Qualcomm 1999 Annual Report Download - page 50

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QUALCOMM Incorporated
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THE COMPANY AND ITS SIGNIFICANT ACCOUNTING POLICIES
The Company
QUALCOMM Incorporated (the “Company” or “QUALCOMM”), a
Delaware corporation, designs, develops manufactures and markets
digital wireless communications products and services based on its
Code Division Multiple Access (“CDMA”) technology. The Company
licenses and receives royalty payments on its CDMA technology from
major domestic and international telecommunications suppliers. The
Company has contracts with Globalstar L.P. (“Globalstar”), a partner-
ship formed to build and operate a worldwide, low-Earth-orbit
satellite-based telecommunications system, to design, develop and
manufacture consumer and ground communications equipment.
Principles of Consolidation
The Company’s consolidated financial statements include the
assets, liabilities and results of operations of majority-owned sub-
sidiaries. The ownership of the other interest holders is reflected as
minority interest. All significant intercompany accounts and transac-
tions have been eliminated.
Financial Statement Preparation
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make esti-
mates 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 period. Actual results could differ from
those estimates. Certain prior year amounts have been reclassified to
conform with the current year presentation.
Fiscal Year
The Company operates and reports using a fiscal year ending on the
last Sunday in September. For presentation purposes, the Company has
indicated its fiscal year as ending on September 30.
Revenues
Revenues on product sales are generally recognized at the time
units are shipped and over the period during which message and war-
ranty services are provided, except for shipments under arrangements
involving significant acceptance requirements. Under such arrange-
ments, revenue is recognized when the Company has substantially met
its performance obligations. Revenue from long-term contracts and
revenue earned under license and development agreements with
continuing performance obligations is recognized using the percent-
age-of-completion method, based either on costs incurred to date
compared with total estimated costs at completion or using a units of
delivery methodology. Billings on uncompleted contracts in excess of
incurred cost and accrued profits are classified as unearned revenue.
Estimated contract losses are recognized when determined.
Non-refundable license fees are recognized when delivery require-
ments have been met and collection is probable. Royalty revenue is
recorded as earned in accordance with the specific terms of each
license agreement when reasonable estimates of such amounts can be
made. Beginning with the second quarter of fiscal 1998, the Company
began to accrue its estimate of certain royalty revenues earned that
previously could not be reasonably estimated prior to being reported by
its licensees.
Concentrations
A significant portion of the Company’s revenues are concentrated
with a limited number of customers as the worldwide market for wire-
less telephone systems and products is dominated by a small number of
large corporations and government agencies. The Company also derives
significant revenues from the North American trucking industry, partic-
ularly providers of long-haul transportation of goods and equipment.
Revenues from international customers, consisting of export sales
and license and royalty fees, were approximately 38%, 34% and 30% of
total revenues in fiscal 1999, 1998 and 1997, respectively. Such rev-
enues included $1,041 million, $697 million and $522 million from Asia,
respectively. During fiscal 1998, sales to one South Korean customer
comprised 11% of consolidated revenues. During fiscal 1999, 1998 and
1997, revenues from Globalstar (Note 11) accounted for 11%, 11% and
10% of revenues, respectively.
Cash Equivalents
The Company considers all highly liquid investments with original
maturities of three months or less to be cash equivalents. Cash and
cash equivalents include money market funds, certificates of deposit,
commercial paper and loan participations. The carrying amounts
approximate fair value due to the short maturities of these instruments.
The Company’s policy is to place its cash, cash equivalents and
investments with high quality financial institutions, government agen-
cies and corporate entities and to limit the amount of credit exposure.
Investments
Management determines the appropriate classification of mar-
ketable securities at the time of purchase and re-evaluates such
designation as of each balance sheet date. Held-to-maturity securities
are carried at amortized cost, which approximates fair value.
Available-for-sale securities are stated at market value as determined
by the most recently traded price of each security at the balance sheet
date. The net unrealized gains or losses on available-for-sale securi-
ties are reported as a component of comprehensive income (loss), net
of tax. The specific identification method is used to compute the real-
ized gains and losses on debt and equity securities.
Warrants
The Company holds warrants to purchase equity interests in certain
other companies. Warrants to purchase equity interests are carried
at cost.
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