ORBC » Topics » Revenue recognition

These excerpts taken from the ORBC 10-K filed Mar 16, 2009.
Revenue recognition
 
We recognize revenues when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collectibility is reasonably assured. Our revenue recognition policy requires us to make significant judgments regarding the probability of collection of the resulting accounts receivable balance based on prior history and the creditworthiness of our customers. In instances where collection is not reasonably assured, revenue is recognized when we receive cash from the customer.
 
Revenues generated from the sale of satellite subscriber communicators, SIMS and other products are either recognized when the products are shipped or when customers accept the products, depending on the specific contractual terms. Sales of satellite subscriber communicators and SIMS and other items are not subject to return and title and risk of loss pass to the customer at the time of shipment.
 
Sales of subscriber communicators and SIMS are primarily to resellers and are not bundled with service arrangements. Revenues from sales of gateway earth stations and related products are recognized only upon installation, customer acceptance and when collectibility is reasonably assured. Revenues from the activation of subscriber communicators and SIMS are initially recorded as deferred revenues and are, thereafter, recognized ratably over the term of the agreement with the customer, generally three years. Revenues generated from monthly usage and administrative fees and engineering services are recognized when the services are rendered. Revenues generated from royalties under our subscriber communicator manufacturing agreements are recognized when we issue to a third party manufacturer upon request a unique serial number to be assigned to each unit manufactured by such third party manufacturer.
 
Under of our agreement with the USCG with respect to the Concept Validation Project and related services, described under “— Overview — Revenues”, as no tangible deliverable other than services will be provided to the USCG and we retain title to the Coast Guard demonstration satellite, the arrangement is accounted for as a long term service arrangement. The deliverables under the agreement with the USCG do not qualify as separate units of accounting. Commencing with acceptance of the AIS data by the USCG in August 2008, the revenues related to the design and development of the satellite, initial post-launch maintenance and AIS data transmission services are being recognized ratably over six years, the expected life of the customer relationship. At its option, the USCG may elect to receive subsequent maintenance and AIS data transmission services. These services, if accepted by the USCG, will be recognized ratably over the remaining expected life of the customer relationship.
 
For arrangements with multiple obligations (e.g., deliverable and undeliverable products, and other post-contract support), we allocate revenues to each component of the contract based upon objective evidence of each component’s fair value. We recognize revenues allocated to undelivered products when the criteria for product revenues set forth above are met. If objective and reliable evidence of the fair value of the undelivered obligations is not available, the arrangement consideration allocable to a delivered item is combined with the amount allocable to the undelivered item(s) within the arrangement. Revenues are recognized as the remaining obligations are fulfilled.
 
Out-of-pocket expenses incurred during the performance of professional service contracts are included in costs of services and any amounts re-billed to clients are included in revenues during the period in which they are incurred. Shipping costs billed to customers are included in product sales revenues and the related costs are included as costs of product sales.
 
Amounts received prior to the performance of services under customer contracts are recognized as deferred revenues and revenue recognition is deferred until such time that all revenue recognition criteria have been met.
 
Revenue
recognition



 



We recognize revenues when persuasive evidence of an arrangement
exists, delivery has occurred, the fee is fixed or determinable
and collectibility is reasonably assured. Our revenue
recognition policy requires us to make significant judgments
regarding the probability of collection of the resulting
accounts receivable balance based on prior history and the
creditworthiness of our customers. In instances where collection
is not reasonably assured, revenue is recognized when we receive
cash from the customer.


 



Revenues generated from the sale of satellite subscriber
communicators, SIMS and other products are either recognized
when the products are shipped or when customers accept the
products, depending on the specific contractual terms. Sales of
satellite subscriber communicators and SIMS and other items are
not subject to return and title and risk of loss pass to the
customer at the time of shipment.


 



Sales of subscriber communicators and SIMS are primarily to
resellers and are not bundled with service arrangements.
Revenues from sales of gateway earth stations and related
products are recognized only upon installation, customer
acceptance and when collectibility is reasonably assured.
Revenues from the activation of subscriber communicators and
SIMS are initially recorded as deferred revenues and are,
thereafter, recognized ratably over the term of the agreement
with the customer, generally three years. Revenues generated
from monthly usage and administrative fees and engineering
services are recognized when the services are rendered. Revenues
generated from royalties under our subscriber communicator
manufacturing agreements are recognized when we issue to a third
party manufacturer upon request a unique serial number to be
assigned to each unit manufactured by such third party
manufacturer.


