Qualcomm Inc. (QCOM)
Analysis of Revenues
Revenue Recognition Accounting Policy
Qualcomm derives revenues principally from sales of integrated circuit products and licensing of the intellectual property and also generates revenues through sales of products that connect medical devices and by performing software hosting, software development and other services. The timing of revenue recognition and the amount of revenue actually recognized in each case depends upon a variety of factors, including the specific terms of each arrangement and the nature of Qualcomm’s deliverables and obligations. Unearned revenues consist primarily of license fees for intellectual property with continuing performance obligations.
Revenues from sales of Qualcomm’s products are recognized at the time of shipment, or when title and risk of loss pass to the customer and all other criteria for revenue recognition are met, if later. Revenues from providing services are recognized when earned. Revenues from providing services were less than 10% of total revenues for all periods presented.
Qualcomm grants licenses or otherwise provides rights to use portions of the intellectual property portfolio, which, among other rights, includes certain patent rights essential to and/or useful in the manufacture and sale of certain wireless products. Licensees pay royalties based on their sales of products incorporating or using Qualcomm’s licensed intellectual property and may also pay a fixed license fee in one or more installments. License fees are recognized over the estimated period of benefit of the license to the licensee, typically 5 to 15 years. Royalties are generally based upon a percentage of the wholesale (i.e., licensee’s) selling price of complete licensed products, net of certain permissible deductions (including transportation, insurance, packing costs and other items). Qualcomm broadly provides per unit royalty caps that apply to certain categories of complete wireless devices, namely smartphones, tablets and laptops, which in general, effectively provide for a maximum royalty amount per device. Qualcomm earns royalties on such licensed products sold worldwide by the licensees at the time that the licensees’ sales occur. Qualcomm’s licensees, however, do not report and pay royalties owed for sales in any given quarter until after the conclusion of that quarter, which is generally the following quarter. Qualcomm recognizes royalty revenues based on royalties reported by licensees during the quarter and when all other revenue recognition criteria are met.
Qualcomm records reductions to revenues for customer incentive arrangements, including volume-related and other pricing rebates as well as cost reimbursements for marketing and other activities involving certain of the products and technologies. The charges for such arrangements are recorded as a reduction to accounts receivable or as other current liabilities based on whether Qualcomm has the contractual right of offset. Qualcomm recognizes the liability based on the estimated amount of the incentive, or if not reasonably estimated, the maximum potential liability, at the later of the date at which Qualcomm records the related revenues or the date at which Qualcomm offers the incentive or, if payment is contingent, when the contingency is resolved. Qualcomm reverses accruals for unclaimed incentive amounts to revenues when the unclaimed amounts are no longer subject to payment.
Source: 10-K (filing date: 2018-11-07).
Revenues as Reported
Qualcomm Inc., Income Statement, Revenues
USD $ in millions
|12 months ended||Sep 30, 2018||Sep 24, 2017||Sep 25, 2016||Sep 27, 2015||Sep 28, 2014||Sep 29, 2013|
|Qualcomm CDMA Technologies (QCT)|
|Qualcomm Technology Licensing (QTL)|
|Qualcomm Strategic Initiatives (QSI)|
|Reduction to revenues related to BlackBerry arbitration decision|
|Other unallocated reductions to revenues|
Based on: 10-K (filing date: 2018-11-07), 10-K (filing date: 2017-11-01), 10-K (filing date: 2016-11-02), 10-K (filing date: 2015-11-04), 10-K (filing date: 2014-11-05), 10-K (filing date: 2013-11-06).
|Revenues||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).||Qualcomm Inc.’s revenues declined from 2016 to 2017 but then slightly increased from 2017 to 2018.|