Blackboard (BBBB)

 

BLACKBOARD INC.

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

arrangement exists; (2) delivery has occurred; (3) the fee is fixed and determinable; and (4) collectibility is probable.

 

The Company does not have vendor-specific objective evidence (“VSOE”) of fair value for support and maintenance separate from software for the majority of its products. Accordingly, when licenses are sold in conjunction with the Company’s support and maintenance, license revenue is recognized over the term of the maintenance service period. When licenses of certain offerings are sold in conjunction with support and maintenance where the Company does have VSOE, the Company recognizes the license revenue upon delivery of the license and recognizes the support and maintenance revenue over the term of the maintenance service period.

 

The Company’s hardware revenues are derived from two types of transactions: sales of hardware in conjunction with the Company’s software licenses, which are referred to as bundled hardware-software systems, and sales of hardware without software, which generally involve the resale of third-party hardware. After any necessary installation services are performed, hardware revenues are recognized when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the fee is fixed and determinable; and (4) collectibility is probable. VSOE of the fair value for the separate components of bundled hardware-software systems has not been determined. Accordingly, when a bundled hardware-software system is sold, all revenue is recognized over the term of the maintenance service period. Hardware sales without software are recognized upon delivery of the hardware to the Company’s client.

 

Hosting revenues are recorded in accordance with Emerging Issues Task Force (“EITF”) 00-3, “Application of AICPA SOP 97-2 to Arrangements That Include the Right to Use Software Stored on Another Entity’s Hardware.” Accordingly, hosting fees and set-up fees are recognized ratably over the term of the hosting agreement.

 

The Company’s sales arrangements may include professional services sold separately under professional services agreements that include training and consulting services. Revenues from these arrangements are accounted for separately from the license revenue because they meet the criteria for separate accounting, as defined in SOP 97-2. The more significant factors considered in determining whether revenues should be accounted for separately include the nature of the professional services, such as consideration of whether the professional services are essential to the functionality of the licensed product, degree of risk, availability of professional services from other vendors and timing of payments. Professional services that are sold separately from license revenue are recognized as the professional services are performed on a time-and-materials basis.

 

The Company does not offer specified upgrades or incrementally significant discounts. Advance payments are recorded as deferred revenues until the product is shipped, services are delivered or obligations are met and the revenues can be recognized. Deferred revenues represent the excess of amounts invoiced over amounts recognized as revenues. Non-specified upgrades of the Company’s product are provided only on a when-and-if-available basis. Any contingencies, such as rights of return, conditions of acceptance, warranties and price protection, are accounted for under SOP 97-2. The effect of accounting for these contingencies included in revenue arrangements has not been material.

 

 

BLACKBOARD INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

The Company’s hardware revenues are derived from two types of transactions: sales of hardware in conjunction with the Company’s software licenses, which are referred to as bundled hardware-software systems, and sales of hardware without software, which generally involve the resale of third-party hardware. After any necessary installation services are performed, hardware revenues are recognized when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the fee is fixed and determinable; and (4) collectibility is probable. VSOE of the fair value for the separate components of bundled hardware-software systems has not been determined. Accordingly, when a bundled hardware-software system is sold, all revenue is recognized over the term of the maintenance service period. Hardware sales without software are recognized upon delivery of the hardware to the Company’s client.

 

Hosting revenues are recorded in accordance with Emerging Issues Task Force (“EITF”) 00-3, “Application of AICPA SOP 97-2 to Arrangements That Include the Right to Use Software Stored on Another Entity’s Hardware.” Accordingly, hosting fees and set-up fees are recognized ratably over the term of the hosting agreement.

 

The Company’s sales arrangements may include professional services sold separately under professional services agreements that include training and consulting services. Revenues from these arrangements are accounted for separately from the license revenue because they meet the criteria for separate accounting, as defined in SOP 97-2. The more significant factors considered in determining whether revenues should be accounted for separately include the nature of the professional services, such as consideration of whether the professional services are essential to the functionality of the licensed product, degree of risk, availability of professional services from other vendors and timing of payments. Professional services that are sold separately from license revenue are recognized as the professional services are performed on a time-and-materials basis.

 

The Company does not offer specified upgrades or incrementally significant discounts. Advance payments are recorded as deferred revenues until the product is shipped, services are delivered or obligations are met and the revenues can be recognized. Deferred revenues represent the excess of amounts invoiced over amounts recognized as revenues. Non-specified upgrades of the Company’s product are provided only on a when-and-if-available basis. Any contingencies, such as rights of return, conditions of acceptance, warranties and price protection, are accounted for under SOP 97-2. The effect of accounting for these contingencies included in revenue arrangements has not been material.

