TeleNav 2011 Annual Report Download - page 56

Table of Contents
has been provided. We recognize revenue for fixed annual fees for any number of subscribers receiving our services as part of bundles monthly
on a straight-line basis over the term of the agreement. 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 customers. 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 customers 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 customers. We are not the principal provider when selling access to our LBS
through our wireless carrier customers as the subscribers directly contract with our wireless carrier customers. In addition, we earn a fixed fee or
fixed percentage of fees charged by our wireless carrier customers and our wireless carrier customers have the sole ability to set the price
charged to their subscribers for our service. Our wireless carrier customers have direct responsibility for billing and collecting those fees from
their subscribers and we and our wireless carrier customers may offer subscribers a 30-day free trial for our service.
We also derive revenue from the delivery of customized software and royalties earned from the distribution of this customized software in
certain automotive navigation applications. We generally recognize software customization revenue using the completed contract method of
contract accounting under which revenue is recognized upon delivery to, and acceptance by, the automobile manufacturer of our on-board
navigation solutions. We generally recognize royalty revenue as the vehicles are produced, assuming all other conditions for revenue recognition
have been met.
In certain instances, due to the nature and timing of monthly revenue and subscriber reporting from our wireless carrier customers, we may
be required to make estimates of the amount of LBS revenue to recognize from a wireless carrier customer for the current period. For example,
certain of our wireless carrier customers 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 customer 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:
If we are unable to reasonably estimate recognizable revenue from a wireless carrier customer for a given period, we defer recognition of
revenue to the period in which we receive and validate the wireless carrier customer’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 customer, which typically occurs within the following month.
Software development costs . We account for the costs of computer software we develop for internal use by capitalizing qualifying costs,
which are incurred during the application development stage, and amortizing those costs over the application’s estimated useful life, which
generally ranges from 18 to 24 months depending on the type of application. Costs incurred and capitalized during the application development
stage generally include the costs of software configuration, coding, installation and testing. Such costs primarily include payroll and payroll
related expenses for employees directly involved in the application development, as well as third party developer
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subscriber data supplied by our wireless carrier customers;
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wireless carrier customer specific historical subscription and revenue reporting trends;
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end user subscription data from our internal systems; and
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data from comparable distribution channels of our other wireless carrier customers.