This company is transferred to the archive: financial data is no longer updated!Revenue Recognition Accounting Policy
Texas Instruments Inc. recognizes revenue from direct sales of products to customers, including shipping fees, when title passes to the customer, which usually occurs upon shipment or delivery, depending upon the terms of the sales order; when persuasive evidence of an arrangement exists; and when collectability is reasonably assured. Revenue from sales of Texas Instruments Inc.'s products that are subject to inventory consignment agreements is recognized when the customer pulls product from consignment inventory that Texas Instruments Inc. stores at designated locations. Estimates of product returns for quality reasons and of price allowances (based on historical experience, product shipment analysis and customer contractual arrangements) are recorded when revenue is recognized. Allowances include volume-based incentives and special pricing arrangements. In addition, Texas Instruments Inc. records allowances for accounts receivable that Texas Instruments Inc. estimates may not be collected.
Texas Instruments Inc. recognizes revenue from direct sales of products to distributors, net of allowances, consistent with the principles discussed above. Title transfers to the distributors at delivery or when the products are pulled from consignment inventory and payment is due on Texas Instruments Inc.'s standard commercial terms; payment terms are not contingent upon resale of the products. Texas Instruments Inc. also grants discounts to some distributors for prompt payments. Texas Instruments Inc. calculates credit allowances based on historical data, current economic conditions and contractual terms. For instance, Texas Instruments Inc. sells to distributors at standard published prices, but Texas Instruments Inc. may grants them price adjustment credits in response to individual competitive opportunities they may have. To estimate allowances, Texas Instruments Inc. uses statistical percentages of revenue, determined quarterly, based upon recent historical adjustment trends.
Texas Instruments Inc. also provides distributors an allowance to scrap certain slow-moving or obsolete products in their inventory, estimated as a negotiated fixed percentage of each distributor's purchases from Texas Instruments Inc. In addition, if Texas Instruments Inc. publishes a new price for a product that is lower than that paid by distributors for the same product still remaining in each distributor's on-hand inventory, Texas Instruments Inc. may credits them for the difference between those prices. The allowance for this type of credit is based on the identified product price difference applied to Texas Instruments Inc.'s estimate of each distributor's on-hand inventory of that product. Texas Instruments Inc. believes that can reasonably and reliably estimates allowances for credits to distributors in a timely manner.
Texas Instruments Inc. determines the amount and timing of royalty revenue based on contractual agreements with intellectual property licensees. Texas Instruments Inc. recognizes royalty revenue when earned under the terms of the agreements and when Texas Instruments Inc. considers realization of payment to be probable. Where royalties are based on a percentage of licensee sales of royalty-bearing products, Texas Instruments Inc. recognizes royalty revenue by applying this percentage to estimate of applicable licensee sales. Texas Instruments Inc. bases this estimate on historical experience and an analysis of each licensee's sales results. Where royalties are based on fixed payment amounts, Texas Instruments Inc. recognizes royalty revenue ratably over the term of the royalty agreement. Where warranted, revenue from licensees may be recognized on a cash basis.
Texas Instruments Inc. includes shipping and handling costs in cost of revenue.
Source: Texas Instruments Inc., Annual Report
.
