Enhanced Investments - Financial Portal

Published: 2020-04-07

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
	To the Shareholders and Board of Directors of BlackBerry Limited
	Opinion on the Consolidated Financial Statements
	We have audited the accompanying consolidated balance sheets of BlackBerry Limited (the Company) as of February 29, 2020and February 28, 2019, the related consolidated statements of operations, comprehensive income (loss), shareholders’ equityand cash flows for each of the three years in the period ended February 29, 2020, and the related notes (collectively referred toas the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all materialrespects, the financial position of the Company at February 29, 2020 and February 28, 2019, and the results of its operationsand its cash flows for each of the three years in the period ended February 29, 2020, in conformity with United States generallyaccepted accounting principles.
	We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States)(PCAOB), the Company’s internal control over financial reporting as of February 29, 2020, based on criteria established inInternal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission(2013 framework) (COSO) and our report dated April 6, 2020 expressed an unqualified opinion thereon.
	Adoption of ASC 842
	As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases as ofMarch 1, 2019 due to the adoption of ASC 842, Leases.
	Basis for Opinion
	These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express anopinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registeredwith the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securitieslaws 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 theaudit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement,whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of theconsolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Suchprocedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financialstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management,as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide areasonable basis for our opinion.
	Critical Audit Matters
	The critical audit matters communicated below are matters arising from the current period audit of the financial statements thatwere communicated or required to be communicated to the Audit & Risk Management Committee and that: (1) relate toaccounts or disclosures that are material to the financial statements and (2) involved especially challenging, subjective orcomplex judgments. The communication of the critical audit matters does not alter in any way our opinion on the consolidatedfinancial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing a separateopinion on the critical audit matters or on the accounts or disclosures to which they relate.
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Goodwill Impairment
	Description of the Matter	As described in Note 1 of the consolidated financial statements, a goodwill impairment test is required atleast annually at the reporting unit level.
The estimation of the fair value of the reporting units is contingent on future cash flows and marketexpectations and there is a risk that, if these cash flows and market outcomes do not meet the Company’sexpectations, the goodwill might be impaired. The fair value of the reporting units was determined usingmultiple approaches including discounted future cash flows analysis and a market-based approach
We identified the valuation of goodwill for certain reporting units as a critical audit matter becauseauditing the impairment analysis was complex due to the significant estimation uncertainty and judgmentapplied by management in determining their fair value. The significant estimation uncertainty wasprimarily due to the sensitivity of the underlying key assumptions to the future cash flows and thesignificant effect that changes in these assumptions would have on the fair value of these reporting units.Furthermore, for certain reporting units, there is limited information on which to base those assumptionsgiven the emerging nature of both the business model and industry. The significant assumptions used toestimate the fair value of these reporting units included discount rates and certain forward-lookingassumptions (e.g., revenue growth rates, terminal growth rates, and profitability metrics) that could beaffected by future economic and market conditions.
	How We Addressed the Matter in Our Audit	We obtained an understanding, evaluated the design and tested the operating effectiveness of theCompany’s controls relating to the determination of the fair value of the reporting units, including controlsover management’s review of the significant assumptions described above.
To test the fair value of the reporting units, we involved our valuation specialists to review the valuationmethodology used by management and to assist in our evaluation of the discount rate used in the fair valueestimate. We also performed audit procedures that included, among others, testing the significantassumptions discussed above and the underlying data used by the Company in its analysis. We comparedthe significant assumptions used by management to available industry and historical trends and evaluatedwhether changes to the significant assumptions would impact the impairment conclusion. In addition, wetested management’s reconciliation of the fair value of the reporting units to the market capitalization ofthe Company and reviewed the related disclosure in the consolidated financial statements.Revenue Recognition – Licensing Revenues
	Description of the Matter	As described in Note 1 of the consolidated financial statements, Licensing revenues relate primarily toIntellectual Property (“IP”) licensing. Revenue recognition on IP licensing arrangements is assessed on acase-by-case basis taking into consideration the relevant contractual terms in each agreement. Revenuerelated to IP licensing agreements for the fiscal year ended February 29, 2020 is included within Licensingas set out in note 13 of the consolidated financial statements.
We identified revenue related to IP licensing agreements as a critical audit matter because of the multipleareas of complexity, including identifying the customer, assessing performance obligations, assessing anyconstraints on variable consideration and determining if control of the license has transferred. Auditing therevenue recognition was complex due to the significant judgment applied by management in assessing theagreements against the provisions of ASC 606, Revenue from Contracts with Customers, in relation to thespecific judgmental areas listed above. The application of these judgments can materially impact theamount and timing of revenue recognition.
	How We Addressed the Matter in Our Audit	We obtained an understanding, evaluated the design and tested the operating effectiveness of theCompany’s controls relating to the accounting for IP licensing arrangements, including those controlsrelated to management’s review of the accounting analyses for the significant judgmental areas describedabove.
To test the revenue recognition of the Company’s IP licensing arrangements, we obtained and analyzedmanagement’s accounting analyses by reference to the relevant accounting literature. We assessed theappropriateness of the accounting treatments by discussing with management to understand the facts andsubstance of the arrangements and inspecting the written agreements. In addition, we also reviewed therelated financial statement disclosure.
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We have served as the Company’s auditor since 1997.
/s/ Ernst & Young LLP
Chartered Professional AccountantsLicensed Public Accountants
Waterloo, CanadaApril 06, 2020
	66

BlackBerry Limited
	Incorporated under the Laws of Ontario
	(United States dollars, in millions)
Consolidated Balance Sheets
			As at
				February 29, 2020	February 28, 2019
		Assets
		Current
					Cash and cash equivalents (note 3)	$	377	$		548
					Short-term investments (note 3)	532			368
					Accounts receivable, net (note 4)	215			233
					Other receivables	14			19
					Income taxes receivable	6			9
					Other current assets (note 4)	52			56
			1,196			1,233
		Restricted cash and cash equivalents (note 3)	49			34
		Long-term investments (note 3)	32			55
		Other long-term assets (note 4)	65			28
		Deferred income tax assets (note 6)	—			2
		Operating lease right-of-use assets, net (note 12)	124			—
		Property, plant and equipment, net (note 4)	70			85
		Goodwill (note 4)	1,437			1,463
		Intangible assets, net (note 4)	915			1,068
				$	3,888	$			3,968
		Liabilities
		Current
					Accounts payable	$	31	$		48
					Accrued liabilities (note 4)	202			192
					Income taxes payable (note 6)	18			17
					Debentures (note 7)	606			—
					Deferred revenue, current (note 13)	264			253
			1,121			510
		Deferred revenue, non-current (note 13)	109			136
		Operating lease liabilities (note 12)	120			—
		Other long-term liabilities (note 4)	9			19
		Long-term debentures (note 7)	—			665
		Deferred income tax liabilities (note 6)	—			2
			1,359			1,332
		Commitments and contingencies (note 11)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 - 554,199,016 voting common shares (February 28, 2019 - 547,357,972)
			2,760			2,688
		Deficit	(198)			(32)
		Accumulated other comprehensive loss (note 10)	(33)			(20)
			2,529			2,636
				$	3,888	$			3,968
		See notes to consolidated financial statements.On behalf of the Board:
		John S. Chen	Barbara Stymiest
		Director	Director
							67

BlackBerry Limited
	(United States dollars, in millions)
		Consolidated Statements of Shareholders’ Equity

						Accumulated
				Capital Stock		Other
				and Additional		Comprehensive
				Paid-in Capital	Deficit	Loss	Total
			Balance as at February 28, 2017	$				2,512 $	(438) $				(17) $	2,057
										Net income	—			405	—			405
										Other comprehensive income	—			—	7			7
										Cumulative impact of adoption of ASU 2016-16	—			(3)	—			(3)
										Stock-based compensation (note 8)	49			—	—			49
										Share repurchase (note 8)	(9)			(9)	—			(18)
			Shares issued:
										Exercise of stock options (note 8)	4			—	—			4
										Employee share purchase plan (note 8)	4			—	—			4
			Balance as at February 28, 2018					2,560			(45)	(10)	2,505
										Net income	—			93	—			93
										Other comprehensive loss	—			—	(4)			(4)
										Cumulative impact of adoption of ASU 606	—			(86)	—			(86)
										Cumulative impact of adoption of ASU 2016-01	—			6	(6)			—
										Stock-based compensation (note 8)	67			—	—			67
										Value of pre-combination service related to
										Replacement Awards included in purchase
										consideration (note 8)	21			—	—			21
			Shares issued:
										Exercise of stock options (note 8)	1			—	—			1
										Exchange shares related to Cylance acquisition (note 5)	35			—	—			35
										Employee share purchase plan (note 8)	4			—	—			4
			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 8)	63			—	—			63
			Shares issued:
										Exercise of stock options (note 8)	3			—	—			3
										Employee share purchase plan (note 8)	6			—	—			6
			Balance as at February 29, 2020	$				2,760 $	(198) $				(33) $	2,529
			See notes to consolidated financial statements.
				68

BlackBerry Limited
	(United States dollars, in millions, except per share data)
		Consolidated Statements of Operations

				For the Years Ended
					February 29, 2020	February 28, 2019		February 28, 2018
			Revenue (note 13)		$		1,040 $	904 $	932
			Cost of sales				277	206	262
			Gross margin				763	698	670
			Operating expenses
										Research and development	259	219	239
										Selling, marketing and administration	493	409	476
										Amortization	194	136	153
										Impairment of goodwill (note 4)	22				—	—
										Impairment of long-lived assets (note 4)	10				—	11
										Debentures fair value adjustment (note 7)	(66)	(117)	191
										Arbitration awards and settlements, net (note 11)	—		(9)			(683)
							912	638	387
			Operating income (loss)				(149)	60	283
										Investment income, net	1				17	123
			Income (loss) before income taxes				(148)	77	406
			Provision for (recovery of) income taxes (note 6)	4				(16)	1
			Net income (loss)		$		(152) $	93 $	405
			Earnings (loss) per share (note 9)
										Basic	$		(0.27) $	0.17 $	0.76
										Diluted	$		(0.32) $	0.00 $	0.74
			See notes to consolidated financial statements.
											69

BlackBerry Limited
	(United States dollars, in millions)
		Consolidated Statements of Comprehensive Income (Loss)

					For the Years Ended
						February 29, 2020	February 28, 2019		February 28, 2018
			Net income (loss)			$		(152) $	93 $	405
			Other comprehensive income (loss)
				Net change in unrealized gains (losses) on available-for-sale
				investments	(2)		1			(3)
				Net changes in fair value and amounts reclassified to net income (loss)
				from derivatives designated as cash flow hedges during the year	(1)		1			(1)
				Foreign currency translation adjustment	(3)		(6)			12
				Actuarial losses associated with other post-employment benefit
				obligations	—				—	(1)
				Loss from change in fair value from instrument-specific credit risk on
				the Debentures (note 7)	(7)				—	—
			Other comprehensive income (loss)					(13)	(4)			7
			Comprehensive income (loss)			$		(165) $	89 $	412
			See notes to consolidated financial statements.
											70

BlackBerry Limited
	(United States dollars, in millions)
	Consolidated Statements of Cash Flows
			For the Years Ended
				February 29, 2020	February 28, 2019		February 28, 2018
		Cash flows from operating activitiesNet income (loss)
				$		(152) $	93	$		405
		Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Amortization	212					149	177
		Deferred income taxes	—					(25)	(7)
		Stock-based compensation	63		67		49
		Impairment of goodwill	22		—		—
		Impairment of long-lived assets	10		—		11
		Non-cash consideration received from contracts with customers	(8)					(46)	—
		Debentures fair value adjustment (note 7)	(66)					(117)	191
		Other long-term assets	(37)		—		(18)
		Other long-term liabilities	2					(12)	5
		Operating leases	(9)		—		—
		Other	10		6		3
		Net changes in working capital items
		Accounts receivable, net	18		(9)		49
		Other receivables	5		52		(44)
		Income taxes receivable	3		17		2
		Other assets	2		(1)		39
		Accounts payable	(17)					(15)	(82)
		Accrued liabilities	(15)					(21)	(36)
		Income taxes payable	1		(2)		4
		Deferred revenue	(18)					(36)	(44)
		Net cash provided by operating activities	26					100	704
		Cash flows from investing activitiesAcquisition of long-term investments
			(1)		(2)		(27)
		Proceeds on sale or maturity of long-term investments	19		2		77
		Acquisition of property, plant and equipment	(12)					(17)	(15)
		Proceeds on sale of property, plant and equipment	—		1		3
		Acquisition of intangible assets	(32)					(32)	(30)
		Business acquisitions, net of cash acquired	1					(1,402)	—
		Acquisition of short-term investments				(1,180)		(2,895)	(3,499)
		Proceeds on sale or maturity of short-term investments				1,017		3,970	2,861
		Net cash used in investing activities				(188)		(375)	(630)
		Cash flows from financing activitiesIssuance of common shares
			9		5		8
		Common shares repurchased	—		—		(18)
		Payment of finance lease liability	(2)		—		—
		Net cash provided by (used in) financing activities	7		5		(10)
		Effect of foreign exchange gain (loss) on cash, cash equivalents, restricted cash, and
		restricted cash equivalents	(1)		(3)		6
		Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash
		equivalents during the year				(156)		(273)	70
		Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of year	582					855	785
		Cash, cash equivalents, restricted cash, and restricted cash equivalents, end of year		$	426	$					582	$	855
		See notes to consolidated financial statements.
									71

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

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 governmentsaround the world. The Company secures more than 500 million endpoints, including 150 million cars. Based in Waterloo,Ontario, the Company leverages artificial intelligence and machine learning to deliver innovative solutions in the areas ofcybersecurity, safety and data privacy solutions, and is a leader in the areas of endpoint security management, encryption,and embedded systems. The Company’s common shares trade under the ticker symbol “BB” on the New York StockExchange and the Toronto Stock Exchange.