 

 

The Company’s revenues are derived from two sources:
product sales and professional services sales. Product revenues
include software license fees, subscription fees from customers
accessing its on-demand application services, hardware, premium
support and maintenance, and hosting revenues. Professional
services revenues include training and consulting services.
Revenue from software licenses and maintenance is recorded in
accordance with the American Institute of Certified Public
Accountants’ Statement of Position (“SOP”)
97-2,
“Software Revenue Recognition,” as modified by
SOP 98-9,
“Modification of
SOP 97-2,
Software Revenue Recognition, with Respect to Certain
Transactions.” The Company’s software does not
require significant modification and customization services.
Where services are not essential to the functionality of the
software, the Company begins to recognize software licensing
revenues when all of the following criteria are met:
(1) persuasive evidence of an arrangement exists;
(2) delivery has occurred; (3) the fee is fixed and
determinable; and (4) collectibility is probable.

 

The Company does not have vendor-specific objective evidence
(“VSOE”) of fair value for support and maintenance
separate from software for the majority of its products.
Accordingly, when licenses are sold in conjunction with the
Company’s support and maintenance, license revenue is
recognized over the term of the maintenance service period. When
licenses of certain offerings are sold in conjunction with
support and maintenance where the Company does have VSOE, the
Company recognizes the license revenue upon delivery of the
license and recognizes the support and maintenance revenue over
the term of the maintenance service period.

 

BLACKBOARD
INC.

 

NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)

 

 

The Company’s hardware revenues are derived from two types
of transactions: sales of hardware in conjunction with the
Company’s software licenses, which are referred to as
bundled hardware-software systems, and sales of hardware without
software, which generally involve the resale of third-party
hardware. After any necessary installation services are
performed, hardware revenues are recognized when all of the
following criteria are met: (1) persuasive evidence of an
arrangement exists; (2) delivery has occurred; (3) the
fee is fixed and determinable; and (4) collectibility is
probable. VSOE of the fair value for the separate components of
bundled hardware-software systems has not been determined.
Accordingly, when a bundled hardware-software system is sold,
all revenue is recognized over the term of the maintenance
service period. Hardware sales without software are recognized
upon delivery of the hardware to the Company’s client.

 

Hosting revenues are recorded in accordance with Emerging Issues
Task Force (“EITF”)
00-3,
“Application of AICPA
SOP 97-2
to Arrangements That Include the Right to Use Software Stored on
Another Entity’s Hardware.” Accordingly, hosting
fees and
set-up fees
are recognized ratably over the term of the hosting agreement.

 

The Company’s sales arrangements may include professional
services sold separately under professional services agreements
that include training and consulting services. Revenues from
these arrangements are accounted for separately from the license
revenue because they meet the criteria for separate accounting,
as defined in
SOP 97-2.
The more significant factors considered in determining whether
revenues should be accounted for separately include the nature
of the professional services, such as consideration of whether
the professional services are essential to the functionality of
the licensed product, degree of risk, availability of
professional services from other vendors and timing of payments.
Professional services that are sold separately from license
revenue are recognized as the professional services are
performed on a
time-and-materials
basis.

 

The Company does not offer specified upgrades or incrementally
significant discounts. Advance payments are recorded as deferred
revenues until the product is shipped, services are delivered or
obligations are met and the revenues can be recognized. Deferred
revenues represent the excess of amounts invoiced over amounts
recognized as revenues. Non-specified upgrades of the
Company’s product are provided only on a
when-and-if-available
basis. Any contingencies, such as rights of return, conditions
of acceptance, warranties and price protection, are accounted
for under
SOP 97-2.
The effect of accounting for these contingencies included in
revenue arrangements has not been material.

 

 

BLACKBOARD INC.

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

maintenance where the Company does have VSOE, the Company recognizes the license revenue upon delivery of the license and recognizes the support and maintenance revenue over the term of the maintenance service period.

 

The Company’s hardware revenues are derived from two types of transactions: sales of hardware in conjunction with the Company’s software licenses, which are referred to as bundled hardware-software systems, and sales of hardware without software, which generally involve the resale of third-party hardware. After any necessary installation services are performed, hardware revenues are recognized when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the fee is fixed and determinable; and (4) collectibility is probable. VSOE of the fair value for the separate components of bundled hardware-software systems has not been determined. Accordingly, when a bundled hardware-software system is sold, all revenue is recognized over the term of the maintenance service period. Hardware sales without software are recognized upon delivery of the hardware to the Company’s client.

