Enhanced Investments - Financial Portal

Published: 2022-04-01

Report of Independent Registered Public Accounting Firm
To the Shareholders and Board of Directors of BlackBerry Limited
Opinions on the Financial Statements and Internal Control over Financial ReportingWe have audited the accompanying consolidated balance sheets of BlackBerry Limited and its subsidiaries (together, the Company) as of February 28, 2022 and 2021, and the related consolidated statements of operations, comprehensive income (loss), shareholders’ equity and cash flows for the years then ended, including the related notes (col ectively referred to as the consolidated financial statements). We also have audited the Company's internal control over financial reporting as of February 28, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
In our opinion, the consolidated financial statements referred to above present fairly, in al material respects, the financial position of the Company as of February 28, 2022 and 2021, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles general y accepted in the United States of America. Also in our opinion, the Company maintained, in al material respects, effective internal control over financial reporting as of February 28, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the COSO.
Change in Accounting PrincipleAs discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for the al owance for credit losses as of March 1, 2020.
Basis for OpinionsThe Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in al material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as wel as evaluating the overal presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with general y accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail,
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accurately and fairly reflect the transactions and dispositions of the assets of the company; (i ) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with general y accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (i i) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that (i) relate to accounts or disclosures that are material to the consolidated financial statements and (i ) involved our especial y chal enging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Goodwil impairment test for the selected reporting units using the income approach
As described in Notes 1, 3 and 4 to the consolidated financial statements, the Company’s goodwil balance was $844 mil ion as of February 28, 2022. A significant portion of the goodwil balance related to certain reporting units for which the income approach was used as the primary basis for determining fair value (the Selected Reporting Units). Management conducts a goodwil impairment test as of December 31 of each year, or more frequently if events or changes in circumstances indicate that the asset may be impaired. The impairment test is performed in one step by comparing the fair value of a reporting unit to its carrying value, including goodwil . When the carrying value of a reporting unit exceeds its fair value, goodwil of the reporting unit is considered to be impaired and written down to its fair value. The estimated fair values of reporting units were determined utilizing multiple valuation techniques, which included the income approach using a discounted future cash flow model, market-based approaches, and the asset value approach. Estimating the fair values of reporting units using discounted future cash flow models requires significant judgment by management, including estimation of future cash flows, which is dependent on estimation of the long-term rates of revenue growth, terminal growth rates, profitability measures, and determination of the discount rates. Based on the result of the annual impairment test, management’s estimates indicated the fair values of al the reporting units substantial y exceeded their carrying values and no goodwil impairment charge needed to be recorded.
The principal considerations for our determination that performing procedures relating to the goodwil impairment test for the Selected Reporting Units using the income approach is a critical audit matter are (i) the significant judgment by management when determining the fair values of the Selected Reporting Units using the income approach; (i ) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumptions related to long-term rates of revenue growth, terminal growth rates, profitability measures, and the discount rates; and (i i) the audit effort involved the use of professionals with specialized skil and knowledge.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overal opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to management’s goodwil impairment test, including controls over the determination of the fair values of the Company’s reporting units. These procedures over the determination of the fair values of the Selected Reporting Units also included, among others, (i) testing management’s process for determining the fair values; (i ) testing the completeness and accuracy of underlying data used in the discounted future cash flow models; (i i) evaluating the appropriateness of the discounted future cash flow models; and (iv) evaluating the reasonableness of the significant assumptions used by management related to long-term rates of revenue growth, terminal growth rates, profitability measures and the discount rates. Evaluating management’s assumptions related to long-term rates of revenue growth and profitability measures involved assessing whether the assumptions used by management were reasonable considering consistency with (i) current and past performance of the Selected
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Reporting Units; (i ) external market and industry data; and (i i) evidence obtained in other areas of the audit. Professionals with specialized skil and knowledge were used to assist in the evaluation of the (i) appropriateness of the Company’s discounted future cash flow models; and (i ) reasonableness of the discount rates and terminal growth rates.
Revenue recognition – Intel ectual property licensing
As described in Notes 1 and 12 to the consolidated financial statements, $63 mil ion of the Company’s total revenues for the year ended February 28, 2022 was generated from Licensing and Other, which includes revenue from intel ectual property licensing arrangements. Management examines intel ectual property agreements on a case-by-case basis to determine whether they contain distinct performance obligations with standalone functionality and whether the Company is the principal or agent in the transaction. As disclosed by management, significant judgment is applied in assessing contractual terms which could impact the timing and amount of revenue recognition.
The principal considerations for our determination that performing procedures relating to the Revenue recognition – Intel ectual property licensing is a critical audit matter are (i) significant judgment by management in assessing contractual terms which could impact the timing and amount of revenue recognition; and (i ) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating evidence relating to the timing and amount of revenue recognition.
Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overal opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the revenue recognition process, including controls over the assessment of contractual terms in the intel ectual property agreements which impact the timing and amount of revenue recognition. These procedures also included, among others, (i) testing the completeness and accuracy of management’s identification of contractual terms by examining intel ectual property agreements on a sample basis; and (i ) testing management's process for determining the appropriate amount and timing of revenue recognition based on the contractual terms identified in the intel ectual property agreements on a sample basis.
/s/PricewaterhouseCoopers LLP
Chartered Professional Accountants, Licensed Public Accountants
Toronto, CanadaApril 1, 2022
We have served as the Company's auditor since 2020.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
	To the Board of Directors and Shareholders of BlackBerry Limited
	Opinion on the Consolidated Financial Statements
	We have audited the accompanying consolidated financial statements of BlackBerry Limited (the “Company”) as of
	February 29, 2020, comprised of the consolidated statements of operations, comprehensive income (loss),
	shareholders’ equity and cash flows for the year ended February 29, 2020, and the related notes (col ectively
	referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements
	present fairly, in al material respects, the consolidated results of operations and cash flows of the Company for
	the year ended February 29, 2020, in conformity with United States general y accepted accounting principles.Basis for Opinion
	These consolidated financial statements are the responsibility of the Company's management. Our responsibility is
	to express an opinion on the Company’s consolidated financial statements based on our audit. We are a public
	accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and
	are required to be independent with respect to the Company in accordance with the U.S. federal securities laws
	and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
	perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of
	material misstatement, whether due to error or fraud. Our audit included performing procedures to assess the
	risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and
	performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence
	regarding the amounts and disclosures in the consolidated financial statements. Our audit also included evaluating
	the accounting principles used and significant estimates made by management, as wel as evaluating the overal
	presentation of the consolidated financial statements. We believe that our audit provides a reasonable basis for
	our opinion.
	/s/Ernst & Young LLP
	Chartered Professional Accountants
	We served as the Company's auditor from 1997 to 2020.
	Waterloo, Canada
	April 6, 2020, except for note 12 which is as of April 1, 2022
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BlackBerry Limited
	Incorporated under the Laws of Ontario
	(United States dollars, in millions)
Consolidated Balance Sheets
			As at
				February 28, 2022	February 28, 2021
		Assets
		Current
					Cash and cash equivalents (note 3)	$	378 $		214
					Short-term investments (note 3)		334		525
					Accounts receivable, net of allowance of $4 and $10, respectively (note 4)		138		182
					Other receivables (note 4)		25		25
					Income taxes receivable		9		10
					Other current assets (note 4)		159		50
					1,043			1,006
		Restricted cash equivalents and restricted short-term investments (note 3)			28			28
		Long-term investments (note 3)			30			37
		Other long-term assets (note 4)			9			16
		Operating lease right-of-use assets, net (note 11)			50			63
		Property, plant and equipment, net (note 4)			41			48
		Goodwill (note 4)			844			849
		Intangible assets, net (note 4)			522			771
				$	2,567 $			2,818
		Liabilities
		Current
					Accounts payable	$	22 $		20
					Accrued liabilities (note 4)		157		178
					Income taxes payable (note 5)		11		6
					Deferred revenue, current (note 12)		207		225
					397			429
		Deferred revenue, non-current (note 12)			37			69
		Operating lease liabilities (note 11)			66			90
		Other long-term liabilities			4			6
		Long-term debentures (note 6)			507			720
					1,011			1,314
		Commitments and contingencies (note 10)Shareholders’ equityCapital stock and additional paid-in capital
		Preferred shares: authorized unlimited number of non-voting, cumulative, redeemable and retractable	—			—
		Common shares: authorized unlimited number of non-voting, redeemable, retractable Class A
		common shares and unlimited number of voting common sharesIssued - 576,227,898 voting common shares (February 28, 2021 - 565,505,328)
					2,869			2,823
		Deficit					(1,294)	(1,306)
		Accumulated other comprehensive loss (note 9)			(19)			(13)
					1,556			1,504
				$	2,567 $			2,818
		See notes to consolidated financial statements.On behalf of the Board:
		John S. Chen	Lisa Disbrow
		Director	Director
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BlackBerry Limited
	(United States dollars, in millions)
		Consolidated Statements of Shareholders’ Equity

						Accumulated
				Capital Stock		Other
				and Additional		Comprehensive
				Paid-in Capital	Deficit	Income (Loss)	Total
			Balance as at February 28, 2019	$				2,688 $	(32) $	(20) $	2,636
											Net loss			—	(152)			—	(152)
											Other comprehensive loss			—	—	(13)	(13)
											Cumulative impact of adoption of ASC 842			—	(14)	—	(14)
											Stock-based compensation (note 7)			63	—	—	63
			Shares issued:
											Exercise of stock options (note 7)			3	—	—	3
											Employee share purchase plan (note 7)			6	—	—	6
			Balance as at February 29, 2020					2,760	(198)			(33)	2,529
											Net loss			—	(1,104)			—	(1,104)
											Other comprehensive income			—	—	20	20
											Cumulative impact of adoption of ASC 326			—	(4)	—	(4)
											Stock-based compensation (note 7)			44	—	—	44
			Shares issued:
											Exercise of stock options (note 7)			12	—	—	12
											Employee share purchase plan (note 7)			7	—	—	7
			Balance as at February 28, 2021					2,823	(1,306)			(13)	1,504
											Net income			—	12	—	12
											Other comprehensive loss			—	—	(6)	(6)
											Stock-based compensation (note 7)			36	—	—	36
			Shares issued:
											Exercise of stock options (note 7)			3	—	—	3
											Employee share purchase plan (note 7)			7	—	—	7
			Balance as at February 28, 2022	$				2,869 $	(1,294) $			(19) $	1,556
			See notes to consolidated financial statements.
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BlackBerry Limited
	(United States dollars, in millions, except per share data)
		Consolidated Statements of Operations

				For the Years Ended
					February 28, 2022	February 28, 2021		February 29, 2020
			Revenue (note 12)		$		718 $	893 $	1,040
			Cost of sales				251	250	277
			Gross margin				467	643	763
			Operating expenses
										Research and development			219	215	259
										Selling, marketing and administration			297	344	493
										Amortization			165	182	194
										Impairment of goodwill (note 3)		—				594	22
										Impairment of long-lived assets (note 3)		—				43	10
										Debentures fair value adjustment (note 6)			(212)	372	(66)
							469	1,750	912
			Operating loss			(2)				(1,107)	(149)
										Investment income (loss), net (note 3 and note 6)		21		(6)			1
			Income (loss) before income taxes			19				(1,113)	(148)
			Provision for (recovery of) income taxes (note 5)			7		(9)			4
			Net income (loss)		$	12 $				(1,104) $	(152)
			Earnings (loss) per share (note 8)
										Basic	$		0.02 $	(1.97) $	(0.27)
										Diluted	$		(0.31) $	(1.97) $	(0.32)
			See notes to consolidated financial statements.
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BlackBerry Limited
	(United States dollars, in millions)
		Consolidated Statements of Comprehensive Income (Loss)

					For the Years Ended
						February 28, 2022	February 28, 2021	February 29, 2020
			Net income (loss)			$	12 $		(1,104) $	(152)
			Other comprehensive income (loss)
				Net change in unrealized losses on available-for-sale investments
				(note 9)			—		—	(2)
				Net change in fair value and amounts reclassified to net income (loss)
				from derivatives designated as cash flow hedges during the year (note
				9)			(1)	2		(1)
				Foreign currency translation adjustment			(6)	5		(3)
				Net change in fair value from instrument-specific credit risk on the
				Debentures during the year (note 6)			1		13	(7)
			Other comprehensive income (loss)				(6)		20	(13)
			Comprehensive income (loss)			$	6 $		(1,084) $	(165)
			See notes to consolidated financial statements.
									70