Basis of Presentation and Preparation

The consolidated financial statements include the accounts of all subsidiaries of the Company with intercompanytransactions and balances eliminated on consolidation. All of the Company’s subsidiaries are wholly owned. Theseconsolidated financial statements have been prepared by management in accordance with United States generally acceptedaccounting 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.

The Company operates as a single reportable segment. For additional information concerning the Company’s segmentreporting, see Note 13.

Correction of Previously Issued Financial Statements

Accounts receivable, contract assets and contract liabilities associated with certain contracts with customers accountedfor under Accounting Standard Codification 606 (“ASC 606”)

During fiscal 2020, the Company corrected an error associated with the presentation of accounts receivable and associateddeferred revenues for certain contracts with customers on the comparative February 28, 2019 consolidated balance sheet.This correction had no impact to the deficit or the consolidated statement of operations for any period and impacts onlythe consolidated balance sheet as at February 28, 2019.

Under ASC 606, a receivable is recorded when it is unconditional; that is, the only thing required for its collection is thepassage of time. If a receivable is not unconditional, the amount is treated as a contract asset and netted against anycontract liabilities, such as deferred revenue, associated with the same contract. Most of the Company’s contracts for itsIoT software and services contain customer termination provisions, but do not have refund rights for the unused portion ofany contract.

As, contractually, all amounts are owed to the Company regardless of the customer’s actions, the Company hasdetermined that the associated accounts receivable are unconditional, should not have been treated as contract assets andwould therefore not be netted against the associated deferred revenue.

The Company continues to net receivables that are not unconditional against the associated deferred revenue, such as pre-billed professional services or contracts with customers that have refund provisions.

As a result of the correction, the balances in the Company’s consolidated balance sheet as at February 28, 2019 have beenreclassified in the consolidated balance sheet as at February 29, 2020 as follows:

As at

February 28, 2019

As at

(as previously

February 28, 2019

disclosed)

Correction

(corrected)

AssetsAccounts receivable, net

194 $

39 $

233

LiabilitiesDeferred revenue, current

214 $

39 $

253

	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
Accounting Policies and Critical Accounting Estimates
Use of estimates
The preparation of the consolidated financial statements requires management to make estimates and assumptions withrespect to the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets andliabilities. Significant areas requiring the use of management estimates relate to revenue-related estimates includingvariable consideration, standalone selling price (“SSP”), estimated customer life, if control of the license has transferred,value of non-cash consideration, right of return and customer incentive commitments, fair value of reporting units inrelation to potential goodwill impairment, fair value of the Debentures, fair value of long-lived assets in relation topotential impairment, useful lives of property, plant and equipment and intangible assets, fair values of assets acquiredand liabilities assumed in business combinations, provision for income taxes, realization of deferred income tax assets andthe related components of the valuation allowance, allowance for doubtful accounts, incremental borrowing rate indetermining the present value of lease liabilities and the determination of reserves for various litigation claims. Actualresults could differ from these estimates, which were based upon circumstances that existed as of the date of theconsolidated financial statements, February 29, 2020. Subsequent to this date, there have been significant changes to theglobal economic situation and to public securities markets as a consequence of the COVID-19 pandemic. It is reasonablypossible that this could cause changes to estimates as a result of the financial circumstances of the markets in which theCompany operates, the price of the Company’s publicly traded equity in comparison to the Company’s carrying value,and the health of the global economy. Such changes to estimates could potentially result in impacts that would be materialto the consolidated financial statements, particularly with respect to the fair value of the Company’s reporting units inrelation to potential goodwill impairment and the fair value of long-lived assets in relation to potential impairment.
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’ssubsidiaries.
Foreign currency denominated assets and liabilities of the Company and its U.S. dollar functional currency subsidiariesare translated into U.S. dollars. Accordingly, monetary assets and liabilities are translated using the exchange rates ineffect as at the consolidated balance sheet dates, and revenue and expenses are translated at the rates of exchangeprevailing when the transactions occurred. Remeasurement adjustments are included in income. Non-monetary assets andliabilities are translated at historical exchange rates.
Foreign currency denominated assets and liabilities of the Company’s non-U.S. dollar functional currency subsidiaries aretranslated into U.S. dollars at the exchange rates in effect as at the consolidated balance sheet dates. Revenue andexpenses are translated using daily exchange rates. Exchange gains or losses arising from translation of foreign currencydenominated assets and liabilities are included as a currency translation adjustment within accumulated othercomprehensive income (loss) (“AOCI”).
Cash and cash equivalents
Cash and cash equivalents consist of balances with banks and liquid investments with maturities of three months or less atthe date of acquisition.
Accounts receivable, net
The accounts receivable balance reflects invoiced and accrued revenue and is presented net of an allowance for doubtfulaccounts. The allowance for doubtful accounts reflects estimates of probable losses in the accounts receivable balance.The Company expects the majority of its accounts receivable balances to continue to come from large customers as it sellsthe majority of its software products and services through resellers and network carriers rather than directly.
The Company evaluates the collectability of its accounts receivable balance based upon a combination of factors on aperiodic basis such as specific credit risk of its customers, historical trends and economic circumstances. The Company, inthe normal course of business, monitors the financial condition of its customers and reviews the credit history of each newcustomer. When the Company becomes aware of a specific customer’s inability to meet its financial obligations to theCompany (such as in the case of bankruptcy filings or material deterioration in the customer’s operating results orfinancial position, and payment experiences), the Company records a specific bad debt provision to reduce the customer’srelated accounts receivable to its estimated net realizable value. If circumstances related to specific customers change, theCompany’s estimates of the recoverability of accounts receivable balances could be further adjusted.
				73

