TeleNav 2011 Annual Report Download - page 86

Table of Contents
TELENAV, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Revenue recognition
In October 2009, the Financial Accounting Standards Board, or FASB, issued its revised standard which supersedes certain guidance with
respect to accounting for revenue arrangements with multiple deliverables. The revised standard changes the determination of when individual
deliverables in a multiple element arrangement may be treated as separate units of accounting and modifies the manner in which the transaction
consideration is allocated across separately identifiable deliverables. We adopted the revised standard prospectively for fiscal 2011 as of July 1,
2010. Adoption of this standard did not have a material impact on our financial position, cash flows or results of operations.
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 derive our revenue primarily from subscriptions to access our LBS, which are
generally provided through wireless carrier customers that offer our services to their subscribers. Revenue is primarily comprised of subscription
fees for the use of our LBS, as well as activation fees related to certain services. Our wireless carrier customers pay us based on several different
revenue models, including (1) a monthly subscription fee per end user, (2) a fixed annual fee for any number of subscribers (up to specified
thresholds) receiving our services as part of bundles with other voice and data services, or (3) a revenue sharing arrangement that may include a
minimum fee per end user, or (4) based on usage or other basis.
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. 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 may 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 provide tiered pricing to
certain of our wireless carrier customers based on the number of paying end users in a given month, which may result in a discounted fee per end
user depending on the number of end users. Revenue recognized is based on the discounted fees earned for a given period.
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
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