Blackberry 2012 Annual Report Download - page 129

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
The Company determines BESP for a product or service by considering multiple factors including, but not limited to, market
conditions, competitive landscape, internal costs, gross margin objectives and pricing practices. The determination of BESP is
made through consultation with and formal approval by, the Company’s management, taking into consideration the Company’s
marketing strategy. The Company regularly reviews VSOE, TPE and BESP, and maintains internal controls over the
establishment and updates of these estimates. Based on the above factors, the Company’s BESP for the unspecified software
upgrade right is $6 per BlackBerry PlayBook tablet.
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
Comprehensive income 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 14 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 9(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. 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
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