BlackBerry Limited
	(United States dollars, in millions)
	Consolidated Statements of Cash Flows
			For the Years Ended
				February 28, 2022	February 28, 2021	February 29, 2020
		Cash flows from operating activitiesNet income (loss)
				$	12 $		(1,104) $	(152)
		Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
		Amortization			176		198	212
		Stock-based compensation			36	44		63
		Gain on sale of investment (note 3)			(22)	—		—
		Impairment of goodwill (note 3)			—		594	22
		Impairment of long-lived assets (note 3)			—	43		10
		Non-cash consideration received from contracts with customers			—	—		(8)
		Debentures fair value adjustment (note 6)					(212)	372	(66)
		Operating leases			(16)	(4)		(9)
		Other			(3)	(5)		12
		Net changes in working capital items
		Accounts receivable, net of allowance			44	29		18
		Other receivables			—		(11)	5
		Income taxes receivable			1	(4)		3
		Other assets			15	55		(35)
		Accounts payable			2		(11)	(17)
		Accrued liabilities			(16)		(20)	(15)
		Income taxes payable			5		(15)	1
		Deferred revenue			(50)		(79)	(18)
		Net cash provided by (used in) operating activities			(28)	82		26
		Cash flows from investing activitiesAcquisition of long-term investments
					(1)	(5)		(1)
		Proceeds on sale, maturity or distribution from long-term investments			35	—		19
		Acquisition of property, plant and equipment			(8)	(8)		(12)
		Acquisition of intangible assets			(31)		(36)	(32)
		Business acquisitions, net of cash acquired			—	—		1
		Acquisition of short-term investments					(916)	(1,039)	(1,180)
		Acquisition of restricted short-term investments			—		(24)	—
		Proceeds on sale or maturity of restricted short-term investments			24	—		—
		Proceeds on sale or maturity of short-term investments					1,104	1,047	1,017
		Net cash provided by (used in) investing activities			207		(65)	(188)
		Cash flows from financing activitiesIssuance of common shares
					10	19		9
		Payment of finance lease liability			—	(1)		(2)
		Repurchase of 3.75% Debentures			—		(610)	—
		Issuance of 1.75% Debentures			—		365	—
		Net cash provided by (used in) financing activities			10		(227)	7
		Effect of foreign exchange gain (loss) on cash, cash equivalents, restricted cash, and
		restricted cash equivalents			(1)	2		(1)
		Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash
		equivalents during the period			188		(208)	(156)
		Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period			218		426	582
		Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of period		$	406 $		218 $	426
		See notes to consolidated financial statements.
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		BlackBerry Limited
			Notes to the Consolidated Financial Statements
				In millions of United States dollars, except share and per share data, and except as otherwise indicated
1.	BLACKBERRY LIMITED AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES
	BlackBerry Limited (the “Company”) provides intelligent security software and services to enterprises and governments around the world. The Company secures more than 500 million endpoints including more than 195 million vehicles. Based in Waterloo, Ontario, the Company leverages artificial intelligence and machine learning to deliver innovative solutions in the areas of cybersecurity, safety and data privacy, and is a leader in the areas of endpoint security, endpoint management, encryption, and embedded systems. The Company’s common shares trade under the ticker symbol “BB” on the New York Stock Exchange and the Toronto Stock Exchange.
	Basis of Presentation and Preparation
	The consolidated financial statements include the accounts of all subsidiaries of the Company with intercompany transactions and balances eliminated on consolidation. All of the Company’s subsidiaries are wholly owned. These consolidated financial statements have been prepared by management in accordance with United States generally accepted accounting principles (“U.S. GAAP”) on a basis consistent for all periods presented, except as described in Note 2.
	Certain of the comparative figures have been reclassified to conform to the current year’s presentation.
	In the first quarter of fiscal 2022, the Chief Operating Decision Maker (“CODM”), who is the Executive Chair and Chief Executive Officer (“CEO”) of the Company, began making decisions and assessing the performance of the Company using three operating segments, whereas the CODM previously made decisions and assessed the performance of the Company as a single operating segment. As a result of the internal reporting reorganization, the Company is now organized and managed as three reportable operating segments: Cybersecurity, IoT (collectively, “Software & Services”), and Licensing and Other, as further discussed in Note 12.
	Risks and Uncertainties
	In fiscal 2022 and fiscal 2021, the economic downturn and uncertainty caused by the novel coronavirus (“COVID-19”) resulted in the Company making significant judgments related to its estimates and assumptions concerning the impairment of goodwill, indefinite-lived intangible assets, certain operating lease right-of-use (“ROU”) assets and associated property, plant and equipment, and concerning the collectability of receivables.
	As of the date of issuance of the financial statements, the Company is not aware of any additional events or circumstances which would require it to update its estimates, judgments, or revise the carrying value of its assets or liabilities. These estimates may change, as new events occur and additional information is obtained, and such changes will be recognized in the consolidated financial statements as soon as they become known. Actual results could differ from these estimates and any such differences may be material to the Company’s financial statements.
	Accounting Policies and Critical Accounting Estimates
	Use of estimates
	The preparation of the consolidated financial statements requires management to make estimates and assumptions with respect to the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities. Significant areas requiring the use of management estimates relate to revenue-related estimates including variable consideration, standalone selling price (“SSP”), estimated customer life, if control of licenses to intellectual property has transferred, the value of non-cash consideration, right of return and customer incentive commitments, fair value of reporting units in relation to actual or potential goodwill impairment, fair value of the Debentures (as defined in Note 6), fair value of share-based liability award, fair value of long-lived assets in relation to actual or potential impairment, the Company’s long-lived asset groupings, useful lives of property, plant and equipment and intangible assets, provision for income taxes, realization of deferred income tax assets and the related components of the valuation allowance, allowance for credit losses, incremental borrowing rate in determining the present value of lease liabilities and the determination of reserves for various litigation claims. Actual results could differ from these estimates, which were based upon circumstances that existed as of the date of the consolidated financial statements, February 28, 2022.
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	BlackBerry Limited
		Notes to the Consolidated Financial Statements
			In millions of United States dollars, except share and per share data, and except as otherwise indicated
The significant accounting policies used in these U.S. GAAP consolidated financial statements are as follows:
Foreign currency translation
The U.S. dollar is the functional and reporting currency of the Company and substantially all of the Company’s subsidiaries.
Foreign currency denominated assets and liabilities of the Company and its U.S. dollar functional currency subsidiaries are translated into U.S. dollars. Accordingly, monetary assets and liabilities are translated using the exchange rates in effect as at the consolidated balance sheet dates, and revenue and expenses are translated at the rates of exchange prevailing when the transactions occurred. Remeasurement adjustments are included in income. Non-monetary assets and liabilities are translated at historical exchange rates.
Foreign currency denominated assets and liabilities of the Company’s non-U.S. dollar functional currency subsidiaries are translated into U.S. dollars at the exchange rates in effect as at the consolidated balance sheet dates. Revenue and expenses are translated using daily exchange rates. Exchange gains or losses arising from translation of foreign currency denominated assets and liabilities are included as a currency translation adjustment within accumulated other comprehensive loss (“AOCL”).
Cash and cash equivalents
Cash and cash equivalents consist of balances with banks and liquid investments with maturities of three months or less at the date of acquisition.
Accounts receivable, net of allowance
Accounting Standards Codification 326, Financial Instruments - Credit Losses (“ASC 326”)
On March 1, 2020, the Company adopted ASC 326 using the modified retrospective method. The accounts receivable balance reflects invoiced and accrued revenue and is presented net of an allowance for credit losses. The Company expects the majority of its accounts receivable balances to continue to come from large customers as it sells the majority of its software products and services through resellers and other distribution partners, rather than directly. The Company establishes current expected credit losses (“CECL”) for pools of assets with similar risk characteristics by evaluating historical levels of credit losses, current economic conditions that may affect a customer’s ability to pay, and creditworthiness of significant customers. 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, in the normal course of business, monitors the financial condition of its customers and reviews the credit history of each new customer. When the Company becomes aware of a specific customer’s inability to meet its financial obligations to the Company (such as in the case of bankruptcy filings or material deterioration in the customer’s operating results or financial position, and payment experiences), the Company records a specific credit loss provision to reduce the customer’s related accounts receivable to its estimated net realizable value. If circumstances related to specific customers change, the Company’s estimates of the recoverability of accounts receivable balances could be further adjusted
For the year prior to adoption of ASC 326, the accounts receivable balance reflects invoiced and accrued revenue and is presented net of an allowance for doubtful accounts. The allowance for doubtful accounts reflects estimates of probable losses in the accounts receivable balance. The Company expected the majority of its accounts receivable balances to continue to come from large customers as it has sold and continues to sell, the majority of its software products and services through resellers and other distribution partners, rather than directly. The Company evaluated the collectability of its accounts receivable balance based upon a combination of factors on a periodic basis such as specific credit risk of its customers, historical trends and economic circumstances. The Company, in the normal course of business, monitored the financial condition of its customers and reviewed the credit history of each new customer. When the Company became aware of a specific customer’s inability to meet its financial obligations to the Company (such as in the case of bankruptcy filings or material deterioration in the customer’s operating results or financial position, and payment experiences), the Company recorded a specific bad debt provision to reduce the customer’s related accounts receivable to its estimated net realizable value. If circumstances related to specific customers changed, the Company’s estimates of the recoverability of accounts receivable balances may have been further adjusted.
Investments
The Company’s cash equivalents and investments, other than publicly issued equity securities and non-marketable equity investments without readily determinable fair value, consist of money market and other debt securities, which are classified as available-for-sale for accounting purposes and are carried at fair value. Unrealized gains and losses, net of
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	BlackBerry Limited
		Notes to the Consolidated Financial Statements
			In millions of United States dollars, except share and per share data, and except as otherwise indicated
related income taxes, are recorded in AOCL until such investments mature or are sold. The Company uses the specific identification method of determining the cost basis in computing realized gains or losses on available-for-sale investments, which are recorded in investment income. The Company does not exercise significant influence with respect to any of these investments. Publicly issued equity securities are recorded at fair value and revalued at each reporting period with changes in fair value recorded through investment income. The Company elects to record non-marketable equity investments without readily determinable fair value at cost minus impairment, and adjusted for any changes resulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. The Company reassesses each reporting period that its non-marketable equity investments without readily determinable fair value continue to qualify for this treatment.
Investments with maturities at the time of purchase of three months or less are classified as cash equivalents. Investments with maturities of one year or less (but which are not cash equivalents), public equity investments and any investments that the Company intends to hold for less than one year are classified as short-term investments. Investments with maturities in excess of one year, non-marketable equity investments without readily determinable fair value and investments that the Company does not intend to sell are classified as long-term investments.
Allowance for Credit Losses on Available-for-sale Debt Securities
On March 1, 2020, the Company adopted ASC 326 on a modified retrospective basis. Under ASC 326, at each reporting period, the Company evaluates its available-for-sale debt securities at the individual security level to determine whether there is a decline in the fair value below its amortized cost basis (an impairment). In circumstances where the Company intends to sell, or is more likely than not required to sell, the security before it recovers its amortized cost basis, the difference between fair value and amortized cost is recognized as a loss in the consolidated statement of operations, with a corresponding write-down of the security’s amortized cost. In circumstances where neither condition exists, the Company then evaluates whether a decline is due to credit-related factors. The factors considered in determining whether a credit loss exists can include the extent to which fair value is less than the amortized cost basis, changes in the credit quality of the underlying issuer, credit ratings actions, as well as other factors. To determine the portion of a decline in fair value that is credit-related, the Company compares the present value of the expected cash flows of the security discounted at the security’s effective interest rate to the amortized cost basis of the security. A credit-related impairment is limited to the difference between fair value and amortized cost, and recognized as an allowance for credit loss on the consolidated balance sheet with a corresponding adjustment to net income. Any remaining decline in fair value that is non-credit related is recognized in other comprehensive income (loss), net of tax. Improvements in expected cash flows due to improvements in credit are recognized through reversal of the credit loss and corresponding reduction in the allowance for credit loss.
Prior to the adoption of ASC 326, the Company assessed individual investments that were in an unrealized loss position to determine whether the unrealized loss was other-than-temporary. The Company made this assessment by considering available evidence, including changes in general market conditions, specific industry and individual company data, the length of time and the extent to which the fair value had been less than cost, the financial condition, the near-term prospects of the individual investment and the Company’s intent and ability to hold the investment. In the event that a decline in the fair value of an investment occurred and that decline in value was considered to be other-than-temporary, an impairment charge was recorded in investment income equal to the difference between the cost basis and the fair value of the individual investment as at the consolidated balance sheet date of the reporting period for which the assessment was made. The fair value of the investment then became the new cost basis of the investment.
If a debt security’s market value was below its amortized cost and either the Company intended to sell the security or it was more likely than not that the Company would be required to sell the security before its anticipated recovery, the Company recorded an other-than-temporary impairment charge to investment income for the entire amount of the impairment. For other-than-temporary impairments on debt securities that the Company did not intend to sell and it was not more likely than not that the entity would be required to sell the security before its anticipated recovery, the Company separated the other-than-temporary impairment into the amount representing the credit loss and the amount related to all other factors. The Company recorded the other-than-temporary impairment related to the credit loss as a charge to investment income, and the remaining other-than-temporary impairment was recorded as a component of AOCL.
Derivative financial instruments
The Company uses derivative financial instruments, including forward contracts and options, to hedge certain foreign currency exposures. The Company does not use derivative financial instruments for speculative purposes.
				74

	BlackBerry Limited
		Notes to the Consolidated Financial Statements
			In millions of United States dollars, except share and per share data, and except as otherwise indicated
The Company records all derivative instruments at fair value on the consolidated balance sheets. The fair value of these instruments is calculated based on notional and exercise values, transaction rates, market quoted currency spot rates, forward points, volatilities and interest rate yield curves. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative instrument and the resulting designation.
For derivative instruments designated as cash flow hedges, the derivative’s gain or loss is initially reported as a component of AOCL, net of tax, and subsequently reclassified into income in the same period or periods in which the hedged item affects income. In order for the Company to receive hedge accounting treatment, the cash flow hedge must be highly effective in offsetting changes in the fair value of the hedged item and the relationship between the hedging instrument and the associated hedged item must be formally documented at the inception of the hedge relationship. Hedge effectiveness is formally assessed, both at hedge inception and on an ongoing basis, to determine whether the derivatives used in hedging transactions are highly effective in offsetting changes in the value of the hedged items and whether they are expected to continue to be highly effective in future periods.
The Company formally documents relationships between hedging instruments and associated hedged items. This documentation includes: identification of the specific foreign currency asset, liability or forecasted transaction being hedged; the nature of the risk being hedged; the hedge objective; and the method of assessing hedge effectiveness. If an anticipated transaction is deemed no longer likely to occur, the corresponding derivative instrument is de-designated as a hedge and any associated unrealized gains and losses in AOCL are recognized in income at that time. Any future changes in the fair value of the instrument are recognized in current income.
For any derivative instruments that do not meet the requirements for hedge accounting, or for any derivative instruments for which hedge accounting is not elected, the changes in fair value of the instruments are recognized in income in the current period and will generally offset the impact to income as a result of changes in the U.S. dollar value of the associated asset, liability or forecasted transaction.
Property, plant and equipment, net
Property, plant and equipment are stated at cost, less accumulated amortization. Amortization is provided using the following rates and methods:
Leasehold improvements and other	Straight-line over terms between 5 and 15 years
BlackBerry operations and other information technology	Straight-line over terms between 3 and 5 years
Manufacturing, repair and research and development
	Straight-line over terms between 1 and 5 years
equipment
Furniture and fixtures	Declining balance at 30% per annum
For amortization on ROU assets, see the Company’s accounting policy on leases below and Note 11 for the remaining lease terms of leases.
Leases
Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at the commencement date. As most of the Company’s leases do not provide an implicit discount rate, the Company primarily uses its incremental borrowing rate, based on the information available at the commencement date of the lease, in determining the present value of future payments. The Company’s incremental borrowing rate requires significant judgment and is determined based on the rate of interest that the Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similar term in a similar economic environment. The operating lease ROU asset includes any lease payments made, lease incentives and initial direct costs incurred. The lease terms include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. In some cases, the Company has index-based variable lease payments for which an estimated rate is applied to the initial lease payment to determine future lease payment amounts.
The Company has building, car and data center lease agreements with lease and non-lease components that are accounted for separately. For lease terms of 12 months or less on the commencement date, the Company does not apply the Accounting Standards Codification 842 recognition requirements and recognizes the lease payments as lease cost on a straight-line basis over the lease term.
				75

	BlackBerry Limited
		Notes to the Consolidated Financial Statements
			In millions of United States dollars, except share and per share data, and except as otherwise indicated
See Note 11 for additional information related to the Company’s leases.
Goodwill
Goodwill represents the excess of the acquisition price in a business combination over the fair value of identifiable net assets acquired. Goodwill is allocated at the date of the business combination. Goodwill is not amortized but is tested for impairment annually on December 31 or more frequently if events or changes in circumstances indicate the asset may be impaired. These events and circumstances may include a significant change in legal factors or in the business climate, a significant decline in the Company’s share price, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant disposal activity and the testing of recoverability for a significant asset group.
On March 1, 2020, the Company adopted Accounting Standards Update 2017-04 on the topic of Intangibles - Goodwill and Other (ASC 350) (“ASU 2017-40”). ASU 2017-04 simplifies the subsequent measurement of goodwill, enabling the Company to carry out its goodwill impairment test in one step, instead of two steps. In the test, the carrying value of the reporting unit, including goodwill, was compared with its fair value. The estimated fair value was determined utilizing multiple approaches based on the nature of the reporting units being valued. In its analysis, the Company utilized multiple valuation techniques, including the income approach using a discounted future cash flow model, market-based approaches, and the asset value approach. The analysis requires significant judgment, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rates of revenue growth for the Company’s reporting units, estimation of the useful life over which cash flows will occur, terminal growth rates, profitability measures, and determination of the discount rates for the reporting units. The carrying value of the Company’s assets was assigned to reporting units using reasonable methodologies based on the asset type. When the carrying value of a reporting unit exceeds its fair value, goodwill of the reporting unit is considered to be impaired and written down to its fair value. Different judgments could yield different results. Events and circumstances resulted in an additional goodwill impairment test being conducted as at May 31, 2020, in addition to the Company’s annual impairment test; see Note 3.
Prior to the adoption of ASU 2017-04, the Company’s annual impairment test was carried out in two steps. In the first step, the carrying value of the reporting unit, including goodwill, was compared with its fair value. The estimated fair value was determined utilizing multiple approaches based on the nature of the reporting units being valued. In its analysis, the Company utilized multiple valuation techniques, including the income approach, discounted future cash flows, market-based approaches, and the asset value approach. The analysis requires significant judgment, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of revenue growth for our reporting units, estimation of the useful life over which cash flows will occur, terminal growth rate, profitability measures, and determination of the discount rates for the reporting units. The carrying value of the Company’s assets was assigned to reporting units using reasonable methodologies based on the asset type. When the carrying value of a reporting unit exceeded its fair value, goodwill of the reporting unit was considered to be impaired and the second step was necessary. Different judgments could have yielded different results. In fiscal 2020, the Company disaggregated one reporting unit and goodwill was assigned to the disaggregated reporting units based upon the relative fair value allocation approach.
In the second step, the implied fair value of the reporting unit’s goodwill was compared with its carrying value to measure the amount of the impairment loss, if any. The second step involved significant judgment in the selection of assumptions necessary to arrive at an implied fair value of goodwill. Different judgments could have yielded different results.
Using the impaired reporting units’ fair value determined in step one as the acquisition prices in hypothetical acquisitions of the reporting units, the implied fair values of goodwill were calculated as the residual amount of the acquisition price after allocations made to the fair values of net assets, including working capital, property, plant and equipment and both recognized and unrecognized intangible assets.
				76

