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Analysis of Revenues

Difficulty: Advanced

Revenue Recognition Accounting Policy

Intel recognizes net product revenue when the earnings process is complete and the risks and rewards of product ownership have transferred to the customers, as evidenced by the existence of an agreement, delivery having occurred, pricing being deemed fixed, and collection being considered probable. Intel records pricing allowances, including discounts based on contractual arrangements with customers, when Intel recognizes revenue as a reduction to both accounts receivable and net revenue. On sales made to distributors that allow for price protections or right of return until the distributor sells through the merchandise, Intel defers product revenue, and related costs of sales, due to sales price reductions and rapid technology obsolescence in the industry. The right of return granted generally consists of a stock rotation program in which distributors are able to exchange certain products based on the number of qualified purchases made by the distributor. Under the price protection program, Intel gives distributors credits for the difference between the original price paid and the current price that Intel offers. Intel includes shipping charges billed to customers in net revenue, and include the related shipping costs in cost of sales.

Intel makes payments to the customers through cooperative advertising programs, such as the Intel Inside® program, for marketing activities for certain of the products. Intel accrues cooperative advertising obligations and records the costs at the same time that the related revenue is recognized. Intel records cooperative advertising costs as marketing, general and administrative (MG&A) expenses to the extent that an advertising benefit separate from the revenue transaction can be identified and the fair value of that advertising benefit received is determinable. Intel records any excess in cash paid to customers over the fair value of the advertising benefit Intel receives as a reduction in revenue.

During the first half of 2017, Intel’s cooperative advertising costs under the Intel Inside program met the criteria to be recorded as MG&A. During the second half of 2017, Intel transitioned customers from previous offerings under the Intel Inside program to cooperative advertising offerings more tailored to customers and their marketing audiences. In the second half of 2017, cooperative advertising costs were recorded as a reduction of revenue, as Intel no longer met the criteria for recording these expenses within MG&A.

Source: 10-K (filing date: 2018-02-16).

Revenues as Reported

Intel Corp., Income Statement, Revenues

USD $ in millions

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12 months ended Dec 30, 2017 Dec 31, 2016 Dec 26, 2015 Dec 27, 2014 Dec 28, 2013
Client Computing Group (CCG) hidden hidden hidden hidden hidden
Data Center Group (DCG) hidden hidden hidden hidden hidden
Internet of Things Group (IOTG) hidden hidden hidden hidden hidden
Non-Volatile Memory Solutions Group (NSG) hidden hidden hidden hidden hidden
Programmable Solutions Group (PSG) hidden hidden hidden hidden hidden
All other hidden hidden hidden hidden hidden
Net revenue hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13), 10-K (filing date: 2014-02-14).

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). Intel Corp.’s net revenue increased from 2015 to 2016 and from 2016 to 2017.