Filter
Top Products
A
pplication of SAB 101 or SOP 97-2
Title and delivery
Revenues were recognized on certain sales (primarily prior to 2001) for which it was subsequently determined that the criteria for revenue
recognition under SAB 101 or SOP 97-2, as applicable, had not been met, including arrangements in which legal title or risk of loss on
products did not transfer to the buyer until full payment was received, and arrangements where delivery had not occurred. Revenues and related
cost of revenues for these agreements should have been deferred until title or risk of loss had passed and all criteria for revenue recognition had
been met. Therefore, adjustments were made to defer revenues and related cost of revenues from the periods in which they were originally
recorded and to recognize them in the periods in which all revenue recognition criteria were met.
Undelivered elements and liquidated damages
In certain multiple element arrangements, total arrangement fees were recognized as revenue at the time of delivery of software or hardware,
but prior to the delivery of future contractual or implicit PCS or other services. Revenues should have been allocated to these future
deliverables based on their fair value and recognized ratably over the PCS period or as the future obligations were performed. As well, in
certain circumstances where the criteria to treat delivered software and hardware elements and undelivered PCS services as separate accounting
units were not met, the entire arrangement fee should have been recognized over the PCS period. Adjustments were made to appropriately
allocate revenue among the accounting units and recognize the allocated revenue in accordance with the applicable revenue recognition
guidance.
Revenues were also recognized for certain contracts that involved undelivered elements as a result of product development delays. The lack of
relative fair value for the undelivered element meant that revenues and cost of revenues for all products delivered should have been deferred
until the undelivered element was delivered. As originally recorded, revenues were recognized upon delivery of an alternative product and
costs were accrued for the undelivered element. To correct for these items, related cost provisions were reversed and revenues and associated
cost of revenues were recognized in the appropriate periods when all elements had been delivered.
Revenues were recognized on certain contracts with potential liquidated damages arising primarily from network outages, shipment delays or
product development delays on undelivered elements. Generally, revenues and related cost of revenues should have been deferred up to the
maximum potential liquidated damages until the damages had been incurred or there was no longer a possibility of incurring such damages.
Specific contracts, primarily in the Asia region, had the potential for liquidated damages plus right of return privileges if such damages
exceeded contractually defined thresholds due to a product development delay (undelivered element). Revenues for all products delivered
should have been deferred until the undelivered element was delivered. After delivery of the undelivered element, and in light of a lack of a
reasonable and reliable history of comparable product returns on which to base a returns allowance, revenues should have been deferred until
the right of return had lapsed or until expected returns could be reasonably estimated. After the right of return had lapsed or reasonable
estimates of expected returns could be made, revenues should have
F-22
Revenues Cost of revenues
2002 2001 2002 2001
Revenue recognition adjustments:
Application of SAB 101 or SOP 97-2
Title and delivery $ 211 $ 1,624 $ 107 $ 727
Undelivered elements and liquidated damages 45 (190) 117 (231)
Fixed or determinable fees 133 –
–
–
Reseller transactions –151
–
83
Other revenue reco
g
nition ad
j
ustments 53 (51) (71) (57)
Increase associated with revenue recognition adjustments 442 1,534 153 522
Other adjustments:
Foreign exchange (3)(42)(51)(73)
Intercompany – – (16) 45
Special charges ––237152
Other – – (64) (88)
Reclassifications – – 46 40
Total increase to revenues and cost of revenues $ 439 $ 1,492 $ 305 $ 598