2.2.0.7 false Change in Significant Accounting Policies 0203 - Disclosure - Change in Significant Accounting Policies true false false false 1 USD false false USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 USDEPS Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares xbrli 0 Shares Standard http://www.xbrl.org/2003/instance shares xbrli 0 $ 2 Change in Significant Accounting Policies [Abstract] 0 arrs_ChangeInSignificantAccountingPoliciesAbstract arrs false na duration Change in Significant Accounting Policies. false false false false false true false false false false false false 1 false false false false 0 0 false false false xbrli:stringItemType string Change in Significant Accounting Policies. false 3 Change in Significant Accounting Policies 1 us-gaap_SignificantAccountingPoliciesTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false verboselabel false 1 false false false false 0 0   <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b>Note 3. Change in Significant Accounting Policies</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">ARRIS’ significant accounting policies are disclosed in the Company’s Form 10-K for the year ended December 31, 2009, as filed with the SEC. The following discussion addresses a change in the Company’s revenue recognition accounting policy. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><i>Revenue Recognition</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">ARRIS generates revenue as a result of varying activities, including the delivery of stand-alone equipment, custom design and installation services, and bundled sales arrangements inclusive of equipment, software and services. The revenue from these activities is recognized in accordance with applicable accounting guidance and their related interpretations. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">Revenue is recognized when all of the following criteria have been met: </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td><i>When persuasive evidence of an arrangement exists</i>. Contracts and customer purchase orders are used to determine the existence of an arrangement.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td><i>Delivery has occurred</i>. Shipping documents, proof of delivery and customer acceptance (when applicable) are used to verify delivery.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td><i>The fee is fixed or determinable</i>. Pricing is considered fixed and determinable at the execution of a customer arrangement, based on specific products and quantities to be delivered at specific prices. This determination includes a review of the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment or future discounts.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td><i>Collectability is reasonably assured</i>. The Company assesses the ability to collect from customers based on a number of factors that include information supplied by credit agencies, analyzing customer accounts, reviewing payment history and consulting bank references. Should a circumstance arise where a customer is deemed not creditworthy, all revenue related to the transaction will be deferred until such time that payment is received and all other criteria to allow the Company to recognize revenue have been met.</td> </tr> </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">Revenue is deferred if any of the above revenue recognition criteria is not met as well as when certain circumstances exist for any of our products or services, including, but not limited to: </div> <div style="margin-top: 6pt"> <table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; text-align: left"> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td>When undelivered products or services that are essential to the functionality of the delivered product exist, revenue is deferred until such undelivered products or services are delivered as the customer would not have full use of the delivered elements.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td>When required acceptance has not occurred.</td> </tr> <tr> <td style="font-size: 6pt"> </td> </tr> <tr valign="top" style="font-size: 10pt; color: #000000; background: transparent"> <td width="2%" style="background: transparent"> </td> <td width="3%" nowrap="nowrap" align="left"><b>•</b></td> <td width="1%"> </td> <td>When trade-in rights are granted at the time of sale, that portion of the sale is deferred until the trade-in right is exercised or the right expires. In determining the deferral amount, management estimates the expected trade-in rate and future value of the product upon trade-in. These factors are periodically reviewed and updated by management, and the updates may result in either an increase or decrease in the deferral.</td> </tr> </table> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Equipment — </i>The Company provides cable system operators with equipment that can be placed within various stages of a broadband cable system that allows for the delivery of cable telephony, video and high speed data as well as outside plant construction and maintenance equipment. For equipment sales, revenue recognition is generally established when the products have been shipped, risk of loss has transferred, objective evidence exists that the product has been accepted, and no significant obligations remain relative to the transaction. Additionally, based on historical experience, ARRIS has established reliable estimates related to sales returns and other allowances for discounts. These estimates are recorded as a reduction to revenue at the time the revenue is initially recorded. </div>   </div>  <div style="font-family: 'Times New Roman',Times,serif"> <div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Software Sold Without Tangible Equipment — </i>ARRIS sells internally developed software as well as software developed by outside third parties that does not require significant production, modification or customization. For arrangements that contain only software and the related post-contract support, the Company recognizes revenue in accordance with the applicable software revenue recognition guidance. If the arrangement includes multiple elements that are software only, then the software revenue recognition guidance is applied and the fee is allocated to the various elements based