	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
Investments
The Company’s cash equivalents and investments, other than publicly issued equity securities and private equityinvestments without readily determinable fair value, consist of money market and other debt securities, which areclassified as available-for-sale for accounting purposes and are carried at fair value. Unrealized gains and losses, net ofrelated income taxes, are recorded in AOCI until such investments mature or are sold. The Company uses the specificidentification method of determining the cost basis in computing realized gains or losses on available-for-saleinvestments, which are recorded in investment income. In the event of a decline in value that is other-than-temporary, theinvestment is written down to fair value with a charge to income. The Company does not exercise significant influencewith respect to any of these investments. Publicly issued equity securities are recorded at fair value and revalued at eachreporting period with changes in fair value recorded through investment income. The Company elects to record privateequity investments without readily determinable fair value at cost minus impairment, and adjusted for any changesresulting from observable price changes in orderly transactions for identical or similar investments of the same issuer. TheCompany reassesses each reporting period that its private equity investments without readily determinable fair valuecontinue to qualify for this treatment.
Investments with maturities at the time of purchase of three months or less are classified as cash equivalents. Investmentswith maturities of one year or less (but which are not cash equivalents), public equity investments and any investmentsthat the Company intends to hold for less than one year are classified as short-term investments. Investments withmaturities in excess of one year or investments that the Company does not intend to sell are classified as long-terminvestments.
The Company assesses individual investments that are in an unrealized loss position to determine whether the unrealizedloss is other-than-temporary. The Company makes this assessment by considering available evidence, including changesin general market conditions, specific industry and individual company data, the length of time and the extent to which thefair value has been less than cost, the financial condition, the near-term prospects of the individual investment and theCompany’s intent and ability to hold the investment. In the event that a decline in the fair value of an investment occursand that decline in value is considered to be other-than-temporary, an impairment charge is recorded in investment incomeequal to the difference between the cost basis and the fair value of the individual investment as at the consolidated balancesheet date of the reporting period for which the assessment was made. The fair value of the investment then becomes thenew cost basis of the investment.
If a debt security’s market value is below its amortized cost and either the Company intends to sell the security or it ismore likely than not that the Company will be required to sell the security before its anticipated recovery, the Companyrecords an other-than-temporary impairment charge to investment income for the entire amount of the impairment. Forother-than-temporary impairments on debt securities that the Company does not intend to sell and it is not more likelythan not that the entity will be required to sell the security before its anticipated recovery, the Company would separatethe other-than-temporary impairment into the amount representing the credit loss and the amount related to all otherfactors. The Company would record the other-than-temporary impairment related to the credit loss as a charge toinvestment income, and the remaining other-than-temporary impairment would be recorded as a component of AOCI.
Derivative financial instruments
On March 1, 2019, the Company adopted Accounting Standards Update (“ASU”) 2017-12 related to accounting forhedging activities. The Company uses derivative financial instruments, including forward contracts and options, to hedgecertain foreign currency exposures. The Company does not use derivative financial instruments for speculative purposes.
The Company records all derivative instruments at fair value on the consolidated balance sheets. The fair value of theseinstruments 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 derivativedepends on the intended use of the derivative instrument and the resulting designation.
For derivative instruments designated as cash flow hedges, the effective portion of the derivative’s gain or loss is initiallyreported as a component of AOCI, net of tax, and subsequently reclassified into income in the same period or periods inwhich the hedged item affects income. The ineffective portion of the derivative’s gain or loss is recognized in currentincome. In order for the Company to receive hedge accounting treatment, the cash flow hedge must be highly effective inoffsetting changes in the fair value of the hedged item and the relationship between the hedging instrument and theassociated hedged item must be formally documented at the inception of the hedge relationship. Hedge effectiveness isformally assessed, both at hedge inception and on an ongoing basis, to determine whether the derivatives used in hedging
				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
transactions are highly effective in offsetting changes in the value of the hedged items and whether they are expected tocontinue to be highly effective in future periods.
The Company formally documents relationships between hedging instruments and associated hedged items. Thisdocumentation includes: identification of the specific foreign currency asset, liability or forecasted transaction beinghedged; the nature of the risk being hedged; the hedge objective; and the method of assessing hedge effectiveness. If ananticipated transaction is deemed no longer likely to occur, the corresponding derivative instrument is de-designated as ahedge and any associated unrealized gains and losses in AOCI are recognized in income at that time. Any future changesin 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 instrumentsfor which hedge accounting is not elected, the changes in fair value of the instruments are recognized in income in thecurrent period and will generally offset the changes in the U.S. dollar value of the associated asset, liability or forecastedtransaction.
Property, plant and equipment, net
Property, plant and equipment are stated at cost, less accumulated amortization. Amortization is provided using thefollowing rates and methods:
Buildings, leasehold improvements and other	Straight-line over terms between 5 and 40 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 20% per annum
Goodwill
Goodwill represents the excess of the acquisition price in a business combination over the fair value of identifiable netassets acquired. Goodwill is allocated at the date of the business combination. Goodwill is not amortized but is tested forimpairment annually on December 31 or more frequently if events or changes in circumstances indicate the asset may beimpaired. These events and circumstances may include a significant change in legal factors or in the business climate, asignificant decline in the Company’s share price, an adverse action or assessment by a regulator, unanticipatedcompetition, a loss of key personnel, significant disposal activity and the testing of recoverability for a significant assetgroup.
The Company’s annual impairment test was carried out in two steps. In the first step, the carrying amount of the reportingunit, including goodwill, was compared with its fair value. The estimated fair value was determined utilizing multipleapproaches based on the nature of the reporting units being valued. In its analysis, the Company utilized multiplevaluation techniques, including the income approach, discounted future cash flows, the market-based approach, and theasset value approach. The analysis requires significant judgment, including estimation of future cash flows, which isdependent on internal forecasts, estimation of the long-term rate of revenue growth for our reporting units, estimation ofthe useful life over which cash flows will occur, terminal growth rate, profitability measures, and determination of thediscount rates for the reporting units. The carrying amount of the Company’s assets was assigned to reporting units usingreasonable methodologies based on the asset type. When the carrying amount of a reporting unit exceeds its fair value,goodwill of the reporting unit is considered to be impaired and the second step is necessary. Different judgments couldyield different results. In fiscal 2020, the Company disaggregated one reporting unit and goodwill was assigned to thedisaggregated reporting units based upon the relative fair value allocation approach.
The completion of step one of the goodwill impairment test provided indications of impairment in certain reporting units,necessitating step two.
In the second step, the implied fair value of the reporting unit’s goodwill is compared with its carrying amount to measurethe amount of the impairment loss, if any. The second step involves significant judgment in the selection of assumptionsnecessary to arrive at an implied fair value of goodwill. Different judgments could yield different results.
Using the impaired reporting units’ fair value determined in step one as the acquisition prices in hypothetical acquisitionsof the reporting units, the implied fair values of goodwill were calculated as the residual amount of the acquisition priceafter allocations made to the fair values of net assets, including working capital, property, plant and equipment and bothrecognized and unrecognized intangible assets.
				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
Intangible assets
Intangible assets with definite lives are stated at cost, less accumulated amortization. Amortization is provided on astraight-line basis over the following terms:
Acquired technology	Between 3 and 10 years
Intellectual property	Between 1 and 17 years
Other acquired intangibles	Between 2 and 10 years
Acquired technology consists of intangible assets acquired through business acquisitions. Intellectual property consists ofpatents (both purchased and internally generated) and agreements with third parties for the use of intellectual property.Other acquired intangibles include items such as customer relationships and brand. The useful lives of intangible assetsare evaluated at least annually to determine if events or circumstances warrant a revision to their remaining period ofamortization. Legal, regulatory and contractual factors, the effects of obsolescence, demand, competition and othereconomic 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 and intangible assets with finiteuseful lives for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset orasset group may not be recoverable. These events and circumstances may include significant decreases in the market priceof an asset or asset group, significant changes in the extent or manner in which an asset or asset group is being used by theCompany or in its physical condition, a significant change in legal factors or in the business climate, a history or forecastof future operating or cash flow losses, significant disposal activity, a significant decline in the Company’s share price, asignificant 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 groupseparately. Determining the Company’s asset groups and related primary assets requires significant judgment bymanagement. Different judgments could yield different results. The Company’s determination of its asset groups, itsprimary asset and its remaining useful life, and estimated cash flows are significant factors in assessing the recoverabilityof 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 theCompany’s results of operations, changes in the Company’s forecasts or market expectations relating to future results, andthe 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 cashflow recoverability test as the first step, which involves comparing the asset group’s estimated undiscounted future cashflows to the carrying amount of its net assets. If the net cash flows of the asset group exceed the carrying amount of its netassets, LLA are not considered to be impaired. If the carrying amount exceeds the net cash flows, there is an indication ofpotential 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 valuationtechniques that are in accordance with U.S. GAAP, including the market approach, income approach and cost approach. Ifthe carrying amount of the asset group’s net assets exceeds the fair value of the Company, then the excess represents themaximum amount of potential impairment that will be allocated to the asset group, with the limitation that the carryingvalue of each separable asset cannot be reduced to a value lower than its individual fair value. The total impairmentamount 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 ifindicators of LLA impairment exist.
Business acquisitions
The Company accounts for its acquisitions using the acquisition method whereby identifiable assets acquired andliabilities assumed are measured at their fair values as of the date of acquisition. The excess of the acquisition price oversuch fair value, if any, is recorded as goodwill, which is not expected to be deductible for tax purposes. The Companyincludes the operating results of each acquired business in the consolidated financial statements from the date ofacquisition.
				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
Royalties
The Company recognizes its liability for royalties in accordance with the terms of existing license agreements. Wherelicense agreements are not yet finalized, the Company recognizes its current estimates of the obligation in accruedliabilities in the consolidated financial statements. When the license agreements are subsequently finalized, the estimate isrevised 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 Note7) at fair value in accordance with the fair value option. Each period, the fair value of the Debentures is recalculated andresulting gains and losses from the change in fair value of the Debentures associated with non-credit components arerecognized in income, while the change in fair value associated with credit components is recognized in AOCI. The fairvalue of the Debentures has been determined using the significant inputs of principal value, interest rate spreads andcurves, embedded call option prices, observable trades of the Debentures, the market price and volatility of theCompany’s listed common shares and the Company’s implicit credit spread.
Leases
On March 1, 2019, the Company adopted the new standard on leases, Accounting Standards Codification 842 (“ASC842”). Operating lease right-of-use (“ROU”) assets and operating lease liabilities are recognized based on the presentvalue of the future minimum lease payments over the lease term at the commencement date. As most of the Company’sleases do not provide an implicit discount rate, the Company primarily uses its incremental borrowing rate, based on theinformation available at the commencement date of the lease, in determining the present value of future payments. TheCompany’s incremental borrowing rate requires significant judgment and is determined based on the rate of interest thatthe Company would have to pay to borrow an amount equal to the lease payments on a collateralized basis over a similarterm in a similar economic environment. The operating lease ROU asset includes any lease payments made, leaseincentives and initial direct costs incurred. The lease terms include options to extend or terminate the lease when it isreasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is recognizedon a straight-line basis over the lease term. In some cases, the Company has index-based variable lease payments forwhich 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 accountedfor separately. For lease terms of 12 months or less on commencement date, the Company does not apply the ASC 842recognition requirements and recognizes the lease payments as lease cost on a straight-line basis over the lease term.
Prior to the adoption of ASC 842, the Company classified leases as either capital or operating leases. Capital leases werecapitalized on the consolidated balance sheet and reported on the consolidated statement of operations. Operating leaseswere considered off-balance sheet transactions and expensed as incurred.
See Note 12 for additional information related to the Company’s leases.
Revenue recognition
On March 1, 2018, the Company adopted ASC 606 and all related amendments using the modified retrospective method.The Company recognizes revenue, when control of the promised products or services are transferred to customers, in anamount 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 acustomer; (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 (oras) the Company satisfies a performance obligation.
A contract exists with a customer when both parties have approved the contract, commitments to performance and rightsof each party (including payment terms) are identified, the contract has commercial substance and collection ofsubstantially 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 tothe customer that are both capable of being distinct, whereby the customer can benefit from the good or service either onits own or together with other available resources, and are distinct in the context of the contract, whereby the transfer ofthe good or service is separately identifiable from other promises in the contract. If these criteria are not met, thepromised goods and services are accounted for as a combined performance obligation.
				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
The transaction price is determined based on the consideration the Company expects to be entitled to in exchange fortransferring promised goods and services to the customer, excluding amounts collected on behalf of third parties such assales taxes. Determining the transaction price requires significant judgment. To the extent the transaction price includesvariable consideration, the Company estimates the amount of variable consideration that should be included in thetransaction price utilizing either the expected value method or the most likely amount method depending on the nature ofthe variable consideration. Non-cash consideration received is measured at fair value at contract inception. The estimatedfair value is determined utilizing multiple valuation techniques, including the discounted future cash flows and themarket-based approach.
Contracts that contain multiple performance obligations require an allocation of the transaction price to each performanceobligation based on a relative SSP. The Company’s method for allocation of consideration to be received and its methodof 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 revenuerecognition policy, and when the Company satisfies its performance obligations.
Nature of products and services
Internet of Things
