Blackberry 2012 Annual Report Download - page 128

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
Other
Revenue from the sale of accessories is recognized when title has transferred to the customer and all significant contractual
obligations that affect the customer’s final acceptance have been fulfilled. Revenue from repair and maintenance programs is
recognized when the service is delivered, which is when the title is transferred to the customer and all significant contractual
obligations that affect the customer’s final acceptance have been fulfilled.
Shipping and handling costs
Amounts billed to customers related to shipping and handling are classified as revenue, and the Company’s shipping and
handling costs are included in cost of sales. Shipping and handling costs that cannot be reasonably attributed to certain
customers are included in selling, marketing and administration.
Multiple-element arrangements
The Company enters into revenue arrangements that may consist of multiple deliverables of its product and service offerings.
The Company’s typical multiple-element arrangements involve: (i) handheld devices with services, (ii) tablets with unspecified
software upgrades on a when-and-if available basis and (iii) software with technical support services.
For the Company’s arrangements involving multiple deliverables of handheld devices with services, the consideration from the
arrangement is allocated to each respective element based on its relative selling price, using vendor-specific objective evidence
of selling price (“VSOE”). In certain limited instances when the Company is unable to establish the selling price using VSOE,
the Company attempts to establish the selling price of each element based on acceptable third party evidence of selling price
(“TPE”); however, the Company is generally unable to reliably determine the selling prices of similar competitor products and
services on a stand-alone basis. In these instances, the Company uses best estimated selling price (“BESP”) in its allocation of
arrangement consideration. The objective of BESP is to determine the price at which the Company would transact a sale if the
product or service was sold on a stand-alone basis.
The BlackBerry PlayBook tablet includes the right to receive free unspecified software upgrade rights on a when-and-if
available basis. This upgrade right to the product’s embedded operating system software is considered an undelivered element at
the time of sale of the tablet and falls within the general revenue recognition guidance. The consideration from the arrangement
is allocated to each respective element based on its relative selling price. As the BlackBerry PlayBook tablet or the upgrade right
are not sold on a standalone basis and no TPE exists for these deliverables, the allocation of revenue is based on the Company’s
BESP’s. The consideration for the delivered hardware and the related essential software operating system are recognized at the
time of sale provided that the four revenue recognition criteria have been met. The consideration allocated to the unspecified
software upgrade rights is deferred and recognized rateably over the 24-month estimated life of the tablets.
For arrangements involving multiple deliverables of software with technical support services, the revenue is recognized based on
the industry-specific software revenue recognition accounting guidance. If the Company is not able to determine VSOE for all o
f
the deliverables of the arrangement, but is able to obtain VSOE for all undelivered elements, revenue is allocated using the
residual method. Under the residual method, the amount of revenue allocated to delivered elements equals the total arrangement
consideration less the aggregate fair value of any undelivered elements. If VSOE of any undelivered software items does not
exist, revenue from the entire arrangement is initially deferred and recognized at the earlier of: (i) delivery of those elements for
which VSOE did not exist; or (ii) when VSOE can be established.
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