 



Under of our agreement with the USCG with respect to the Concept
Validation Project and related services, described under
“— Overview — Revenues”, as no
tangible deliverable other than services will be provided to the
USCG and we retain title to the Coast Guard demonstration
satellite, the arrangement is accounted for as a long term
service arrangement. The deliverables under the agreement with
the USCG do not qualify as separate units of accounting.
Commencing with acceptance of the AIS data by the USCG in August
2008, the revenues related to the design and development of the
satellite, initial post-launch maintenance and AIS data
transmission services are being recognized ratably over six
years, the expected life of the customer relationship. At its
option, the USCG may elect to receive subsequent maintenance and
AIS data transmission services. These services, if accepted by
the USCG, will be recognized ratably over the remaining expected
life of the customer relationship.


 



For arrangements with multiple obligations (e.g., deliverable
and undeliverable products, and other post-contract support), we
allocate revenues to each component of the contract based upon
objective evidence of each component’s fair value. We
recognize revenues allocated to undelivered products when the
criteria for product revenues set forth above are met. If
objective and reliable evidence of the fair value of the
undelivered obligations is not available, the arrangement
consideration allocable to a delivered item is combined with the
amount allocable to the undelivered item(s) within the
arrangement. Revenues are recognized as the remaining
obligations are fulfilled.


 



Out-of-pocket
expenses incurred during the performance of professional service
contracts are included in costs of services and any amounts
re-billed to clients are included in revenues during the period
in which they are incurred. Shipping costs billed to customers
are included in product sales revenues and the related costs are
included as costs of product sales.


 



Amounts received prior to the performance of services under
customer contracts are recognized as deferred revenues and
revenue recognition is deferred until such time that all revenue
recognition criteria have been met.


 




Revenue recognition
 
Product revenues are derived from sales of Communicators, SIMS, and other equipment such as gateway earth stations and gateway control centers to customers. The Company derives service revenues from the utilization of Communicators on the ORBCOMM System and the reselling of airtime from the utilization of SIMS on the cellular providers’ wireless network from its resellers (i.e., its value added resellers, international value added resellers, international licensees and country representatives) and direct customers. These service revenues consist of subscriber-based and recurring monthly usage fees and generally a one-time activation fee for each Communicator and SIMS activated for use. Usage fees charged to customers are based upon the number, size and frequency of data transmitted by a customer and the overall number of Communicators and SIMS activated by each customer. Usage fees charged to the Company’s resellers are charged primarily based on the overall number of Communicators and SIMS activated by the resellers and the total amount of data transmitted by their customers.
 
The Company also earns service revenues from providing engineering, technical and management support services to customers, and a one-time royalty fee relating to the manufacture of Communicators from third parties under a manufacturing agreement.
 
Revenues generated from the sale of Communicators, SIMS and other products are either recognized when the products are shipped or when customers accept the products, depending on the specific contractual terms. Sales of Communicators, SIMS and other products are not subject to return and title and risk of loss pass to the customer at the time of shipment. Sales of Communicators and SIMS are primarily to resellers and are not bundled with services arrangements. Revenues from sales of gateway earth stations and related products are recognized upon customer acceptance. Revenues from the activation of both Communicators and SIMS are initially recorded as deferred revenues and are, thereafter, recognized ratably over the term of the agreement with the customer, generally three years. Revenues generated from monthly usage and administrative fees and engineering services are recognized when the services are rendered. Revenues generated from royalties relating to the manufacture of Communicators by third parties are recognized when the third party notifies the Company of the units it has manufactured and a unique serial number is assigned to each unit by the Company.
 
Amounts received prior to the performance of services under customer contracts are recognized as deferred revenues and revenue recognition is deferred until such time that all revenue recognition criteria have been met.
 
For arrangements with multiple obligations (e.g., deliverable and undeliverable products, and other post-contract support), the Company allocates revenues to each component of the contract based on objective evidence


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Table of Contents

 
Notes to consolidated financial statements
(In thousands, except share and per share amounts)
 
of its fair value in accordance with Emerging Issues Task Force Issue No. 00-21 Revenue Arrangements With Multiple Deliverables. The Company recognizes revenues allocated to undelivered products when the criteria for product revenues set forth above are met. If objective and reliable evidence of the fair value of the undelivered obligations is not available, the arrangement consideration allocable to a delivered item is combined with the amount allocable to the undelivered item(s) within the arrangement. Revenues are recognized as the remaining obligations are fulfilled.
 