IoT includes revenue from the Company’s suite of security software products and services designed to secure endpointcommunications for the IoT, including BlackBerry Unified Endpoint Manager (“UEM”) and BlackBerry Dynamics,among other products and applications, as well as revenue from the sale of the Company’s AtHoc Alert secure networkedcrisis communications solution, its SecuSUITE secure voice and text solution, and the technologies offered by BlackBerryQNX.
The Company generates software license revenue from both term subscription and perpetual license contracts, both ofwhich 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 orderto function, revenue from term subscription contracts is recognized over time, ratably over the term, and revenue fromperpetual license contracts is recognized over time, ratably over the expected customer life, which in most cases theCompany has estimated to be four years. If access to the Company’s proprietary network infrastructure is not required forthe software to function, revenue associated with both term subscription and perpetual licenses contracts is recognized at apoint in time upon delivery of the software. Generally, most of the Company’s enterprise software products sold requireaccess to the Company’s proprietary secure network infrastructure in order to function, and therefore the associatedrevenue is recognized over time, ratably over either the subscription term or expected customer life as described above.
BlackBerry QNX software license revenue from both term subscription and perpetual contracts is recognized at a point intime when the software is made available to the customer for use, as the software has standalone functionality and thelicense is distinct in the context of the contract. The licenses for certain software embedded into hardware such asautomotive infotainment systems and advanced driver-assistance systems are sold as a sales-based royalty whereintellectual property is the predominant item to which the royalty relates, and are recognized based on actual volumes andunderlying sales by the customer of the hardware with the embedded software except in cases where the customer makes anon-refundable prepayment related to its future royalties, in which case consideration is fixed and recognizedimmediately.
Revenue from technical support is recognized over the support period. Revenue from professional services is recognizedas the customer simultaneously receives and consumes the benefits provided by the Company’s performance as theservices are provided. This can be on a proportional performance basis, or over the term of the contract. Revenue fromsoftware maintenance services is recognized over the length of the maintenance period, with an average term of one year.
BlackBerry Cylance
BlackBerry Cylance includes revenue from the Company’s artificial intelligence and machine learning-based platformconsisting of CylancePROTECT, CylanceOPTICS, CylanceGUARD professional services and other cybersecurityapplications. The Company generates software license revenue from term subscription products, which includes technicalsupport, and any updates and upgrades. Professional services are provided through hourly rate and fixed fee arrangements.
				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
The Company recognizes the license revenue over the term of the contract beginning on the commencement date of eachcontract, the date that services are made available to customers. The Company’s software license and updates, to theextent made available, are not distinct in the context of the contract as they are critical to the ongoing usability of thesolution 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 fixedfee professional services is recognized on a proportional performance basis as the services are performed. This also nowincludes BlackBerry cybersecurity services, which was previously included within IoT; it has been reclassified intoBlackBerry Cylance for the years ended February 28, 2019 and February 28, 2018 in order to conform to the current yearpresentation.
Licensing
Licensing includes revenue from the Company’s intellectual property licensing arrangements, BBM Consumer licensingarrangement, settlement awards and mobility licensing software arrangements, which include revenue from licensedhardware sales.
The Company’s outbound patent licensing agreements provide for license fees that may be a single upfront payment ormultiple payments representing all or a majority of the licensing revenue that will be payable to the Company. Theseagreements may be perpetual or term in nature and grant (i) a limited non-exclusive, non-transferable license to certain ofthe Company’s patents, (ii) a covenant not to enforce patent rights against the licensee, and (iii) the release of the licenseefrom certain claims.
The Company examines intellectual property agreements on a case-by-case basis to determine whether the intellectualproperty has standalone functionality and whether the Company is the principal or agent in the transaction. Revenue frompatent licensing agreements is often recognized for the transaction price either when the license has been transferred to thecustomer or based upon subsequent sales by the customer in the case of sales-based royalty licenses where the license ofintellectual property is the predominant item to which the royalty relates. The transaction price may include non-monetaryconsideration in the form of patents transferred to the Company, which is recorded at fair value as determined by acombination of market and income-based valuation approaches.
As part of the Company’s business strategy and operations is to monetize its IP, the Company recognizes revenue relatedto consideration that may result from a negotiated agreement with a licensee that utilized the Company’s IP prior tosigning a patent license agreement with the Company or from the resolution of a disagreement or arbitration with alicensee over the specific terms of an existing license agreement. The Company may also recognize revenue related toconsideration for past patent royalties in connection with the settlement of patent litigation where there was no prior patentlicense agreement.
The Company’s BBM Consumer licensing arrangement is a multi-year agreement where the license was not previouslyseparately identifiable from the requirement to maintain interoperability between the licensed BBM Consumer productand the BBM Enterprise product sold by the Company. During fiscal 2020, the licensed BBM Consumer product was shutdown by the licensee, removing any requirement for the Company to maintain interoperability and thus all performanceobligations were completed. As a result, the Company estimated the amount for which it is probable that a significantreversal in the amount of cumulative revenue recognized will not occur and recognized that amount as revenue duringfiscal 2020.
In fiscal 2017 and fiscal 2018, the Company entered into multiple multi-year license agreements under which theCompany licensed its security software and services suite and, in many cases, related brand assets to third parties whodesign, manufacture, sell and provide customer support for BlackBerry-branded and white-label handsets. Mobilitylicense revenue for licensees whose sales exceed contractual sales minimums is recognized when licensed products aresold as reported by the Company’s licensees. For licensees whose sales do not exceed contractual sales minimums,revenue is recognized over time, ratably over the license term based on contractual minimum amounts due to the promiseto provide engineering services to the licensees.
Other
Other includes revenue associated with the Company’s legacy service access fees (“SAF”) business, relating tosubscribers utilizing the Company’s legacy BlackBerry 7 and prior operating systems, as well as revenue relating tounspecified future software upgrade rights for devices previously sold by the Company and legacy handheld revenueassociated with the release of previously accrued amounts when the Company determines it has no further performance
				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
obligations. SAF revenue is recognized over time as the monthly service is provided. In instances where the Companyinvoices the SAF customer prior to performing the service, the pre-billing is recorded as deferred revenue.
See Note 13 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 forseparately 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 significantfuture reversal of cumulative revenue recognized under the contract will not occur. Any estimates, including anyconstraints on variable consideration, are evaluated at each reporting period. Judgment is required to determine the fairvalue of non-cash consideration at contract inception. The Company uses an independent third-party valuator for the fairvalue of non-cash consideration.
Judgment is required to determine the SSP for each distinct performance obligation. The Company’s products andservices often have observable SSP when the Company sells a promised product or service separately to similarcustomers. 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 observableinputs and using an adjusted market assessment approach using information that may include market conditions and otherobservable 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. TheCompany considers factors such as, but not limited to, which party can direct the usage of the product or service, whichparty 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 requireaccess to the Company’s proprietary secure network infrastructure to function. The Company uses historical experienceregarding 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 whencontractual billing schedules differ from revenue recognition timing. An unbilled receivable is recorded in instances whenrevenue is recognized prior to invoicing, and amounts collected in advance of services being provided are recorded asdeferred revenue.
Certain sales commissions are considered incremental and recoverable costs of obtaining a contract with a customer. TheCompany’s capitalized commissions are recorded as other current assets and other long-term assets and are recognizedimmediately or amortized proportionally, based on the satisfaction of the related performance obligations, and areincluded in selling, marketing and administration expenses. See Note 13 for further information on the Company’scontract balances.
Payment terms and conditions vary by contract type although standard billing terms are that payment is due upon receiptof invoice, payable within 30 to 60 days. In instances where the timing of revenue recognition differs from the timing ofinvoicing, the Company has determined that contracts generally do not include a significant financing component if theperiod between when the payment is received and when the Company transfers the promised goods or services to thecustomer 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 assetsand liabilities are recognized based upon temporary differences between the financial reporting and income tax bases ofassets and liabilities and measured using enacted income tax rates and tax laws that will be in effect when the differencesare expected to reverse. The Company records a valuation allowance to reduce deferred income tax assets to the amountthat is more likely than not to be realized. The Company considers both positive evidence and negative evidence, todetermine whether, based upon the weight of that evidence, a valuation allowance is required. Judgment is required inconsidering the relative impact of negative and positive evidence.
Significant judgment is also required in evaluating the Company’s uncertain income tax positions and provisions forincome taxes. Liabilities for uncertain income tax positions are recognized based on a two-step approach. The first step is
				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
to evaluate whether an income tax position has met the recognition threshold by determining if the weight of availableevidence indicates that it is more likely than not to be sustained upon examination. The second step is to measure theincome tax position that has met the recognition threshold as the largest amount that is more than 50% likely of beingrealized upon settlement. The Company continually assesses the likelihood and amount of potential adjustments andadjusts the income tax provisions, income taxes payable and deferred income taxes in the period in which the facts thatgive rise to a revision become known. The Company recognizes interest and penalties related to uncertain income taxpositions 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 scientificresearch and experimental development expenditures. Under this method, the ITCs are recognized as a reduction toincome tax expense.
Research and development
Research costs are expensed as incurred. Development costs for licensed software to be sold, leased or otherwisemarketed are subject to capitalization beginning when a product’s technological feasibility has been established andending when a product is available for general release to customers. The Company’s products are generally released soonafter technological feasibility has been established and therefore costs incurred subsequent to achievement oftechnological feasibility are not significant and have been expensed as incurred. The Company does not currently haveany capitalized research and development costs other than those identified through business combinations as in-processresearch and development included within intangible assets, net, which were recorded at their fair values and beganamortizing 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 fromtransactions and other events and circumstances from non-owner sources and includes all changes in equity during aperiod, except those resulting from investments by owners and distributions to owners. The Company’s reportable itemsof comprehensive income (loss) are the cumulative translation adjustment resulting from non-U.S. dollar functionalcurrency subsidiaries as described under the foreign currency translation policy above, cash flow hedges as describedabove in derivative financial instruments, changes in the fair value of available-for-sale investments as described in Note3, changes in fair value from instrument-specific credit risk on Debentures as described in Notes 7 and 10, and actuarialgains 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 thefiscal year. The treasury stock method is used for the calculation of the dilutive effect of stock options. The if-convertedmethod 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 8(b).
The Equity Incentive Plan (the “Equity Plan”) was adopted during fiscal 2014. The Equity Plan provides for grants ofincentive 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 commonshares authorized for awards under the Equity Plan is 33,875,000 common shares. Any shares that are subject to optionsgranted under the Equity Plan are counted against this limit as 0.625 shares for every one option granted, any shares thatare subject to TBRSUs granted under the Equity Plan are counted against this limit as one share for every TBRSU, andany shares that are subject to PBRSUs granted under the Equity Plan are counted against this limit at the maximumperformance attainment (which is generally 1.5 shares for every PBRSU). Awards previously granted under the EquityPlan that expire or are forfeited, or settled in cash, are added to the shares available under the Equity Plan. Optionsforfeited will be counted as 0.625 shares to the shares available under the Equity Plan. Shares issued as awards other thanoptions that expire or are forfeited (i.e, RSUs), settled in cash or sold to cover withholding tax requirements are counted asone share added to the shares available under the Equity Plan. There are approximately 4 million shares in the equity poolavailable for future grants under the Equity Plan as at February 29, 2020.
In connection with the Cylance (as defined in Note 5) acquisition, the Company adopted the BlackBerry-Cylance StockPlan (the “Cylance Stock Plan”). The Cylance Stock Plan provides for the grant of Replacement Awards (as defined inNote 8(b)) in connection with unvested Cylance employee equity awards. The number of common shares authorized for
				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
awards under the Cylance Stock Plan is 9,144,176 common shares, which is equal to the amount of Replacement Awardsgranted. As at February 28, 2019, there were no shares remaining in the Cylance Stock Plan for future grants. Inaddition, no shares may be reissued under the Cylance Stock Plan in respect of shares that expire, are forfeited, or aresettled in cash.
The Company measures stock-based compensation expense for options at the grant date based on the award’s fair value ascalculated by the Black-Scholes-Merton (“BSM”) option pricing model for stock options, and the expense is recognizedratably over the vesting period. Options granted under the Equity 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 requiresvarious judgmental assumptions including volatility and expected option life. In addition, judgment is also applied inestimating the number of stock-based awards that are expected to be forfeited, and if actual results differ significantlyfrom 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 withinadditional 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 bythe Board or the Compensation, Nomination and Governance Committee of the Board. The RSUs granted under theEquity 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’sbusiness plan approved by the Board. The estimated achievement is updated for the Company’s outlook for the fiscal yearas at the end of each fiscal quarter. Compensation cost will only be recognized to the extent that performance goals areachieved. The Company classifies RSUs as equity instruments as the Company has the ability and intent to settle theawards in common shares. The compensation expense for standard RSUs is calculated based on the fair value of eachRSU as determined by the closing value of the Company’s common shares on the business day of the grant date. TheCompany 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 ofthe cash fees otherwise payable to them for serving as a director of the Company. Each independent director’s annualretainer will be entirely satisfied in the form of DSUs. Within a specified period after a director ceases to be a member ofthe Board, DSUs will be redeemed for cash with the redemption value of each DSU equal to the weighted average tradingprice of the Company’s shares over the five trading days preceding the redemption date. Alternatively, the Company mayelect 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 attheir fair value on the date of issuance and remeasured at each reporting period until settlement.
	2.	ADOPTION OF ACCOUNTING POLICIES
Accounting Standards Adopted During Fiscal 2020
ASC 842, Leases
