What expense amount related to inventory decline in value was recorded

| March 29, 2017

Question
Read Blackberry’s notes disclosures related to inventory as reported in the annual report, Q3, Q2, & Q1 of 2014, as well as the income statements for Q3 below. Then answer the following questions:

What expense amount related to inventory decline in value was recorded in each quarter
What can we say about the inventory write-down in Q3 except for the fact it was very large?
Approximate how much inventory was sold in Q3 and how much was written down.
In your words, explain what a “supply commitments write-down” means.

Blackberry Inventory Case
Read Blackberry’s notes disclosures related to inventory as reported in the annual report, Q3, Q2,
& Q1 of 2014, as well as the income statements for Q3 below. Then answer the following
questions:
1. What expense amount related to inventory decline in value was recorded in each quarter
2. What can we say about the inventory write-down in Q3 except for the fact it was very
large?
3. Approximate how much inventory was sold in Q3 and how much was written down.
4. In your words, explain what a “supply commitments write-down” means.

CONSOLIDATED BALANCE SHEETS DETAILS – ANNUAL REPORT
Inventories
Inventories were comprised of the following:
As at
March 1,
2014

Raw
materials
Work in
process
Finished
goods

$

March 2,
2013

51 $

271

156
37
$

278
54

244 $

603

During fiscal 2014, the Company recorded charges against inventory and supply
commitments of approximately $2.4 billion. The charges included a write-down of inventory
of approximately $1.6 billion and supply commitments of approximately $782 million.

CONSOLIDATED BALANCE SHEETS DETAILS – 3RD QUARTER
Inventories
Inventories were comprised of the following:
As at

November
30,
2013

Raw
materials
Work in
process
Finished
goods

$

March
2,
2013

8 $ 271
170
76

$

278
54

254 $ 603

During the second quarter of fiscal 2014, the Company recorded the Z10 Inventory Charge
of approximately $934 million ($666 million after tax or $1.27 per share diluted). The Z10
Inventory Charge included a write-down of inventory of approximately $627 million and
supply commitments of approximately $307 million.
During the third quarter of fiscal 2014, the Company recorded the Q3 Fiscal 2014 Inventory
Charge of approximately $1.6 billion ($1.3 billion or $2.56 per share diluted). The Q3 Fiscal
2014 Inventory Charge included a write-down of inventory of approximately $1.1 billion and
supply commitments of approximately $511 million.
CONSOLIDATED BALANCE SHEETS DETAILS – 2ND QUARTER
Inventories
Inventories were comprised of the following:
As at
August
31,
2013

Raw
materials
Work in
process
Finished
goods

$

March
2,
2013

191 $ 271
667
83

$

278
54

941 $ 603

During the second quarter of fiscal 2014, the Company recorded the Z10 Inventory Charge
of approximately $934
million ($666 million after tax or $1.27 per share diluted). The Z10 Inventory Charge
included a write-down of inventory of approximately $627 million and supply commitments
of approximately $307 million.

CONSOLIDATED BALANCE SHEETS DETAILS – 1ST QUARTER
Inventories
Inventories were comprised of the following:
As at

June
1,
2013

Raw materials
Work in process
Finished goods
Provision for excess and obsolete
inventories

March
2,
2013

$641 $ 588
629
371
80
78
(463
)

(434)

$887 $ 603

BlackBerry Limited
Incorporated under the Laws of Ontario
(United States dollars, in millions except share and per share amounts)
(unaudited)
Consolidated Statements of Operations

For the three months ended
November 30,
2013
Revenue

August 31, December 1,
2013
2012

$ 1,193

$ 1,597

$ 2,727

Cost of sales

2,457

1,947

1.897

Gross margin

(1,264)

Operating expenses

(374)

830

Research and development

322

360

393

Selling, marketing and administration

543

527

487

Amortization

148

171

180

Impairment of long­lived assets

2,748

0

0

Total operating expenses

3,761

1,058

1,060

Operating income (loss)

(5,025)

(1,432)

(230)

Investment income, net
Loss from continuing operations before income
taxes
Recovery of income taxes
Income (loss) from continuing operations
Loss from discontinued operations, net of tax
Net income (loss)

0

(6)

18

(5,025)

(1,438)

(212)

(624)

(473)

(226)

(4,401)

(965)

14

0
$ (4,401)

0
$ (965)

(5)
$ 9

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