Tesla 2014 Annual Report Download - page 100

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Table of Contents
parties requiring them to purchase our regulatory credits at pre-determined prices. We recognize revenue on the sale of these credits at the time
legal title to the credits is transferred to the purchasing party by the governmental agency issuing the credits. Revenue from the sale of regulatory
credits totaled $194.4 million, $40.5 million and $2.7 million for the years ended December 31, 2013, 2012 and 2011, respectively.
Maintenance and Service Plans
We offer a prepaid maintenance program for Model S, which includes plans covering maintenance for up to eight years or up to 100,000
miles, provided these services are purchased within a specified period of time. The maintenance plans cover annual inspections and the
replacement of wear and tear parts, excluding tires and the battery, with either a fixed fee per visit for Tesla Ranger service or unlimited Tesla
Ranger visits for a higher initial purchase price. Payments collected in advance of the performance of service are initially recorded in deferred
revenues on the consolidated balance sheets and recognized in automotive sales as we fulfill our performance obligations.
We also offer an extended service plan, which covers the repair or replacement of Model S parts for an additional four years or up to an
additional 50,000 miles, after the end of our initial New Vehicle Limited Warranty, provided they are purchased within a specified period of
time. For customers that are not covered by our New Vehicle Limited Warranties or our extended service plans, we offer Tesla Ranger service at
a higher cost. Payments collected in advance of the performance of service are initially recorded in deferred revenues on the consolidated
balance sheets and recognized in automotive sales ratably over the service coverage periods.
As of December 31, 2013, we had deferred $24.9 million related to our maintenance and service plans. During the year ended
December 31, 2013, we recognized revenue of $0.6 million related to these plans.
We provided Tesla Roadster customers with the opportunity to purchase an extended warranty plan for the period after the end of our
initial New Vehicle Limited Warranty to cover additional services for an additional three years or 36,000 miles. We refer to this program as our
Extended Service plan. Amounts collected on these sales are initially recorded in deferred revenues on the consolidated balance sheets and
recognized in automotive sales over the extended warranty period. As of December 31, 2013 and 2012, we had deferred $1.4 million and
$1.5 million, respectively. During the years ended December 31, 2013 and 2012, we recognized revenue of $0.4 million and $0.1 million related
to this program, respectively.
Additionally, we have previously provided customers of our Tesla Roadsters with a one-time option to replace the battery packs in their
vehicles at any time after the expiration of the New Vehicle Limited Warranty but before the tenth anniversary of the purchase date of their
vehicles. We refer to this program as our Battery Replacement program. Amounts collected on these sales are initially recorded in deferred
revenues on the consolidated balance sheets and recognized in automotive sales as we fulfill our obligation to replace the battery packs. As of
December 31, 2013 and 2012, we had deferred $1.3 million and $1.2 million, respectively, related to the Battery Replacement program and have
not yet recognized any related revenues.
Development Services Revenue
Revenue from development services arrangements consist of revenue earned from the development of electric vehicle powertrain
components and systems for other automobile manufacturers, including the design and development of battery packs, drive units and sample
vehicles to meet a customer’s specifications. Revenue is recognized as the performance requirements of each development arrangement are met
and collection is reasonably assured. Where development arrangements include substantive at-risk milestones, revenue is recognized based upon
the achievement of the contractually-defined milestones. Amounts collected in advance of meeting all of the revenue recognition criteria are not
recognized in the consolidated statement of operations and are instead recorded as deferred revenue on the consolidated balance sheets. Costs of
development services are
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