Blackberry 2011 Annual Report Download - page 68

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.
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 and are awarded on a
quarterly basis. These awards are measured at their fair value on the date of issuance, and remeasured at each reporting period, until
settlement.
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.
Advertising costs
The Company expenses all advertising costs as incurred. These costs are included in selling, marketing and administration.
2. ADOPTION OF ACCOUNTING POLICIES
In January 2010, the Financial Accounting Standards Board (the “FASB”) issued authoritative guidance to improve disclosures about
fair value measurements. The guidance amends previous literature to require an entity to provide a number of additional disclosures
regarding fair value measurements including significant transfers between Level 1 and Level 2 on a gross basis and the reasons for
such transfers, transfers in and out of Level 3 on a gross basis and the reasons for such transfers, the entity’s policy for recognizing
transfers between Levels and to disclose information regarding purchases, sales, issuances and settlements on a gross basis in the
Level 3 reconciliation of recurring fair value measurements. The guidance also further clarifies existing guidance on disclosure
requirements around disaggregation and valuation techniques for both recurring and non-recurring fair value measurements in either
RESEARCH IN MOTION ANNUAL REPORT 2011 55
RESEARCH IN MOTION LIMITED
Notes to the Consolidated Financial Statements continued
In millions of United States dollars, except share and per share data, and except as otherwise indicated