Blackberry 2013 Annual Report Download - page 126

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 has a Deferred Share Unit Plan (the “DSU Plan”), adopted by the Board of Directors on December 20, 2007,
under which each independent director will be credited with Deferred Share Units (“DSUs”) in satisfaction of all or a portion of
the cash fees otherwise payable to them for serving as a director of the Company. Grants under the DSU plan replace the stock
option awards that were historically granted to independent members of the Board of Directors. At a minimum, 60% of each
independent director’s annual retainer will be satisfied in the form of DSUs. The director can elect to receive the remaining 40%
in any combination of cash and DSUs. Within a specified period after such a director ceases to be a director, DSUs will be
redeemed for cash with the redemption value of each DSU equal to the weighted average trading price of the Company’s shares
over the five trading days preceding the redemption date. Alternatively, subject to receipt of shareholder approval, the Company
may elect to redeem DSUs by way of shares purchased on the open market or issued by the Company.
DSUs are accounted for as liability-classified awards and are awarded on a quarterly basis. These awards are measured at their
fair value on the date of issuance and remeasured at each reporting period until settlement.
Warranty
The Company provides for the estimated costs of product warranties at the time revenue is recognized. BlackBerry devices are
generally covered by a time-limited warranty for varying periods of time. The Company’s warranty obligation is affected by
product failure rates, differences in warranty periods, regulatory developments with respect to warranty obligations in the
countries in which the Company carries on business, freight expense, and material usage and other related repair costs.
The Company’s estimates of costs are based upon historical experience and expectations of future return rates and unit warranty
repair costs. If the Company experiences increased or decreased warranty activity, or increased or decreased costs associated
with servicing those obligations, revisions to the estimated warranty liability would be recognized in the reporting period when
such revisions are made.
Advertising costs
The Company expenses all advertising costs as incurred. These costs are included in selling, marketing and administration.
In September 2011, the Financial Accounting Standards Board (the “FASB”) issued authoritative guidance to simplify how
entities, both public and non-public, test goodwill for impairment. The guidance amends previous literature by permitting an
entity to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less
than its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test.
Under previous guidance, an entity was required to test goodwill for impairment, on at least an annual basis, by comparing the
fair value of a reporting unit with its carrying amount, including goodwill (step one). If the fair value of the reporting unit is less
than its carrying amount, then the second step of the test must be performed to measure the amount of the impairment loss, if
any. Under the new authoritative guidance, an entity is not required to calculate the fair value of a reporting unit unless the entity
determines that it is more likely than not that its fair value is less than its carrying value. The new authoritative guidance became
effective for annual and interim goodwill impairment tests performed for fiscal
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2. ADOPTION OF ACCOUNTING POLICIES