In February 2016, the Financial Accounting Standards Board (“FASB”) issued ASC 842 on leases. The standard requirescompanies to include lease obligations in their balance sheets, including a dual approach for lessee accounting underwhich a lessee would account for leases as finance leases or operating leases. Both finance leases and operating leasesresult in the lessee recognizing a ROU asset and a corresponding lease liability. The operating lease ROU asset alsoincludes any lease payments made and excludes lease incentives and initial direct costs incurred on transition. For financeleases, the lessee will recognize interest expense and amortization of the ROU asset, and for operating leases, the lesseewill recognize a straight-line total lease expense. The short-term lease exemption allows the Company to not apply therecognition requirements to lease terms of 12 months or less on the commencement date. The Company elected thepackage of practical expedients where lease classification, embedded leases, and initial direct costs are not reassessedupon adoption of ASC 842.
The guidance is effective for interim and annual periods beginning after December 15, 2018. The Company adopted thisguidance in the first quarter of fiscal 2020 using the modified retrospective method for all leases that existed at orcommence after the date of initial application. As a result of the adoption of the new standard on leases, the Companyrecognized ROU assets of approximately $161 million, lease liabilities of approximately $175 million, and a cumulativeadjustment to increase the deficit of approximately $14 million in the consolidated balance sheet as at March 1, 2019.
					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
Future lease costs included in the Resource Allocation Program (“RAP”) of approximately $14 million, which wereaccrued for prior to adoption of ASC 842, and were previously included in accrued liabilities and other long-termliabilities, are now presented in accrued liabilities and operating lease liabilities in the consolidated balance sheet as atMarch 1, 2019. As a result, total operating lease liabilities were $189 million in the consolidated balance sheet as atMarch 1, 2019.
ASU 2017-12, Hedge Accounting
In August 2017, the FASB issued ASU 2017-12. This guidance expands the range of strategies that qualify for hedgeaccounting, changes how certain hedging relationships are presented in the financial statements and simplifies theapplication of hedge accounting in certain situations. The guidance is effective for interim and annual periods beginningafter December 15, 2018. The Company adopted this guidance in the first quarter of fiscal 2020 and it did not have amaterial impact to the consolidated financial results.
Issued Accounting Pronouncements
In June 2016, the FASB issued guidance related to the measurement of credit losses on financial instruments, ASU2016-13. This guidance replaces the incurred loss impairment methodology in current U.S. GAAP with a methodologythat reflects expected credit losses, requires consideration of a broader range of reasonable and supportable information toinform credit loss estimates, and requires entities to estimate an expected lifetime credit loss on its financial assets. Theguidance is effective for interim and annual periods beginning after December 15, 2019. The Company will adopt thisguidance in the first quarter of fiscal 2021 and does not expect the adoption to have a material impact on its results ofoperations, financial position and 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 anorderly transaction between market participants at the measurement date. When determining the fair value measurementsfor assets and liabilities required to be recorded at fair value, the Company considers the principal or most advantageousmarket in which it would transact and considers assumptions that market participants would use in pricing the asset orliability, such as inherent risk, non-performance risk and credit risk. The Company applies the following fair valuehierarchy, 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 similarassets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in marketsthat 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 ofunobservable inputs when measuring fair value.
Recurring Fair Value Measurements
The Company’s cash and cash equivalents, accounts receivable, other receivables, accounts payable and accrued liabilitiesare 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 (other than those classified as Level 3), the Company primarily relies onan independent third-party valuator for the fair valuation of securities. The Company also reviews the inputs used in thevaluation process and assesses the pricing of the securities for reasonableness after conducting its own internal collectionof quoted prices from brokers. Fair values for all investment categories provided by the independent third-party valuatorthat 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 informationprovided by the Company before determining whether a change in their original pricing is warranted.
The Company’s investments (other than those classified as Level 3) largely consist of securities issued by major corporateand banking organizations, the provincial and federal governments of Canada, international government bankingorganizations and the United States Department of the Treasury and are all investment grade. The Company also holds a
					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
limited amount of equity securities following the initial public offering by the issuer of a previous private equityinvestment.
The following table summarizes the changes in fair value of the Company’s Level 3 assets for the years endedFebruary 29, 2020 and February 28, 2019:
	Level 3
Balance at February 28, 2018	$	20
Principal repayments		(1)
Balance at February 28, 2019		19
Principal repayments		(19)
Balance at February 29, 2020	$	—
The Company recognizes transfers in and out of levels within the fair value hierarchy at the end of the reporting period inwhich the actual event or change in circumstance occurred. There were no significant transfers in or out of Level 3 assetsduring the years ended February 29, 2020 or February 28, 2019.
The Company’s Level 3 assets previously consisted of auction rate securities. The Company realized $3 million in gains on auction rate securities. The Company no longer has Level 3 assets as of February 29, 2020.
Cash, Cash Equivalents and Investments
The components of cash, cash equivalents and investments by fair value level as at February 29, 2020 were as follows:
						Other-than-		Cash and
				Unrealized	Unrealized	temporary		Cash	Short-term	Long-term	Restricted
			Cost Basis	Gains	Losses	Impairment	Fair Value	Equivalents	Investments	Investments	Cash
Bank balances			$	100 $								— $	— $	— $	100 $	100 $					— $	— $	—
Other investments															32	—	—	—		32	—					—	32	—
			132								—	—	—	132	100					—	32	—
Level 1:Equity securities
															10	—	(8)						—	2	—	2	—	—
Level 2:Term deposits,
certificates of deposits,
and GICs			118								—	—	—	118	44					25	—	49
Bankers’ acceptances/
bearer deposit notes															84	—	—	—		84	30					54	—	—
Commercial paper			276								—	—	—	276	108	168	—	—
Non-U.S. promissory
notes			133								—	—	—	133	25	108	—	—
Non-U.S. government
sponsored enterprise
notes			144								—	—	—	144	—	144	—	—
Non-U.S. treasury
bills/notes															56	—	—	—		56	25					31	—	—
U.S. treasury bills/
notes															45	—	—	—		45	45					—	—	—
			856								—	—	—	856	277	530	—	49
			$	998 $								— $	(8) $						— $	990 $	377 $	532 $	32 $	49
						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
The components of cash, cash equivalents and investments by fair value level as at February 28, 2019 were as follows:
									Restricted
				Other-than-		Cash and			Cash and
		Unrealized	Unrealized	temporary		Cash	Short-term	Long-term	Cash
	Cost Basis	Gains	Losses	Impairment	Fair Value	Equivalents	Investments	Investments	Equivalents
Bank balances	$	326 $									— $	— $	— $	326 $	322 $						— $	— $	4
Other investments																36	—	—	—				36	—				—	36	—
	362									—	—	—	362	322						—	36	4
Level 1:Equity securities
																10	—	(10)								—		—	—			—	—	—
Level 2:Term deposits,
certificates of deposits,
and GICs																85	—	—	—				85	—				55	—	30
Bankers’ acceptances																39	—	—	—				39	4			35	—	—
Commercial paper	264									—	—	—	264	177						87	—	—
Non-U.S. promissory
notes																20	—	—	—				20	20				—	—	—
Non-U.S. government
sponsored enterprise
notes	139									—	—	—	139	25	114						—	—
Non-U.S. treasury
bills/notes																35	—	—	—				35	—				35	—	—
U.S. treasury bills/
notes																42	—	—	—				42	—				42	—	—
	624									—	—	—	624	226	368						—	30
Level 3:Auction rate securities
																20	2							—	(3)		19	—			—	19	—
	$ 1,016 $		2 $	(10) $									(3) $ 1,005 $	548 $	368 $						55 $	34
As at February 29, 2020, the Company had private equity investments without readily determinable fair value of $32million (February 28, 2019 - $36 million).
During the year ended February 29, 2020, there was a $3 million impairment recognized relating to a certain privateequity investment without readily determinable fair value (February 28, 2019 and February 28, 2018 - nil).
There were no realized gains or losses on available-for-sale securities for the year ended February 29, 2020 (realizedlosses of nil and $1 million for the years ended February 28, 2019 and February 28, 2018, respectively).
The Company has restricted cash and cash equivalents, consisting of cash and securities pledged as collateral to majorbanking partners in support of the Company’s requirements for letters of credit. These letters of credit support certainleasing arrangements entered into in the ordinary course of business and also support patent litigation in certainjurisdictions. The letters of credit are for terms ranging from one month to six years. The Company is legally restrictedfrom accessing these funds during the term of the leases for which the letters of credit have been issued; however, theCompany can continue to invest the funds and receive investment income thereon.
				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
The following table provides a reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents asat February 29, 2020, February 28, 2019 and February 28, 2018 from the consolidated balance sheets to the consolidatedstatements of cash flows:
	As at
		February 29,	February 28,		February 28,
		2020	2019		2018
Cash and cash equivalents		$		377 $	548 $	816
Restricted cash and cash equivalents				49	34	39
Total cash, cash equivalents, restricted cash, and restricted cash
equivalents presented in the consolidated statements of cash flows $				426 $	582 $	855
The contractual maturities of available-for-sale investments as at February 29, 2020 and February 28, 2019 were asfollows:
				As at
							February 29, 2020	February 28, 2019
							Cost Basis	Fair Value	Cost Basis				(1)	Fair Value
Due in one year or less								$	856 $	856 $	624 $	624
Due after five years——	17	19
No fixed maturity							10	2	10	—
								$	866 $	858 $	651 $	643
______________________________
(1) Cost basis includes other-than-temporary impairment.As at February 29, 2020, the Company had investments with continuous unrealized losses totaling $8 million, consistingof unrealized losses on equity securities (February 28, 2019 - continuous unrealized losses totaling $10 million).
									4. CONSOLIDATED BALANCE SHEET DETAILS
Accounts Receivable, Net
The allowance for doubtful accounts as at February 29, 2020 was $9 million (February 28, 2019 - $25 million).
There were two customers that comprised more than 10% of accounts receivable as at February 29, 2020 (February 28,2019 - one customer comprised more than 10%).
Other Current Assets
As at February 29, 2020, other current assets include items such as the current portion of deferred commissions andprepaid expenses, among other items, none of which were greater than 5% of the current assets balance in all yearspresented.
								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
Property, Plant and Equipment, Net
Property, plant and equipment comprised the following:
	As at
		February 29, 2020	February 28, 2019
Cost
			Buildings, leasehold improvements and other	$	72 $			68
			BlackBerry operations and other information technology	84			85
			Manufacturing, repair and research and development equipment	73			73
			Furniture and fixtures	11			14
	240			240
Accumulated amortization	170			155
Net book value		$	70 $			85
For the year ended February 29, 2020, amortization expense related to property, plant and equipment amounted to $24million (February 28, 2019 - $20 million; February 28, 2018 - $36 million).
Intangible Assets, Net
Intangible assets comprised the following:
		As at February 29, 2020
		Accumulated				Net Book
					Cost	Amortization				Value
Acquired technology							$	1,019 $	636 $			383
Intellectual property								489	275			214
Other acquired intangibles								494	176			318
							$	2,002 $				1,087 $	915
		As at February 28, 2019
		Accumulated				Net Book
					Cost	Amortization				Value
Acquired technology							$	1,020 $	557 $			463
Intellectual property								466	239			227
Other acquired intangibles								494	116			378
							$	1,980 $	912 $			1,068
For the year ended February 29, 2020, amortization expense related to intangible assets amounted to $188 million(February 28, 2019 - $129 million; February 28, 2018 - $141 million).
Total additions to intangible assets in fiscal 2020 amounted to $32 million (fiscal 2019 - $725 million which included$646 million in connection with the Cylance acquisition). During fiscal 2020, the additions to intangible assets primarilyconsisted of patents received as non-cash consideration in a contract with a customer and payments for intellectualproperty relating to patent registration, licenses and maintenance fees.
Based on the carrying value of the identified intangible assets as at February 29, 2020, and assuming no subsequentimpairment of the underlying assets, the annual amortization expense for each of the succeeding years is expected to be asfollows: fiscal 2021 - $167 million; fiscal 2022 - $144 million; fiscal 2023 - $115 million; fiscal 2024 - $106 million; andfiscal 2025 - $100 million.
												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 weighted average remaining useful lives of the intangible assets are as follows:
	As at
		February 29, 2020	February 28, 2019
Acquired technology			5.4 years	5.5 years
Intellectual property			6.6 years	7.3 years
Other acquired intangibles			6.0 years	6.8 years
Impairment of LLA
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 (see Note 12) and $2million related to property, plant and equipment associated with those facilities. There were no LLA impairment chargestaken in fiscal 2019.
During fiscal 2018, the Company recorded an LLA impairment charge of $11 million, which was applicable to certainprepaid royalty arrangements associated with the Company’s sale of handheld devices.
Goodwill
Changes to the carrying amount of goodwill during the fiscal years ended February 29, 2020, February 28, 2019 andFebruary 28, 2018 were as follows:
	Carrying Amount
Carrying amount as at February 28, 2017	$				559
Effect of foreign exchange on non-U.S. dollar denominated goodwill					10
Carrying amount as at February 28, 2018					569
Effect of foreign exchange on non-U.S. dollar denominated goodwill					(5)
Goodwill acquired through business combination completed during the year					899
Carrying amount as at February 28, 2019				1,463
Measurement period adjustment (see Note 5)					(2)
Goodwill impairment charge					(22)
Effect of foreign exchange on non-U.S. dollar denominated goodwill					(2)
Carrying amount as at February 29, 2020	$			1,437
Based on the results of step two of the goodwill impairment test in fiscal 2020 discussed in Note 1, it was concluded thatthe carrying value of goodwill was impaired. Consequently, the Company recorded a goodwill impairment charge of $22million in the fourth quarter of fiscal 2020, relating to its BBM Consumer reporting unit.
Other Long-term Assets
As at February 29, 2020, other long-term assets include long-term portion of deferred commission and long-termreceivables, 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 29, 2020	February 28, 2019
Variable incentive accrual		$	33 $				36
Operating lease liabilities, current (note 12)	31				—
Other	138			156
		$	202			192
									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
Other accrued liabilities include accrued vendor liabilities, accrued carrier liabilities and payroll withholding taxes, amongother items, none of which were greater than 5% of the current liabilities balance.
Other Long-term Liabilities
Other long-term liabilities consist of the long-term portion of finance lease liabilities and non-lease components of RAPliabilities. It previously included the present value of the long-term portion of accrued future lease payments associatedwith RAP, which are presented in operating lease liabilities as of the adoption of ASC 842. See Note 1.
	5.	BUSINESS ACQUISITIONS
There were no business acquisitions during fiscal 2020.
On February 21, 2019, the Company acquired all of the issued and outstanding shares of Cylance Inc. (“Cylance”), anartificial intelligence and cybersecurity leader, for approximately $1.4 billion in cash and common shares, plus theassumption of unvested employee incentive awards. The acquisition of Cylance is a strategic addition to the Company’send-to-end secure communications portfolio. The accounting for the acquisition of Cylance was completed in the secondquarter of fiscal 2020, as the calculation of working capital of Cylance was finalized.
The following table summarizes the fair value allocations of the acquisition price of the assets acquired and liabilitiesassumed during fiscal 2019:
		Preliminary Balance	Measurement Period	Balance as at
		February 28, 2019	Adjustment	August 31, 2019
Non-cash assets acquired
					Current assets	$				40 $	(6) $	34
					Property, plant and equipment and other long-term
					assets	25	—	25
					Intangible assets Acquired technology
						283	—	283
					In-process research and development	66	—	66
					Customer relationships	277	—	277
					Trade name	20	—	20
					Goodwill (1)	899	(2)	897
						1,610	(8)	1,602
Liabilities assumed
					Current liabilities	27	1	28
					Debt	125	—	125
					Deferred revenue (2)	95	(2)	93
					Deferred tax liability	22	1	23
					Other long-term liabilities	8				(7)	1
						277	(7)	270
Net non-cash assets acquired						1,333	(1)	1,332
					Cash acquired	10	—	10
					Restricted cash acquired	4				—	4
Net assets acquired						1,347	(1)	1,346
					Settlement of acquired debt (3)	125	—	125
		$				1,472 $	(1) $	1,471
Consideration
					Cash consideration	$				1,416 $	(1) $	1,415
					Replacement Awards issued (4)	21	—	21
					Exchange shares (5)	35	—	35
Total consideration		$				1,472 $	(1) $	1,471
_____________________________
		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
(1)	Goodwill represents the excess of the acquisition price over the fair value of net assets acquired, which is notexpected to be deductible for tax purposes when goodwill results from share purchases.
(2)	The fair value of deferred revenue represents the costs to service the assumed obligations, plus a normal profitmargin as required under purchase accounting.