	BlackBerry Limited
		Notes to the Consolidated Financial Statements
			In millions of United States dollars, except share and per share data, and except as otherwise indicated
Intangible assets
Intangible assets with definite lives are stated at cost, less accumulated amortization. Amortization is provided on a straight-line basis over the following terms:
Acquired technology	Between 3 and 10 years
Intellectual property	Between 1 and 20 years
Other acquired intangibles	Between 2 and 10 years
Acquired technology consists of intangible assets acquired through business acquisitions. Intellectual property consists of patents (including purchased and internally generated patents and maintenance fees). Other acquired intangibles include items such as customer relationships and brand. The useful lives of intangible assets are evaluated at least annually to determine if events or circumstances warrant a revision to their remaining period of amortization. Legal, regulatory and contractual factors, the effects of obsolescence, demand, competition and other economic factors are potential indicators that the useful life of an intangible asset may be revised.
Impairment of long-lived assets
The Company reviews long-lived assets (“LLA”) such as property, plant and equipment, intangible assets with finite useful lives and ROU assets for impairment whenever events or changes in circumstances indicate that the carrying value of the asset or asset group may not be recoverable. These events and circumstances may include significant decreases in the market price of an asset or asset group, significant changes in the extent or manner in which an asset or asset group is being used by the Company or in its physical condition, a significant change in legal factors or in the business climate, a history or forecast of future operating or cash flow losses, significant disposal activity, a significant decline in the Company’s share price, a significant decline in revenue or adverse changes in the economic environment.
The LLA impairment test requires the Company to identify its asset groups and test impairment of each asset group separately. Determining the Company’s asset groups and related primary assets requires significant judgment by management. Different judgments could yield different results. The Company’s determination of its asset groups, its primary asset and its remaining useful life, and estimated cash flows are significant factors in assessing the recoverability of the Company’s assets for the purposes of LLA impairment testing. The Company’s share price can be affected by, among other things, changes in industry or market conditions, including the effect of competition, changes in the Company’s results of operations, changes in the Company’s forecasts or market expectations relating to future results, and the Company’s strategic initiatives and the market’s assessment of any such factors.
When indicators of impairment exist, LLA impairment is tested using a two-step process. The Company performs a cash flow recoverability test as the first step, which involves comparing the asset group’s estimated undiscounted future cash flows to the carrying value of its net assets. If the net cash flows of the asset group exceed the carrying value of its net assets, LLA are not considered to be impaired. If the carrying value exceeds the net cash flows, there is an indication of potential impairment and the second step of the LLA impairment test is performed to measure the impairment amount. The second step involves determining the fair value of the asset group. Fair values are determined using valuation techniques that are in accordance with U.S. GAAP, including the market approach, income approach and cost approach. If the carrying value of the asset group’s net assets exceeds the fair value of the Company, then the excess represents the maximum amount of potential impairment that will be allocated to the asset group, with the limitation that the carrying value of each separable asset cannot be reduced to a value lower than its individual fair value. The total impairment amount allocated is recognized as a non-cash impairment loss.
The Company reviews any changes in events and circumstances that have occurred on a quarterly basis to determine if indicators of LLA impairment exist.
				77

	BlackBerry Limited
		Notes to the Consolidated Financial Statements
			In millions of United States dollars, except share and per share data, and except as otherwise indicated
Royalties
The Company recognizes its liability for royalties in accordance with the terms of existing license agreements. Where license agreements are not yet finalized, the Company recognizes its current estimates of the obligation in accrued liabilities in the consolidated financial statements. When the license agreements are subsequently finalized, the estimate is revised accordingly. Management’s estimates of royalty rates are based on the Company’s historical licensing activities, royalty payment experience, and forward-looking expectations.
Convertible debentures
The Company elected to measure its outstanding convertible debentures (collectively, the “Debentures”, as defined in Note 6) at fair value in accordance with the fair value option. Each period, the fair value of the Debentures is recalculated and resulting gains and losses from the change in fair value of the Debentures associated with non-credit components are recognized in income, while the change in fair value associated with credit components is recognized in AOCL.
1.75% Debentures
The fair value of the 1.75% Debentures (as defined in Note 6) has been determined using the significant inputs of principal value, interest rate spreads and curves, any observable trades of the Debentures that occurred during the period, the market price and volatility of the Company’s listed common shares, and the significant Level 3 inputs related to credit spread and the implied discount of the 1.75% Debentures at issuance.
3.75% Debentures
The fair value of the 3.75% Debentures (as defined in Note 6) was determined using the significant inputs of principal value, interest rate spreads and curves, embedded call option prices, observable trades of the Debentures, the market price and volatility of the Company’s listed common shares and the Company’s implicit credit spread.
Revenue recognition
The Company recognizes revenue when control of the promised products or services are transferred to customers, in an amount that reflects the consideration that the Company expects to receive in exchange for those products and services. Revenue is recognized through the application of the following steps: (i) identification of the contract, or contracts, with a customer; (ii) identification of the performance obligations in the contract; (iii) determination of the transaction price; (iv) allocation of the transaction price to the performance obligations in the contract; and (v) recognition of revenue when (or as) the Company satisfies a performance obligation.
A contract exists with a customer when both parties have approved the contract, commitments to performance and rights of each party (including payment terms) are identified, the contract has commercial substance and collection of substantially all consideration is probable for goods and services that are transferred.
Performance obligations promised in a contract are identified based on the goods and services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the good or service either on its own or together with other available resources, and are distinct in the context of the contract, whereby the transfer of the good or service is separately identifiable from other promises in the contract. If these criteria are not met, the promised goods and services are accounted for as a combined performance obligation.
The transaction price is determined based on the consideration the Company expects to be entitled to in exchange for transferring promised goods and services to the customer, excluding amounts collected on behalf of third parties such as sales taxes. Determining the transaction price requires significant judgment. To the extent the transaction price includes variable consideration, the Company estimates the amount of variable consideration that should be included in the transaction price utilizing either the expected value method or the most likely amount method depending on the nature of the variable consideration. Non-cash consideration received is measured at fair value at contract inception. The estimated fair value is determined utilizing multiple valuation techniques, including the discounted future cash flows and the market-based approach.
Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative SSP. The Company’s method for allocation of consideration to be received and its method of estimation of SSP are described below under “Significant judgments”.
For each of the Company’s major categories of revenue, the following paragraphs describe the applicable specific revenue recognition policy, and when the Company satisfies its performance obligations.
				78

	BlackBerry Limited
		Notes to the Consolidated Financial Statements
			In millions of United States dollars, except share and per share data, and except as otherwise indicated
Nature of products and services
The Company is organized and managed as three operating segments. The Company has multiple products and services from which it derives revenue, which are structured in three groups: Cybersecurity, IoT and Licensing and Other.
Cybersecurity
Cybersecurity includes revenue from the Company’s BlackBerry Spark® software platform, BlackBerry® AtHoc®, BlackBerry® Alert, BlackBerry® SecuSUITE® and BlackBerry Messenger (BBM®) Enterprise. Cybersecurity revenue is generated predominantly through software licenses, commonly bundled with support, maintenance and professional services.
BlackBerry Spark
The BlackBerry Spark platform is a comprehensive offering of security software products and services, including the BlackBerry® Cyber Suite and the BlackBerry Spark® Unified Endpoint Management Suite, which are also marketed together as the BlackBerry Spark® Suite, offering the Company’s broadest range of tailored cybersecurity and endpoint management options.
The BlackBerry Spark Cyber Suite includes revenue from the Company’s Cylance® artificial intelligence and machine learning-based platform consisting of BlackBerry® Protect, BlackBerry® Optics, BlackBerry® Persona, BlackBerry® Gateway, BlackBerry® Guard managed services and other cybersecurity applications. The Company generates software license revenue from term subscription products, which includes technical support, and any updates and upgrades. The BlackBerry Cyber Suite natively integrates with BlackBerry® UEM and also works with UEM solutions from other vendors.
The Company recognizes the license revenue over the term of the contract beginning on the commencement date of each contract, the date that services are made available to customers. The Company’s software license and updates, to the extent made available, are not distinct in the context of the contract as they are critical to the ongoing usability of the solution and so fulfill a single promise to the customer in the contract. The typical subscription term is one to three years. The technical support is recognized over the support period, which will normally be the same term as the software license.
Revenue for hourly rate professional services arrangements is recognized as services are performed and revenue for fixed fee professional services is recognized on a proportional performance basis as the services are performed.
The BlackBerry Spark® UEM Suite includes the Company’s BlackBerry® UEM, BlackBerry® Dynamics™ and BlackBerry® Workspaces solutions. The Company generates software license revenue from both term subscription and perpetual license contracts, both of which are commonly bundled with support, maintenance and professional services.
If the licensed software in a contract requires access to the Company’s proprietary secure network infrastructure in order to function, revenue from term subscription contracts is recognized over time, ratably over the term, and revenue from perpetual license contracts is recognized over time, ratably over the expected customer life, which in most cases the Company has estimated to be four years. If access to the Company’s proprietary network infrastructure is not required for the software to function, revenue associated with both term subscription and perpetual licenses contracts is recognized at a point in time upon delivery of the software. Generally, most of the Company’s enterprise software products sold require access to the Company’s proprietary secure network infrastructure in order to function, and therefore the associated revenue is recognized over time, ratably over either the subscription term or expected customer life as described above.
BlackBerry AtHoc and BlackBerry Alert
BlackBerry AtHoc and BlackBerry Alert generate revenue from networked critical event management solutions through term subscriptions which include technical support and associated professional services. The Company recognizes the license revenue over the term of the contract beginning on the commencement date of each contract, the date that services are made available to customers.
BlackBerry SecuSUITE
SecuSUITE revenue is generated from software license products associated with secure messaging and the associated hardware. Similar to the BlackBerry Spark products, if the licensed software requires access to the Company’s proprietary secure network infrastructure, revenue from the contract is recognized over time, ratably over the expected term or over the customer life, if licensed on a perpetual basis. If access to the Company’s proprietary network infrastructure is not required, revenue associated with the license is recognized at a point in time upon delivery of the software. Revenue from
				79

	BlackBerry Limited
		Notes to the Consolidated Financial Statements
			In millions of United States dollars, except share and per share data, and except as otherwise indicated
the hardware is recognized once title and the significant risks and rewards of ownership of the products are transferred to the customer, which occurs after the product has shipped.
IoT
IoT consists of BlackBerry Technology Solutions and BlackBerry IVY™. BlackBerry Technology Solutions includes revenue from BlackBerry® QNX®, BlackBerry Certicom®, BlackBerry Radar® and other IoT applications. IoT revenue is generated predominantly through software licenses, commonly bundled with support, maintenance and professional services.
BlackBerry® QNX® software license revenue from both term subscription and perpetual contracts is recognized at a point in time when the software is made available to the customer for use, as the software has standalone functionality and the license is distinct in the context of the contract. The licenses for certain software embedded into hardware such as automotive infotainment systems and advanced driver-assistance systems are sold as a sales-based royalty where intellectual property is the predominant item to which the royalty relates, and are recognized based on actual volumes and underlying sales by the customer of the hardware with the embedded software except in cases where the customer makes a non-refundable prepayment related to its future royalties, in which case consideration is fixed and recognized immediately.
Revenue from technical support is recognized over the support period. Revenue from professional services is recognized as the customer simultaneously receives and consumes the benefits provided by the Company’s performance as the services are provided. This can be on a proportional performance basis, or over the term of the contract. Revenue from software maintenance services is recognized over the length of the maintenance period, with an average term of one year.
Licensing and Other
Licensing and Other includes revenue from the Company’s intellectual property licensing arrangements, BBM Consumer licensing arrangement, settlement awards and mobility licensing software arrangements, which include revenue from licensed hardware sales. Other revenue consists of revenue associated with the Company’s legacy service access fees (“SAF”) business.
The Company’s outbound patent licensing agreements provide for license fees that may be a single upfront payment or multiple payments representing all or a majority of the licensing revenue that will be payable to the Company. These agreements may be perpetual or term in nature and grant (i) a limited non-exclusive, non-transferable license to certain of the Company’s patents, (ii) a covenant not to enforce patent rights against the licensee, and (iii) the release of the licensee from certain claims.
The Company examines intellectual property agreements on a case-by-case basis to determine whether the intellectual property contains distinct performance obligations with standalone functionality and whether the Company is the principal or agent in the transaction. Significant judgment is applied in assessing contractual terms which could impact the timing and amount of revenue recognition. Revenue from patent licensing agreements is often recognized for the transaction price either when the license has been transferred to the customer or based upon subsequent sales by the customer in the case of sales-based royalty licenses where the license of intellectual property is the predominant item to which the royalty relates. The transaction price may include non-monetary consideration in the form of patents transferred to the Company, which is recorded at fair value as determined by a combination of market and income-based valuation approaches. As part of these agreements the Company may also recognize revenue relating to the sale and assignment of patents.
The Company recognizes revenue related to consideration that may result from a negotiated agreement with a licensee that utilized the Company’s IP prior to signing a patent license agreement with the Company or from the resolution of a disagreement or arbitration with a licensee over the specific terms of an existing license agreement. The Company may also recognize revenue related to consideration for past patent royalties in connection with the settlement of patent litigation where there was no prior patent license agreement.
The Company’s BBM Consumer licensing arrangement was a multi-year agreement where the license was not previously separately identifiable from the requirement to maintain interoperability between the licensed BBM Consumer product and the BBM Enterprise product sold by the Company. During fiscal 2020, the licensed BBM Consumer product was shut down by the licensee, removing any requirement for the Company to maintain interoperability and thus all performance obligations were completed. As a result, the Company estimated the amount for which it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur and recognized that amount as revenue during fiscal 2020.
				80

	BlackBerry Limited
		Notes to the Consolidated Financial Statements
			In millions of United States dollars, except share and per share data, and except as otherwise indicated
In fiscal 2017 and fiscal 2018, the Company entered into multiple multi-year license agreements under which the Company licensed its security software and services suite and, in many cases, related brand assets to third parties who design, manufacture, sell and provide customer support for BlackBerry-branded and white-label handsets. Mobility license revenue for licensees whose sales exceeded contractual sales minimums was recognized when licensed products were sold as reported by the Company’s licensees. For licensees whose sales did not exceed contractual sales minimums, revenue was recognized over time, ratably over the license term based on contractual minimum amounts due to the promise to provide engineering services to the licensees.
Other includes revenue associated with the Company’s legacy SAF business, relating to subscribers utilizing the Company’s legacy BlackBerry 7 and prior operating systems, which are no longer supported or maintained by the Company as of January 4, 2022. SAF revenue was recognized over time as the monthly service was provided. In instances where the Company invoiced the SAF customer prior to performing the service, the pre-billing was recorded as deferred revenue.
See Note 12 for further information, including revenue by major product and service types.
Significant judgments in revenue recognition
The Company’s contracts with customers often include promises to transfer multiple products and services to a customer. Determining whether products and services are considered distinct performance obligations that should be accounted for separately versus together may require significant judgment.
Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue recognized under the contract will not occur. Any estimates, including any constraints on variable consideration, are evaluated at each reporting period. Judgment is required to determine the fair value of non-cash consideration at contract inception. The Company uses an independent third-party valuator for the fair value of non-cash consideration.
Judgment is required to determine the SSP for each distinct performance obligation. The Company’s products and services often have observable SSP when the Company sells a promised product or service separately to similar customers. A contractually stated price or list price for a good or service may be the SSP of that good or service. However, in instances where SSP is not directly observable, the Company determines the SSP by maximizing observable inputs and using an adjusted market assessment approach using information that may include market conditions and other observable inputs from the Company’s pricing team, including historical SSP.
Judgment is required to determine in certain agreements if the Company is the principal or agent in the arrangement. The Company considers factors such as, but not limited to, which party can direct the usage of the product or service, which party obtains substantially all the remaining benefits and which party has the ability to establish the selling price.
Significant judgment is required to determine the estimated customer life used in perpetual license contracts that require access to the Company’s proprietary secure network infrastructure to function. The Company uses historical experience regarding the length of the technology upgrade cycle and the expected life of the product to draw this conclusion.
Revenue contract balances
Timing of revenue recognition may differ from the timing of invoicing to customers. Contract assets are generated when contractual billing schedules differ from revenue recognition timing. An unbilled receivable is recorded in instances when revenue is recognized prior to invoicing, and amounts collected in advance of services being provided are recorded as deferred revenue.
Certain sales commissions are considered incremental and recoverable costs of obtaining a contract with a customer. The Company’s capitalized commissions are recorded as other current assets and other long-term assets and are recognized immediately or amortized proportionally, based on the satisfaction of the related performance obligations, and are included in selling, marketing and administration expenses. The Company has applied the practical expedient to expense sales commission as incurred if the amortization period would have been for one year or less. The practical expedient was applied to sales commissions allocated to professional services, as these contracts are generally for one year or less. See Note 12 for further information on the Company’s contract balances.
Payment terms and conditions vary by contract type although standard billing terms are that payment is due upon receipt of invoice, payable within 30 to 60 days. In instances where the timing of revenue recognition differs from the timing of invoicing, the Company has determined that contracts generally do not include a significant financing component if the
				81

