Clearwire 2008 Annual Report Download - page 64

assets;
i
mpa
i
rments o
fi
ntan
gibl
e assets w
i
t
hi
n
d
e
fi
n
i
te use
f
u
lli
ves;
b
us
i
ness com
bi
nat
i
ons; s
h
are-
b
ase
d
compen-
s
ation; accountin
g
for spectrum licenses and leases; the deferred tax asset valuation allowance; investments and fai
r
v
a
l
ue measurements
.
R
evenue Recogn
i
t
i
o
n
We reco
g
nize revenue in accordance with Staff Accountin
g
Bulletin, which we refer to as SAB, Topic 13
,
R
evenue Reco
g
n
i
t
i
on
,
w
hen all of the following conditions exist: (i) persuasive evidence of an arrangement exists i
n
th
e
f
orm o
f
an accepte
d
purc
h
ase or
d
er; (
ii
)
d
e
li
very
h
as occurre
d
,
b
ase
d
on s
hi
pp
i
ng terms, or serv
i
ces
h
ave
b
een
r
en
d
ere
d
;(
iii
)t
h
epr
i
ce to t
h
e
b
u
y
er
i
s
fi
xe
d
or
d
eterm
i
na
bl
e, as
d
ocumente
d
on t
h
e accepte
d
purc
h
ase or
d
er; an
d
(iv) collectabilit
y
is reasonabl
y
assured.
We primaril
y
earn revenue b
y
providin
g
access to our wireless broadband network. Also included is revenue
from the lease of CPE to customers and other additional services, including VoIP telephony service, personal an
d
b
us
i
ness ema
il
an
d
stat
i
c Internet Protoco
l
. Act
i
vat
i
on
f
ees are c
h
arge
d
to customers w
h
en
i
n
i
t
i
at
i
ng a serv
i
ce
s
ubscri
p
tion.
We app
ly
Emer
gi
n
g
Issues Tas
k
Force, w
hi
c
h
we re
f
er to as EITF, Issue No. 00-21
,
R
evenue
A
rrangement
s
w
ith Multi
p
le Deliverables
,
to account for revenue arran
g
ements with activation and/or multiple service compo-
n
ents. T
h
ese arrangements are a
ll
ocate
d
among t
h
e separate un
i
ts o
f
account
i
ng
b
ase
d
on t
h
ere
l
at
i
ve
f
a
i
rva
l
ues
if
t
he deliverables in the arran
g
ement meet certain criteria.
We app
ly
EITF Issue No. 99-19
,
Reporting Revenue Gross as a Principa
l
versus Net as an Agent
,in
determinin
g
whether it is appropriate to record the
g
ross amount of product sales and related costs or the net amoun
t
e
arne
d
as comm
i
ss
i
ons. W
h
en we are t
h
epr
i
mary o
bli
gor
i
n a transact
i
on, are su
bj
ect to
i
nventory r
i
s
k
,
h
ave
l
at
i
tu
de
i
n esta
bli
s
hi
ng pr
i
ces an
d
se
l
ect
i
ng supp
li
ers, or
h
ave severa
lb
ut not a
ll
o
f
t
h
ese
i
n
di
cators, revenue
i
s recor
d
e
d
g
ross. If we are not the primar
y
obli
g
or and amounts earned are determined usin
g
a fixed percenta
g
e, a fixed
-
p
ayment sc
h
e
d
u
l
e, or a com
bi
nat
i
on o
f
t
h
e two, we recor
d
t
h
e net amounts as comm
i
ss
i
ons earne
d.
We recor
d
est
i
mate
d
re
d
uct
i
ons to revenue
f
or customer programs at t
h
et
i
me revenue
i
s recogn
i
ze
d
.Ou
r
c
ustomer programs pr
i
mar
il
y
i
nvo
l
ve promot
i
ona
ldi
scounts on serv
i
ce
f
ees
f
or a spec
ifi
e
d
per
i
o
d
o
f
t
i
me, w
hi
c
h
are
d
es
ig
ne
d
to serve as sa
l
es
i
ncent
i
ves
f
or our pro
d
ucts
i
nvar
i
ous tar
g
et mar
k
ets. We account
f
or promot
i
ona
l
discounts in accordance with EITF Issue No. 01-09
,
Accounting
f
or Consideration Given by a Vendor to a Custome
r
(
Including a Reseller o
f
the Vendor’s Products)
,
w
hich we refer to as EITF No. 01-09 and
,
as such
,
the discount is
treate
d
as cas
h
cons
id
erat
i
on an
d
recor
d
e
d
as a re
d
uct
i
on o
f
revenue. Ot
h
er promot
i
ons prov
idi
n
g
a
f
ree pro
d
uct o
r
s
ervice from an unrelated entit
y
are considered a deliverable in the exchan
g
e and not a refund or rebate of a portion
of the service fees charged to the customer, and are treated as non-cash consideration and are expensed as incurre
d
i
n accor
d
ance w
i
t
h
EITF No. 01-09 as oppose
d
to a re
d
uct
i
on
i
n revenue.
Serv
i
ce revenue
f
rom customers
f
or t
h
ew
i
re
l
ess
b
roa
db
an
d
an
d
opt
i
ona
l
serv
i
ces are
bill
e
di
na
d
vance an
d
r
eco
g
nized ratabl
y
over the service period. Activation fees char
g
ed to the customer are deferred and reco
g
nized as
s
ervice revenue on a strai
g
ht-line basis over the expected life of the customer relationship, which we have estimate
d
to be 3.5 years for our pre-WiMAX customers. This expected life was determined based on our assessment of
i
ndustr
y
avera
g
es and our assessment of data on the duration of a customer life and avera
g
e monthl
y
churn
.
Revenue associated with the sale of CPE and other equipment to our customers is reco
g
nized when title an
d
r
isk of loss transfer to the customer. Generall
y
, the risks of ownership and title pass when product is delivered to ou
r
c
ustomer. S
hi
pp
i
ng an
dh
an
dli
ng costs
bill
e
d
to customers are recor
d
e
d
to serv
i
ce revenue
.
52
CLEARWIRE CORPORATION AND
S
UB
S
IDIARIE
S
MANA
G
EMENT’
S
DI
SCUSS
I
O
N AND ANALY
S
I
SO
F FINAN
C
IAL
CO
NDITI
O
N
AND RESULTS OF OPERATIONS —
(
Continued
)