(3)	$125 million in cash was paid to existing debt holders to settle Cylance debt outstanding at acquisition.
(4)	Fair value of 8,320,130 options and 824,046 RSUs (“Replacement Awards”) issued in connection with unvestedCylance employee equity awards, related to pre-combination service and considered purchase consideration. SeeNote 8(b) for details on the Replacement Awards.
(5)	In lieu of cash, a proportion of consideration owed to certain Cylance shareholders will be paid in BlackBerry sharesissued from treasury in equal instalments on the first three anniversary dates of the acquisition. There are no serviceor other requirements associated with the issuance of these shares.
The weighted average amortization periods of the acquired technology, in-process research and development, customerrelationships and trade name related to the business acquisitions completed during the year ended February 28, 2019 wereapproximately 8 years, 9 years, 9 years and 7 years, respectively.
The Company incurred $12 million in acquisition-related costs included in selling, general and administration expensesfor the fiscal year ended February 28, 2019.
The Company recorded a measurement period recovery of $2 million in selling, general and administration expensesduring the fiscal year ended February 29, 2020, as the amount would have been recognized in the prior fiscal year, if theadjustment to the provisional amounts had been recognized as of the acquisition date.
The amounts of revenue and loss before income taxes of the acquisition above included in the consolidated statement ofoperations for the year ended February 28, 2019 are as follows:
		Loss before
	Revenue	income taxes
Actuals from acquisition date to February 28, 2019	$		2 $	(5)
Supplemental Pro Forma Combined Financial Statements
The following pro forma combined results for the year ended February 28, 2019 reflect the consolidated statement ofoperations of the Company as if the acquisition of Cylance had occurred at the beginning of fiscal 2019. These resultscombine the historical results of Cylance’s consolidated statement of operations and are not necessarily indicative of theconsolidated results of operations of the combined business had the acquisition actually occurred at the beginning of fiscal2019 or of the results of future operations of the combined business.
The supplemental pro forma information, as if the acquisition had occurred on March 1, 2018, is as follows:
			For the Year Ended
		February 28, 2019
		(unaudited)
Revenue			$	1,027
Net loss (1)				(77)
______________________________
(1) Includes measurement period adjustments identified during the fiscal year ended February 29, 2020 of $2 million to
reflect if the adjustment to the provisional amounts had been recognized as of the acquisition date.
								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
6.	INCOME TAXES
	The difference between the amount of the provision for (recovery of) income taxes and the amount computed bymultiplying income (loss) before income taxes by the statutory Canadian tax rate is reconciled as follows:
		For the Years Ended
			February 29, 2020	February 28, 2019		February 28, 2018
	Statutory Canadian tax rate				26.5 %	26.5 %	26.5 %
	Expected provision for (recovery of) income taxes		$		(39)	$				20	$			108
	Differences in income taxes resulting from:
								Valuation allowance	41	(55)	(169)
								Investment tax credits	(10)	(10)	(3)
								Change in unrecognized income tax benefits	(12)	9	8
								Foreign tax rate differences	3	(1)	(6)
								Effect of adjustments to deferred tax amounts for enacted
								changes resulting from U.S. tax reform	—	—	67
								Non-deductible permanent differences	15	19	4
								Goodwill impairment	6	—	—
								Other differences	1	2	(9)
								Withholding tax on unremitted earnings	(1)	—	1
			$		4	$				(16)	$			1
		For the Years Ended
			February 29, 2020	February 28, 2019		February 28, 2018
	Income (loss) before income taxes:
								Canadian	$	15 $				63 $	413
								Foreign	(163)	14	(7)
			$		(148) $	77 $	406
	The provision for (recovery of) income taxes consists of the following:
		For the Years Ended
			February 29, 2020	February 28, 2019		February 28, 2018
	Current
								Canadian	$	2 $		2 $					1
								Foreign	3		7					7
	Deferred
								Canadian	—				—	—
								Foreign	(1)				(25)	(7)
			$	4 $				(16) $			1
												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
Deferred income tax assets and liabilities consist of the following temporary differences:
	As at
		February 29, 2020	February 28, 2019
Assets
			Property, plant, equipment and intangibles assets	$	174 $			175
			Non-deductible reserves	65			89
			Minimum taxes	267			264
			Convertible Debentures (see Note 7)	1			15
			Research and development	327			304
			Tax loss carryforwards	419			414
			Other	117			98
Deferred income tax assets					1,370	1,359
Valuation allowance					1,223	1,192
Deferred income tax assets net of valuation allowance	147			167
Liabilities
			Property, plant, equipment and intangibles assets	(147)			(167)
Deferred income tax liabilities	(147)			(167)
Net deferred income tax asset (liability)		$	— $			—
Deferred income tax asset		$	— $			2
Deferred income tax liability	—			(2)
		$	— $			—
The Company regularly assesses the need for a valuation allowance against its deferred tax assets. In making thatassessment, the Company considers both positive and negative evidence related to the likelihood of realization of thedeferred tax assets to determine, based on the weight of available evidence, whether it is more likely than not that some orall 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 lossesincluding fiscal 2020. In fiscal 2020, the Company saw an increase in the deferred tax valuation allowance of $41 million(February 28, 2019 - decrease of $55 million). As a result, the deferred tax valuation allowance had an ending balance of$1,223 million (February 28, 2019 - $1,192 million). This accounting treatment has no effect on the Company’s ability toutilize deferred tax assets to reduce future cash tax payments. The Company will continue to assess the likelihood that thedeferred tax assets will be realizable at each reporting period and the valuation allowance will be adjusted accordingly.The Company’s total unrecognized income tax benefits as at February 29, 2020 and February 28, 2019 were $72 millionand $84 million, respectively. A reconciliation of the beginning and ending amount of unrecognized income tax benefitsthat, if recognized, would affect the Company’s effective income tax rate is as follows:
		For the Years Ended
						February 29, 2020	February 28, 2019	February 28, 2018
Unrecognized income tax benefits, opening balance						$	84 $	73 $			65
Increase for income tax positions of prior years							2	10			4
Increase for income tax positions of current year							1	5			4
Settlement of tax positions							(15)	(4)			—
Unrecognized income tax benefits, ending balance						$	72 $	84 $			73
As at February 29, 2020, $59 million of the unrecognized tax benefits have been netted against deferred income taxes and$13 million has been recorded within income taxes payable on the Company’s consolidated balance sheets.
										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
A summary of open tax years by major jurisdiction is presented below:
JurisdictionCanada (1)
	Fiscal 2011 - 2020
United States (2)	Fiscal 2017 - 2020
United Kingdom	Fiscal 2019 - 2020
______________________________
(1) Includes federal as well as provincial jurisdictions, as applicable.
(2) Pertains to federal tax years. Certain state jurisdictions remain open from fiscal 2015 through fiscal 2020.The Company is subject to ongoing examination by tax authorities in the jurisdictions in which it operates. The Companyregularly assesses the status of these examinations and the potential for adverse outcomes to determine the adequacy ofthe provision for income taxes, as well as the provisions for indirect and other taxes and related penalties and interest. TheCompany believes it is reasonably possible that approximately $34 million of its gross unrecognized income tax benefitswill be realized in the next twelve months. While the final resolution of these audits is uncertain, the Company believesthe 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 isnetted and reported within investment income, net. The amount of interest accrued as at February 29, 2020 wasapproximately $4 million (February 28, 2019 - approximately $5 million). The amount of penalties accrued as atFebruary 29, 2020 was nil (February 28, 2019 - $2 million).
As at February 29, 2020, the Company has the following net operating loss carryforwards and tax credits, which arescheduled to expire in the following years:
					Research and Development
		Year of Expiry	Net Operating Losses	Capital Losses		Tax Credits	(1)	Minimum Taxes
		2029	$					10 $	— $	— $		—
		2030						—	—				5	109
		2031						26	—				5	128
		2032						78	—				3	27
		2033						98	—	111		2
		2034						94	—	109		1
		2035						11	—	51		—
		2036						399	—	40		—
		2037						472	—	25		—
		2038						185	—	19		—
		2039						—	—	18		—
		2040						68	—	13		—
		Indefinite						173	31	21		—
			$					1,614 $	31 $	420 $		267
______________________________
(1) Includes federal, provincial and state balances.
										7.	DEBENTURES
On September 7, 2016, Fairfax Financial Holdings Limited (“Fairfax”) and other institutional investors invested in theCompany through a private placement of new debentures in an aggregate amount of $605 million (the “Debentures”).
Interest on the Debentures is payable quarterly in arrears at a rate of 3.75% per annum. The Debentures mature onNovember 13, 2020, and each $1,000 of Debentures is convertible at any time into 100 common shares of the Company,for a total of 60.5 million common shares at a price of $10.00 per share for all Debentures, subject to adjustments.Covenants associated with the Debentures include limitations on the Company’s total indebtedness.
				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
Under specified events of default, the outstanding principal and any accrued interest on the Debentures becomeimmediately due and payable upon request of holders holding not less than 25% of the principal amount of the Debenturesthen outstanding. During an event of default, the interest rate rises to 7.75% per annum.
The Debentures are subject to a change of control provision whereby the Company would be required to make an offer torepurchase the Debentures at 115% of par value if a person or group (not affiliated with Fairfax) acquires 35% of theCompany’s outstanding common shares, acquires all or substantially all of its assets, or if the Company merges withanother entity and the Company’s existing shareholders hold less than 50% of the common shares of the surviving entity.
The following table summarizes the changes in fair value of the Debentures for the fiscal year ended February 29, 2020,February 28, 2019 and February 28, 2018:
	As at
		February 29, 2020
Balance as at February 28, 2017		$	591
Change in fair value of the Debentures			191
Balance as at February 28, 2018			782
Change in fair value of the Debentures			(117)
Balance as at February 28, 2019			665
Change in fair value of the Debentures			(59)
Balance as at February 29, 2020		$	606
The difference between the fair value of the Debentures and the unpaid principal balance of $605 million is $1 million. The fair value of the Debentures is measured using Level 2 fair value inputs.
The following table shows the impact of the change in fair value of the Debentures for the fiscal years ended February 29,2020, February 28, 2019 and February 28, 2018:
				For the Years Ended
					February 29, 2020	February 28, 2019	February 28, 2018
Income (charge) associated with the change in fair value from non-
credit components recorded in the consolidated statements of
operations						(1)	$	66 $			117 $	(191)
Charges associated with the change in fair value from instrument-
specific credit components recorded in AOCI								(1)	(7)			—	—
Total decrease (increase) in the fair value of the Debentures									(1)	$	59 $			117 $	(191)
______________________________
(1)						During the year ended February 28, 2018 and prior to the adoption of ASU 2016-01 on March 1, 2018, the changesin fair value from both instrument-specific credit components and non-credit components of the Debentures wererecorded in the consolidated statement of operations for the fiscal year ended February 28, 2018.
The Company recorded interest expense related to the Debentures of $23 million, which has been included in investmentincome, net on the Company’s consolidated statements of operations in fiscal 2020 (fiscal 2019 - $24 million; fiscal 2018- $23 million). The Company is required to make quarterly interest-only payments of approximately $6 million in the firstand second quarter of fiscal 2021 and approximately $5 million in the third quarter of fiscal 2021 when the Debenturesmature.
Fairfax, a related party under U.S. GAAP, purchased $500 million principal amount of the Debentures. As such, thepayment of interest on the Debentures represents a related-party transaction. Fairfax receives interest at the same rate asother Debenture holders.
									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
8.	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 29, 2020 and February 28, 2019, there were no Class A common shares orpreferred shares outstanding.
	The following details the changes in issued and outstanding common shares for the years ended February 29, 2020,February 28, 2019 and February 28, 2018:
		Capital Stock and
		Additional Paid-in Capital
		Stock
			Outstanding
		(000s)		Amount
	Common shares outstanding as at February 28, 2017	530,497 $		2,512
	Exercise of stock options	536			4
	Common shares issued for restricted share unit settlements	7,258			—
	Stock-based compensation	—			49
	Share repurchase	(1,992)			(9)
	Common shares issued for employee share purchase plan	435			4
	Common shares outstanding as at February 28, 2018	536,734		2,560
	Exercise of stock options	105			1
	Common shares issued for restricted share unit settlements	10,156			—
	Stock-based compensation	—			67
	Exchange shares issued from Cylance acquisition (see note 5)	—			35
	Value of pre-combination service related to Replacement Awards included in purchase
	consideration	—			21
	Common shares issued for employee share purchase plan	363			4
	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 exchanges shares (see note 5)	1,380			—
	Common shares issued for employee share purchase plan	911			6
	Common shares outstanding as at February 29, 2020	554,199 $		2,760
	The Company had 554 million voting common shares outstanding, 6 million options to purchase voting common shares,24 million RSUs and 1 million DSUs outstanding as at March 26, 2020. In addition, 60.5 million common shares areissuable upon conversion in full of the Debentures as described in Note 7.
	On June 23, 2017, the Company announced that it received acceptance from the Toronto Stock Exchange with respect to anormal course issuer bid to purchase for cancellation up to 31 million common shares of the Company, or approximately6.4% of the outstanding public float as at May 31, 2017. During fiscal 2018, the Company repurchased approximately 2million common shares at a cost of approximately $18 million. The Company recorded a reduction of approximately $9million to capital stock and the amount paid in excess of the per share paid-in capital of the common shares ofapproximately $9 million was charged to deficit. All common shares repurchased by the Company pursuant to the normalcourse issuer bid have been canceled. The common share repurchase program expired on June 26, 2018. During fiscal2019 and fiscal 2020, the Company did not repurchase any common shares.
									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
(b) Stock-based Compensation
	Replacement awards
	In connection with the Cylance acquisition in fiscal 2019, the Company granted 8,320,130 options and 824,046 RSUs(“Replacement Awards”) to replace unvested Cylance employee stock options and unvested restricted share units, all ofwhich were canceled upon the closing of the transaction. The Company was obligated to replace the unvested Cylanceemployee equity awards under the merger agreement governing the acquisition.
	In accordance with ASC Topic 805, Business Combinations, as the Company was obligated to conduct the replacement,these awards are considered to be replacement awards. Exchanges of share options or other share-based payment awardsin conjunction with a business combination are modifications of share-based payment awards in accordance with ASCTopic 718, Compensation - Stock Compensation (“ASC 718”). As a result, a portion of the fair-value-based measure ofthe Replacement Awards is included in measuring the consideration transferred in the Cylance business combination. Todetermine the portion of the Replacement Awards that is consideration transferred, the Company measured the value ofboth the Replacement Awards granted by the Company and the historical Cylance awards as of February 21, 2019 inaccordance with ASC 718. The portion of the fair-value-based measure of the Replacement Awards that was part of theconsideration transferred equaled the portion of the replaced Cylance award that was attributable to pre-combinationservice. The Company attributed a portion of the Replacement Awards to post-combination service as these awardsrequire post-combination service. The fair value of the rollover consideration was estimated to be $39 million, net offorfeitures, of which $21 million was attributable to pre-acquisition services. The remaining fair value of $18 million isrecorded as stock-based compensation over the remaining vesting period subsequent to the acquisition date. As ofFebruary 29, 2020, the remaining amount of unrecognized expense for the replacement awards totaled $6 million(February 28, 2019 - $18 million).
	Stock options
	The Company recorded a charge to income and a credit to paid-in capital of approximately $5 million in fiscal 2020(fiscal 2019 - $1 million; fiscal 2018 - $1 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 generallyexercisable over a period of five years from the grant date. Replacement stock options granted under the Cylance StockPlan 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.
	A summary of option activity for fiscal 2020 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, 2019		9,014	4.21
	Granted during the year					—	—
	Exercised during the year		(1,189)	2.80
	Forfeited/canceled/expired during the year		(2,120)	4.47
	Balance as at February 29, 2020		5,705 $	4.41				6.86 $	8
	Vested and expected to vest as at February 29, 2020		5,204 $	4.35				6.76 $	7
	Exercisable as at February 29, 2020		3,465 $	4.04				6.15 $	6
	The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value that would have been receivedby the option holders if all in-the-money options had been exercised on February 29, 2020. The intrinsic value of stockoptions exercised during fiscal 2020, calculated using the average market price during the year, was approximately $4.30per share (February 28, 2019 - $2.55; February 28, 2018 - $2.89).
			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

