Blackberry 2014 Annual Report Download - page 141

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BlackBerry Limited
Management’s Discussion and Analysis of Financial Condition and Results of Operations
11
For the Fiscal Year Ended
Gross Margin
Loss from
continuing
operations before
income taxes
Loss from
continuing
operations
Diluted loss per
share from
continuing
operations
As reported $(43) $ (7,184) $ (5,873) $ (11.18)
LLA Impairment Charge — 2,748 2,475 4.71
Q3 Fiscal 2014 Inventory Charge 1,592 1,592 1,347 2.56
Z10 Inventory Charge 934 934 666 1.27
CORE program charges 103 512 398 0.76
Debentures Fair Value Adjustment — 382 382 0.73
Q4 Fiscal 2014 Inventory Recovery (149)(149)(106)(0.20)
Adjusted $ 2,437 $ (1,165) $ (711) $ (1.35)
Accounting Policies and Critical Accounting Estimates
Accounting Policies
Please see Note 1 of the Company's Consolidated Financial Statements for a description of the Company's significant
accounting policies, which is included in the Company’s Annual Report.
Critical Accounting Estimates
The preparation of the Consolidated Financial Statements requires management to make estimates and assumptions with
respect to the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and
liabilities. These estimates and assumptions are based upon management’s historical experience and are believed by
management to be reasonable under the circumstances. Such estimates and assumptions are evaluated on an ongoing basis and
form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other
sources. Actual results could differ from these estimates.
The Company’s critical accounting estimates have been reviewed and discussed with the Company’s Audit & Risk
Management Committee and are set out below. The Company’s significant accounting policies are described in Note 1 to the
Consolidated Financial Statements. Except as noted below, there have not been any changes to the Company’s critical
accounting estimates during the past three fiscal years.
Valuation of LLA
The LLA impairment test prescribed by U.S. GAAP requires the Company to identify its asset groups and test impairment of
each asset group separately. To conduct the LLA impairment test, the asset group is tested for recoverability using
undiscounted cash flows over the remaining useful life of the primary asset. If forecasted net cash flows are less than the
carrying amount of the asset group, an impairment charge is measured by comparing the fair value of the asset group to its
carrying value. Determining the Company's asset groups and related primary assets requires significant judgment by
management. Different judgments could yield different results.
The Company's determination of its asset groups, its primary asset and its remaining useful life, and estimated cash flows are
significant factors in assessing the recoverability of the Company's assets for the purposes of LLA impairment testing. The
Company's share price can be affected by, among other things, changes in industry or market conditions, including the effect of
competition, changes in the Company's results of operations, changes in the Company's forecasts or market expectations
relating to future results, and the Company's strategic initiatives and the market's assessment of any such factors. See “Risk
Factors - The market price of the Company's common shares is volatile” in the Company's AIF. The current macroeconomic
environment and competitive dynamics continue to be challenging to the Company's business and the Company cannot be
certain of the duration of these conditions and their potential impact on the Company's future financial results and cash flows. A
continued decline in the Company's performance, the Company's market capitalization and future changes to the Company's
assumptions and estimates used in the LLA impairment test, particularly the expected future cash flows, remaining useful life
of the primary asset and terminal value of the asset group, may result in further impairment charges in future periods of some or
all of the assets on the Company's balance sheet. Although it does not affect the Company's cash flow, an impairment charge to
earnings has the effect of decreasing the Company's earnings or increasing the Company's losses, as the case may be. The
Company's share price could also be adversely affected by the Company's recorded LLA impairment charges.