	BlackBerry Limited
		Notes to the Consolidated Financial Statements
			In millions of United States dollars, except share and per share data, and except as otherwise indicated
period between when the payment is received and when the Company transfers the promised goods or services to the customer will be one year or less.
Income taxes
The Company uses the liability method of income tax allocation to account for income taxes. Deferred income tax assets and liabilities are recognized based upon temporary differences between the financial reporting and income tax bases of assets and liabilities and measured using enacted income tax rates and tax laws that will be in effect when the differences are expected to reverse. The Company records a valuation allowance to reduce deferred income tax assets to the amount that is more likely than not to be realized. The Company considers both positive evidence and negative evidence, to determine whether, based upon the weight of that evidence, a valuation allowance is required. Judgment is required in considering the relative impact of negative and positive evidence.
Significant judgment is also required in evaluating the Company’s uncertain income tax positions and provisions for income taxes. Liabilities for uncertain income tax positions are recognized based on a two-step approach. The first step is to evaluate whether an income tax position has met the recognition threshold by determining if the weight of available evidence indicates that it is more likely than not to be sustained upon examination. The second step is to measure the income tax position that has met the recognition threshold as the largest amount that is more than 50% likely of being realized upon settlement. The Company continually assesses the likelihood and amount of potential adjustments and adjusts the income tax provisions, income taxes payable and deferred income taxes in the period in which the facts that give rise to a revision become known. The Company recognizes interest and penalties related to uncertain income tax positions as interest expense, which is then netted and reported within investment income.
The Company uses the flow-through method to account for investment tax credits (“ITCs”) earned on eligible scientific research and experimental development expenditures. Under this method, the ITCs are recognized as a reduction to income tax expense.
Research and development
Research costs are expensed as incurred. Development costs for licensed software to be sold, leased or otherwise marketed are subject to capitalization beginning when a product’s technological feasibility has been established and ending when a product is available for general release to customers. The Company’s products are generally released soon after technological feasibility has been established and therefore costs incurred subsequent to achievement of technological feasibility are not significant and have been expensed as incurred. The Company does not currently have any capitalized research and development costs other than those identified through business combinations as in-process research and development included within intangible assets, net, which were recorded at their fair values and began amortizing when the related technology became available for general release to customers.
Comprehensive income (loss)
Comprehensive income (loss) is defined as the change in net assets of a business enterprise during a period from transactions and other events and circumstances from non-owner sources and includes all changes in equity during a period, except those resulting from investments by owners and distributions to owners. The Company’s reportable items of comprehensive income (loss) are the cumulative translation adjustment resulting from non-U.S. dollar functional currency subsidiaries as described under the foreign currency translation policy above, cash flow hedges as described above in derivative financial instruments, changes in the fair value of available-for-sale investments as described in Note 3, changes in fair value from instrument-specific credit risk on the Debentures as described in Note 6 and Note 9, and actuarial gains or losses associated with certain other post-employment benefit obligations. Realized gains or losses on available-for-sale investments are reclassified into investment income using the specific identification basis.
Earnings (loss) per share
Earnings (loss) per share is calculated based on the weighted average number of common shares outstanding during the fiscal year. The treasury stock method is used for the calculation of the dilutive effect of stock options. The if-converted method is used for the calculation of the dilutive effect of the Debentures.
Stock-based compensation plans
The Company has stock-based compensation plans. Awards granted under the plans are detailed in Note 7(b).
The Equity Incentive Plan (the “Equity Plan”) was adopted during fiscal 2014. The Equity Plan provides for grants of incentive stock options and restricted share units (“RSUs”) to officers and employees of the Company or its subsidiaries. RSUs may be either time-based (“TBRSUs”) or time- and performance-based (“PBRSUs”). The number of common
				82

	BlackBerry Limited
		Notes to the Consolidated Financial Statements
			In millions of United States dollars, except share and per share data, and except as otherwise indicated
shares authorized for awards under the Equity Plan is 45,875,000 common shares. Any shares that are subject to options granted under the Equity Plan are counted against this limit as 0.625 shares for every one option granted, any shares that are subject to TBRSUs granted under the Equity Plan are counted against this limit as one share for every TBRSU, and any shares that are subject to PBRSUs granted under the Equity Plan are counted against this limit at the maximum performance attainment (which is generally 1.5 shares for every PBRSU). Awards previously granted under the Equity Plan that expire or are forfeited, or settled in cash, are added to the shares available under the Equity Plan. Options forfeited will be counted as 0.625 shares to the shares available under the Equity Plan. Shares issued as awards other than options that expire or are forfeited (i.e., RSUs), settled in cash or sold to cover withholding tax requirements are counted as one share added to the shares available under the Equity Plan. There are approximately 19 million shares in the equity pool available for future grants under the Equity Plan as at February 28, 2022.
In connection with the Cylance Inc. (“Cylance”) acquisition in fiscal 2019, the Company adopted the BlackBerry-Cylance Stock Plan (the “Cylance Stock Plan”). The Cylance Stock Plan provides for the grant of replacement awards in connection with unvested Cylance employee equity awards, all of which were canceled upon the closing of the transaction. The number of common shares authorized for awards under the Cylance Stock Plan is 9,144,176 common shares, which is equal to the amount of replacement awards granted. As at February 28, 2019, there were no shares remaining in the Cylance Stock Plan for future grants. In addition, no shares may be reissued under the Cylance Stock Plan in respect of shares that expire, are forfeited, or are settled in cash.
The Company measures stock-based compensation expense for options at the grant date based on the award’s fair value as calculated by the Black-Scholes-Merton (“BSM”) option pricing model for stock options, and the expense is recognized ratably over the vesting period. Options granted under the Cylance Stock Plan generally vest over a four-year period with 25% vesting on the first anniversary date, and the remainder vesting in equal monthly installments. The BSM model requires various judgmental assumptions including volatility and expected option life. In addition, judgment is also applied in estimating the number of stock-based awards that are expected to be forfeited, and if actual results differ significantly from these estimates, stock-based compensation expense and the Company’s results of operations would be impacted.
Any consideration paid by employees on exercise of stock options, plus any recorded stock-based compensation within additional paid-in capital related to that stock option, is credited to capital stock.
RSUs are redeemed for common shares issued by the Company or the cash equivalent on the vesting dates established by the Board or the Compensation, Nomination and Governance Committee of the Board. The RSUs granted under the Equity Plan generally vest over a three-year period, either in equal annual installments or on the third anniversary date. For PBRSUs, the Company estimates its achievement against the performance goals, which are based on the Company’s business plan approved by the Board. The estimated achievement is updated for the Company’s outlook for the fiscal year as at the end of each fiscal quarter. Compensation cost will only be recognized to the extent that performance goals are achieved. The Company classifies RSUs as equity instruments as the Company has the ability and intent to settle the awards in common shares. The compensation expense for standard RSUs is calculated based on the fair value of each RSU as determined by the closing value of the Company’s common shares on the business day of the grant date. The Company recognizes compensation expense over the vesting period of the RSU. The Company expects to settle RSUs, upon vesting, through the issuance of new common shares from treasury.
The Company has a Deferred Share Unit Plan (the “DSU Plan”), originally approved by the Board on December 20, 2007, under which each independent director is credited with Deferred Share Units (“DSUs”) in satisfaction of all or a portion of the cash fees otherwise payable to them for serving as a director of the Company. Each independent director’s annual retainer will be entirely satisfied in the form of DSUs. Within a specified period after a director ceases to be a member of the Board, DSUs will be redeemed for cash with the redemption value of each DSU equal to the weighted average trading price of the Company’s shares over the five trading days preceding the redemption date. Alternatively, the Company may elect to redeem DSUs by way of shares purchased on the open market or issued by the Company.
DSUs are accounted for as liability-classified awards and are awarded on a quarterly basis. These awards are measured at their fair value on the date of issuance and remeasured at each reporting period until settlement.
Advertising costs
The Company expenses all advertising costs as incurred. These costs are included in selling, marketing and administration expenses.
				83

		BlackBerry Limited
			Notes to the Consolidated Financial Statements
				In millions of United States dollars, except share and per share data, and except as otherwise indicated
Government subsidies
The Company recognizes government subsidies as a reduction to operating expenses in the consolidated statement of operations when there is reasonable assurance the Company will receive the amount and has complied with the conditions, if any, attached to the government subsidies.
	2.	ADOPTION OF ACCOUNTING POLICIES
Accounting Standards Adopted During Fiscal 2022
ASC 740, Income Taxes
In December 2019, the Financial Accounting Standards Board (“FASB”) released ASU 2019-12 on the topic of simplifying the accounting for income taxes, as part of its simplification initiative to reduce the cost and complexity in accounting for income taxes. The amendments in this update remove certain exceptions from Topic 740, Income Taxes, including: (i) the exception to the incremental approach for intra-period tax allocation; (ii) the exception to accounting for basis differences when there are ownership changes in foreign investments; and (iii) the exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses. The update also simplifies U.S. GAAP in several other areas of Topic 740 such as: (i) franchise taxes and other taxes partially based on income; (ii) transactions with a government that result in a step up in the tax basis of goodwill; (iii) separate financial statements of entities not subject to tax; and (iv) enacted changes in tax laws in interim periods.
The guidance was effective for interim and annual periods beginning after December 15, 2020, with early adoption permitted. The only aspect of ASU 2019-12 that impacts the Company is the removal of the exception related to intra-period tax allocation. As a result of its adoption of the new standard, the Company determines the tax attributable to continuing operations without regard to the tax effect of other items included in other comprehensive income. The Company adopted this guidance in the first quarter of fiscal 2022 and it did not have a material impact on the Company’s results of operations, financial position and disclosures.
Accounting Pronouncements Issued But Not Yet Adopted
In August 2020, the FASB issued a new accounting standard on the topic of debt with conversion and other options, ASU 2020-06. The amendment in this update simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments and convertible preferred stock. This update also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions and requires the application of the if-converted method for calculating diluted earnings per share. The update also requires entities to provide expanded disclosures about the terms and features of convertible instruments, how the instruments have been reported in the entity’s financial statements, and information about events, conditions, and circumstances that can affect how to assess the amount or timing of an entity’s future cash flows related to those instruments. The guidance is effective for interim and annual periods beginning after December 15, 2021. The Company will adopt this guidance in the first quarter of fiscal 2023 and does not expect the adoption to have a material impact on its results of operations, financial position and disclosures as the fair value option accounting model used by the Company is not impacted by this ASU and the Company already utilizes the if-converted method in its calculation of diluted earnings per share relating to the Debentures (as defined in Note 6).
In October 2021, the FASB issued a new accounting standard on the topic of business combinations, accounting for contract assets and contract liabilities from contracts with customers, ASU 2021-08. The amendment in this update improves the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency. This update requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers. The guidance is effective for interim and annual periods beginning after December 15, 2022 and requires entities to prospectively apply business combinations occurring on or after the effective date of the amendments. The Company will early adopt this guidance in the first quarter of fiscal 2023, and apply it prospectively to any business acquisitions subsequent to the date of adoption. Should the Company complete business acquisitions subsequent to adoption, the impact in future periods compared to current accounting standards will depend on any contract assets and contract liabilities acquired.
					84

			BlackBerry Limited
				Notes to the Consolidated Financial Statements
		In millions of United States dollars, except share and per share data, and except as otherwise indicated
In November 2021, the FASB issued a new accounting standard on the topic of government assistance, ASU 2021-10. The standard requires additional disclosures for transactions with a government accounted for by applying a grant or contribution accounting model by analogy, including: (i) information about the nature of the transactions and related accounting policy used to account for the transactions; (ii) the line items on the balance sheet and income statement affected by these transactions including amounts applicable to each line; and (iii) significant terms and conditions of the transactions, including commitments and contingencies. The update also requires entities that omit any of the information because it is legally prohibited from being disclosed to include a statement to that effect. The guidance is effective for annual periods beginning after December 15, 2021. The Company will adopt this guidance in the first quarter of fiscal 2023 and does not expect the adoption to have a material impact on its disclosures.
	3.	FAIR VALUE MEASUREMENTS, CASH, CASH EQUIVALENTS AND INVESTMENTS
Fair Value
The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use in pricing the asset or liability, such as inherent risk, non-performance risk and credit risk. The Company applies the following fair value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value into three levels:
•		Level 1 - Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets.
•		Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.
•		Level 3 - Significant unobservable inputs that are supported by little or no market activity.
The fair value hierarchy also requires the Company to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
Recurring Fair Value Measurements
The Company’s cash and cash equivalents, accounts receivable, other receivables, accounts payable and accrued liabilities are measured at an amount that approximates their fair values (Level 2 measurement) due to their short maturities.
In determining the fair value of investments held, the Company primarily relies on an independent third-party valuator for the fair valuation of securities. The Company also reviews the inputs used in the valuation process and assesses the pricing of the securities for reasonableness after conducting its own internal collection of quoted prices from brokers. Fair values for all investment categories provided by the independent third-party valuator that are in excess of 0.5% from the fair values determined by the Company are communicated to the independent third-party valuator for consideration of reasonableness. The independent third-party valuator considers the information provided by the Company before determining whether a change in their original pricing is warranted.
The Company’s investments largely consist of debt securities issued by major corporate and banking organizations, the provincial and federal governments of Canada, international government banking organizations and the United States Department of the Treasury and are all investment grade. The Company also holds certain public equity securities obtained through an initial public offering of a previously held non-marketable equity investment.
The Company recognizes transfers in and out of levels within the fair value hierarchy at the end of the reporting period in which the actual event or change in circumstance occurred. There were no significant transfers in or out of Level 3 assets during the years ended February 28, 2022 or February 28, 2021. The Company realized nil in gains on previously held auction rate securities classified as Level 3 assets for the years ended February 28, 2022 and February 28, 2021 (February 29, 2020 - $3 million).
For a description of how the fair values of the Debentures (as defined in Note 6) were determined, see the “Convertible debentures” accounting policies in Note 1. The 3.75% Debentures (as defined in Note 6) were classified as Level 2 and the 1.75% Debentures (as defined in Note 6) are classified as Level 3. For a description of how the fair value of the CEO Contingent Cash Award (as defined in Note 7) was determined, see the “2019 Executive Chair Incentive Grant” section of Note 7(b).
					85

	BlackBerry Limited
		Notes to the Consolidated Financial Statements
			In millions of United States dollars, except share and per share data, and except as otherwise indicated
Non-Recurring Fair Value Measurements
Upon the occurrence of certain events, the Company re-measures the fair value of non-marketable equity investments for which it utilizes the measurement alternative, and long-lived assets, including property, plant and equipment, operating lease ROU assets, intangible assets and goodwill if an impairment or observable price adjustment is recognized in the current period.
Non-Marketable Equity Investments Measured Using the Measurement Alternative
Non-marketable equity investments measured using the measurement alternative include investments in privately held companies without readily determinable fair values in which the Company does not own a controlling interest or have significant influence. The estimation of fair value used in the fair value measurements required the use of significant unobservable inputs, and as a result, the fair value measurements were classified as Level 3.
Goodwill Impairment
During the year ended February 28, 2022, there were no goodwill impairment charges. In its annual goodwill impairment test in the fourth quarter of fiscal 2022, the Company’s estimates indicated the fair values of all its reporting units substantially exceeded their carrying values, such carrying values were expected to be recovered, and there was no goodwill impairment. In the fourth quarter of fiscal 2022, the Company announced that it has agreed to the sale of a significant amount of patent assets to Catapult IP Innovations, Inc. (“Catapult”) subject to the satisfaction of closing conditions. The completion of the sale would accelerate the timing of estimated cash flows for the Intellectual Property reporting unit and, based upon changes in the estimates to future cash flows following the sale, could potentially result in impacts that would be material to the consolidated financial statements in relation to the fair value of the goodwill of that reporting unit.
During the year ended February 28, 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 value 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. 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 estimated fair values of the Company’s other reporting units substantially exceeded their carrying values at May 31, 2020.
During the year ended February 29, 2020, the Company recorded a goodwill impairment charge of $22 million relating to its BBM Consumer reporting unit.
Impairment of Long-Lived Assets (“LLA”)
During the year ended February 28, 2022, there were no LLA impairment charges.
During the year ended February 28, 2021, the Company recorded a non-cash, pre-tax and after-tax impairment charge of $46 million consisting of $37 million related to operating lease ROU assets for certain facilities and $9 million related to property, plant and equipment associated with those facilities. In addition, the Company also recorded a decrease to its lease liabilities of $3 million associated with certain leased facilities with an early termination option, which has been included as a partial offset in impairment of long-lived assets on the Company’s consolidated statements of operations. The Company conducts an evaluation of the related liabilities and expenses and revises its assumptions and estimates as appropriate as new or updated information becomes available.
During the year ended February 29, 2020, the Company recorded a non-cash, pre-tax and after-tax impairment charge of $10 million consisting of $8 million related to operating lease ROU assets for certain facilities that have been exited and $2 million related to property, plant and equipment associated with those facilities.
				86

