Motorola 2012 Annual Report Download - page 63

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Motorola Solutions, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
(Dollars in millions, except as noted)
1. Summary of Significant Accounting Policies
Principles of Consolidation: The consolidated financial statements include the accounts of Motorola Solutions, Inc.
(the “Company” or “Motorola Solutions”) and all controlled subsidiaries. All intercompany transactions and balances have
been eliminated.
The consolidated financial statements as of December 31, 2012 and 2011 and for the years ended December 31, 2012,
2011 and 2010, include, in the opinion of management, all adjustments (consisting of normal recurring adjustments and
reclassifications) necessary to present fairly the Company's consolidated financial position, results of operations, statements of
comprehensive income, statement of stockholder's equity, and cash flows for all periods presented.
The preparation of financial statements in conformity with U.S. Generally Accepted Accounting Principles ("GAAP")
requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting periods. Actual results could differ from those estimates.
Changes in Presentation
Reverse Stock Split and Name Change
On November 30, 2010, Motorola Solutions announced the timing and details regarding the distribution of Motorola
Mobility Holdings, Inc. ("Motorola Mobility") and the approval of a reverse stock split at a ratio of 1-for-7 (“the Reverse Stock
Split”). On January 4, 2011, immediately following the distribution of Motorola Mobility common stock, the Company
completed a the Reverse Stock Split and changed its name to Motorola Solutions, Inc. All consolidated share and per share
information presented gives effect to the distribution of Motorola Mobility and Reverse Stock Split.
Revenue Recognition: Net sales consist of a wide range of activities including the delivery of stand-alone equipment or
services, custom design and installation over a period of time, and bundled sales of equipment, software and services. The
Company enters into revenue arrangements that may consist of multiple deliverables of its product and service offerings due to
the needs of its customers. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has
occurred, the sales price is fixed or determinable, and collectability of the sales price is reasonably assured. The Company
recognizes revenue from the sale of equipment, software bundled with equipment that is essential to the functionality of the
equipment, and most services in accordance with general revenue recognition accounting principles. The Company recognizes
revenue in accordance with software accounting guidance for the following types of sales transactions: (i) standalone sales of
software products or software upgrades, (ii) standalone sales of software maintenance agreements, and (iii) sales of software
bundled with hardware not essential to the functionality of that hardware.
Products —For product sales, revenue recognition occurs when products have been shipped, risk of loss has transferred
to the customer, objective evidence exists that customer acceptance provisions have been met, no significant obligations remain
and allowances for discounts, price protection, returns and customer incentives can be reliably estimated. Recorded revenues
are reduced by these allowances. The Company bases its estimates of these allowances on historical experience taking into
consideration the type of products sold, the type of customer, and the specific type of transaction in each arrangement. Where
customer incentives cannot be reliably estimated, the Company defers revenue until the incentive has been finalized with the
customer.
The Company sells software and equipment obtained from other companies. The Company establishes its own pricing
and retains related inventory risk, is the primary obligor in sales transactions with customers, and assumes the credit risk for
amounts billed to customers. Accordingly, the Company generally recognizes revenue for the sale of products obtained from
other companies based on the gross amount billed.
Within the Enterprise segment, products are primarily sold through distributors and value-added resellers (collectively
“channel partners”). Channel partners may provide a service or add componentry in order to resell the Company's products to
end customers. For sales to channel partners where the Company cannot reliably estimate the final sales price or when a
channel partner is unable to pay for the Company's products without reselling them to their customers, revenue is not
recognized until the products are resold by the channel partner to the end customer.
Long-Term Contracts—For long-term contracts that involve customization of equipment and/or software, the Company
generally recognizes revenue using the percentage of completion method based on the percentage of costs incurred to date
compared to the total estimated costs to complete the contract. In certain instances, when revenues or costs associated with
long-term contracts cannot be reliably estimated or the contract contains other inherent uncertainties, revenues and costs are