT
approach is recognized on a prospective basis in the financial statements for all new and unvested stock options that are
ultimately expected to vest as the requisite service is rendered beginning in the Company’s fiscal 2007 year. The Company
measures stock-based compensation expense at the grant date based on the award’s fair value as calculated by the
Black-Scholes-Merton (“BSM”) option-pricing model and is recognized rateably over the vesting period. The BSM model
requires various judgmental assumptions including volatility and expected option life. In addition, judgment is also applied
in estimating the amount of stock-based awards that are expected to be forfeited, and if actual results differ significantly
from these estimates, stock-based compensation expense and our results of operations would be impacted.
Any consideration paid by employees on exercise of stock options plus any recorded stock-based compensation within
additional paid-in capital related to that stock option is credited to capital stock.
The Company has a Restricted Share Unit Plan (the “RSU Plan”) under which eligible participants include any officer or
employee of the Company or its subsidiaries. At the Company’s discretion, Restricted Share Units (“RSUs”) are redeemed
for either common shares issued by the Company, common shares purchased on the open market by a trustee selected
by the Company or the cash equivalent on the vesting dates established by the Board of Directors or the Compensation,
Nomination and Governance Committee of the Board of Directors. The RSUs vest over a three-year period, either on the
third anniversary date or in equal instalments on each anniversary date over the vesting period. The Company classifies
RSUs as equity instruments as the Company has the ability and intent to settle the awards in shares. The compensation
expense is calculated based on the fair value of each RSU as determined by the closing value of the Company’s common
shares on the business day of the grant date. The Company recognizes compensation expense over the vesting period of
the RSU.
Upon issuance of the RSU, common shares for which RSUs may be exchanged will be purchased on the open market by a
trustee selected and funded by the Company. The trustee has been appointed to settle the Company’s obligation to
deliver shares to individuals upon vesting. In addition, upon vesting, the trustee is required to sell enough shares to cover
the individual recipient’s minimum statutory withholding tax requirement, with the remaining shares delivered to the
individual. As the Company is considered to be the primary beneficiary of the trust, the trust is considered a variable
interest entity and is consolidated by the Company.
NOTES 1NOTE 1
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