During 2004, the Company entered into a contract with the United States Coast Guard (“USCG”) to design, develop, launch and operate a single satellite equipped with the capability to receive, process and forward Automatic Identification Systems (“AIS”) data (the “Concept Validation Project”). Under the terms of the agreement, title to the Concept Validation Project demonstration satellite (also called the Coast Guard demonstration satellite) remains with the Company, however the USCG was granted a non-exclusive, royalty-free license to use the designs, software processes and procedures developed under the contract in connection with any future Company satellites that are AIS enabled. The Company is permitted to use the Concept Validation Project satellite to provide services to other customers. The agreement also provides for post-launch maintenance and AIS data transmission services to be provided by the Company to the USCG for an initial term of 14 months.
 
On June 19, 2008, the Coast Guard demonstration satellite was launched. In August 2008, the USCG accepted the AIS data and elected to receive the initial post-launch maintenance for $380 and AIS data transmission services for $198. At that time, the Company placed the Coast Guard demonstration satellite in service and began to recognize revenues. On September 30, 2008, the USCG exercised its option to increase the AIS data transmission services to $575. At its option, the USCG may elect to receive post-launch maintenance and AIS data transmission services for up to an additional 18 months subsequent to the initial term.
 
Because no tangible deliverable other than services will be provided to the USCG and the Company retains title to the Concept Validation Project satellite, the arrangement is accounted for as a long-term service arrangement. The deliverables under the agreement with the USCG do not qualify as separate units of accounting. Commencing with acceptance of the AIS data by the USCG in August 2008, the revenues related to the design and development of the satellite, initial post-launch maintenance and AIS data transmission services are being recognized ratably over six years, the expected life of the customer relationship. At its option, the USCG may elect to receive subsequent maintenance and AIS data transmission services. These services, if accepted by the USCG, will be recognized ratably over the remaining expected life of the customer relationship.
 
Out-of-pocket expenses incurred during the performance of professional service contracts are included in costs of services and any amounts re-billed to customers are included in revenues during the period in which they are incurred. Shipping costs billed to customers are included in product sales revenues and the related costs are included as costs of product sales.
 
Revenue
recognition



 



Product revenues are derived from sales of Communicators, SIMS,
and other equipment such as gateway earth stations and gateway
control centers to customers. The Company derives service
revenues from the utilization of Communicators on the ORBCOMM
System and the reselling of airtime from the utilization of SIMS
on the cellular providers’ wireless network from its
resellers (i.e., its value added resellers, international value
added resellers, international licensees and country
representatives) and direct customers. These service revenues
consist of subscriber-based and recurring monthly usage fees and
generally a one-time activation fee for each Communicator and
SIMS activated for use. Usage fees charged to customers are
based upon the number, size and frequency of data transmitted by
a customer and the overall number of Communicators and SIMS
activated by each customer. Usage fees charged to the
Company’s resellers are charged primarily based on the
overall number of Communicators and SIMS activated by the
resellers and the total amount of data transmitted by their
customers.


 



The Company also earns service revenues from providing
engineering, technical and management support services to
customers, and a one-time royalty fee relating to the
manufacture of Communicators from third parties under a
manufacturing agreement.


 



Revenues generated from the sale of Communicators, SIMS and
other products are either recognized when the products are
shipped or when customers accept the products, depending on the
specific contractual terms. Sales of Communicators, SIMS and
other products are not subject to return and title and risk of
loss pass to the customer at the time of shipment. Sales of
Communicators and SIMS are primarily to resellers and are not
bundled with services arrangements. Revenues from sales of
gateway earth stations and related products are recognized upon
customer acceptance. Revenues from the activation of both
Communicators and SIMS are initially recorded as deferred
revenues and are, thereafter, recognized ratably over the term
of the agreement with the customer, generally three years.
Revenues generated from monthly usage and administrative fees
and engineering services are recognized when the services are
rendered. Revenues generated from royalties relating to the
manufacture of Communicators by third parties are recognized
when the third party notifies the Company of the units it has
manufactured and a unique serial number is assigned to each unit
by the Company.


 



Amounts received prior to the performance of services under
customer contracts are recognized as deferred revenues and
revenue recognition is deferred until such time that all revenue
recognition criteria have been met.


