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Analysis of Revenues

Difficulty: Advanced

Revenue Recognition Accounting Policy

Broadcom recognizes revenue related to sales of the products, net of trade discounts and allowances, provided that (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred and title and risk of loss have transferred, (iii) the price is fixed or determinable and (iv) collectibility is reasonably assured. Delivery is considered to have occurred when title and risk of loss have transferred to the customer. Broadcom considers the price to be determinable when the price is not subject to refund or adjustments or when any such adjustments can be estimated. Broadcom evaluates the creditworthiness of the customers to determine that appropriate credit limits are established prior to the acceptance of an order. Revenue, including sales to resellers and distributors, is reduced for estimated returns and distributor allowances.

Broadcom recognizes revenue from sales of the products to distributors upon delivery of product to the distributors. An allowance for distributor credits covering price adjustments is made based on Broadcom's estimate of historical experience rates as well as considering economic conditions and contractual terms. To date, actual distributor claims activity has been materially consistent with the provisions Broadcom has made based on the historical estimates. Broadcom also records reductions of revenue for rebates, in the same period that the related revenue is recorded. Broadcom accrues 100% of potential rebates at the time of sale and do not apply a breakage factor. Broadcom reverses the accrual of unclaimed rebate amounts as specific rebate programs contractually end and when Broadcom believes unclaimed rebates are no longer subject to payment and will not be paid. Thus, the reversal of unclaimed rebates may have a positive impact on Broadcom's net revenue and results of operations in subsequent periods.

Broadcom enters into development agreements with some of the customers and recognizes revenue from these agreements upon completion and acceptance by the customer of contract deliverables or as services are provided, depending on the terms of the arrangement. Revenue is deferred for any amounts billed or received prior to completion or delivery of services. As Broadcom retains the intellectual property generated from these development agreements, costs related to these arrangements are included in research and development expense.

Broadcom recognizes revenue from the sales and licensing of the intellectual property when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) the sales price is fixed or determinable, and (iv) collection of resulting receivables is reasonably assured. Revenue from upfront payments for the licensing of Broadcom's patents is recognized when the arrangement is mutually signed, if there is no future delivery or future performance obligation and all other criteria are met. Revenue from guaranteed royalty streams are recognized when paid, or collection is reasonably assured and all other criteria are met. When patent licensing arrangements include royalties for future sales of the licensees' products using Broadcom's licensed patented technology, revenue is recognized when the royalty report is received from the licensee, at which time the sales price is determinable, provided that all other criteria have been met.

Source: 10-K (filing date: 2017-12-21).

Revenues as Reported

Broadcom Inc., Income Statement, Revenues

USD $ in millions

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12 months ended Oct 29, 2017 Oct 30, 2016 Nov 1, 2015 Nov 2, 2014 Nov 3, 2013 Oct 28, 2012
Wired infrastructure hidden hidden hidden hidden hidden hidden
Wireless communications hidden hidden hidden hidden hidden hidden
Enterprise storage hidden hidden hidden hidden hidden hidden
Industrial & other hidden hidden hidden hidden hidden hidden
Net revenue hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2017-12-21), 10-K (filing date: 2016-12-23), 10-K (filing date: 2015-12-17), 10-K (filing date: 2014-12-29), 10-K (filing date: 2013-12-20), 10-K (filing date: 2012-12-17).

Item Description The company
Net revenue Amount of revenue recognized from goods sold, services rendered, insurance premiums, or other activities that constitute an earning process. Includes, but is not limited to, investment and interest income before deduction of interest expense when recognized as a component of revenue, and sales and trading gain (loss). Broadcom Inc.'s net revenue increased from 2015 to 2016 and from 2016 to 2017.