		BlackBerry Limited
	Notes to the Consolidated Financial Statements
																In millions of United States dollars, except share and per share data, and except as otherwise indicated
Cash, Cash Equivalents and Investments
The components of cash, cash equivalents and investments by fair value level as at February 28, 2022 were as follows:
					Cash and			Restricted
		Unrealized	Unrealized		Cash	Short-term	Long-term	Cash
	Cost Basis (1)	Gains	Losses	Fair Value	Equivalents	Investments	Investments	Equivalents
Bank balances	$								105 $	— $	— $ 105 $ 104 $	— $	— $	1
Other investments		8								—	—	8	—					—	8	—
									113	—	—	113	104					—	8					1
Level 1:Equity securities
									10	—	(9)	1	—		1				—	—
Level 2:Term deposits, certificates of
deposits, and GIC's									157	—	—	157	65					65	—	27
Bankers’ acceptances/bearer
deposit notes									58	—	—				58	58					—	—	—
Commercial paper									247	—	—	247	62	185					—	—
Non-U.S. promissory notes									71	—	—				71	46					25	—	—
Non-U.S. government sponsored
enterprise notes									58	—	—				58	—					58	—	—
Non-U.S. treasury bills/notes									43	—	—				43	43					—	—	—
									634	—	—	634	274	333					—	27
Level 3:Other investments
									17	5							—			22	—				—	22	—
	$								774 $	5 $							(9) $ 770 $ 378 $ 334 $	30 $	28
______________________________
(1) Cost basis for other investments includes the effect of returns of capital.
			87

		BlackBerry Limited
														Notes to the Consolidated Financial Statements
															In millions of United States dollars, except share and per share data, and except as otherwise indicated
The components of cash, cash equivalents and investments by fair value level as at February 28, 2021 were as follows:
				Cash and			Restricted	Restricted
		Unrealized		Cash	Short-term	Long-term	Cash	Short-term
	Cost Basis	Losses	Fair Value	Equivalents	Investments	Investments	Equivalents	Investments
Bank balances	$ 165 $								— $ 165 $ 165 $	— $	— $	— $	—
Other investments												37	—			37	—						—	37	—	—
		202								—	202	165					—	37	—	—
Level 1:Equity securities
												10	(7)	3	—	3					—	—	—
Level 2:Term deposits, certificates of
deposits, and GICs		138								—	138		7	103					—	4	24
Bearer deposit notes												40	—			40	—						40	—	—	—
Commercial paper		162								—	162	15	147					—	—	—
Non-U.S. promissory notes												55	—			55	26						29	—	—	—
Non-U.S. government sponsored
enterprise notes		154								—	154		1	153					—	—	—
Non-U.S. treasury bills/notes												25	—			25	—						25	—	—	—
Corporate notes/bonds												25	—			25	—						25	—	—
		599								—	599	49	522					—	4	24
	$ 811 $								(7) $ 804 $ 214 $ 525 $		37 $	4 $	24
As at February 28, 2022, the Company had non-marketable equity investments without readily determinable fair value of $30 million (February 28, 2021 - $37 million). During the fiscal year ended February 28, 2022, the Company recorded an upward adjustment to the carrying value of certain non-marketable equity investments without readily determinable fair value of $5 million resulting from observable price changes in orderly transactions for identical or similar securities which have been included in investment income (loss), net on the Company’s consolidated statements of operations. The Company also received a distribution from a non-marketable equity investment without readily determinable fair value in the amount of $35 million, which for accounting purposes, consisted of a return of capital of $13 million and a realized gain of $22 million included in investment income (loss), net on the Company’s consolidated statements of operations.
During the year ended February 28, 2022, there was no impairment recognized relating to non-marketable equity investments without readily determinable fair value (February 28, 2021 - nil and February 29, 2020 - $3 million).
There were no realized gains or losses on available-for-sale securities for the year ended February 28, 2022 (February 28, 2021 and February 29, 2020 - nil).
The Company has restricted cash and cash equivalents and restricted short-term investments, consisting of cash and securities pledged as collateral to major banking partners in support of the Company’s requirements for letters of credit. These letters of credit support certain leasing arrangements entered into in the ordinary course of business. The letters of credit are for terms ranging from one month to four years. The Company is legally restricted from accessing these funds during the term of the leases for which the letters of credit have been issued; however, the Company can continue to invest the funds and receive investment income thereon.
			88

										BlackBerry Limited
											Notes to the Consolidated Financial Statements
												In millions of United States dollars, except share and per share data, and except as otherwise indicated
The following table provides a reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents as at February 28, 2022, February 28, 2021 and February 29, 2020 from the consolidated balance sheets to the consolidated statements of cash flows:
	As at
		February 28,	February 28,		February 29,
		2022	2021		2020
Cash and cash equivalents		$		378 $	214 $	377
Restricted cash and cash equivalents				28	4	49
Total cash, cash equivalents, restricted cash, and restricted cash
equivalents presented in the consolidated statements of cash flows		$		406 $	218 $	426
The contractual maturities of available-for-sale investments as at February 28, 2022 and February 28, 2021 were as follows:
				As at
							February 28, 2022	February 28, 2021
							Cost Basis	Fair Value	Cost Basis		Fair Value
Due in one year or less								$	634 $	634 $	599 $	599
No fixed maturity									10	1	10	3
								$	644 $	635 $	609 $	602
As at February 28, 2022 and February 28, 2021, the Company had no available-for-sale debt securities with continuous unrealized losses.
									4. CONSOLIDATED BALANCE SHEET DETAILS
Accounts Receivable, Net of Allowance
The allowance for credit losses as at February 28, 2022 was $4 million (February 28, 2021 - $10 million).
The Company recognizes current estimated credit losses (“CECL”) for accounts receivable. The CECL for accounts receivable 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. 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.
								89

				BlackBerry Limited
					Notes to the Consolidated Financial Statements
						In millions of United States dollars, except share and per share data, and except as otherwise indicated
The following table sets forth the activity in the Company’s allowance for credit losses:
	For the Year Ended
	February 28, 2022
Beginning balance as of February 29, 2020	$	9
Impact of adopting ASC 326		4
Prior period recovery for expected credit losses		(3)
Ending balance of the allowance for credit loss as at February 28, 2021		10
Current period recovery for expected credit losses		(2)
Write-offs charged against the allowance	$	(4)
Ending balance of the allowance for credit loss as at February 28, 2022	$	4
The allowance for credit losses as at February 28, 2022 consists of $2 million (February 28, 2021 - $3 million) relating to CECL estimated based on days past due and region and $2 million (February 28, 2021 - $7 million) relating to specific customers that were evaluated separately.
There was no customer that comprised more than 10% of accounts receivable as at February 28, 2022 (February 28, 2021 - one customer comprised more than 10%).
Other Receivables
As at February 28, 2022 and February 28, 2021, other receivables included items such as receivables from Hardest-Hit Business Recovery Program (“HHBRP”) and intellectual property licensing receivable, among other items, none of which were greater than 5% of the current assets balance in any of the periods presented.
Other Current Assets
Other current assets comprised the following:
	As at
			February 28, 2022	February 28, 2021
Intellectual property			$	118 $	—
Other				41	50
			$	159 $	50
On January 29, 2022, the Company entered into a patent sale agreement with Catapult, pursuant to which the Company has agreed to sell substantially all of its non-core patent assets to Catapult for total transaction price of $600 million. Patents that are essential to the Company’s current core business operations are excluded from the transaction. The Company will receive a license back to the patents being sold, which relate primarily to mobile devices, messaging and wireless networking. Completion of the revenue transaction is subject to the satisfaction of closing conditions. For the year ended February 28, 2022, the Company reclassified $118 million of intellectual property that will be sold under this revenue arrangement as other current assets on the Company’s consolidated balance sheets relating to the patent sale agreement.
Other current assets also included 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 any of the periods presented.
							90

										BlackBerry Limited
											Notes to the Consolidated Financial Statements
			In millions of United States dollars, except share and per share data, and except as otherwise indicated
Property, Plant and Equipment, Net
Property, plant and equipment comprised the following:
	As at
		February 28, 2022	February 28, 2021
Cost
			BlackBerry operations and other information technology	$	92 $			110
			Leasehold improvements and other		53			67
			Furniture and fixtures		10			10
			Manufacturing, repair and research and development equipment		1			72
			156			259
Accumulated amortization			115			211
Net book value		$	41 $			48
For the year ended February 28, 2022, amortization expense related to property, plant and equipment amounted to $15 million (February 28, 2021 - $21 million; February 29, 2020 - $24 million).
Intangible Assets, Net
Intangible assets comprised the following:
		As at February 28, 2022
		Accumulated				Net Book
					Cost	Amortization				Value
Acquired technology							$	1,023 $	776 $			247
Other acquired intangibles								494	283			211
Intellectual property								117	53			64
							$	1,634 $				1,112 $	522
		As at February 28, 2021
		Accumulated				Net Book
					Cost	Amortization				Value
Acquired technology							$	1,023 $	712 $			311
Other acquired intangibles								494	233			261
Intellectual property								498	299			199
							$	2,015 $				1,244 $	771
For the year ended February 28, 2022, amortization expense related to intangible assets amounted to $161 million (February 28, 2021 - $177 million; February 29, 2020 - $188 million).
Total additions to intangible assets in fiscal 2022 amounted to $31 million (fiscal 2021 - $36 million). During fiscal 2022, 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 February 28, 2022, and assuming no subsequent impairment of the underlying assets, the annual amortization expense for each of the succeeding years is expected to be as follows: fiscal 2023 - $99 million; fiscal 2024 - $94 million; fiscal 2025 - $90 million; fiscal 2026 - $85 million; and fiscal 2027 - $79 million.
												91

						BlackBerry Limited
							Notes to the Consolidated Financial Statements
								In millions of United States dollars, except share and per share data, and except as otherwise indicated
The weighted average remaining useful lives of the intangible assets are as follows:
	As at
		February 28, 2022	February 28, 2021
Acquired technology			5.1 years	5.9 years
Other acquired intangibles			5.7 years	6.4 years
Intellectual property			7.5 years	6.4 years
Goodwill
Changes to the carrying amount of goodwill during the fiscal years ended February 28, 2022, February 28, 2021 and February 29, 2020 were as follows:
	Carrying Amount
Carrying amount as at February 28, 2019	$			1,463
Measurement period adjustment (1)					(2)
Goodwill impairment charge (note 3)					(22)
Effect of foreign exchange on non-U.S. dollar denominated goodwill					(2)
Carrying amount as at February 29, 2020				1,437
Goodwill impairment charge (note 3)				(594)
Effect of foreign exchange on non-U.S. dollar denominated goodwill					6
Carrying amount as at February 28, 2021					849
Effect of foreign exchange on non-U.S. dollar denominated goodwill					(5)
Carrying amount as at February 28, 2022	$				844
______________________________
(1) The Company recorded a measurement period adjustment of $2 million in selling, general and administration expenses during the fiscal year ended February 29, 2020 related to the Cylance acquisition, as the amount would have been recognized in the prior fiscal year, if the adjustment to the provisional amounts had been recognized as of the acquisition date on February 21, 2019.
Other Long-term Assets
As at February 28, 2022 and February 28, 2021, other long-term assets included 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 comprised the following:
	As at
		February 28, 2022	February 28, 2021
Accrued royalties		$	20 $				20
Operating lease liabilities, current (note 11)			28				33
Other			109			125
		$	157 $			178
Other accrued liabilities include variable incentive accrual, accrued director fees, accrued vendor liabilities, accrued carrier liabilities and payroll withholding taxes, among other items, none of which were greater than 5% of the current liabilities balance in any of the periods presented.
									92

									BlackBerry Limited
										Notes to the Consolidated Financial Statements
								In millions of United States dollars, except share and per share data, and except as otherwise indicated
5.	INCOME TAXES
	The difference between the amount of the provision for (recovery of) income taxes and the amount computed by multiplying income (loss) before income taxes by the statutory Canadian tax rate is reconciled as follows:
		For the Years Ended
			February 28, 2022	February 28, 2021		February 29, 2020
	Statutory Canadian tax rate				26.5 %	26.5 %	26.5 %
	Expected provision for (recovery of) income taxes		$		5	$				(295)	$			(39)
	Differences in income taxes resulting from:
								Valuation allowance			(9)				205	41
								Investment tax credits			7				(41)	(10)
								Change in unrecognized income tax benefits			(2)				(48)	(12)
								Foreign tax rate differences			3				3	3
								Non-deductible permanent differences			3				13	15
								Goodwill impairment			—				158	6
								Other differences			—				(4)	1
								Withholding tax on unremitted earnings			—				—	(1)
			$		7	$				(9)	$			4
		For the Years Ended
			February 28, 2022	February 28, 2021		February 29, 2020
	Income (loss) before income taxes:
								Canadian	$		133 $	(383) $	15
								Foreign			(114)	(730)	(163)
			$	19 $				(1,113) $	(148)
											93

							BlackBerry Limited
								Notes to the Consolidated Financial Statements
				In millions of United States dollars, except share and per share data, and except as otherwise indicated
The provision for (recovery of) income taxes consists of the following:
	For the Years Ended
		February 28, 2022	February 28, 2021		February 29, 2020
Current
				Canadian	$	(1) $		(2) $		2
				Foreign		8		(7)		3
Deferred
				Foreign		—					—	(1)
		$	7 $		(9) $		4
Deferred income tax assets and liabilities consist of the following temporary differences:
			As at
	February 28, 2022		February 28, 2021
Assets
				Property, plant, equipment and intangibles assets	$					262 $	240
				Non-deductible reserves						44	59
				Minimum taxes						207	206
				Debentures (note 6)						37	94
				Research and development						379	390
				Tax loss carryforwards						441	414
				Other						104	82
Deferred income tax assets						1,474	1,485
Valuation allowance						1,367	1,360
Deferred income tax assets net of valuation allowance						107	125
Liabilities
				Property, plant, equipment and intangibles assets						(107)	(125)
Deferred income tax liabilities						(107)	(125)
Net deferred income tax asset (liability)	$					— $	—
The Company regularly assesses the need for a valuation allowance against its deferred tax assets. In making that assessment, the Company considers both positive and negative evidence related to the likelihood of realization of the deferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some or all of the deferred tax assets will be realized.
In evaluating the need for a valuation allowance, the Company noted that there had been three years of cumulative losses, including fiscal 2022. In fiscal 2022, the Company saw an increase in the deferred tax valuation allowance of $7 million (February 28, 2021 - increase of $137 million). As a result, the deferred tax valuation allowance had an ending balance of $1,367 million (February 28, 2021 - $1,360 million). This accounting treatment has no effect on the Company’s ability to utilize deferred tax assets to reduce future cash tax payments. The Company will continue to assess the likelihood that the deferred tax assets will be realizable at each reporting period and the valuation allowance will be adjusted accordingly.
									94

							BlackBerry Limited
								Notes to the Consolidated Financial Statements
									In millions of United States dollars, except share and per share data, and except as otherwise indicated
The Company’s total unrecognized income tax benefits as at February 28, 2022 and February 28, 2021 were $20 million and $24 million, respectively. A reconciliation of the beginning and ending amount of unrecognized income tax benefits that, if recognized, would affect the Company’s effective income tax rate is as follows:
	For the Years Ended
		February 28, 2022	February 28, 2021		February 29, 2020
Unrecognized income tax benefits, opening balance		$		24 $	72 $	84
Increase for income tax positions of prior years				—	—	2
Increase for income tax positions of current year				—	2	1
Settlement of tax positions				(4)	(50)	(15)
Unrecognized income tax benefits, ending balance		$		20 $	24 $	72
As at February 28, 2022, $20 million of the unrecognized tax benefits have been netted against deferred income taxes and nil has been recorded within income taxes payable on the Company’s consolidated balance sheets.
A summary of open tax years by major jurisdiction is presented below:
JurisdictionCanada (1)
			Fiscal 2016 - 2022
United States (2)			Fiscal 2019 - 2022
United Kingdom			Fiscal 2021 - 2022
______________________________
(1) Includes federal as well as provincial jurisdictions, as applicable.
(2) Pertains to federal tax years. Certain state jurisdictions remain open from fiscal 2018 through fiscal 2022.The Company is subject to ongoing examination by tax authorities in the jurisdictions in which it operates. The Company regularly assesses the status of these examinations and the potential for adverse outcomes to determine the adequacy of the provision for income taxes, as well as the provisions for indirect and other taxes and related penalties and interest. The Company believes it is reasonably possible that approximately nil of its gross unrecognized income tax benefits will be realized in the next twelve months. While the final resolution of these audits is uncertain, the Company believes the ultimate resolution of these audits will not have a material adverse effect on its consolidated financial position, liquidity or results of operations.
The Company recognizes interest and penalties related to unrecognized income tax benefits as interest expense that is netted and reported within investment income, net. The amount of interest accrued as at February 28, 2022 was approximately $3 million (February 28, 2021 - approximately $3 million). The amount of penalties accrued as at February 28, 2022 was nil (February 28, 2021 - nil).
										95

