TeleNav 2010 Annual Report Download - page 54

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Accordingly, actual results could differ significantly from the estimates made by our management. To the extent
that there are differences between our estimates and actual results, our future financial statement presentation,
financial condition, results of operations and cash flows will be affected. We believe that the accounting policies
discussed below are critical to understanding our historical and future performance, as these policies relate to the
more significant areas involving our judgments and estimates.
Revenue recognition. We primarily derive our revenue from subscriptions to access our LBS, which are
generally provided through our wireless carrier partners that offer our services to their subscribers. Our revenue
is primarily comprised of monthly subscription fees for the use of our LBS, as well as activation fees related to
certain services. We recognize revenue when persuasive evidence of an arrangement exists, delivery of those
services has occurred, the fee is fixed or determinable and collectability is reasonably assured.
We recognize monthly fees related to our services in the month we provide the services. We defer amounts
received in advance of the service being provided and recognize the deferred amounts when the monthly service
has been provided. Our agreements do not contain general rights of refund once the service has been provided.
We also establish allowances for estimated credits subsequently issued to end users by our wireless carrier
partners. We defer activation fees received upon the initiation of certain services and recognize the deferred
amounts over the estimated average length of subscription to the service, historically 16 months.
We recognize as revenue the amount our wireless carrier partners report to us as we provide our services,
which are net of any revenue sharing or other fees earned and deducted by our wireless carrier partners. We are
not the principal provider when selling access to our LBS through our wireless carrier partners as the subscribers
directly contract with our wireless carrier partners. In addition, we earn a fixed fee or fixed percentage of fees
charged by our wireless carrier partners and our wireless carrier partners have the sole ability to set the price
charged to their subscribers for our service. Our wireless carrier partners have direct responsibility for billing and
collecting those fees from their subscribers and we and our wireless carrier partners may offer subscribers a
30-day free trial for our service.
In certain instances, due to the nature and timing of monthly revenue and subscriber reporting from our
wireless carrier partners, we may be required to make estimates of the amount of LBS revenue to recognize from
a wireless carrier partner for the current period. For example, several of our wireless carrier partners do not
provide us with sufficient monthly individual subscriber billing period details to allow us to compute the
allocation of monthly service fees to the individual end user’s service period, and in such cases we make
estimates of any required service period revenue cutoff. In addition, if we fail to receive an accurate revenue
report from a wireless carrier partner for the month, we will need to estimate the amount of revenue that should
be recorded for that month. These estimates may require judgment, and we consider certain factors and
information in making these estimates such as:
• subscriber data supplied by our wireless carrier partners;
• wireless carrier partner specific historical subscription and revenue reporting trends;
• end user subscription data from our internal systems; and
• data from comparable distribution channels of our other wireless carrier partners.
If we are unable to reasonably estimate recognizable revenue from a wireless carrier partner for a given
period, we defer recognition of revenue to the period in which we receive and validate the wireless carrier
partner’s revenue report and all of our revenue recognition criteria have been met. If we have recorded an
estimated revenue amount, we record any difference between the estimated revenue and actual revenue in the
period when we receive the final revenue reports from our wireless carrier partner, which typically occurs within
the following month.
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