TomTom 2013 Annual Report Download - page 48

Associates
Associates are all entities over which the group has significant influence but not control, generally accompanying a shareholding of between
20% and 50% of the voting rights, or other evidence of significant influence. Investments in associates are accounted for using the equity
method of accounting, and are initially recognised at cost. The group's investment in associates includes goodwill identified on acquisition,
net of any accumulated impairment loss.
The group's share of its associates' post-acquisition profits or losses is recognised in the income statement, and its share of post-acquisition
movements in 'Other comprehensive income' is recognised in 'Other comprehensive income'. The cumulative post-acquisition movements
are adjusted against the carrying amount of the investment. When the group's share of losses in an associate equals or exceeds its interest
in the associate, including any other unsecured receivables, the group does not recognise further losses, unless it has incurred obligations or
made payments on behalf of the associate. Unrealised gains on transactions between the group and its associates are eliminated to the extent
of the group's interest in the associates. Unrealised losses are also eliminated, unless the transaction provides evidence of an impairment of
the asset transferred. Accounting policies of associates have been changed where necessary to ensure consistency with the policies adopted
by the group.
Revenue recognition
Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for products and/or
services delivered in the normal course of business. Revenue is reduced for estimated customer returns, rebates and other similar allowances
whenever applicable based on historical data and expectations of future sales. For further details, refer to note 4 - Critical accounting estimates
and judgements.
Sale of goods
Revenue on the sale of goods is only recognised when the risks and rewards of ownership of goods are transferred to the customers, which
include distributors, retailers, end-users and OEMs. The risks and rewards of ownership are generally transferred at the time the product is
shipped and delivered to the customer and, depending on the delivery conditions, title and risk have passed to the customer and acceptance
of the product, when contractually required, has been obtained. In cases where contractual acceptance is not required, revenue is recognised
when management has established that all aforementioned conditions for revenue recognition have been met.
Royalty revenue
Royalty revenue is generated through licensing of geographic and/or other traffic-/location-based content to customers. Revenue is recognised
on an accrual basis based on the contractual terms and substance of the relevant arrangements with the customers.
Sale of services
Services revenue is generated from the selling of traffic and map update services, content sales, connected navigation and fleet management
services for commercial fleets. The revenue relating to the service element is recognised over the agreed or estimated service period on a
straight-line basis.
Multiple-element arrangements
The group's product and services offerings include arrangements that require the group to deliver equipment (e.g. navigation hardware) and/
or a number of services (e.g. traffic information services) under one agreement, or under a series of agreements that are commercially linked
(referred to as 'multiple-element arrangements'). In such multiple-element arrangements, the consideration received is allocated to each
separately identifiable element, based on the relative fair values of each identifiable element. In the absence of a stand-alone selling price the
fair value of each element is estimated using other methods allowed under IFRS, such as the cost plus reasonable margin or the residual
method.
The amount of revenues allocated to the hardware element is recognised in line with the accounting policy for the sale of goods as described
above. The revenue relating to the service element is recognised over the agreed or estimated service period on a straight-line basis, which
varies on average from 3 months to 48 months (for lifetime services). To the extent that there is a discount on the arrangement, the discount
is allocated between the elements of the contract in such a manner as to reflect the fair value of the elements and the substance of the
transaction.
Notes to the Consolidated Financial Statements / Continued
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