 

Hosting revenues are recorded in accordance with Emerging Issues Task Force (“EITF”) 00-3, “Application of AICPA SOP 97-2 to Arrangements That Include the Right to Use Software Stored on Another Entity’s Hardware.” Accordingly, hosting fees and set-up fees are recognized ratably over the term of the hosting agreement.

 

The Company’s sales arrangements may include professional services sold separately under professional services agreements that include training and consulting services. Revenues from these arrangements are accounted for separately from the license revenue because they meet the criteria for separate accounting, as defined in SOP 97-2. The more significant factors considered in determining whether revenues should be accounted for separately include the nature of the professional services, such as consideration of whether the professional services are essential to the functionality of the licensed product, degree of risk, availability of professional services from other vendors and timing of payments. Professional services that are sold separately from license revenue are recognized as the professional services are performed on a time-and-materials basis.

 

The Company does not offer specified upgrades or incrementally significant discounts. Advance payments are recorded as deferred revenues until the product is shipped, services are delivered or obligations are met and the revenues can be recognized. Deferred revenues represent the excess of amounts invoiced over amounts recognized as revenues. Non-specified upgrades of the Company’s product are provided only on a when-and-if-available basis. Any contingencies, such as rights of return, conditions of acceptance, warranties and price protection, are accounted for under SOP 97-2. The effect of accounting for these contingencies included in revenue arrangements has not been material.

 

 

BLACKBOARD INC.

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

The Company’s hardware revenues are derived from two types of transactions: sales of hardware in conjunction with the Company’s software licenses, which are referred to as bundled hardware-software systems, and sales of hardware without software, which generally involve the resale of third-party hardware. After any necessary installation services are performed, hardware revenues are recognized when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the fee is fixed and determinable; and (4) collectibility is probable. VSOE of the fair value for the separate components of bundled hardware-software systems has not been determined. Accordingly, when a bundled hardware-software system is sold, all revenue is recognized over the term of the maintenance service period. Hardware sales without software are recognized upon delivery of the hardware to the Company’s client.

 

Hosting revenues are recorded in accordance with Emerging Issues Task Force (“EITF”) 00-3, “Application of AICPA SOP 97-2 to Arrangements That Include the Right to Use Software Stored on Another Entity’s Hardware.” Accordingly, hosting fees and set-up fees are recognized ratably over the term of the hosting agreement.

 

The Company’s sales arrangements may include professional services sold separately under professional services agreements that include training and consulting services. Revenues from these arrangements are accounted for separately from the license revenue because they meet the criteria for separate accounting, as defined in SOP 97-2. The more significant factors considered in determining whether revenues should be accounted for separately include the nature of the professional services, such as consideration of whether the professional services are essential to the functionality of the licensed product, degree of risk, availability of professional services from other vendors and timing of payments. Professional services that are sold separately from license revenue are recognized as the professional services are performed on a time-and-materials basis.

 

The Company does not offer specified upgrades or incrementally significant discounts. Advance payments are recorded as deferred revenues until the product is shipped, services are delivered or obligations are met and the revenues can be recognized. Deferred revenues represent the excess of amounts invoiced over amounts recognized as revenues. Non-specified upgrades of the Company’s product are provided only on a when-and-if-available basis. Any contingencies, such as rights of return, conditions of acceptance, warranties and price protection, are accounted for under SOP 97-2. The effect of accounting for these contingencies included in revenue arrangements has not been material.

 

 

BLACKBOARD INC.

 

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL — (Continued)

 

 

BLACKBOARD INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

SOP 97-2, Software Revenue Recognition, with Respect to Certain Transactions.” The Company’s software does not require significant modification and customization services. Where services are not essential to the functionality of the software, the Company begins to recognize software licensing revenues when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the fee is fixed and determinable; and (4) collectibility is probable.

 

The Company does not have vendor-specific objective evidence (“VSOE”) of fair value for support and maintenance separate from software for the majority of its products. Accordingly, when licenses are sold in conjunction with the Company’s support and maintenance, license revenue is recognized over the term of the maintenance service period. The Company does have VSOE of fair value for its support and maintenance separate from its software for certain offerings. Accordingly, when licenses of these products are sold in conjunction with its support and maintenance, the Company’s recognizes the license revenue upon delivery of the license and recognizes the support and maintenance revenue over the term of the maintenance service period.

