InterDigital Inc (IDCC)

[rmarchma]

Accounting for a possible Nokia settlement

Doing a lit bit more research in this matter, my earlier referenced post on this matter might not be right. From IDCC's latest 10K as follows:

"Consideration for Prior Sales: Consideration related to a licensee’s product sales from prior periods. Such consideration may result from a negotiated agreement with a licensee that utilized our patented inventions prior to signing a patent license agreement with us or from the resolution of a disagreement or arbitration with a licensee over the specific terms of an existing license agreement. In each of these cases, we record the consideration as revenue. We may also receive consideration from the settlement of patent infringement litigation where there was no prior patent license agreement. We record the consideration related to such litigation as other income.

We recognize revenues related to Consideration for Prior Sales when we have obtained a signed agreement, identified a fixed and determinable price and determined that collectibility is reasonably assured."

The word "when" is causing me second thoughts. Suppose Nokia were to settle in February 2005, then 2005 would be "when" the amount would be finalized and determined, and collectibility reasonably assured. Even if the settlement clearly designated the royalty amounts to 2004 and previous years, and even if the 2004 Financial Statements were not yet published, I'm now unsure if IDCC would report the settlement as Revenue in 2004 or in 2005.