A summary of unvested stock options since February 28, 2019 is shown below:

Options Outstanding

Weighted Average

Number

Grant Date Fair

(000’s)

Value

Balance as at February 28, 2019

8,458 $

5.45

Vested during the year

(4,317)

5.77

Forfeited during the year

(1,901)

5.37

Balance as at February 29, 2020

2,240 $

4.91

As at February 29, 2020, there was $4 million of unrecognized stock-based compensation expense related to unvestedstock options that will be expensed over the vesting period, which, on a weighted average basis, results in a period ofapproximately 1.56 years. The total fair value of stock options vested during the year ended February 29, 2020 amountedto $25 million (February 28, 2019 - $1 million; February 28, 2018 - $1 million).

Cash received from the stock options exercised for the year ended February 29, 2020 amounted to $3 million(February 28, 2019 - $1 million; February 28, 2018 - $4 million). There were no tax deficiencies incurred by the Companyrelated to stock options exercised as at February 29, 2020 (February 28, 2019 - tax deficiency of nil; February 28, 2018 -tax deficiency of nil).

During the year ended February 29, 2020, there were no stock options granted (February 28, 2019 - 8,320,130;February 28, 2018 - nil). The weighted average fair value of these grants was calculated using the BSM option pricingmodel with the following assumptions:

February 29, 2020

February 28, 2019

February 28, 2018

Weighted average grant date fair value of stock options granted

during the period

—

$3.97 to $7.48 $

—

Assumptions:

Risk-free interest rates

— %

2.50% to 2.56%

— %

Expected life in years

3.91 to 6.16

— %

Expected dividend yield

— %

Volatility

— %

37% to 40%

— %

The Company has no current expectation of paying cash dividends on its common shares. The risk-free interest ratesutilized during the life of the stock options are based on a U.S. Treasury security for an equivalent period. The Companyestimates the volatility of its common shares at the date of grant based on a combination of the implied volatility ofpublicly traded options on its common shares and historical volatility, as the Company believes that this is a reasonableindicator of expected volatility going forward. The expected life of stock options granted under the Equity Plan is basedon historical exercise patterns, which the Company believes are representative of future exercise patterns. The expectedlife of stock options granted under the Cylance Stock Plan is based on the simplified method, as the terms and conditionsare different than those previously granted under the Equity Plan.

Restricted share units

The Company recorded compensation expense with respect to RSUs of approximately $57 million in the year endedFebruary 29, 2020 (February 28, 2019 - $66 million; February 28, 2018 - $48 million).

						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 2020 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, 2019		17,758	9.48
Granted during the year		16,902	7.19
Vested during the year		(3,361)	9.90
Forfeited/cancelled during the year		(6,797)	9.15
Balance as at February 29, 2020		24,502 $	7.93			1.65 $	127
Expected to vest February 29, 2020		22,284 $	7.88			1.65 $	115
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the aggregate closing shareprice of the Company’s common shares on February 29, 2020 that would have been received by RSU holders if all RSUshad been vested on February 29, 2020).
Tax deficiencies incurred by the Company related to the RSUs vested were nil for the year ended February 29, 2020(February 28, 2019 - tax deficiency of nil; February 28, 2018 - tax deficiency of nil).
As at February 29, 2020, there was $104 million of unrecognized compensation expense related to RSUs that will beexpensed over the vesting period, which, on a weighted average basis, results in a period of approximately 1.84 years.
During the year ended February 29, 2020, there were 16,902,445 RSUs granted, of which 4,182,189 were inducementawards in connection with the Cylance acquisition (February 28, 2019 - 14,245,412, of which 824,046 RSUs wereReplacement Awards in connection with the Cylance acquisition, all of which will be settled upon vesting by the issuanceof new common shares).
During the year ended February 29, 2020, the weighted average fair value for RSUs granted was $7.19 (February 28, 2019- $9.45; February 28, 2018 - $10.84). During the year ended February 29, 2020, the fair value of RSUs that vested was$33 million (February 28, 2019 - $73 million; February 28, 2018 - $54 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% and40% 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. TheCompany also notes that 75% of the awards eligible to vest in a given year are based on achievement of a billings goaland 25% are based on achievement of a contribution margin goal. In the third quarter of fiscal 2020, 3,122,140 commonshares subject to Inducement Awards were forfeited due to the departure of one of the co-founders of Cylance. As atFebruary 29, 2020, there were 1,060,049 common shares subject to Inducement Awards outstanding. The Companyrecorded compensation expense with respect to the Inducement Awards of approximately $3 million for the year endedFebruary 29, 2020.
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-termmarket performance-based equity award and a contingent cash award (together, the “2019 Executive Chair Grant”) to theCompany’s Executive Chair and CEO as an incentive to remain as Executive Chair until November 3, 2023. The expenseassociated with the time-based equity award and market performance-based equity award is included in the compensationexpense noted above. The equity and liability components of the agreement are summarized below:
Time-based equity award
The time-based equity award consists of 5 million time-based RSUs that will vest annually in five equal tranchesbeginning on November 3, 2019.
Market performance-based equity award
The market performance-based equity award consists of five tranches, each of 1 million market-condition RSUs that willbecome earned and vested in increments of 1 million RSUs when the 10-day average closing price of the Company’s
		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
common shares on the New York Stock Exchange reaches $16, $17, $18, $19 and $20, respectively. The grant date fairvalue and the derived service period for each of the market condition equity awards were determined through the use of aMonte Carlo simulation model utilizing Level 2 inputs. Should the target price of an award be reached prior to the derivedservice date, the remaining unrecognized compensation cost for the award will be accelerated and recorded at that time.Any market-condition RSUs that have not been earned before November 3, 2023 will terminate on such date.
Contingent cash award
The contingent cash award consists of a cash amount of $90 million that becomes payable should the 10-day averageclosing price of the Company’s common shares on the New York Stock Exchange reach $30. As the award is triggered bythe 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 inputsand the associated compensation expense for the reporting period recorded. If unearned, the contingent cash award willterminate on November 3, 2023. See also the discussion under “Other contingencies” in Note 11. The Company recordedcompensation expense with respect to the contingent cash award of approximately $1 million for the year endedFebruary 29, 2020 (February 28, 2019 - $1 million). The liability recorded in respect to the award was $1 million as atFebruary 29, 2020 and is included within accrued liabilities (February 28, 2019 - $1 million).
Deferred share units
The Company issued 270,164 DSUs in the year ended February 29, 2020. There were 1.1 million DSUs outstanding as atFebruary 29, 2020 (February 28, 2019 - 0.8 million). The Company had a liability of $6 million in relation to the DSUPlan as at February 29, 2020 (February 28, 2019 - $7 million) included in accrued liabilities.
				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
9.	EARNINGS (LOSS) PER SHARE
	The following table sets forth the computation of basic and diluted earnings (loss) per share:
		For the Years Ended
			February 29, 2020	February 28, 2019		February 28, 2018
	Net income (loss) for basic and diluted earnings (loss) per share
	available to common shareholders		$		(152) $	93 $	405
	Less: Debentures fair value adjustment (1) (2)				(66)	(117)	—
	Add: interest expense on Debentures (1) (2)	23				24	—
	Net income (loss) for diluted earnings (loss) per share available to
	common shareholders		$		(195) $	— $	405
	Weighted average number of shares outstanding (000’s) - basic (3)				553,861			540,477	532,888
	Effect of dilutive securities (000’s)
	Stock-based compensation (4) (5)	—				11,308	12,998
	Conversion of Debentures (1) (2)				60,500	60,500	—
	Exchange shares from Cylance acquisition (6)	—				4,182	—
	Weighted average number of shares and assumed conversions (000’s)
	diluted				614,361			616,467	545,886
	Earnings (loss) per share - reported
	Basic		$		(0.27) $	0.17 $	0.76
	Diluted		$		(0.32) $	0.00 $	0.74
	______________________________
	(1) The Company has not presented the dilutive effect of the Debentures using the if-converted method in the calculation
	of diluted earnings (loss) per share for the year ended February 28, 2018, as to do so would be antidilutive. See Note 7for 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 29, 2020 and February 28, 2019. Accordingly, tocalculate diluted earnings (loss) per share, the Company adjusted net income (loss) by eliminating the fair valueadjustment made to the Debentures and interest expense incurred on the Debentures in the years ended February 29,2020 and February 28, 2019, and added the number of shares that would have been issued upon conversion to thediluted weighted average number of shares outstanding. See Note 7 for details on the Debentures.
	(3)	Includes approximately 2,802,067 common shares remaining to be issued in equal installments on the next two
	anniversary dates of the Cylance acquisition, in consideration for the acquisition in the year ended February 28, 2019.There are 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 earnings (loss) per share for the year endedFebruary 29, 2020, as to do so would be antidilutive.
	(5) The Company has 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 earnings (loss) per share for the years endedFebruary 28, 2019 and February 28, 2018. As at February 28, 2019, there were 8,985,836 options and 9,300,191 RSUsoutstanding that were in-the-money and may have a dilutive effect on earnings (loss) per share in future periods(February 28, 2018 - 790,918 options and 14,068,069 RSUs).
	(6) The Company has presented the dilutive effect of the exchange shares in connection with the Cylance acquisition
	completed on February 21, 2019 in the calculation of diluted earnings (loss) per share for the year ended February 28,2019. The remaining exchange shares are included in the calculation of weighted average number of sharesoutstanding for the year ended February 29, 2020 as noted in footnote 3 above.

