Ddweller re accounting change in quarterly revenue recognition
I completely agree with your post. There is no change at all in the underlying revenue fundamentals, only a quarter delay in reporting the earned recurring per unit royalties from licensees due to narrowing time constraints being imposed by the SEC for quarterly reports. All IDCC is doing is changing to reflect recurring royalty revenue in the quarter reported by the licensee to IDCC, as opposed to the quarter in which the licensee actually made the royalty-bearing sales. Qualcomm is making this same change, no big deal at all. A repost on this matter as follows:
Posted by: rmarchma
In reply to: texb who wrote msg# 79606 Date:9/17/2004 11:10:53 AM
Post #of 82452
Texb re IDCC's quarterly royalty accounting
IDCC currently records royalty revenue in the quarter earned for its major licensees, as opposed to the quarter reported by major licensees. IDCC usually delays its quarterly reports long enough to get the major licensee's actual quarterly reports, before IDCC issues its own quarterly report. Qualcomm reports its quarterly earnings much earlier than IDCC, and thus has to estimate a lot of revenues, because they have not yet received many of their licensees' quarterly reports.
A major licensee like NEC would report its royalty for a quarter usually within thirty days in the month following the end of the quarter. IDCC has enough time to incorporate NEC's actual quarterly royalties into its royalty revenues for that quarter. For example IDCC probably received NEC's second quarter royalty report for March through June before July 31. Since IDCC did not report its quarterly earnings until August 9, they had enough time to incorporate NEC's actual second quarter royalties into IDCC's second quarter earnings. However, IDCC might try to estimate some minor licensees, who are semiannual reporters or later filers.
From the latest 10K as follows:
"We generally recognize revenue related to Current Royalty Payments in the period in which the sales of each licensee's products occurred.
Licensees that either owe us Current Royalty Payments or have prepayment balances provide us with quarterly or semi-annual royalty reports that summarize their sales of covered products and their related royalty obligations to us. We typically receive these royalty reports subsequent to the period in which our licensees' underlying sales occurred, but prior to the issuance of our financial statements for that period. In such cases, we recognize the related revenue in the period the sales occurred.
When we do not receive the royalty reports prior to the issuance of our financial statements, we accrue the related royalty revenue if reasonable estimates of such amounts can be made. These estimates are based on the historical royalty data of the licensees involved, currently available third party forecasts of royalty related product sales in the applicable market and, if available, information provided by the licensee. When our licensees formally report royalties for which we accrued revenues based on estimates, or when they report updates to prior royalty reports, we adjust revenue in the period in which the final reports are received. In cases where we receive objective, verifiable evidence that a licensee has discontinued sales of covered products, we recognize any remaining deferred revenue balance related to unexhausted Prepayments in the period that we receive such evidence."
AI