											BlackBerry Limited
												Notes to the Consolidated Financial Statements
													In millions of United States dollars, except share and per share data, and except as otherwise indicated
As at February 28, 2022, the Company has the following net operating loss carryforwards and tax credits, which are scheduled to expire in the following years:
			Research and Development
					(1)
	Year of Expiry	Net Operating Losses		Tax Credits		Minimum Taxes
	2029	$					10 $	— $			1
	2030						—	—			109
	2031		1		12			72
	2032						28		1	22
	2033						88	133			—
	2034						96	124			—
	2035						92	52			3
	2036						355	40			—
	2037						492	23			—
	2038						199	17			—
	2039						13	14			—
	2040						—	13			—
	2041						—		8	—
	2042						12		8	—
	Indefinite						321	21			—
		$					1,707 $	466 $			207
______________________________
(1) Includes federal, provincial and state balances.
										6.	DEBENTURES
1.75% Convertible Debentures
On September 1, 2020, Hamblin Watsa Investment Counsel Ltd., in its capacity as investment manager of Fairfax Financial Holdings Limited (“Fairfax”), and another institutional investor invested in the Company through a $365 million private placement of new debentures (the “1.75% Debentures”), which replaced $605 million of debentures issued in a private placement on September 7, 2016 (the “3.75% Debentures”) as described below (collectively, the “Debentures”).
Interest on the 1.75% Debentures is payable quarterly in arrears at a rate of 1.75% per annum. The 1.75% Debentures mature on November 13, 2023 and each $1,000 of 1.75% Debentures is convertible at any time into 166.67 common shares of the Company, for a total of 60.8 million common shares at a price of $6.00 per share for all 1.75% Debentures, subject to adjustments. Covenants associated with the 1.75% Debentures include limitations on the Company’s total indebtedness.
Under specified events of default, the outstanding principal and any accrued interest on the 1.75% Debentures become immediately due and payable upon request of holders holding not less than 25% of the principal amount of the 1.75% Debentures then outstanding. During an event of default, the interest rate rises to 5.75% per annum.
The 1.75% Debentures are subject to a change of control provision whereby the Company would be required to make an offer to repurchase the 1.75% Debentures at 115% of par value if a person or group (not affiliated with Fairfax) acquires 35% of the Company’s outstanding common shares, acquires all or substantially all of its assets, or if the Company merges with another entity and the Company’s existing shareholders hold less than 50% of the common shares of the surviving entity. Additionally, the 1.75% Debentures cannot be converted to the extent that, after giving effect to the conversion, the holder would beneficially own or exercise control or direction over more than 19.99% of the Company’s then issued and outstanding shares (the “Blocker Provision”).
Due to the conversion option and other embedded derivatives within the 1.75% Debentures, and consistent with the Company’s accounting for the 3.75% Debentures, the Company has elected to record the 1.75% Debentures, including the debt itself and all embedded derivatives, at fair value and present the 1.75% Debentures as a single hybrid financial
		96

							BlackBerry Limited
								Notes to the Consolidated Financial Statements
									In millions of United States dollars, except share and per share data, and except as otherwise indicated
instrument. No portion of the fair value of the 1.75% Debentures has been recorded as equity, nor would be if the embedded derivatives were bifurcated from the host debt contract.
Each period, the fair value of the 1.75% Debentures is recalculated and resulting gains and losses from the change in fair value of the Debentures associated with non-credit components are recognized in income, while the change in fair value associated with credit components is recognized in AOCL. The fair value of the Debentures has been determined using the significant Level 2 inputs interest rate curves and any observable trades of the Debentures that may have occurred during the period, the market price and volatility of the Company’s listed common shares, and the significant Level 3 inputs related to credit spread and the implied discount of the 1.75% Debentures at issuance.
The Company originally determined its credit spread by calibrating to observable trades of the 3.75% Debentures and trending the calibrated spread to valuation dates utilizing an appropriate credit index. The Company’s credit spread was determined to be 7.90% as of the issuance date of the 1.75% Debentures and 6.58% as of February 28, 2022. An increase in credit spread will result in a decrease in the fair value of 1.75% Debentures and vice versa. The fair value of the 1.75% Debentures on September 1, 2020 was determined to be approximately $456 million and the implied discount approximately $91 million. The Company determined the implied discount on the 1.75% Debentures by calculating the fair value of the 1.75% Debentures on September 1, 2020 utilizing the above credit spread and other inputs described above.
The following table summarizes the change in fair value of the 1.75% Debentures for the fiscal year ended February 28, 2022, which also represents the total changes through earnings of items classified as Level 3 in the fair value hierarchy:
	As at
		February 28, 2022
Balance as at Principal received as of September 1, 2020		$	365
Change in fair value of the Debentures			355
Balance as at February 28, 2021			720
Change in fair value of the Debentures			(213)
Balance as at February 28, 2022		$	507
The difference between the fair value of the 1.75% Debentures and the unpaid principal balance of $365 million is $142 million.
The following table shows the impact of the changes in fair value of the 1.75% Debentures for the years ended February 28, 2022, February 28, 2021 and February 29, 2020:
				For the Years Ended
					February 28,	February 28,	February 29,
					2022	2021	2020
Income (charge) associated with the change in fair value from non-credit
components recorded in the consolidated statements of operations					$	212 $	(347) $	—
Income (charge) associated with the change in fair value from instrument-specific
credit components recorded in AOCL						1	(8)	—
Total decrease (increase) in the fair value of the 1.75% Debentures					$	213 $	(355) $	—
For the year ended February 28, 2022, the Company recorded interest expense related to the Debentures of $6 million, which has been included in investment income (loss), net on the Company’s consolidated statements of operations (fiscal 2021 - $15 million; fiscal 2020 - $23 million). The Company is required to make quarterly interest-only payments of approximately $2 million during the remaining term the 1.75% Debentures are outstanding.
Fairfax, a related party under U.S. GAAP due to its beneficial ownership of common shares in the Company after taking into account potential conversion of the Debentures, owned $500 million principal amount of the 3.75% Debentures and purchased $330 million principal amount of the 1.75% Debentures. As such, the redemption of Fairfax’s portion of the 3.75% Debentures, the investment by Fairfax in the 1.75% Debentures and the payment of interest on the Debentures to Fairfax represent related party transactions. Fairfax receives interest at the same rate as other holders of the Debentures.
										97

							BlackBerry Limited
								Notes to the Consolidated Financial Statements
									In millions of United States dollars, except share and per share data, and except as otherwise indicated
3.75% Convertible Debentures
On September 7, 2016, Fairfax and other institutional investors invested in the Company through a $605 million private placement of the 3.75% Debentures. The terms of the 3.75% Debentures were substantially similar to those of the 1.75% Debentures, except that the 3.75% Debentures had a higher interest rate, were convertible into common shares at a price of $10.00 per common share, were subject to a lower approval threshold for extraordinary resolutions, did not contain the Blocker Provision and had a maturity date of November 13, 2020.
On July 22, 2020, the Company announced that, with the required approval of the holders of the 3.75% Debentures, it would redeem the 3.75% Debentures for a redemption amount of approximately $615 million (the “Redemption Amount”), which would settle all outstanding obligations of the Company in respect of the 3.75% Debentures. The redemption was completed on September 1, 2020. As the Redemption Amount represented fair value at August 31, 2020 and the Company elected the fair value option for the 3.75% Debentures, the impact to the consolidated statements of operations of the redemption on the fair value was recorded in the second quarter of fiscal 2021. A portion of the fair value associated with changes in instrument-specific credit components in the amount of $6 million remained in OCI until redemption on September 1, 2020 at which point $6 million was discharged to the consolidated statement of operations and is included in the table below.
The following table shows the impact of the changes in fair value of the 3.75% Debentures for the years ended February 28, 2022, February 28, 2021 and February 29, 2020:
	For the Years Ended
		February 28,	February 28,		February 29,
		2022	2021	2020
Income (charge) associated with the change in fair value from non-credit
components recorded in the consolidated statements of operations		$	— $			(19) $	66
Income (charge) associated with the change in fair value from instrument-specific
credit components recorded in AOCL			—			15	(7)
Realized charges associated with the change in fair value from credit components
recorded in the consolidated statements of operations on redemption			—			(6)	—
Realized charges associated with the change in fair value from credit components
released from AOCL on redemption			—		6		—
Total decrease (increase) in the fair value of the 3.75% Debentures		$	— $			(4) $	59
						7.	CAPITAL STOCK
						(a) Capital Stock
The Company is authorized to issue an unlimited number of voting common shares, an unlimited number of non-voting, redeemable, retractable Class A common shares and an unlimited number of non-voting, cumulative, redeemable, retractable preferred shares. As at February 28, 2022 and February 28, 2021, there were no Class A common shares or preferred shares outstanding.
										98

					BlackBerry Limited
						Notes to the Consolidated Financial Statements
							In millions of United States dollars, except share and per share data, and except as otherwise indicated
The following details the changes in issued and outstanding common shares for the years ended February 28, 2022, February 28, 2021 and February 29, 2020:
	Capital Stock and
	Additional Paid-in Capital
	Stock
		Outstanding
	(000s)		Amount
Common shares outstanding as at February 28, 2019			547,358 $	2,688
Exercise of stock options			1,189		3
Common shares issued for restricted share unit settlements			3,361		—
Stock-based compensation			—		63
Common shares issued related to Exchange Shares			1,380		—
Common shares issued for employee share purchase plan			911		6
Common shares outstanding as at February 29, 2020			554,199	2,760
Exercise of stock options			3,072		12
Common shares issued for restricted share unit settlements			5,330		—
Stock-based compensation			—		44
Common shares issued related to Exchange Shares			1,380		—
Common shares issued for employee share purchase plan			1,524		7
Common shares outstanding as at February 28, 2021			565,505	2,823
Exercise of stock options			555		3
Common shares issued for restricted share unit settlements			8,011		—
Stock-based compensation			—		36
Common shares issued related to Exchange Shares			1,422		—
Common shares issued for employee share purchase plan			735		7
Common shares outstanding as at February 28, 2022			576,228 $	2,869
Common shares (the “Exchange Shares”) were issued in connection with the Cylance acquisition, which was completed on February 21, 2019. In lieu of cash, a portion of the consideration owed to certain Cylance shareholders was paid in equal installments of Exchange Shares on the first three anniversary dates of the closing.
The Company had 576 million voting common shares outstanding, 1 million options to purchase voting common shares, 15 million RSUs and 2 million DSUs outstanding as at March 29, 2022. In addition, 60.8 million common shares are issuable upon conversion in full of the 1.75% Debentures as described in Note 6.
				(b) Stock-based Compensation
Stock options
The Company recorded a charge to income and a credit to paid-in capital of approximately $2 million in fiscal 2022 (fiscal 2021 - $6 million; fiscal 2020 - $5 million) in relation to stock option-based compensation expense.
Stock options previously granted under the Equity Plan generally vest over a period of three years, and are generally exercisable over a period of five years from the grant date. Replacement stock options granted under the Cylance Stock Plan generally vest between three months and four years and are generally exercisable over a period of five to ten years. The Company issues new shares to satisfy stock option exercises.
								99

BlackBerry Limited

Notes to the Consolidated Financial Statements

In millions of United States dollars, except share and per share data, and except as otherwise indicated

A summary of option activity for fiscal 2022 is shown below:

Options Outstanding

Weighted

Average

Aggregate

Average

Remaining

Intrinsic

Number

Exercise

Contractual

Value

(000’s)

Price

Life in Years

(millions)

Balance as at February 28, 2021

1,583 $

4.92

Exercised during the year

(555)

4.60

Forfeited/canceled/expired during the year

(300)

6.07

Balance as at February 28, 2022

728 $

4.70

5.78 $

Vested and expected to vest as at February 28, 2022

718 $

4.68

5.77 $

Exercisable as at February 28, 2022

669 $

4.55

5.70 $

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value that would have been received by the option holders if all in-the-money options had been exercised on February 28, 2022. The intrinsic value of stock options exercised during fiscal 2022, calculated using the average market price during the year, was approximately $5.35 per share (February 28, 2021 - $2.22; February 29, 2020 - $4.30).

A summary of unvested stock options since February 28, 2022 is shown below:

Options Outstanding

Weighted Average

Number

Grant Date Fair

(000’s)

Value

Balance as at February 28, 2021

548 $

4.50

Vested during the year

(285)

4.67

Forfeited during the year

(204)

4.33

Balance as at February 28, 2022

59 $

4.26

As at February 28, 2022, there was a nominal amount of unrecognized stock-based compensation expense related to unvested stock options that will be expensed over the vesting period, which was approximately 0.27 years on a weighted average basis. The total fair value of stock options vested during the year ended February 28, 2022 amounted to $1 million (February 28, 2021 - $6 million; February 29, 2020 - $25 million).

Cash received from the stock options exercised for the year ended February 28, 2022 amounted to $3 million (February 28, 2021 - $12 million; February 29, 2020 - $3 million). There were no tax deficiencies incurred by the Company related to stock options exercised as at February 28, 2022 (February 28, 2021 - tax deficiency of nil; February 29, 2020 - tax deficiency of nil).

During the year ended February 28, 2022, there were no stock options granted (February 28, 2021 - nil; February 29, 2020 - nil).

Restricted share units

The Company recorded compensation expense with respect to RSUs of approximately $35 million in the year ended February 28, 2022 (February 28, 2021 - $38 million; February 29, 2020 - $57 million).