 



For arrangements with multiple obligations (e.g., deliverable
and undeliverable products, and other post-contract support),
the Company allocates revenues to each component of the contract
based on objective evidence





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Table of Contents





 




Notes to
consolidated financial statements

(In thousands, except share and per share amounts)


 



of its fair value in accordance with Emerging Issues Task Force
Issue
No. 00-21
Revenue Arrangements With Multiple Deliverables. The
Company recognizes revenues allocated to undelivered products
when the criteria for product revenues set forth above are met.
If objective and reliable evidence of the fair value of the
undelivered obligations is not available, the arrangement
consideration allocable to a delivered item is combined with the
amount allocable to the undelivered item(s) within the
arrangement. Revenues are recognized as the remaining
obligations are fulfilled.


 



During 2004, the Company entered into a contract with the United
States Coast Guard (“USCG”) to design, develop, launch
and operate a single satellite equipped with the capability to
receive, process and forward Automatic Identification Systems
(“AIS”) data (the “Concept Validation
Project”). Under the terms of the agreement, title to the
Concept Validation Project demonstration satellite (also called
the Coast Guard demonstration satellite) remains with the
Company, however the USCG was granted a non-exclusive,
royalty-free license to use the designs, software processes and
procedures developed under the contract in connection with any
future Company satellites that are AIS enabled. The Company is
permitted to use the Concept Validation Project satellite to
provide services to other customers. The agreement also provides
for post-launch maintenance and AIS data transmission services
to be provided by the Company to the USCG for an initial term of
14 months.


 



On June 19, 2008, the Coast Guard demonstration satellite
was launched. In August 2008, the USCG accepted the AIS data and
elected to receive the initial post-launch maintenance for $380
and AIS data transmission services for $198. At that time, the
Company placed the Coast Guard demonstration satellite in
service and began to recognize revenues. On September 30,
2008, the USCG exercised its option to increase the AIS data
transmission services to $575. At its option, the USCG may elect
to receive post-launch maintenance and AIS data transmission
services for up to an additional 18 months subsequent to
the initial term.


 



Because no tangible deliverable other than services will be
provided to the USCG and the Company retains title to the
Concept Validation Project satellite, the arrangement is
accounted for as a long-term service arrangement. The
deliverables under the agreement with the USCG do not qualify as
separate units of accounting. Commencing with acceptance of the
AIS data by the USCG in August 2008, the revenues related to the
design and development of the satellite, initial post-launch
maintenance and AIS data transmission services are being
recognized ratably over six years, the expected life of the
customer relationship. At its option, the USCG may elect to
receive subsequent maintenance and AIS data transmission
services. These services, if accepted by the USCG, will be
recognized ratably over the remaining expected life of the
customer relationship.


 



Out-of-pocket
expenses incurred during the performance of professional service
contracts are included in costs of services and any amounts
re-billed to customers are included in revenues during the
period in which they are incurred. Shipping costs billed to
customers are included in product sales revenues and the related
costs are included as costs of product sales.


 




These excerpts taken from the ORBC 10-K filed Mar 17, 2008.
Revenue recognition
 
Product revenues are derived sales of Communicators, SIMS, and other equipment such as gateway earth stations and gateway control centers to customers. The Company derives service revenues from both the utilization of Communicators and SIMS, on the ORBCOMM System from its resellers (i.e., its value added resellers (“VARs”), international value added resellers (“IVARs”), international licensees and country representatives) and direct customers and reselling of airtime using the cellular provider’s wireless network. These service revenues consist of subscriber-based and recurring monthly usage fees and generally a one-time activation fee for each Communicator and SIMS activated for use. Usage fees charged to customers are based upon the number, size and frequency of data transmitted by a customer and the overall number of Communicators and SIMS activated by each customer. Usage fees charged to the Company’s VARs, IVARs, international licensees and country representatives are charged primarily based on the overall number of Communicators and SIMS activated by the VAR, IVAR, international licensee or country representative and the total amount of data transmitted by their customers. The Company also earns revenues from providing engineering, technical and management support services to customers, and a one-time royalty fee relating to the manufacture of Communicators from third parties under a manufacturing agreement.
 
