Blackberry 2013 Annual Report Download - page 123

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
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. Service revenue also includes
the recognition of previously deferred revenue related to multi-element arrangements for non-software services and software
upgrade rights related to the BlackBerry PlayBook tablets and BlackBerry 10 devices.
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.
Other
Other revenue consists of the sale of accessories and repair and maintenance contracts. Revenue is recognized when persuasive
evidence of an arrangement exists, delivery has occurred, the sales price is fixed or determinable, and collection is probable.
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) certain BlackBerry 7 or earlier handheld devices with
services, (ii) BlackBerry 10 handheld devices with unspecified software upgrades on a when-and-if available basis along with
undelivered non-software services (iii) tablets with unspecified software upgrades on a when-and-if available basis and
(iv) software with technical support services.
For the Company’s arrangements involving multiple deliverables of BlackBerry 7 or earlier 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.
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