100

						BlackBerry Limited
							Notes to the Consolidated Financial Statements
								In millions of United States dollars, except share and per share data, and except as otherwise indicated
A summary of RSU activity during fiscal 2022 is shown below:
	RSUs Outstanding
			Weighted	Average	Aggregate
	Average			Remaining	Intrinsic
		Number	Grant Date	Contractual	Value
		(000’s)	Fair Value	Life in Years	(millions)
Balance as at February 28, 2021			22,075 $	7.88
Granted during the year			6,196	9.72
Vested during the year			(8,011)	8.63
Forfeited/cancelled during the year			(4,642)	6.01
Balance as at February 28, 2022			15,618 $	8.79			1.62 $	107
Expected to vest February 28, 2022			13,324 $	8.54			1.63 $	92
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the aggregate closing share price of the Company’s common shares on February 28, 2022 that would have been received by RSU holders if all RSUs had been vested on February 28, 2022).
Tax deficiencies incurred by the Company related to the RSUs vested were nil for the year ended February 28, 2022 (February 28, 2021 - tax deficiency of nil; February 29, 2020 - tax deficiency of nil).
As at February 28, 2022, there was $73 million of unrecognized compensation expense related to RSUs that will be expensed over the vesting period, which, on a weighted average basis, results in a period of approximately 1.62 years.
During the year ended February 28, 2022, there were 6,195,827 RSUs granted (February 28, 2021 - 8,620,551), all of which will be settled upon vesting by the issuance of new common shares.
During the year ended February 28, 2022, the weighted average fair value for RSUs granted was $9.72 (February 28, 2021 - $5.54; February 29, 2020 - $7.19). During the year ended February 28, 2022, the fair value of RSUs that vested was $69 million (February 28, 2021 - $44 million; February 29, 2020 - $33 million).
Inducement awards
In the first quarter of fiscal 2020, the Board approved an agreement to grant performance-based equity awards (“Inducement Awards”) to the co-founders of Cylance covering up to 4,182,189 common shares. Up to 25%, 35% and 40% of the Inducement Awards may be earned at the end of the Company’s 2020, 2021 and 2022 fiscal years, respectively, if certain performance conditions are met, and any earned amounts will vest at the end of fiscal 2022. In fiscal 2020, 3,122,140 common shares subject to Inducement Awards were forfeited due to the departure of one of the co-founders of Cylance.
As at February 28, 2022, there were 666,432 common shares subject to Inducement Awards outstanding. The Company recorded a recovery to compensation expense with respect to the Inducement Awards of approximately $1 million for the year ended February 28, 2022 (February 28, 2021 - expense of $1 million; February 29, 2020 - expense of $3 million).
2019 Executive Chair Incentive Grant
In the first quarter of fiscal 2019, the Board approved an agreement to grant a time-based equity award, a long-term market performance-based equity award and a contingent cash award (together, the “2019 Executive Chair Grant”) to the Company’s Executive Chair and CEO as an incentive to remain as Executive Chair until November 3, 2023. The expense associated with the time-based equity award and market performance-based equity award is included in the compensation expense noted above.
		101

							BlackBerry Limited
								Notes to the Consolidated Financial Statements
									In millions of United States dollars, except share and per share data, and except as otherwise indicated
Contingent cash award
The contingent cash award consists of a cash amount of $90 million that becomes payable should the 10-day volume weighted average closing price of the Company’s common shares on the New York Stock Exchange reach $30 (“CEO Contingent Cash Award”). As the award is triggered by the Company’s share price, it is considered stock-based compensation and accounted for as a share-based liability award, the fair value of which is determined at each reporting period end utilizing an option pricing model using Level 2 inputs and the associated compensation expense for the reporting period recorded. If unearned, the contingent cash award will terminate on November 3, 2023. The Company recorded a recovery to compensation expense with respect to the contingent cash award of approximately $6 million for the year ended February 28, 2022 (February 28, 2021 - expense of $8 million; February 29, 2020 - expense of $1 million). The liability recorded in respect to the award was $2 million as at February 28, 2022 and is included within accrued liabilities (February 28, 2021 - $8 million).
Deferred share units
The Company issued 192,400 DSUs in the year ended February 28, 2022. There were 1.6 million DSUs outstanding as at February 28, 2022 (February 28, 2021 - 1.4 million). The Company had a liability of $11 million in relation to the DSU Plan as at February 28, 2022 (February 28, 2021 - $14 million) included in accrued liabilities.
	8.	EARNINGS (LOSS) PER SHARE
The following table sets forth the computation of basic and diluted earnings (loss) per share:
		For the Years Ended
			February 28, 2022	February 28, 2021	February 29, 2020
Net income (loss) for basic earnings (loss) per share available to
common shareholders			$	12 $		(1,104) $	(152)
Less: Debentures fair value adjustment (1) (2)						(212)	—	(66)
Add: interest expense on Debentures (1) (2)				6		—	23
Net loss for diluted loss per share available to common shareholders			$			(194) $	(1,104) $	(195)
Weighted average number of shares outstanding (000’s) - basic (3)(4)						570,607	561,305	553,861
Effect of dilutive securities (000’s)
Conversion of Debentures (1) (2)						60,833	—	60,500
Weighted average number of shares and assumed conversions (000’s)
diluted						631,440	561,305	614,361
Earnings (loss) per share - reported
Basic			$			0.02 $	(1.97) $	(0.27)
Diluted			$			(0.31) $	(1.97) $	(0.32)
______________________________
(1) The Company has not presented the dilutive effect of the Debentures using the if-converted method in the calculation
of diluted loss per share for the year ended February 28, 2021, as to do so would be antidilutive. See Note 6 for details on the Debentures.
(2) The Company has presented the dilutive effect of the Debentures using the if-converted method, assuming conversion
at the beginning of the fiscal year for the years ended February 28, 2022 and February 29, 2020. Accordingly, to calculate diluted loss per share, the Company adjusted net income (loss) by eliminating the fair value adjustment made to the Debentures and interest expense incurred on the Debentures in the years ended February 28, 2022 and February 29, 2020, and added the number of shares that would have been issued upon conversion to the diluted weighted average number of shares outstanding. See Note 6 for details on the Debentures.
(3) The year ended February 28, 2021, included approximately 1,421,945 Exchange Shares remaining to be issued on the
third anniversary date of the Cylance acquisition. The year ended February 29, 2020, included approximately 2,802,067 Exchange Shares to be issued in equal installments on the two anniversary dates of the Cylance acquisition thereafter. There were no service or other requirements associated with the issuance of these shares.
(4) The Company has not presented the dilutive effect of in-the-money options and RSUs that will be settled upon vesting
by the issuance of new common shares in the calculation of diluted loss per share for the years ended February 28, 2022, February 28, 2021 and February 29, 2020 as to do so would be antidilutive.
										102

								BlackBerry Limited
									Notes to the Consolidated Financial Statements
										In millions of United States dollars, except share and per share data, and except as otherwise indicated
9.	ACCUMULATED OTHER COMPREHENSIVE LOSS
	The changes in AOCL by component net of tax, for the years ended February 28, 2022, February 28, 2021 and February 29, 2020 were as follows:
		As At
			February 28, 2022	February 28, 2021		February 29, 2020
	Available-for-Sale Debt SecuritiesBalance, beginning of period
			$		— $	— $	2
	Other comprehensive loss before reclassification				—	—	(2)
	Accumulated net unrealized gains on available-for-sale debt securities		$		— $	— $	—
	Cash Flow HedgesBalance, beginning of period
			$		1 $	(1) $			—
	Other comprehensive income (loss) before reclassification				—	2			(1)
	Amounts reclassified from AOCL into net income (loss)				(1)	—	—
	Accumulated net unrealized gains (losses) on derivative instruments
	designated as cash flow hedges		$		— $	1 $			(1)
	Foreign Currency Cumulative Translation AdjustmentBalance, beginning of period
			$		(4) $	(9) $			(7)
	Other comprehensive income (loss)				(6)	5			(2)
	Foreign currency cumulative translation adjustment		$		(10) $	(4) $			(9)
	Change in Fair Value From Instrument-Specific Credit Risk On
	DebenturesBalance, beginning of period
			$		(9) $	(22) $	(14)
	Other comprehensive income (loss) before reclassification				1	7			(8)
	Amounts reclassified from AOCL into net income (loss)				—	6			—
	Change in fair value from instruments-specific credit risk on
	Debentures		$		(8) $	(9) $			(22)
	Other Post-Employment Benefit ObligationsActuarial losses associated with other post-employment benefit
	obligations		$		(1) $	(1) $			(1)
	Accumulated Other Comprehensive Loss, End of Period		$		(19) $	(13) $	(33)
	During the year ended February 28, 2022, $1 million in gains (pre-tax and post-tax) associated with cash flow hedges were reclassified from AOCL into selling, marketing and administration expenses (February 28, 2021 - nil gains or losses).
10. COMMITMENTS AND CONTINGENCIES
(a) Letters of Credit
	The Company has $27 million in collateralized outstanding letters of credit in support of certain leasing arrangements entered into in the ordinary course of business as of February 28, 2022. See the discussion of restricted cash in Note 3.
(b) Contingencies
	Litigation
	The Company is involved in litigation in the normal course of its business, both as a defendant and as a plaintiff. The Company is subject to a variety of claims (including claims related to patent infringement, purported class actions and other claims in the normal course of business) and may be subject to additional claims either directly or through indemnities against claims that it provides to certain of its partners and customers. In particular, the industry in which the Company competes has many participants that own, or claim to own, intellectual property, including participants that have
											103

	BlackBerry Limited
		Notes to the Consolidated Financial Statements
			In millions of United States dollars, except share and per share data, and except as otherwise indicated
been issued patents and may have filed patent applications or may obtain additional patents and proprietary rights for technologies similar to those used by the Company in its products. The Company has received, and may receive in the future, assertions and claims from third parties that the Company’s products infringe on their patents or other intellectual property rights. Litigation has been, and will likely continue to be, necessary to determine the scope, enforceability and validity of third-party proprietary rights or to establish the Company’s proprietary rights. Regardless of whether claims against the Company have merit, those claims could be time-consuming to evaluate and defend, result in costly litigation, divert management’s attention and resources and subject the Company to significant liabilities.
Management reviews all of the relevant facts for each claim and applies judgment in evaluating the likelihood and, if applicable, the amount of any potential loss. Where a potential loss is considered probable and the amount is reasonably estimable, provisions for loss are made based on management’s assessment of the likely outcome. Where a range of loss can be reasonably estimated with no best estimate in the range, the Company records the minimum amount in the range. The Company does not provide for claims for which the outcome is not determinable or claims for which the amount of the loss cannot be reasonably estimated. Any settlements or awards under such claims are provided for when reasonably determinable.
As of February 28, 2022, there are no material claims outstanding for which the Company has assessed the potential loss as both probable to result and reasonably estimable; therefore, no accrual has been made. Further, there are claims outstanding for which the Company has assessed the potential loss as reasonably possible to result; however, an estimate of the amount of loss cannot reasonably be made. There are many reasons that the Company cannot make these assessments, including, among others, one or more of the following: the early stages of a proceeding does not require the claimant to specifically identify the patent claims that have allegedly been infringed or the products that are alleged to infringe; damages sought are unspecified, unsupportable, unexplained or uncertain; discovery has not been started or is incomplete; the facts that are in dispute are highly complex; the difficulty of assessing novel claims; the parties have not engaged in any meaningful settlement discussions; the possibility that other parties may share in any ultimate liability; and the often slow pace of litigation.
The Company has included the following summaries of certain of its legal proceedings though they do not meet the test for accrual described above.
Between October and December 2013, several purported class action lawsuits and one individual lawsuit were filed against the Company and certain of its former officers in various jurisdictions in the U.S. and Canada alleging that the Company and certain of its officers made materially false and misleading statements regarding the Company’s financial condition and business prospects and that certain of the Company’s financial statements contain material misstatements. The individual lawsuit was voluntarily dismissed.
On March 14, 2014, the four putative U.S. class actions were consolidated in the U.S. District Court for the Southern District of New York, and on May 27, 2014, a consolidated amended class action complaint was filed. On March 13, 2015, the Court issued an order granting the Company’s motion to dismiss. The Court denied the plaintiffs’ motion for reconsideration and for leave to file an amended complaint on November 13, 2015. On August 24, 2016, the U.S. Court of Appeals for the Second Circuit affirmed the District Court order dismissing the complaint, but vacated the order denying leave to amend and remanded to the District Court for further proceedings in connection with the plaintiffs’ request for leave to amend. The Court granted the plaintiffs’ motion for leave to amend on September 13, 2017. On September 29, 2017, the plaintiffs filed a second consolidated amended class action complaint (the “Second Amended Complaint”), which added the Company’s former Chief Legal Officer as a defendant. The Court denied the motion to dismiss the Second Amended Complaint on March 19, 2018. On August 2, 2019, the Magistrate Judge issued a Report and Recommendation that the Court grant the defendants’ motion for judgment on the pleadings dismissing the claims of additional plaintiffs Cho and Ulug. On September 24, 2019, the District Court Judge accepted the Magistrate Judge’s recommendation and dismissed the claims of Cho and Ulug against all defendants. On October 17, 2019, Cho and Ulug filed a Notice of Appeal. Plaintiffs filed a motion for class certification on June 8, 2020. On January 26, 2021, the District Court granted the plaintiffs’ motion for class certification. The class includes “all persons who purchased or otherwise acquired the common stock of BlackBerry Limited on the NASDAQ during the period from March 28, 2013, through and including September 20, 2013.” The class excludes (a) all persons and entities who purchased or otherwise acquired the Company’s common stock between March 28, 2013, and April 10, 2013, and who sold all their the Company common stock before April 11, 2013, and (b) the Defendants, officers and directors of the Company, members of their immediate families and their legal representatives, heirs, successors, or assigns, and any entity in which any of the Defendants have or had a controlling interest. On February 9, 2021, the defendants filed a Rule 23(f) petition for interlocutory review of the class certification order with the Second Circuit Court of Appeals. The Second Circuit Court of Appeals denied the Rule 23(f) petition on June 23, 2021. The Second Circuit Court of Appeals affirmed the District Court judgment
				104

		BlackBerry Limited
			Notes to the Consolidated Financial Statements
				In millions of United States dollars, except share and per share data, and except as otherwise indicated
dismissing Cho and Ulug’s claims on March 11, 2021, and denied Cho and Ulug’s petition for panel rehearing and rehearing en banc on April 28, 2021. On April 19, 2021, Defendants filed a motion for summary judgment, and both parties filed Daubert motions to exclude the testimony of the oppositions’ marketing and accounting experts. On May 5, 2021, the parties participated in a mediation with the Hon. Layn Phillips (ret.), which did not result in an agreement. On August 13, 2021, Plaintiffs filed an unopposed motion for approval of a class notice plan. On September 10, 2021, the Court (i) granted in part and denied in part the parties’ Daubert motions and (ii) granted Plaintiffs’ unopposed motion for approval of the class notice plan. Postcard notice was mailed on October 8, 2021; publication notice was issued starting on October 18, 2021. On January 3, 2022, the Court granted Defendants’ motion for summary judgment with respect to seven statements, and otherwise denied Defendants’ motion. Trial is scheduled to begin on April 7, 2022.
On July 23, 2014, the plaintiffs in the putative Ontario class action filed a motion for certification and leave to pursue statutory misrepresentation claims. On November 16, 2015, the Ontario Superior Court of Justice issued an order granting the plaintiffs’ motion for leave to file a statutory claim for misrepresentation. On December 2, 2015, the Company filed a notice of motion seeking leave to appeal this ruling. On January 22, 2016, the Court postponed the hearing on the plaintiffs’ certification motion to an undetermined date after asking the Company to file a motion to dismiss the claims of the U.S. plaintiffs for forum non conveniens. Before that motion was heard, the parties agreed to limit the class to purchasers who reside in Canada or purchased on the Toronto Stock Exchange. On November 15, 2018, the Court denied the Company’s motion for leave to appeal the order granting the plaintiffs leave to file a statutory claim for misrepresentation. On February 5, 2019, the Court entered an order certifying a class comprised persons (a) who purchased BlackBerry common shares between March 28, 2013, and September 20, 2013, and still held at least some of those shares as of September 20, 2013, and (b) who acquired those shares on a Canadian stock exchange or acquired those shares on any other stock exchange and were a resident of Canada when the shares were acquired. Notice of class certification was published on March 6, 2019. The Company filed its Statement of Defence on April 1, 2019, and discovery is proceeding.
On February 15, 2017, a putative employment class action was filed against the Company in the Ontario Superior Court of Justice. The Statement of Claim alleges that actions the Company took when certain of its employees decided to accept offers of employment from Ford Motor Company of Canada amounted to a wrongful termination of the employees’ employment with the Company. The claim seeks (i) an unspecified quantum of statutory, contractual, or common law termination entitlements; (ii) punitive or breach of duty of good faith damages of CAD$20,000,000, or such other amount as the Court finds appropriate, (iii) pre- and post- judgment interest, (iv) attorneys’ fees and costs, and (v) such other relief as the Court deems just. The Court granted the plaintiffs’ motion to certify the class action on May 27, 2019. The Company commenced a motion for leave to appeal the certification order on June 11, 2019. The Court denied the motion for leave to appeal on September 17, 2019. The Company filed its Statement of Defence on December 19, 2019, and discovery is proceeding.
Other contingencies
As at February 28, 2022, the Company has recognized $17 million (February 28, 2021 - $15 million) in funds from claims filed with the Ministry of Innovation, Science and Economic Development Canada relating to its Strategic Innovation Fund (“SIF”) program’s investment in BlackBerry QNX. A portion of this amount may be repayable in the future under certain circumstances if certain terms and conditions are not met by the Company, which is not probable at this time.
	(c) Concentrations in Certain Areas of the Company’s Business
The Company attempts to ensure that most components essential to the Company’s business are generally available from multiple sources; however, certain components are currently obtained from limited sources within a competitive market, which subjects the Company to supply, availability and pricing risks. The Company has also entered into various agreements for the supply of components, and the manufacturing of its products; however, there can be no guarantee that the Company will be able to extend or renew these agreements on similar terms, or at all. Therefore, the Company remains subject to risks of supply shortages.
	(d) Indemnifications
The Company enters into certain agreements that contain indemnification provisions under which the Company could be subject to costs and damages, including in the event of an infringement claim against the Company or an indemnified third party. Such intellectual property infringement indemnification clauses are generally not subject to any dollar limits and remain in effect for the term of the Company’s agreements. To date, the Company has not encountered material costs as a result of such indemnifications.
					105