Revenues generated from the sale of Communicators and other products are either recognized when the products are shipped or when customers accept the products, depending on the specific contractual terms. Sales of


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Table of Contents

 
Notes to consolidated financial statements
(In thousands, except share and per share amounts)
 
Communicators and other products are not subject to return and title and risk of loss pass to the customer at the time of shipment. Sales of SIMS are subject to return and title and risk of loss pass to the customer at the time of shipment as the Company does not have a sufficient historical experience on which to make a reasonable estimate of the amount of SIMS returns that will occur, accordingly revenues on the sales of SIMS is deferred until the return privilege has substantially expired. Sales of Communicators and SIMS are primarily to VARs and IVARs are not bundled with services arrangements. Revenues from sales of gateway earth stations and related products are recognized upon customer acceptance. Revenues from the activation of both Communicators and SIMS are initially recorded as deferred revenues and are, thereafter, recognized ratably over the term of the agreement with the customer, generally three years. Revenues generated from monthly usage and administrative fees and engineering services are recognized when the services are rendered. Revenues generated from royalties relating to the manufacture of Communicators by third parties are recognized when the third party notifies the Company of the units it has manufactured and a unique serial number is assigned to each unit by the Company.
 
Amounts received prior to the performance of services under customer contracts are recognized as deferred revenues and revenue recognition is deferred until such time that all revenue recognition criteria have been met.
 
For arrangements with multiple obligations (e.g., deliverable and undeliverable products, and other post-contract support), the Company allocates revenues to each component of the contract based on objective evidence of its fair value. The Company recognizes revenues allocated to undelivered products when the criteria for product revenues set forth above are met. If objective and reliable evidence of the fair value of the undelivered obligations is not available, the arrangement consideration allocable to a delivered item is combined with the amount allocable to the undelivered item(s) within the arrangement. Revenues are recognized as the remaining obligations are fulfilled.
 
Out-of-pocket expenses incurred during the performance of professional service contracts are included in costs of services and any amounts re-billed to clients are included in revenues during the period in which they are incurred. Shipping costs billed to customers are included in product sales revenues and the related costs are included as costs of product sales.
 
The Company, on occasion, issues options to purchase its equity securities or the equity securities of its subsidiaries, or issues shares of its common stock as an incentive in soliciting sales commitments from its customers. The grant date fair value of such equity instruments is recorded as a reduction of revenues on a pro-rata basis as products or services are delivered under the sales arrangement.
 
Revenue
recognition



 



Product revenues are derived sales of Communicators, SIMS, and
other equipment such as gateway earth stations and gateway
control centers to customers. The Company derives service
revenues from both the utilization of Communicators and SIMS, on
the ORBCOMM System from its resellers (i.e., its value added
resellers (“VARs”), international value added
resellers (“IVARs”), international licensees and
country representatives) and direct customers and reselling of
airtime using the cellular provider’s wireless network.
These service revenues consist of subscriber-based and recurring
monthly usage fees and generally a one-time activation fee for
each Communicator and SIMS activated for use. Usage fees charged
to customers are based upon the number, size and frequency of
data transmitted by a customer and the overall number of
Communicators and SIMS activated by each customer. Usage fees
charged to the Company’s VARs, IVARs, international
licensees and country representatives are charged primarily
based on the overall number of Communicators and SIMS activated
by the VAR, IVAR, international licensee or country
representative and the total amount of data transmitted by their
customers. The Company also earns revenues from providing
engineering, technical and management support services to
customers, and a one-time royalty fee relating to the
manufacture of Communicators from third parties under a
manufacturing agreement.


 



Revenues generated from the sale of Communicators and other
products are either recognized when the products are shipped or
when customers accept the products, depending on the specific
contractual terms. Sales of





F-8





Table of Contents





 




Notes to
consolidated financial statements

(In thousands, except share and per share amounts)


 



Communicators and other products are not subject to return and
title and risk of loss pass to the customer at the time of
shipment. Sales of SIMS are subject to return and title and risk
of loss pass to the customer at the time of shipment as the
Company does not have a sufficient historical experience on
which to make a reasonable estimate of the amount of SIMS
returns that will occur, accordingly revenues on the sales of
SIMS is deferred until the return privilege has substantially
expired. Sales of Communicators and SIMS are primarily to VARs
and IVARs are not bundled with services arrangements. Revenues
from sales of gateway earth stations and related products are
recognized upon customer acceptance. Revenues from the
activation of both Communicators and SIMS are initially recorded
as deferred revenues and are, thereafter, recognized ratably
over the term of the agreement with the customer, generally
three years. Revenues generated from monthly usage and
administrative fees and engineering services are recognized when
the services are rendered. Revenues generated from royalties
relating to the manufacture of Communicators by third parties
are recognized when the third party notifies the Company of the
units it has manufactured and a unique serial number is assigned
to each unit by the Company.


 



Amounts received prior to the performance of services under
customer contracts are recognized as deferred revenues and
revenue recognition is deferred until such time that all revenue
recognition criteria have been met.


