Blackberry 2013 Annual Report Download - page 181

Research In Motion Limited
Management’s Discussion and Analysis of Financial Condition and Results of Operations
The Company records reductions to revenue for estimated commitments related to price protection, right of return and for customer
incentive programs. Price protection is accrued as a reduction to revenue based on estimates of price reductions provided the price
reduction can be reliably estimated or based on contractual caps and all other revenue recognition criteria have been met. The
Company also records reductions to revenue for a right of return based on contractual terms and conditions and, if the expected
product returns can be reasonably and reliably estimated, based on historical experience. Where a general right of return cannot be
reasonably and reliably estimated, the Company recognizes revenue when the product sells through the distribution channel. The
estimated cost of customer incentive programs is accrued as a reduction to revenue and is recognized at the later of the date at which
the Company has sold the product or the date at which the program is offered. If historical experience cannot support a breakage rate,
the maximum rebate amount is accrued and adjusted when the incentive programs end.
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.
M
ultiple-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) 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.
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