 

The Company’s hardware revenues are derived from two types of transactions: sales of hardware in conjunction with the Company’s software licenses, which are referred to as bundled hardware-software systems, and sales of hardware without software, which generally involve the resale of third-party hardware. After any necessary installation services are performed, hardware revenues are recognized when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the fee is fixed and determinable; and (4) collectibility is probable. VSOE of the fair value for the separate components of bundled hardware-software systems has not been determined. Accordingly, when a bundled hardware-software system is sold, all revenue is recognized over the term of the maintenance service period. Hardware sales without software are recognized upon delivery of the hardware to the Company’s client.

 

Hosting revenues are recorded in accordance with Emerging Issues Task Force (“EITF”) 00-3, “Application of AICPA SOP 97-2 to Arrangements That Include the Right to Use Software Stored on Another Entity’s Hardware.” Accordingly, hosting fees and set-up fees are recognized ratably over the term of the hosting agreement.

 

The Company’s sales arrangements may include professional services sold separately under professional services agreements that include training and consulting services. Revenues from these arrangements are accounted for separately from the license revenue because they meet the criteria for separate accounting, as defined in SOP 97-2. The more significant factors considered in determining whether revenues should be accounted for separately include the nature of the professional services, such as consideration of whether the professional services are essential to the functionality of the licensed product, degree of risk, availability of professional services from other vendors and timing of payments. Professional services that are sold separately from license revenue are recognized as the professional services are performed on a time-and-materials basis.

 

The Company does not offer specified upgrades or incrementally significant discounts. Advance payments are recorded as deferred revenues until the product is shipped, services are delivered or obligations are met and the revenues can be recognized. Deferred revenues represent the excess of amounts invoiced over amounts recognized as revenues. Non-specified upgrades of the Company’s product are provided only on a when-and-if-available basis. Any contingencies, such as rights of return, conditions of acceptance, warranties and price protection, are accounted for under SOP 97-2. The effect of accounting for these contingencies included in revenue arrangements has not been material.

 

 

The Company’s revenues are derived from two sources:
product sales and professional services sales. Product revenues
include software license, hardware, premium support and
maintenance, and hosting revenues. Professional services
revenues include training and consulting services. Revenues from
software licenses and maintenance is recorded in accordance with
the American Institute of Certified Public Accountants’
Statement of Position (“SOP”)
97-2,
“Software Revenue Recognition,” as modified by
SOP 98-9,
“Modification of

 

BLACKBOARD
INC.

 

NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)

 

SOP 97-2,
Software Revenue Recognition, with Respect to Certain
Transactions.” The Company’s software does not
require significant modification and customization services.
Where services are not essential to the functionality of the
software, the Company begins to recognize software licensing
revenues when all of the following criteria are met:
(1) persuasive evidence of an arrangement exists;
(2) delivery has occurred; (3) the fee is fixed and
determinable; and (4) collectibility is probable.

 

The Company does not have vendor-specific objective evidence
(“VSOE”) of fair value for support and maintenance
separate from software for the majority of its products.
Accordingly, when licenses are sold in conjunction with the
Company’s support and maintenance, license revenue is
recognized over the term of the maintenance service period. The
Company does have VSOE of fair value for its support and
maintenance separate from its software for certain offerings.
Accordingly, when licenses of these products are sold in
conjunction with its support and maintenance, the Company’s
recognizes the license revenue upon delivery of the license and
recognizes the support and maintenance revenue over the term of
the maintenance service period.

 

The Company’s hardware revenues are derived from two types
of transactions: sales of hardware in conjunction with the
Company’s software licenses, which are referred to as
bundled hardware-software systems, and sales of hardware without
software, which generally involve the resale of third-party
hardware. After any necessary installation services are
performed, hardware revenues are recognized when all of the
following criteria are met: (1) persuasive evidence of an
arrangement exists; (2) delivery has occurred; (3) the
fee is fixed and determinable; and (4) collectibility is
probable. VSOE of the fair value for the separate components of
bundled hardware-software systems has not been determined.
Accordingly, when a bundled hardware-software system is sold,
all revenue is recognized over the term of the maintenance
service period. Hardware sales without software are recognized
upon delivery of the hardware to the Company’s client.

