Blackberry 2012 Annual Report Download - page 127

Research In Motion Limited
Notes to the Consolidated Financial Statements
In millions of United States dollars, except share and per share data, and except as otherwise indicated
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 collection is reasonably assured. In addition to this
general policy, the following paragraphs describe the specific revenue recognition policies for each of the Company’s major
categories of revenue.
Hardware
Revenue from the sale of BlackBerry wireless hardware products (e.g. BlackBerry® handheld devices and BlackBerry®
PlayBook™ tablets) is recognized when title has transferred to the customer and all significant contractual obligations that affect
the customer’s final acceptance have been fulfilled. For hardware products for which the software is deemed essential to the
functionality of the hardware, the Company recognizes revenue in accordance with general revenue recognition accounting
guidance.
The Company sells its BlackBerry PlayBook tablet with the right to receive unspecified software upgrade rights on a “when-
and-if available” basis. These upgrade rights are related specifically to the product’s essential operating system software. In
these instances, the amount allocated to the unspecified software upgrade rights are deferred and recognized rateably over the
24-month estimated life of the tablet.
The Company records reductions to revenue for estimated commitments related to price protection, right of return and for
customer incentive programs. Price protection is accrued as a reduction to revenue based on estimates of price reductions,
provided the price reduction can be reliably estimated and all other revenue recognition criteria have been met. The Company
also records reductions to revenue for a right of return based on contractual terms and conditions and, if the expected product
returns can be reasonably and reliably estimated, based on historical experience. Where a general right of return cannot be
reasonably and reliably estimated, the Company recognizes revenue when the product sells through the distribution channel. The
estimated cost of the customer incentive program is accrued as a reduction to revenue based on historical experience, and is
recognized at the later of the date at which the Company has sold the product or the date at which the program is offered. If
historical experience cannot support a breakage rate, the maximum rebate amount is deferred and adjusted when incentive
programs end.
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 and in accordance with industry-specific
software revenue recognition accounting guidance. 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 those services are provided.
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