Tesla 2011 Annual Report Download - page 114

Table of Contents
The changes in the fair value of the common stock and convertible preferred stock warrant liabilities were as follows (in thousands):
The valuation of the common stock and convertible preferred stock warrants is discussed in Notes 6 and 7.
Revenue Recognition
We recognize revenues from sales of the Tesla Roadster, including vehicle options and accessories, vehicle service and sales of zero
emission vehicle (ZEV) credits, and sales of electric vehicle powertrain components. We recognize revenue when: (i) persuasive evidence of an
arrangement exists; (ii) delivery has occurred and there are no uncertainties regarding customer acceptance; (iii) fees are fixed or determinable;
and (iv) collection is reasonably assured.
Automotive Sales
Automotive sales consisted of the following for the periods presented (in thousands):
Automotive sales consist primarily of revenue earned from the sales of the Tesla Roadster, vehicle service, and vehicle options, accessories
and destination charges as well as sales of ZEV credits. Automotive sales also consist of revenue earned from the sales of electric vehicle
powertrain components, such as battery packs and battery chargers, to other automotive manufacturers. Sales or other amounts collected in
advance of meeting all of the revenue recognition criteria are not recognized in the consolidated statements of operations and are instead
recorded as deferred revenue on the consolidated balance sheets. Prior to February 2010, we did not provide direct financing for the purchase of
the Tesla Roadster although a third-party lender has provided financing arrangements to our customers in the United States. Under these
arrangements, we have been paid in full by the customer at the time of purchase.
In regards to the sale of Tesla Roadsters, revenue is generally recognized upon delivery of the vehicle. Concurrent with a purchase order
for a Roadster that is manufactured to specification, customers must remit a reservation payment (see Note 5). For vehicles purchased directly
from our showrooms, no deposit is required. Approximately three months prior to production of a Tesla Roadster manufactured to specification,
the reservation payment becomes nonrefundable when the customer enters into a purchase agreement. In a limited number of circumstances, we
may deliver a vehicle to a customer without all of the options ordered by the customer if the options do not limit the functionality of the vehicle.
This may happen, for example, in an instance where the customer orders an additional hard top which is not ready at the time the vehicle is
delivered. In such cases, we will continue to defer the related revenue based on the undelivered item’s fair value, as evidenced by the contractual
price of the option in stand-alone transactions.
While sales of vehicle options and accessories may take place separately from a vehicle sale, they are often part of one vehicle sales
agreement resulting in multiple element arrangements. We are able to establish the fair
113
2010
2009
Fair value, beginning of period
$
1,734
$
2,074
Issuances
6,294
—
Settlements and extinguishments
(6,962
)
(1,468
)
Change in fair value
5,022
1,128
Fair value, end of period
$
6,088
$
1,734
2010
2009
2008
Vehicle, options and related sales
$
75,459
$
111,555
$
14,742
Powertrain component and related sales
21,619
388
—
$
97,078
$
111,943
$
14,742