 

Hosting revenues are recorded in accordance with Emerging Issues
Task Force (“EITF”)
00-3,
“Application of AICPA
SOP 97-2
to Arrangements That Include the Right to Use Software Stored on
Another Entity’s Hardware.” Accordingly, hosting
fees and
set-up fees
are recognized ratably over the term of the hosting agreement.

 

The Company’s sales arrangements may include professional
services sold separately under professional services agreements
that include training and consulting services. Revenues from
these arrangements are accounted for separately from the license
revenue because they meet the criteria for separate accounting,
as defined in
SOP 97-2.
The more significant factors considered in determining whether
revenues should be accounted for separately include the nature
of the professional services, such as consideration of whether
the professional services are essential to the functionality of
the licensed product, degree of risk, availability of
professional services from other vendors and timing of payments.
Professional services that are sold separately from license
revenue are recognized as the professional services are
performed on a
time-and-materials
basis.

 

The Company does not offer specified upgrades or incrementally
significant discounts. Advance payments are recorded as deferred
revenues until the product is shipped, services are delivered or
obligations are met and the revenues can be recognized. Deferred
revenues represent the excess of amounts invoiced over amounts
recognized as revenues. Non-specified upgrades of the
Company’s product are provided only on a
when-and-if-available
basis. Any contingencies, such as rights of return, conditions
of acceptance, warranties and price protection, are accounted
for under
SOP 97-2.
The effect of accounting for these contingencies included in
revenue arrangements has not been material.

 

 

BLACKBOARD INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

Professional services revenues, which are generally contracted on a time-and-materials basis and consist of training, implementation and installation services, are recognized as the services are provided.

 

The Company does not offer specified upgrades or incrementally significant discounts. Advance payments are recorded as deferred revenues until the product is shipped, services are delivered or obligations are met and the revenue can be recognized. Deferred revenues represent the excess of amounts invoiced over amounts recognized as revenues. Non-specified upgrades of the Company’s product are provided only on a when-and-if-available basis. Any contingencies, such as rights of return, conditions of acceptance, warranties and price protection, are accounted for under SOP 97-2. The effect of accounting for these contingencies included in revenue arrangements has not been material.

 

 

BLACKBOARD INC.

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

 

The Company recognizes software license and maintenance revenues in accordance with the American Institute of Certified Public Accountants’ (AICPA) Statement of Position (SOP) 97-2, “Software Revenue Recognition” (SOP 97-2), as modified by SOP 98-9, “Modification of SOP 97-2, Software Revenue Recognition, with Respect to Certain Transactions”.

 

Software licensing and maintenance revenues generally represent the sale of licenses for the Company’s software, which does not require significant modification and customization services. For software licensing sales not requiring significant modification and customization services and where professional services are not essential to the functionality of the software, the Company recognizes software licensing revenues when all of the following criteria are met: (1) persuasive evidence of an arrangement exists, (2) delivery and acceptance, if required, has occurred, (3) the fee is fixed and determinable and (4) collectibility is probable. The Company does not have vendor-specific objective evidence (VSOE) of fair value for its maintenance services. Accordingly, when licenses are sold in conjunction with the maintenance services, the license and maintenance revenues are recognized over the term of the maintenance service period. Support and maintenance revenues include software patches, unspecified enhancements and upgrades (when and if available), and telephone support. The Company recognizes revenue for hosting arrangements, including set-up fees, over the term of the hosting period.

 

The Company sells two different types of hardware:  hardware that is sold in conjunction with the Company’s software licenses and hardware sold without software (generally the resale of third party hardware). After any and all installation services are performed, hardware revenues are recognized when all of the following criteria are met: (1) persuasive evidence of an arrangement exists; (2) delivery and acceptance, if required, has occurred; (3) the fee is fixed and determinable; and (4) collectibility is probable. The Company does not have VSOE of fair value for hardware that is sold in conjunction with software licenses. Accordingly, when hardware is sold in conjunction with software licenses and maintenance services, all revenues are recognized over the term of the maintenance service period. Professional services revenues, which are substantially time and materials related, consist of training, implementation and installation services and are recognized as the services are provided.

 

Advance payments are recorded as deferred revenue until the product is shipped, services are delivered, or obligations are met. Deferred revenue represents the difference between amounts invoiced and amounts recognized as revenues. The Company provides nonspecified upgrades of its product only on a when-and-if-available basis. Any contingencies, such as rights of return, conditions of acceptance, warranties and price protection, are accounted for under SOP-97-2. The effect of accounting for these contingencies included in revenue arrangements has not been material.