Intel 2012 Annual Report Download - page 61
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Revenue Recognition
We recognize net product revenue when the earnings process is complete, as evidenced by an agreement with the
customer, delivery has occurred, and acceptance, if applicable, as well as fixed pricing and probable collectibility. We
record pricing allowances, including discounts based on contractual arrangements with customers, when we recognize
revenue as a reduction to both accounts receivable and net revenue. Because of frequent sales price reductions and
rapid technology obsolescence in the industry, we defer product revenue and related costs of sales from component sales
made to distributors under agreements allowing price protection or right of return until the distributors sell the
merchandise. The right of return granted generally consists of a stock rotation program in which distributors are able to
exchange certain products based on the number of qualified purchases made by the distributor. Under the price protection
program, we give distributors credits for the difference between the original price paid and the current price that we offer.
We include shipping charges billed to customers in net revenue, and include the related shipping costs in cost of sales.
Revenue from license agreements with our McAfee business generally includes service and support agreements for
which the related revenue is deferred and recognized ratably over the performance period. Revenue derived from online
subscription products is deferred and recognized ratably over the performance period. Professional services revenue is
recognized as services are performed or, if required, upon customer acceptance. For arrangements with multiple
elements, including software licenses, maintenance, and/or services, revenue is allocated across the separately identified
deliverables and may be recognized or deferred. When vendor-specific objective evidence (VSOE) does not exist for
undelivered elements such as maintenance and support, the entire arrangement fee is recognized ratably over the
performance period. Direct costs, such as costs related to revenue-sharing and royalty arrangements associated with
license arrangements, as well as component costs associated with product revenue and sales commissions, are deferred
and amortized over the same period that the related revenue is recognized.
We record deferred revenue offset by the related cost of sales on our consolidated balance sheets as deferred income.
Advertising
Cooperative advertising programs reimburse customers for marketing activities for certain of our products, subject to
defined criteria. We accrue cooperative advertising obligations and record the costs at the same time that the related
revenue is recognized. We record cooperative advertising costs as marketing, general and administrative expenses to the
extent that an advertising benefit separate from the revenue transaction can be identified and the fair value of that
advertising benefit received is determinable. We record any excess in cash paid over the fair value of the advertising
benefit received as a reduction in revenue. Advertising costs, including direct marketing costs, recorded within marketing,
general and administrative expenses were $2.0 billion in 2012 ($2.1 billion in 2011 and $1.8 billion in 2010).
Employee Equity Incentive Plans
We have employee equity incentive plans, which are described more fully in “Note 22: Employee Equity Incentive Plans.”
We use the straight-line attribution method to recognize share-based compensation over the service period of the award.
Upon exercise, cancellation, forfeiture, or expiration of stock options, or upon vesting or forfeiture of restricted stock units
(RSUs), we eliminate deferred tax assets for options and restricted stock units with multiple vesting dates for each vesting
period on a first-in, first-out basis as if each vesting period were a separate award.
Income Tax
We compute the provision for income taxes using the asset and liability method, under which deferred tax assets and
liabilities are recognized for the expected future tax consequences of temporary differences between the financial
reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards. We measure
deferred tax assets and liabilities using the currently enacted tax rates that apply to taxable income in effect for the years
in which those tax assets are expected to be realized or settled. We record a valuation allowance to reduce deferred tax
assets to the amount that it is believed more likely than not to be realized.
We recognize tax benefits from uncertain tax positions only if that tax position is more likely than not to be sustained on
examination by the taxing authorities, based on the technical merits of the position. We then measure the tax benefits
recognized in the financial statements from such positions based on the largest benefit that has a greater than 50%
likelihood of being realized upon ultimate settlement. We recognize interest and penalties related to unrecognized tax
benefits within the provision for taxes. For more information about income taxes, see “Note 26: Income Taxes.”