Consolidated Balance Sheets Details

3 Months Ended

May 31, 2020

Balance Sheet Related Disclosures [Abstract]

CONSOLIDATED BALANCE SHEET DETAILS

Accounts Receivable, Net

The allowance for credit losses as at May 31, 2020 was $13 million (February 29, 2020 - $9 million).

The Company recognizes current estimated credit losses for accounts receivable, net. The CECL for accounts receivable, net are estimated based on days past due and region for each customer in relation to a representative pool of assets consisting of a large number of customers with similar risk characteristics that operate under similar economic environments. The Company determined the CECL by estimating historical credit loss experience based on the past due status and region of the customers, adjusted as appropriate to reflect current conditions and estimates of future economic conditions, inclusive of the effect of the COVID-19 pandemic on credit losses. The duration and severity of COVID-19 and continued market volatility is highly uncertain and, as such, the impact on expected credit losses is subject to significant judgment and may cause variability in the Company’s allowance for credit losses in future periods. When specific customers are identified as no longer sharing the same risk profile as their current pool, they are removed from the pool and evaluated separately. The Company also has long-term accounts receivable included in Other Long-term Assets. The CECL for long-term accounts receivable is estimated using the probability of default method and the default exposure due to limited historical information. The exposure of default is represented by the assets’ amortized carrying amount at the reporting date.

The following table sets forth the activity in the Company’s allowance for credit losses:


	Three Months Ended
	May 31, 2020
Beginning balance as of February 29, 2020	$	9
Impact of adopting ASC 326	4
Current period provision for expected credit losses	—


Ending balance of the allowance for credit loss as at May 31, 2020	$	13

The allowance for credit losses as at May 31, 2020 consists of $6 million relating to CECL estimated based on days past due and region, $6 million relating to specific customers that were evaluated separately and $1 million relating to CECL estimated for long-term accounts receivables.

There were two customers that comprised more than 10% of accounts receivable as at May 31, 2020 (February 29, 2020 - two customers comprised more than 10%).

Other Current Assets

As at May 31, 2020, other current assets include items such as the current portion of deferred commissions and prepaid expenses, among other items, none of which were greater than 5% of the current assets balance in all periods presented.

Property, Plant and Equipment, Net

Property, plant and equipment comprised the following:


	As at
	May 31, 2020		February 29, 2020
Cost
Buildings, leasehold improvements and other	$	72	$	72
BlackBerry operations and other information technology	82		84
Manufacturing, repair and research and development equipment	73		73
Furniture and fixtures	11		11
	238		240
Accumulated amortization	172		170
Net book value	$	66	$	70

Intangible Assets, Net

Intangible assets comprised the following:


	As at May 31, 2020
	Cost		Accumulated Amortization		Net Book Value
Acquired technology	$	1,020	$	656	$	364
Intellectual property	493		284		209
Other acquired intangibles	494		189		305
	$	2,007	$	1,129	$	878


	As at February 29, 2020
	Cost		Accumulated Amortization		Net Book Value
Acquired technology	$	1,019	$	636	$	383
Intellectual property	489		275		214
Other acquired intangibles	494		176		318
	$	2,002	$	1,087	$	915

For the three months ended May 31, 2020, amortization expense related to intangible assets amounted to $45 million (three months ended May 31, 2019 - $47 million)

Total additions to intangible assets for three months ended May 31, 2020 amounted to $8 million (three months ended May 31, 2019 - $7 million). During the three months ended May 31, 2020, additions to intangible assets primarily consisted of payments for intellectual property relating to patent maintenance, registration and license fees.

Based on the carrying value of the identified intangible assets as at May 31, 2020, and assuming no subsequent impairment of the underlying assets, the annual amortization expense for the remainder of fiscal 2021 and each of the five succeeding years is expected to be as follows: fiscal 2021 - $126 million; fiscal 2022 - $145 million; fiscal 2023 - $115 million; fiscal 2024 - $107 million; fiscal 2025 - $101 million and fiscal 2026 - $95 million.

Goodwill

Changes to the carrying amount of goodwill during the three months ended May 31, 2020 were as follows:


	Carrying Amount
Carrying amount as at February 29, 2020	1,437

Goodwill impairment charge	(594)

Carrying amount as at May 31, 2020	$	843

During the first quarter of fiscal 2021, as a result of the deterioration in economic conditions caused by the global COVID-19 pandemic and its impact on the Company’s reporting units, and the decline of the trading value of the Company’s capital stock below the Company’s consolidated carrying value, the Company determined that it was more likely than not that the fair value of at least one of its reporting units was lower than its carrying amount after including goodwill. As a result, the Company completed an analysis of the fair value of its reporting units to compare against their respective carrying values as of May 31, 2020.

In its analysis, the Company utilized multiple valuation techniques, including the income approach, discounted future cash flows, the market-based approach, and the asset value approach which is based on the sum of the values of each of the assets and liabilities within the entity. In addition to market data, the valuation techniques utilize Level 3 inputs such as the Company’s internal forecasts of its future results, cash flows and its weighted average cost of capital, which is risk-adjusted to reflect the specific risk profile of the reporting unit being tested and based upon the Company’s estimated credit rating. The analysis involves significant judgment in the selection of assumptions necessary to arrive at the reporting units’ fair values, especially in light of the ongoing COVID-19 pandemic and its short-term and potential long-term impacts to the Company’s business. The total of the fair values of the Company’s reporting units was reconciled to the Company’s market capitalization based on the quoted market price of the Company’s stock in an active market, adjusted by an appropriate control premium. Where the carrying amount of a reporting unit exceeded its fair value, goodwill of the reporting unit was considered to be impaired.

Based on the results of the goodwill impairment test, it was concluded that the carrying value of one reporting unit exceeded its fair value, necessitating an impairment charge for the amount of excess and reducing the carrying value of Goodwill. Consequently, the Company recorded total non-cash goodwill impairment charges of $594 million in the BlackBerry Spark reporting unit (the “Goodwill Impairment Charge”).

Other Long-term Assets

As at May 31, 2020, other long-term assets include long-term portion of deferred commission and long-term receivables, among other items, none of which were greater than 5% of total assets in any of the periods presented.

Accrued Liabilities

Accrued liabilities includes the current portion of operating lease liabilities, accrued vendor liabilities, accrued carrier liabilities, variable incentive accrual and payroll withholding taxes, among other items, none of which were greater than 5% of the current liabilities balance.

Other Long-term Liabilities

Other long-term liabilities consist of the long-term portion of finance lease liabilities and non-lease components of Resource Allocation Program liabilities.