 



For arrangements with multiple obligations (e.g., deliverable
and undeliverable products, and other post-contract support),
the Company allocates revenues to each component of the contract
based on objective evidence of its fair value. The Company
recognizes revenues allocated to undelivered products when the
criteria for product revenues set forth above are met. If
objective and reliable evidence of the fair value of the
undelivered obligations is not available, the arrangement
consideration allocable to a delivered item is combined with the
amount allocable to the undelivered item(s) within the
arrangement. Revenues are recognized as the remaining
obligations are fulfilled.


 



Out-of-pocket expenses incurred during the performance of
professional service contracts are included in costs of services
and any amounts re-billed to clients are included in revenues
during the period in which they are incurred. Shipping costs
billed to customers are included in product sales revenues and
the related costs are included as costs of product sales.


 



The Company, on occasion, issues options to purchase its equity
securities or the equity securities of its subsidiaries, or
issues shares of its common stock as an incentive in soliciting
sales commitments from its customers. The grant date fair value
of such equity instruments is recorded as a reduction of
revenues on a pro-rata basis as products or services are
delivered under the sales arrangement.


 




This excerpt taken from the ORBC 10-K filed Mar 28, 2007.
Revenue recognition
 
Product revenues are derived from sales of Communicators and other equipment, such as gateway earth stations and gateway control centers, to customers. The Company derives service revenues from its resellers (i.e., its value added resellers (“VARs”), international value added resellers (“IVARs”), international licensees and country representatives) and direct customers from utilization of Communicators on the ORBCOMM System. These service revenues consist of a one-time activation fee for each Communicator activated for use and monthly usage


F-8


Table of Contents

 
Notes to consolidated financial statements
(In thousands, except share, unit, per share and per unit amounts)

fees. Usage fees charged to customers are based upon the number, size and frequency of data transmitted by a customer and the overall number of Communicators activated by each customer. Usage fees charged to the Company’s VARs, IVARs, international licensees and country representatives are charged primarily based on the overall number of Communicators activated by the VAR, IVAR, international licensee or country representative and the total amount of data transmitted by their customers. For one licensee customer, the Company charges usage fees as a percentage of the licensee’s revenues. The Company also earns revenues from providing engineering, technical and management support services to customers, and from license fees and royalties relating to the manufacture of Communicators by third parties under certain manufacturing agreements.
 
Revenues generated from the sale of Communicators and other products are either recognized when the products are shipped or when customers accept the products, depending on the specific contractual terms. Sales of Communicators and other products are not subject to return and title and risk of loss pass to the customer at the time of shipment. Sales of Communicators are primarily to VARs and IVARs are not bundled with services arrangements. Revenues from sales of gateway earth stations and related products are recognized upon customer acceptance. Revenues from the activation of Communicators are initially recorded as deferred revenues and are, thereafter, recognized ratably over the term of the agreement with the customer, generally three years. Revenues generated from monthly usage and administrative fees and engineering services are recognized when the services are rendered. Upfront payments for manufacturing license fees are initially recorded as deferred revenues and are recognized ratably over the term of the agreements, generally ten years. Revenues generated from royalties relating to the manufacture of Communicators by third parties are recognized when the third party notifies the Company of the units it has manufactured and a unique serial number is assigned to each unit by the Company.
 
Amounts received prior to the performance of services under customer contracts are recognized as deferred revenues and revenue recognition is deferred until such time that all revenue recognition criteria have been met.
 
For arrangements with multiple obligations (e.g., deliverable and undeliverable products, and other post-contract support), the Company allocates revenues to each component of the contract based on objective evidence of its fair value. The Company recognizes revenues allocated to undelivered products when the criteria for product revenues set forth above are met. If objective and reliable evidence of the fair value of the undelivered obligations is not available, the arrangement consideration allocable to a delivered item is combined with the amount allocable to the undelivered item(s) within the arrangement. Revenues are recognized as the remaining obligations are fulfilled.
 
Out-of-pocket expenses incurred during the performance of professional service contracts are included in costs of services and any amounts re-billed to clients are included in revenues during the period in which they are incurred. Shipping costs billed to customers are included in product sales revenues and the related costs are included as costs of product sales.
 
The Company, on occasion, issues options to purchase its equity securities or the equity securities of its subsidiaries, or issues shares of its common stock as an incentive in soliciting sales commitments from its customers. The grant date fair value of such equity instruments is recorded as a reduction of revenues on a pro-rata basis as products or services are delivered under the sales arrangement.
 

RELATED TOPICS for ORBC:

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