Blackberry 2012 Annual Report Download - page 202

Research In Motion Limited
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Research and Development Expenses
Research and development expenditures increased by $386 million to $1.4 billion, or 6.8% of revenue, in fiscal 2011, compared to
$965 million, or 6.5% of revenue, in fiscal 2010. The majority of the increase during fiscal 2011 compared to fiscal 2010 was
attributable to salaries and benefits due to an increase in the headcount associated with research and development activities, as well as
increased materials usage.
Selling, Marketing and Administration Expenses
Selling, marketing and administration expenses increased by $493 million to $2.4 billion for fiscal 2011 compared to $1.9 billion for
fiscal 2010. As a percentage of revenue, selling, marketing and administration expenses decreased to 12.1% in fiscal 2011 versus
12.8% in fiscal 2010. Excluding the impact of $96 million of unusual charges during fiscal 2010, selling, marketing and
administration expenses increased by $589 million. The majority of this increase was primarily attributable to increased expenditures
for marketing, advertising and promotion, increased salary and benefits expenses primarily as a result of increased personnel as well
as information technology costs, which was partially offset by reduced facilities expenditures in fiscal 2011 primarily due to the one-
time charge recognized in fiscal 2010 in relation to the enactment of changes to the functional currency tax legislation discussed
further below, and reduced facilities expenditures.
With the enactment of changes to the functional currency tax legislation by the Government of Canada in the first quarter of fiscal
2010, the Company changed the basis of calculating its income tax provision for its Canadian operations from Canadian dollars to the
U.S. dollar, its reporting currency, with the effective date being the beginning of fiscal 2010. Gains realized on the revaluation of
these tax liabilities previously denominated in Canadian dollars throughout 2009 were reversed upon enactment of the changes to the
rules in the first quarter of fiscal 2010. Included in the total selling, marketing and administration for fiscal 2010 is a $54 million
charge primarily relating to the reversal of foreign exchange gains previously recorded in fiscal 2009 on the revaluation of Canadian
dollar denominated tax liability balances. Throughout fiscal 2009, foreign exchange gains were offset by foreign exchange losses
incurred as a part of the Company’s foreign currency hedging program.
Selling, marketing and administration expenses for fiscal 2010 also included a charge of $42 million for the payment on account of
certain employee tax liabilities related to certain previously-exercised stock options with measurement date issues that were exercised
during certain time periods. The Company’s Board of Directors approved the payment on account of certain incremental personal tax
liabilities of certain employees, excluding RIM’s then Co-Chief Executive Officers, related to the exercise of certain stock options
issued by the Company.
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