on vendor-specific objective evidence (“VSOE”) of fair value. If sufficient VSOE of fair value does not exist for the allocation of revenue to all the various elements in a multiple element software arrangement, all revenue from the arrangement is deferred until the earlier of the point at which such sufficient VSOE of fair value is established or all elements within the arrangement are delivered. If VSOE of fair value exists for all undelivered elements, but does not exist for one or more delivered elements, the arrangement consideration is allocated to the various elements of the arrangement using the residual method of accounting. Under the residual method, the amount of the arrangement consideration allocated to the delivered elements is equal to the total arrangement consideration less the aggregate fair value of the undelivered elements. Under the residual method, if VSOE exists for the undelivered element, generally post contract support (“PCS”), the fair value of the undelivered element is deferred and recognized ratably over the term of the PCS contract, and the remaining portion of the arrangement is recognized as revenue upon delivery. If sufficient VSOE of fair value does not exist for PCS, revenue is recognized ratably over the term of support. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Standalone Services —</i>Installation, training, and professional services are generally recognized in service revenues when performed. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Incentives — </i>Customer incentive programs that include consideration, primarily rebates/credits to be used against future product purchases and certain volume discounts, have been recorded as a reduction of revenue when the shipment of the requisite equipment occurs. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Value Added Resellers </i>— ARRIS employs the sell-in method of accounting for revenue when using a Value Added Reseller (“VAR”) as our channel to market. Because product returns are restricted, revenue under this method is recognized at the time of shipment to the VAR provided all criteria for recognition are met. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><i>Multiple Element Arrangements — </i>Certain customer transactions may include multiple deliverables based on the bundling of equipment, software and services. When a multiple element arrangement exists, the fee from the arrangement is allocated to the various deliverables, to the extent appropriate, so that the proper amount can be recognized as revenue as each element is delivered. Based on the composition of the arrangement, the Company analyzes the provisions of the accounting guidance to determine the appropriate model that is applied towards accounting for the multiple element arrangement. If the arrangement includes a combination of elements that fall within different applicable guidance, ARRIS follows the provisions of the hierarchal literature to separate those elements from each other and apply the relevant guidance to each. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">For multiple element arrangements that include software or have a software-related element that is essential to the functionality of the tangible product, more than incidental but that does not involve significant production, modification or customization, the Company applies, and will continue to apply the provisions of the relevant software revenue recognition accounting guidance for arrangements originating before January 1, 2010 that continue to effective after January 1, 2010<i>.</i> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">For multiple element arrangements that include software or have a software-related element that is more than incidental and does involve significant production, modification or customization, revenue is recognized using the contract accounting guidelines by applying the percentage of completion or completed contract method. The Company recognizes software license and associated professional services revenue for its mobile workforce management software license product installations using the percentage of completion method of accounting as the Company believes that its estimates of costs to complete and extent of progress toward completion of such contracts are reliable. For certain software license arrangements where professional services are being provided and are deemed to be essential to the functionality or are for significant production, modification, or customization of the software product, both the software and the associated professional service revenue are recognized using the completed contract method if the Company does not have the ability to reasonably estimate contract costs at the inception of the contracts. Under the completed contract method, revenue is recognized when the contract is complete, and all direct costs and related revenues are deferred until that time. The entire amount of an estimated loss on a contract is accrued at the time a loss on a contract is projected. Actual profits and losses may differ from these estimates. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">If the arrangement includes multiple elements, the fee is allocated to the various elements based on VSOE of fair value. If sufficient VSOE of fair value does not exist for the allocation of revenue to all the various elements in a multiple element arrangement, all revenue from the arrangement is deferred until the earlier of the point at which such sufficient VSOE is established or all elements within the arrangement are delivered. If VSOE of fair value exists for all undelivered elements, but does not exist for one or more delivered elements, the arrangement consideration is allocated to the various elements of the arrangement using the residual method of accounting. Under the residual method, the amount of the arrangement consideration allocated to the delivered elements is equal to the total arrangement consideration less the aggregate fair value of the undelivered elements. Using this method, any potential discount on the arrangement is allocated entirely to the delivered elements, which ensures that the amount of revenue recognized at any point in time is not overstated. Under the residual method, if VSOE exists for the undelivered element, generally PCS, the fair value of the undelivered element is deferred and recognized ratably over the term of the PCS contract, and the remaining portion of the arrangement is recognized as revenue upon delivery, which generally occurs upon delivery of the product or implementation of the system. License revenue allocated to software products, in certain circumstances, is recognized upon delivery of the software products. