TiVo 2013 Annual Report Download - page 78

profit from the engineering professional services is recognized over the period of the maintenance and support or other services that are
provided, whichever is longer.
If the Company cannot be reasonably assured that no loss will be incurred under the arrangement, the Company will account for the
arrangement under the completed contract method, which results in a full deferral of the revenue and costs until the project is complete.
Provisions for losses are recorded when estimates indicate that a loss will be incurred on the contract.
Advertising and Audience Research Measurement Services
Advertising and audience research measurement service revenue is recognized as the service is provided. When advertising services are
sold in packages customized for each campaign, they generally last for up to three months. Because of the significant customization of
offerings, the Company historically has not been able to obtain VSOE of selling prices for each element in the package. Accordingly, the
Company would combine all elements in the package as a single unit and recognize revenue ratably over the campaign period. As a result of
the updated guidance on multiple element revenue arrangements, the Company can now estimate BESP for each element in the package
and separate them into individual units of accounting. Nonetheless, the new units of accounting have very similar revenue earning patterns
and timing and the amounts of revenue recorded in each period are not significantly impacted by the new guidance.
Hardware Revenues
Hardware revenues represent revenues from standalone hardware sales and amounts allocated to hardware elements in multiple
element arrangements. Revenues are recognized upon product shipment to the customers or receipt of the products by the customer,
depending on the shipping terms, provided that all fees are fixed or determinable, evidence of an arrangement exists, and collectibility is
reasonably assured. End users have the right to return their product within 30 days of the purchase. TiVo establishes allowances for expected
product and service returns and these allowances are recorded as a direct reduction of revenues and accounts receivable.
Certain payments to retailers and distributors such as market development funds and revenue share are recorded as a reduction of
hardware revenues rather than as a sales and marketing expense. TiVo's policy for revenue share payments is to reduce revenue when
these payments are incurred and fixed or determinable. TiVo reduces revenue at the later of the date at which the related hardware revenue is
recognized or the date at which the market development program is offered.
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The Company has equity incentive plans under which officers, employees, consultants, and non-employee directors may be granted
options to purchase shares of the Company’s authorized but unissued or reacquired common stock, and may also be granted restricted
stock, performance based stock options and other stock awards. Additionally the Company has an Employee Stock Purchase Plan (ESPP)
which officers and employees can participate. Upon the exercise of options, the Company issues new common stock from its authorized
shares.
The fair value of TiVo’s restricted stock awards is calculated based on the fair market value of the Company’s stock at the grant date. The
fair value of TiVo’s stock options and ESPP awards is estimated using a Black-Scholes option valuation model and Monte-Carlo valuation
model for stock awards with market vesting conditions. TiVo recognizes compensation expense for stock option awards expected to vest on a
straight-line basis over the requisite service period of the award.
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The Company expenses advertising costs related to its products and service as incurred. Marketing co-op development payments, where
the Company receives, or will receive, an identifiable benefit (goods or services) in exchange for the amount paid to its customer, and the
Company can reasonably estimate the fair value of the benefit it receives, are classified as marketing expense. For the fiscal years ended
January 31, 2014, 2013, and 2012, this amount was immaterial. All other marketing co-op development payments are classified as a
reduction of hardware revenues. Advertising expenses were $4.9 million, $4.3 million, and $2.5 million, of sales and marketing,
subscription acquisition costs for the fiscal years ended January 31, 2014, 2013, and 2012, respectively. Included in these advertising
expenses were $3.4 million, $3.9 million, and $2.0 million, respectively, related to media placement costs.
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