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Technology Stocks : Qualcomm Moderated Thread - please read rules before posting
QCOM 162.88-1.0%10:00 AM EST
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To: scratchmyback who wrote (79283)7/28/2008 12:33:22 PM
From: AlfaNut  Read Replies (2) of 197217
 
I don't see any other alternative for Nokia than to book it as a one time item for the third quarter.

Absolutely not. Any payment that is defined in the agreement as an up-front license fee MUST be expensed ratably over the life of the agreement. Not really a choice - this is GAAP. Such a payment would show more clearly in the balance sheet (prepaid expense) or cash flow statement if it isn't too obscured by other items. Likewise, QCOM MUST recognize an up-front license fee over the life of the agreement.

Note also that Nokia has been accruing royalty/license type expenses since the prior expiration date. Everything will get trued up as the final agreement is signed. I have no idea how much Nokia has accrued as a liability, but this will also affect the net current expense, perhaps very significantly. I point this out as it is one area where people will get confused.

One final comment. There has been a lot of chatter about "make up" royalty payments and so on. I would advise against thinking of the monies like this, as I can almost guarantee that the two parties will NOT define the payments as such.
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