Gman re IDCC booking Nokia royalty you said:
...."whether they book revs on a confirmation or not is just ronnie's opinion. no one knows if they will or not..... please don't post opinion as fact."
You are absolutely correct that it is only my opinion, and I was careful to state it as an opinion. However, it is a very strong opinion of mine that IDCC should book the Nokia royalty upon a favorable court ruling of enforceability. Some of my previous reposts on the issue as follows:
Posted by: rmarchma
In reply to: spencer who wrote msg# 129438
Date:10/12/2005 2:07:35 PM
Post # of 134151
Spencer re booking Nokia royalty before payment you asked:
...."rmarchma, why do you think IDCC should book royalties upon the confirmation? What if Nokia appeals to the 2nd circuit? Why should IDCC book royalties that they have not received?"
IDCC and virtually every public corporation uses accrual accounting and not cash basis accounting. Accrual accounting allows companies to record revenues when they are earned, and not just when the cash is received. Accrual accounting also requires that expenses be recorded when incurred, and not necessarily when paid. Royalties are earned when IDCC has a legal right to the royalty and the amount is reasonably ascertainable. Per IDCC's Annual Report:
...."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."
An arbitration ruling and a court ruling of enforceability are enough to satisfy the above revenue recognition rules, in my professional opinion. With these two favorable rulings in hand, I would not think that IDCC would have to wait until they actually received cash money from Nokia before recording the earned royalties. As I stated previously:
Yes I think that it is possible for Nokia to appeal a judge's ruling to enforce the arbitration ruling. However, the chance that Nokia would be successful in overturning a courts ruling to enforce an arbitration ruling is so infinitesimally small and so highly improbable, that for all practical matters Nokia's game would be over.
Posted by: rmarchma
In reply to: sinnet14 who wrote msg# 129452
Date:10/12/2005 3:17:36 PM
Post # of 134146
Sinnet re delayed revenue recognition pending appeals
I suppose that an appeal of a "normal" court case does have some relative chance of being overturned, and thus collectibility is not reasonably assured until after the appeals. However the IDCC and Nokia royalty dispute is not a normal court case, subject to the same probabilities of successful appeal.
The Nokia/IDCC royalty dispute was fist submitted to Binding Arbitration upon Nokia's request. It is very rare for an arbitration ruling to be ignored. The matter now before the court is for a ruling of enforceability of a previous arbitration ruling. Therefore, this is not a "normal" court case. The probability that the court will rule that a binding arbitration ruling is not enforceable is virtually nil. And if Nokia were to appeal the enforceability ruling, the probability of overturn is next to nothing. All this IMO.
Posted by: rmarchma
In reply to: GAB who wrote msg# 129442
Date:10/12/2005 2:23:06 PM
Post # of 134153
GAB re enforceability of Nokia royalty and arbitration ruling, note the following excerpt from Nokia's response:
...."But now Nokia has said it is not convinced that the award is enforceable, and has told Mobile Europe that InterDigital's decision to pursue enforcement of the decision in the US District Court for the Southern district of new York is "premature". "
This is probably what kept IDCC from booking the Nokia royalty following the favorable arbitration ruling. They knew Nokia was still arguing enforceability of the arbitration ruling, and that is why IDCC filed for arbitration enforcement with the Court. However with a favorable enforcement ruling by the court, enforcement and collectibility are virtually assured. That is why I think that IDCC can go ahead and book the Nokia royalty when they receive a favorable court ruling on enforceability in my previous post to Spencer.
Posted by: rmarchma
In reply to: georgebailey who wrote msg# 129385
Date:10/12/2005 12:54:56 PM
Post # of 134148
GBailey re booking of Nokia royalty you asked:
..."Do you still hold the opinion that IDC will book the Nokia award upon confirmation?"
Yes I do, and my opinion has not changed in that regard. Once IDCC gets an inforcement ruling on the Nokia arbitration, they should book Nokia earned royalties from 2002 to the date of the enforcement ruling IMO. They should also reverse the remaining allowance against the deferred tax asset, and book the deferred tax asset too. A couple of reposts of my initial stated opinion on this matter as follows:
Posted by: rmarchma
In reply to: georgebailey who wrote msg# 126989
Date:9/22/2005 2:50:19 PM
Post #of 129431
GeorgeB re accounting after court ruling on arbitration you asked:
..."If their is a Court Judgement to compel collection of the royalties due to InterDigital from Nokia under the Final Award, would/could IDC book Income/Receivable for some 250M?"
IMO Yes they should. I think that IDCC should book earned revenues from Nokia for 2002 - 3rd Quarter of 2005 and a related receivable, immediately upon a favorable court confirmation of the arbitration ruling. I think that they should also completely reverse the valuation allowance against the deferred tax asset, and effectively use all the NOL carryforwards for book purposes. This will reduce the effective tax rate and the income tax expense on the income statement, and thus increase Net Income and Earnings per Share.
I think IDCC could have even done all the above when the arbitration panel ruled in favor of IDCC. However, they were very conservative and did not do so, due to the anticipated Nokia appeal to enforce the arbitration ruling. Once the court rules to enforce the arbitration ruling, it will clearly all be over for Nokia on this matter.
Posted by: rmarchma
In reply to: spencer who wrote msg# 127037
Date:9/22/2005 3:08:47 PM
Post #of 129431
Spencer re possible Nokia appeals after court ruling
Yes I think that it is possible for Nokia to appeal a judge's ruling to enforce the arbitration ruling. However, the chance that Nokia would be successful in overturning a courts ruling to enforce an arbitration ruling is so infinitesimally small and so highly improbable, that for all practical matters Nokia's game would be over.
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