								BlackBerry Limited
									Notes to the Consolidated Financial Statements
										In millions of United States dollars, except share and per share data, and except as otherwise indicated
The Company has entered into indemnification agreements with its current and former directors and executive officers. Under these agreements, the Company agreed, subject to applicable law, to indemnify its current and former directors and executive officers against all costs, charges and expenses reasonably incurred by such individuals in respect of any civil, criminal or administrative action that could arise by reason of their status as directors or officers. The Company maintains liability insurance coverage for the benefit of the Company, and its current and former directors and executive officers. The Company has not encountered material costs as a result of such indemnifications in fiscal 2022. See the Company’s Management Information Circular for its 2021 annual meeting of shareholders for additional information regarding the Company’s indemnification agreements with its current and former directors and executive officers.
	11. LEASES
The Company has operating and finance leases primarily for corporate offices, research and development facilities, data centers and certain equipment. The Company’s leases have remaining lease terms of between one year and seven years, some of which may include options to extend the lease for up to 10 years, and some of which may include options to terminate the lease within three months.
The components of lease expense were as follows:
		For the Years Ended
			February 28, 2022	February 28, 2021		February 29, 2020
Operating lease cost, included in selling, marketing and
administration			$		23 $	30 $	33
Finance lease cost
Amortization of ROU assets, included in amortization			$		— $	1 $			2
Total finance lease cost			$		— $	1 $			2
Supplemental cash flow information related to leases was as follows:
		For the Years Ended
			February 28, 2022	February 28, 2021		February 29, 2020
Cash paid for amounts included in the measurement of lease
liabilities:
Cash used in operating activities related to operating lease
payments			$		37 $	37 $	40
Cash used in financing activities related to finance lease
payments					—	1			2
During the year ended February 28, 2022, the Company entered into $6 million (February 28, 2021 - $4 million) in lease obligations and recognized a corresponding ROU asset of $6 million (February 28, 2021 - $4 million).
During the year ended February 28, 2022, the Company incurred losses of nil (February 28, 2021 - $37 million; February 29, 2020 - $8 million) on LLA impairment of ROU assets, as described in Note 3. The Company also had sublease income during the year ended February 28, 2022 of $3 million (February 28, 2021 - $1 million; February 29, 2020 - $2 million) and incurred short-term lease costs of $2 million (February 28, 2021 - $2 million; February 29, 2020 - $2 million).
											106

							BlackBerry Limited
								Notes to the Consolidated Financial Statements
									In millions of United States dollars, except share and per share data, and except as otherwise indicated
Supplemental consolidated balance sheet information related to leases was as follows:
	As at
		February 28, 2022	February 28, 2021
Operating leasesOperating lease assets
Operating lease ROU assets		$	50 $		63
Operating lease liabilities
Accrued liabilities		$	28 $		33
Operating lease liabilities			66		90
Total operating lease liabilities		$	94 $		123
Finance leases Finance lease assets
Property, plant and equipment		$	— $		3
Accumulated amortization			—		(3)
Total finance lease assets		$	— $		—
	As at
		February 28, 2022	February 28, 2021
Weighted average remaining lease term
Operating leases				4.3 years	4.7 years
Weighted average discount rate
Operating lease	3.4 %		3.4 %
Maturities of undiscounted lease liabilities were as follows:
					As at
	February 28, 2022
	Operating Leases
Fiscal year 2023	$		31
Fiscal year 2024			23
Fiscal year 2025			17
Fiscal year 2026			13
Fiscal year 2027			9
Thereafter			8
Total future minimum lease payments			101
Less:
Imputed interest			(7)
Total	$		94
						12. REVENUE AND SEGMENT DISCLOSURES
The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by the CODM for making decisions and assessing performance as a source of the Company’s reportable operating segments. In the first quarter of fiscal 2022, the CODM, who is the Executive Chair and CEO of the Company, began making decisions and assessing the performance of the Company using three operating segments,
										107

					BlackBerry Limited
	Notes to the Consolidated Financial Statements
												In millions of United States dollars, except share and per share data, and except as otherwise indicated
whereas the CODM previously made decisions and assessed the performance of the Company as a single operating segment.
The CODM does not evaluate operating segments using discrete asset information. The Company does not specifically allocate assets to operating segments for internal reporting purposes.
Segment Disclosures
The Company is now organized and managed as three operating segments: Cybersecurity, IoT, and Licensing and Other. Prior year information has been restated to conform to the current year presentation of the Company’s segment information.
The Company disaggregates revenue from contracts with customers based on geographical regions, timing of revenue recognition, and the major product and service types as described in Note 1.
The following table shows information by operating segment for the fiscal year ended February 28, 2022:
	Cybersecurity	IoT	Licensing and Other	Segment Totals
Segment revenue	$				477 $	178 $	63 $	718
Segment cost of sales					194	30	23	247
Segment gross margin (1)	$				283 $	148 $	40 $	471
______________________________
(1) A reconciliation of total segment gross margin to consolidated totals is set forth below.
The following table shows information by operating segment for the fiscal year ended February 28, 2021 and February 29, 2020:
		For the Year Ended
									February 28, 2021	February 29, 2020
					Licensing	Segment		Licensing				Segment
										Cybersecurity	IoT	and Other	Totals	Cybersecurity				IoT	and Other				Totals
Segment revenue										$	491 $				130 $						272 $	893 $	475 $			216 $	349 $ 1,040
Segment cost of sales											192				23	30				245	185			29	53			267
Segment gross margin (1) $	299 $				107 $						242 $	648 $	290 $				187 $	296 $				773
______________________________
(1) A reconciliation of total segment gross margin to consolidated totals is set forth below.
Cybersecurity consists of the Company’s BlackBerry Spark software platform, BlackBerry AtHoc, BlackBerry Alert and BlackBerry SecuSUITE. The BlackBerry Spark platform is a comprehensive offering of security software products and services, including the BlackBerry Cyber Suite and the BlackBerry Spark Unified Endpoint Management Suite, which are also marketed together as the BlackBerry Spark Suite, offering the Company’s broadest range of tailored cybersecurity and endpoint management options. The BlackBerry Cyber Suite includes revenue from the Company’s Cylance artificial intelligence and machine learning-based platform consisting of BlackBerry Protect, BlackBerry Optics, BlackBerry Persona, BlackBerry Gateway, BlackBerry Guard managed services and other cybersecurity applications. The BlackBerry Spark UEM Suite includes the Company’s BlackBerry UEM, BlackBerry Dynamics, and BlackBerry Workspaces solutions. Cybersecurity revenue is generated predominantly through software licenses, commonly bundled with support, maintenance and professional services.
IoT consists of BlackBerry QNX, BlackBerry Certicom, BlackBerry Radar, BlackBerry IVY and other IoT applications. IoT revenue is generated predominantly through software licenses, commonly bundled with support, maintenance and professional services.
Licensing and Other consists of the Company’s intellectual property arrangements and settlement awards. Other consists of the Company’s legacy service access fees (“SAF”) business.
											108

								BlackBerry Limited
										Notes to the Consolidated Financial Statements
							In millions of United States dollars, except share and per share data, and except as otherwise indicated
The following table reconciles total segment gross margin for the fiscal year ended February 28, 2022, February 28, 2021 and February 29, 2020 to the Company’s consolidated totals:
	For the Years Ended
		February 28, 2022	February 28, 2021		February 29, 2020
Total segment gross margin				471 $	648 $	773
Adjustments (1):
Less: Stock compensation				4	5	5
Less: Restructuring charges				—	—	5
Less:
Research & development				219	215	259
Selling, marketing and administration				297	344	493
Amortization				165	182	194
Impairment of long-lived assets				—	43	10
Impairment of goodwill				—	594	22
Debentures fair value adjustment				(212)	372	(66)
Investment income (loss), net				(21)	6	(1)
Consolidated income (loss) before income taxes		$		19 $	(1,113) $	(148)
______________________________
(1) The CODM reviews segment information on an adjusted basis, which excludes certain amounts as described below:
							Stock compensation expenses - Equity compensation is a non-cash expense and does not impact the ongoing operating decisions taken by the Company’s management.
							Restructuring charges - The Company believes that restructuring costs relating to employee termination benefits and facilities pursuant to the Resource Allocation Program (“RAP”) entered into in order to transition the Company from a legacy hardware manufacturer to a licensing driven software business do not reflect expected future operating expenses, are not indicative of the Company’s core operating performance, and may not be meaningful in comparison to the Company’s past operating performance.
Revenue
The Company disaggregates revenue from contracts with customers based on geographical regions, timing of revenue recognition, and the major product and service types, as discussed above in “Segment Disclosures”.
The Company’s revenue, classified by major geographic region in which the Company’s customers are located, was as follows:
				For the Years Ended
								February 28, 2022	February 28, 2021	February 29, 2020
North America (1)								$	413	57.5 % $	633				70.9 % $	743	71.4 %
Europe, Middle East and Africa									234	32.6 %	197				22.1 %	221	21.3 %
Other regions									71	9.9 %	63				7.0 %	76	7.3 %
Total								$	718	100.0 % $	893	100.0 % $	1,040	100.0 %
______________________________
(1) North America includes all revenue from the Company’s intellectual property arrangements, due to the global applicability of the patent portfolio and licensing arrangements thereof.
		109

									BlackBerry Limited
										Notes to the Consolidated Financial Statements
											In millions of United States dollars, except share and per share data, and except as otherwise indicated
Revenue, classified by timing of recognition, was as follows:
	For the Year Ended
		February 28, 2022	February 28, 2021		February 29, 2020
Products and services transferred over time		$		428 $	476 $	512
Products and services transferred at a point in time				290	417	528
Total		$		718 $	893 $	1,040
Revenue contract balances
The following table sets forth the activity in the Company’s revenue contract balances for the fiscal year ended February 28, 2022:
				Accounts	Deferred		Deferred
				Receivable	Revenue	Commissions
Opening balance as at February 28, 2021				$	188 $		294 $			21
Increases due to invoicing of new or existing contracts, associated
contract acquisition costs, or other					702		597			19
Decrease due to payment, fulfillment of performance obligations, or
other					(752)		(647)			(24)
Decrease, net					(50)		(50)			(5)
Closing balance as at February 28, 2022				$	138 $		244 $			16
Transaction price allocated to the remaining performance obligations
The table below discloses the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as at February 28, 2022 and the time frame in which the Company expects to recognize this revenue. The disclosure includes estimates of variable consideration, except when the variable consideration is a sales-based or usage-based royalty promised in exchange for a license of intellectual property.
				As at February 28, 2022
								Less than 12
		Months		12 to 24 Months	Thereafter	Total
Remaining performance obligations								$	211 $	31 $		12 $	254
Revenue recognized for performance obligations satisfied in prior periods
For the fiscal year ended February 28, 2022, $1 million in revenue was recognized relating to performance obligations satisfied in a prior period (fiscal year ended February 28, 2021 - $2 million; fiscal year ended February 29, 2020 - $1 million).
								110

		BlackBerry Limited
												Notes to the Consolidated Financial Statements
													In millions of United States dollars, except share and per share data, and except as otherwise indicated
Property, plant and equipment, intangible assets, operating lease ROU assets and goodwill, classified by geographic region in which the Company’s assets are located, were as follows:
	As at
		February 28, 2022	February 28, 2021
				Property, Plant and	Property, Plant and
				Equipment, Intangible	Equipment, Intangible
				Assets, Operating		Assets, Operating
				Lease ROU Assets and	Lease ROU Assets and
				Goodwill	Total Assets	Goodwill	Total Assets
Canada				$	117 $	467 $		289 $					504
United States					1,313	1,789		1,411					1,963
Other					27	311		31					351
				$	1,457 $	2,567 $		1,731 $					2,818
Information About Major Customers
There was one customer that comprised 11% of the Company’s revenue in fiscal 2022 (fiscal 2021 - one customer that comprised 22%; fiscal 2020 - one customer that comprised 13%).
									13. CASH FLOW AND ADDITIONAL INFORMATION
									(a) Certain consolidated statements of cash flow information related to interest and income taxes paid is summarized as
follows:
			For the Years Ended
										February 28, 2022	February 28, 2021			February 29, 2020
Interest paid during the year										$	6 $	15 $	23
Income taxes paid during the year											5	5			8
Income tax refunds received during the year											6	2			9
									(b) Additional Information
Advertising expense, which includes media, agency and promotional expenses totaling $25 million is included in selling, marketing and administration expenses for the fiscal year ended February 28, 2022. (February 28, 2021 - $24 million; February 29, 2020 - $39 million)
Selling, marketing and administration expenses for the fiscal year ended February 28, 2022 included $1 million with respect to foreign exchange gain, net of foreign exchange hedging (February 28, 2021 - $1 million; February 29, 2020 - nil).
Foreign exchange
The Company is exposed to foreign exchange risk as a result of transactions in currencies other than its functional currency, the U.S. dollar. The majority of the Company’s revenue in fiscal 2022 was transacted in U.S. dollars. Portions of the revenue were denominated in Canadian dollars, euros and British pounds. Other expenses, consisting mainly of salaries and certain other operating costs, were incurred primarily in Canadian dollars, but were also incurred in U.S. dollars, euros and British pounds. At February 28, 2022, approximately 37% of cash and cash equivalents, 23% of accounts receivable and 30% of accounts payable were denominated in foreign currencies (February 28, 2021 – 20%, 25% and 34%, respectively). These foreign currencies primarily include the Canadian dollar, euro and British pound. As part of its risk management strategy, the Company maintains net monetary asset and/or liability balances in foreign currencies and engages in foreign currency hedging activities using derivative financial instruments, including currency forward contracts and currency options. The Company does not use derivative instruments for speculative purposes.
Interest rate risk
Cash and cash equivalents and investments are invested in certain instruments of varying maturities. Consequently, the Company is exposed to interest rate risk as a result of holding investments of varying maturities. The fair value of investments, as well as the investment income derived from the investment portfolio, will fluctuate with changes in
		111

	BlackBerry Limited
		Notes to the Consolidated Financial Statements
			In millions of United States dollars, except share and per share data, and except as otherwise indicated
prevailing interest rates. The Company has also issued Debentures with a fixed interest rate as described in Note 6. The fair value of the 1.75% Debentures will fluctuate with changes in prevailing interest rates. Consequently, the Company is exposed to interest rate risk as a result of the 1.75% Debentures. The Company does not currently utilize interest rate derivative instruments to hedge its investment portfolio or changes in the market value of the 1.75% Debentures.
Credit risk
The Company is exposed to market and credit risk on its investment portfolio. The Company reduces this risk by investing in liquid, investment-grade securities and by limiting exposure to any one entity or group of related entities. As at February 28, 2022, no single issuer represented more than 10% of the total cash, cash equivalents and investments (February 28, 2021 - no single issuer represented more than 13% of the total cash, cash equivalents and investments), representing cash balances at one of the Company’s banking counterparties.
Liquidity risk
Cash, cash equivalents, and investments were approximately $770 million as at February 28, 2022. The Company’s management remains focused on efficiently managing working capital balances and managing the liquidity needs of the business. Based on its current financial projections, the Company believes its financial resources, together with expected future operating cash generating and operating expense reduction activities and access to other potential financing arrangements, should be sufficient to meet funding requirements for current financial commitments and future operating expenditures not yet committed, and should provide the necessary financial capacity for the foreseeable future.
Government subsidies
During fiscal 2021, the Government of Canada announced the Canada Emergency Wage Subsidy (“CEWS”) and the Canada Emergency Rent Subsidy (“CERS”) for Canadian employers whose businesses were affected by the COVID-19 pandemic. The CEWS program initially ran for a thirty-six week period between March and November 2020 and the CERS program for a period between September 2020 and July 2021. These programs were subsequently extended to October 2021. The CEWS program provided a subsidy of up to 75% of eligible employees’ employment insurable remuneration, subject to certain criteria. The extension also included a gradual decrease to the subsidy rate. CEWS received after June 5, 2021 may be repayable in the future under certain circumstances if certain terms and conditions are not met by the Company, which is not probable at this time. The CERS program provided a subsidy of up to 65% of eligible fixed property expenses. The base subsidy was determined based on the percentage revenue decline experienced by businesses affected by the COVID-19 pandemic. The CERS program gradually reduced the amount and availability of subsidies in the months leading up to the program’s final claim period.
During the third quarter of fiscal 2022, the Government of Canada announced the HHBRP to continue supporting businesses affected by the COVID-19 pandemic. The HHBRP provides a subsidy of up to 50% of eligible employees’ employment insurable remuneration, subject to certain criteria, and rent.
The Company applied for the CEWS, CERS and HHBRP to the extent it met the requirements to receive the subsidy and during the year ended February 28, 2022, recorded $46 million in government subsidies as a reduction to operating expenses in the consolidated statement of operations (February 28, 2021 - $53 million).
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