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">Many of ARRIS’ products are sold in combination with customer support and maintenance services, which consist of software updates and product support. Software updates provide customers with rights to unspecified software updates that ARRIS chooses to develop and to maintenance releases and patches that the Company chooses to release during the period of the support period. Product support services include telephone support, remote diagnostics, email and web access, access to on-site technical support personnel and repair or replacement of hardware in the event of damage or failure during the term of the support period. Maintenance and support service fees are recognized ratably under the straight-line method over the term of the contract, which is generally one year. The Company does not record receivables associated with maintenance revenues without a firm, non-cancelable order from the customer. VSOE of the fair value for all service offerings. VSOE of fair value is determined based on the price charged when the same element is sold separately and based on the prices at which our customers have renewed their customer support and maintenance. For elements that are not yet being sold separately, the price established by management, if it is probable that the price, once established, will not change before the separate introduction of the element into the marketplace is used to measure VSOE of fair value for that element. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">The Company elected to early adopt accounting standards on a prospective basis related to multiple element arrangements as discussed in Note 2 of the Notes to the Consolidated Financial Statements. The Company applies the previous applicable accounting guidance for arrangements originating prior to the adoption date of January 1, 2010. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">Below is a comparison of: 1) units of accounting, 2) allocation of arrangement consideration and 3) timing of revenue recognition applying the old and new guidance. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Units of Accounting</i></b><b>:</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Before January 1, 2010</b>: For multiple element arrangements originating before January 1, 2010, the deliverables are separated into more than one unit of accounts when the following criteria are met: (i) the delivered element(s) have value to the customer on a stand-alone basis, (ii) objective and reliable evidence of fair value exists for the undelivered element(s), and (iii) delivery of the undelivered element(s) is probable and substantially in the control of the Company. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b>After December 31, 2009</b>: For multiple element arrangements (other than software sold without tangible equipment) originating or materially modified after January 1, 2010, the deliverables are separated into more than one unit of accounting when the following criteria are met: (i) the delivered element(s) have value to the customer on a stand-alone basis, and (ii) if a general right of return exits relative to the delivered item, delivery or performance of the undelivered element(s) is probable and substantially in the control of the Company. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">Adoption of the new standard did not alter the Company’s assessment of units of accounting as defined by the guidance, because ARRIS historically has had objective and reliable fair value for undelivered elements. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Allocation of Arrangement Consideration</i></b><b>:</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b>Before January 1, 2010</b>: Revenue is allocated to each unit of accounting based on the relative fair value of each accounting unit or by using the residual method if objective evidence of fair value does not exist for the delivered element(s). </div> <div align="left" style="font-size: 10pt; margin-top: 6pt"><b>After December 31, 2009: </b>The Company uses best estimated selling price (“BESP”) of the element(s) for the allocation of arrangement consideration when unable to establish VSOE or third-party evidence of selling price (“TPE”). The objective of BESP is to determine the price at which the Company would transact a sale if the product or service were sold on a stand-alone basis. BESP is generally used for new or highly customized offerings and solutions or elements not priced within a narrow range. The Company determines BESP for a product or service by considering multiple factors including, but not limited to, geographies, market conditions, competitive landscape, internal costs, gross margin objectives, and pricing practices. The Company uses the relative selling price basis for the allocation of the arrangement consideration. </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">There was not a material difference in the amount of revenue recorded applying either the old or new guidance. This is attributable to the lack of material difference between allocations using the residual method and the relative selling price method. </div> <div align="left" style="font-size: 10pt; margin-top: 12pt"><b><i>Timing of Revenue Recognition</i></b><b>:</b> </div> <div align="left" style="font-size: 10pt; margin-top: 6pt">As discussed above, the Company did not have any material changes to the identified units of accounting, nor to the allocation of revenue to those units, during the reporting period that would have materially affected the timing of the recognition of revenue. </div> </div>  <!-- Begin Block Tagged Note false false false us-types:textBlockItemType textblock This element may be used to describe all significant accounting policies of the reporting entity. Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 22 -Paragraph 8 false 1 2 false UnKnown UnKnown UnKnown false true