									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
10. ACCUMULATED OTHER COMPREHENSIVE LOSS
	The components of accumulated other comprehensive loss are as follows:
		As at
			February 29, 2020	February 28, 2019	February 28, 2018
	Accumulated net unrealized gains (losses) on available-for-sale debt
	securities		$			— $	2	$		(7)
	Accumulated net unrealized losses on derivative instruments
	designated as cash flow hedges, net of tax			(1)	—		(1)
	Foreign currency cumulative translation adjustment			(9)	(7)		(1)
	Change in fair value from instruments-specific credit risk on
	Debentures					(22)		(14)	—
	Actuarial losses associated with other post-employment benefit
	obligations			(1)	(1)		(1)
	Accumulated other comprehensive loss		$			(33) $		(20) $	(10)
	As a result of the adoption of ASU 2016-01 in fiscal 2019, the Company reclassified $8 million in unrecognized losses onequity securities that had previously been recorded to other comprehensive income (loss), through a cumulative additionto deficit in the consolidated balance sheet as of March 1, 2018. The Company recognized approximately $14 million onthe change in fair value from instrument-specific credit risk that had previously been recorded to deficit through acumulative increase to accumulated other comprehensive loss in the consolidated balance sheet as of March 1, 2018.
	During the year ended February 29, 2020, nil gains (pre-tax and post-tax) associated with cash flow hedges werereclassified from AOCI into selling, marketing and administration expenses (February 28, 2019 - $3 million in gains).
11. COMMITMENTS AND CONTINGENCIES
(a) Letters of Credit
	The Company has $42 million in collateralized outstanding letters of credit in support of certain leasing arrangementsentered into in the ordinary course of business and in support of patent litigation in certain jurisdictions as of February 29,2020. 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. TheCompany is subject to a variety of claims (including claims related to patent infringement, purported class actions andother claims in the normal course of business) and may be subject to additional claims either directly or throughindemnities against claims that it provides to certain of its partners and customers. In particular, the industry in which theCompany competes has many participants that own, or claim to own, intellectual property, including participants that havebeen issued patents and may have filed patent applications or may obtain additional patents and proprietary rights fortechnologies similar to those used by the Company in its products. The Company has received, and may receive in thefuture, assertions and claims from third parties that the Company’s products infringe on their patents or other intellectualproperty rights. Litigation has been, and will likely continue to be, necessary to determine the scope, enforceability andvalidity of third-party proprietary rights or to establish the Company’s proprietary rights. Regardless of whether claimsagainst the Company have merit, those claims could be time-consuming to evaluate and defend, result in costly litigation,divert management’s attention and resources, subject the Company to significant liabilities and could have the othereffects that are described in greater detail under Part I, Item 1A “Risk Factors” for the fiscal year ended February 29,2020, which is included in the Company’s Annual Report on Form 10-K, including the risk factors entitled “Litigationagainst the Company may result in adverse outcomes” and “The Company could be found to have infringed on theintellectual property rights of others”.
	Management reviews all of the relevant facts for each claim and applies judgment in evaluating the likelihood and, ifapplicable, the amount of any potential loss. Where a potential loss is considered probable and the amount is reasonablyestimable, provisions for loss are made based on management’s assessment of the likely outcome. Where a range of losscan be reasonably estimated with no best estimate in the range, the Company records the minimum amount in the range.
												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
The Company does not provide for claims for which the outcome is not determinable or claims for which the amount ofthe loss cannot be reasonably estimated. Any settlements or awards under such claims are provided for when reasonablydeterminable.
As of February 29, 2020, there are no material claims outstanding for which the Company has assessed the potential lossas both probable to result and reasonably estimable; therefore, no accrual has been made. Further, there are claimsoutstanding for which the Company has assessed the potential loss as reasonably probable to result; however, an estimateof the amount of loss cannot reasonably be made. There are many reasons that the Company cannot make theseassessments, including, among others, one or more of the following: the early stages of a proceeding does not require theclaimant to specifically identify the patent claims that have allegedly been infringed or the products that are alleged toinfringe; damages sought are unspecified, unsupportable, unexplained or uncertain; discovery has not been started or isincomplete; the facts that are in dispute are highly complex (e.g., once a patent is identified, the analysis of the patent anda comparison to the activities of the Company is a labour-intensive and highly technical process); the difficulty ofassessing novel claims; the parties have not engaged in any meaningful settlement discussions; the possibility that otherparties may share in any ultimate liability; and the often slow pace of litigation.
Though they do not meet the test for accrual described above, the Company has included the following summaries ofcertain of its legal proceedings that it believes may be of interest to its investors.
Between October and December 2013, several purported class action lawsuits and one individual lawsuit were filedagainst the Company and certain of its former officers in various jurisdictions in the U.S. and Canada alleging that theCompany and certain of its officers made materially false and misleading statements regarding the Company’s financialcondition 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 SouthernDistrict 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 forreconsideration and for leave to file an amended complaint on November 13, 2015. On August 24, 2016, the U.S. Court ofAppeals for the Second Circuit affirmed the District Court order dismissing the complaint, but vacated the order denyingleave to amend and remanded to the District Court for further proceedings in connection with the plaintiffs’ request forleave 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 theSecond Amended Complaint on March 19, 2018. During the first quarter of fiscal 2019, the U.S. class actions lawsuitproceeded to discovery. Fact discovery was completed on January 31, 2020, and expert discovery is scheduled to becompleted on June 29, 2020. On August 2, 2019, the Magistrate Judge issued a Report and Recommendation that theCourt grant the defendants’ motion for judgment on the pleadings dismissing the claims of additional plaintiffs Cho andUlug. On September 24, 2019, the District Court Judge accepted the Magistrate Judge’s recommendation and dismissedthe claims of Cho and Ulug against all defendants. On October 17, 2019, Cho and Ulug filed a Notice of Appeal. All otherproceedings, including plaintiffs’ pending motion for class certification but excluding fact and expert discovery, arecurrently suspended pending the decision of the Second Circuit Court of Appeals in Arkansas Teachers RetirementSystem et al. v. Goldman Sachs Group, Inc., et al., which involves an issue relevant to the motion for class certification.
On July 23, 2014, the plaintiffs in the putative Ontario class action filed a motion for certification and leave to pursuestatutory misrepresentation claims. On November 16, 2015, the Ontario Superior Court of Justice issued an order grantingthe plaintiffs’ motion for leave to file a statutory claim for misrepresentation. On December 2, 2015, the Company filed anotice of motion seeking leave to appeal this ruling. On January 22, 2016, the Court postponed the hearing on theplaintiffs’ certification motion to an undetermined date after asking the Company to file a motion to dismiss the claims ofthe U.S. plaintiffs for forum non conveniens. Before that motion was heard, the parties agreed to limit the class topurchasers who reside in Canada or purchased on the Toronto Stock Exchange. On November 15, 2018, the Court deniedthe Company’s motion for leave to appeal the order granting the plaintiffs leave to file a statutory claim formisrepresentation. On February 5, 2019, the Court entered an order certifying a class comprised persons (a) whopurchased BlackBerry common shares between March 28, 2013, and September 20, 2013, and still held at least some ofthose shares as of September 20, 2013, and (b) who acquired those shares on a Canadian stock exchange or acquired thoseshares on any other stock exchange and were a resident of Canada when the shares were acquired. Notice of classcertification was published on March 6, 2019. The Company filed its Statement of Defence on April 1, 2019, anddiscovery is proceeding.
				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
On February 15, 2017, a putative employment class action was filed against the Company in the Ontario Superior Court ofJustice. The Statement of Claim alleges that actions the Company took when certain of its employees decided to acceptoffers 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 lawtermination entitlements; (ii) punitive or breach of duty of good faith damages of CAD$20,000,000, or such other amountas the Court finds appropriate, (iii) pre- and post- judgment interest, (iv) attorneys’ fees and costs, and (v) such other reliefas the Court deems just. The Court granted the plaintiffs’ motion to certify the class action on May 27, 2019. TheCompany commenced a motion for leave to appeal the certification order on June 11, 2019. The Court denied the motionfor leave to appeal on September 17, 2019.
On February 4, 2019, a putative employment class action and California Private Attorney General Act claim was filedagainst the Company in the San Joaquin County Superior Court alleging the Company (i) failed to provide itemized wagestatements in violation of California Labor Code Section 226(a); and (ii) failed to pay all wages due at termination inviolation of California Labor Code Section 201. The complaint seeks statutory penalties, injunctive relief, interest, costs,and attorneys’ fees. The Company filed its answer denying the allegations in the complaint on March 18, 2019, anddiscovery is proceeding. On August 22, 2019, the Company filed a Motion for Summary Adjudication of the namedplaintiff’s wage statement claims. The Court took the motion under submission following oral argument on November 13,2019, and the motion remains pending. The Court denied the motion on January 21, 2020. The parties have reached atentative settlement and will provide notice of the settlement to the class after the Court enters its order preliminarilyapproving the settlement.
Other contingencies
In the first quarter of fiscal 2019, the Board approved the 2019 Executive Chair Grant. As part of the agreement, theCompany’s Executive Chair and CEO is entitled to receive a contingent performance-based cash award in the amount of$90 million that will become earned and payable should the 10-day average closing price of the Company’s commonshares on the New York Stock Exchange reach $30 before November 3, 2023. As the award is triggered by theCompany’s share price, it is considered stock-based compensation and accounted for as a share-based liability award. Asat February 29, 2020, the liability recorded in association with this award is approximately $1 million.
During the year ended February 29, 2020, the Company received $10 million in funds from claims filed with the Ministryof Innovation, Science and Economic Development Canada relating to its Strategic Innovation Fund program’sinvestment in BlackBerry QNX. A portion of this amount may be repayable in the future under certain circumstances ifcertain terms and conditions are not met by the Company, which is not probable at this time.
	(c)	Arbitration awards and settlements, net
Panasonic settlement agreement
In fiscal 2019, the Company and Panasonic Corporation entered into a settlement agreement whereby the Companyreceived approximately $12 million in connection with previously purchased components utilized by the legacy handhelddevices business. This amount, net of legal costs of approximately $3 million, was recorded within arbitration awards andsettlements, net on the consolidated statements of operations in the fourth quarter of fiscal 2019.
Qualcomm arbitration award
On April 20, 2016, the Company and Qualcomm Incorporated (“Qualcomm”) entered into an agreement to arbitrate adispute regarding whether Qualcomm’s agreement to cap certain royalties applied to payments made by the Companyunder a license between the parties. Following a joint stipulation by the parties, the arbitration panel issued a final awardon May 26, 2017 providing for the payment by Qualcomm to the Company of a total amount of $940 million includinginterest and attorneys’ fees, which was net of $22 million in certain royalties owed by the Company to Qualcomm forcalendar 2016 and the first quarter of calendar 2017 previously recorded within accrued liabilities on the consolidatedbalance sheets.
Approximately $815 million of the arbitration award represents the return of royalty overpayments. The Company alsorecorded on the consolidated statements of operations recoveries of legal expenses of approximately $8 million includedin selling, marketing and administration, and $139 million of interest income within investment income, net, for a totalgain associated with the award of $962 million.
					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
Nokia arbitration decision
On April 28, 2016, Nokia Corporation (“Nokia”) filed a Request for Arbitration with the International Chamber ofCommerce International Court of Arbitration. The dispute related to whether certain payments due under a patentagreement between the parties were in fact owed under the terms of the agreement. The arbitration panel issued adecision, finding in favour of Nokia. In the third quarter of fiscal 2018, the Company recorded $148 million in chargesassociated with the arbitration, consisting of $132 million within arbitration awards and settlements, net and $16 millionin interest expense within investment income, net on the consolidated statements of operations.
	(d) 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 frommultiple 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 variousagreements for the supply of components, and the manufacturing of its products; however, there can be no guarantee thatthe Company will be able to extend or renew these agreements on similar terms, or at all. Therefore, the Companyremains subject to risks of supply shortages.
	(e)	Indemnifications
The Company enters into certain agreements that contain indemnification provisions under which the Company could besubject to costs and damages, including in the event of an infringement claim against the Company or an indemnifiedthird party. Such intellectual property infringement indemnification clauses are generally not subject to any dollar limitsand remain in effect for the term of the Company’s agreements. To date, the Company has not encountered material costsas a result of such indemnifications.
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 andexecutive 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 maintainsliability 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 2020. See the Company’sManagement Information Circular for its 2019 annual meeting of shareholders for additional information regarding theCompany’s indemnification agreements with its current and former directors and executive officers.
	12. LEASES
The Company has operating and finance leases primarily for corporate offices, research and development facilities, datacenters and certain equipment. The Company’s leases have remaining lease terms of between one year and eight years,some of which may include options to extend the lease for up to 10 years, and some of which may include options toterminate the lease within one month.
The components of lease expense were as follows:
		For the Year Ended
		February 29, 2020
Operating lease cost, included in selling, marketing and administration		$	33
Finance lease cost
Amortization of ROU assets, included in amortization		$	2
Interest on lease liabilities, included in investment income, net—
Total finance lease cost		$	2
							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
Supplemental cash flow information related to leases was as follows:
	For the Year Ended
	February 29, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Cash used in operating activities related to operating lease payments	$	40
Cash used in financing activities related to finance lease payments		2
During the year ended February 29, 2020, the Company entered into $1 million in lease obligations and recognized acorresponding ROU asset of $1 million. During the year ended February 29, 2020, the Company incurred losses of$8 million on LLA impairment of ROU assets (cost of $18 million, accumulated amortization of $10 million, and a netbook value of approximately $8 million). The Company also had sublease income of $2 million and incurred $2 million inshort-term lease costs during the year ended February 29, 2020.
Supplemental consolidated balance sheet information related to leases was as follows:
	As at
	March 1, 2019
			February 29, 2020	(adoption)
Operating leasesOperating lease assets
Operating lease ROU assets			$	124 $	161
Operating lease liabilities
Accrued liabilities			$	31 $	36
Operating lease liabilities				120	153
Total operating lease liabilities			$	151 $	189
Finance leases Finance lease assets
Property, plant and equipment			$	5 $	8
Accumulated amortization	(4)	(5)
Total finance lease assets			$	1 $	3
Finance lease liabilities
Accrued liabilities			$	1 $	2
Other long-term liabilities—	1
Total finance lease liabilities			$	1 $	3
					As at
	February 29, 2020
Weighted average remaining lease term
Operating leases					5.5 years
Finance leases					1.3 years
Weighted average discount rate
Operating lease		3.6 %
Finance leases		2.2 %
									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
Maturities of undiscounted lease liabilities were as follows:
	As at
	February 29, 2020
		Operating Leases	Finance Leases
Fiscal year 2021		$	36 $			1
Fiscal year 2022	34			—
Fiscal year 2023	28			—
Fiscal year 2024	22			—
Fiscal year 2025	17			—
Thereafter	29			—
Total future minimum lease payments	166			1
Less:
Imputed interest	(15)			—
Total		$	151 $			1
Supplemental Information for Comparative Periods
As of February 28, 2019, prior to the adoption of ASC 842, future minimum annual lease payments related to operatingleases were as follows:
2020			$	36
2021				28
2022				27
2023				27
2024				20
Thereafter				47
			$	185
For the year ended February 28, 2019, the Company incurred rental expense of $31 million (February 28, 2018 -$32 million).
					13. REVENUE AND SEGMENT DISCLOSURES
Revenue
The Company disaggregates revenue from contracts with customers based on geographical regions, timing of revenuerecognition, and the major product and service types as described in Note 1.
									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
The Company’s revenue, classified by major geographic region in which the Company’s customers are located, was asfollows:
	For the Years Ended
		February 29, 2020	(1)	February 28, 2019			(1)	February 28, 2018	(2)
North America (3)		743	71.4 %	599			66.2 %	540	58.0 %
Europe, Middle East and Africa		221	21.3 %	222			24.6 %	278	29.8 %
Other regions		76	7.3 %	83			9.2 %	114	12.2 %
Total		$	1,040	100.0 % $	904			100.0 % $	932	100.0 %
______________________________
(	1) As reported under ASC 606.
(2) Comparative information has not been restated and continues to be reported under the accounting standards in effect for
the year ended February 28, 2018.
(3) 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.
Total revenue, classified by product and service type (see Note 1), was as follows:
							For the Years Ended
			February 29, 2020	(1)						February 28, 2019	(1)	February 28, 2018	(2)
IoT			$	540 $				554 $	551
BlackBerry Cylance	151				5	—
Licensing	328				286	196
Other	21				59	185
Total			$	1,040 $				904 $	932
______________________________
(1) As reported under ASC 606.
(2) Comparative information has not been restated and continues to be reported under the accounting standards in effect for
the year ended February 28, 2018.
Revenue, classified by timing of recognition, was as follows:
				For the Year Ended
				February 29, 2020	February 28, 2019
Products and services transferred over time							$	512 $	488
Products and services transferred at a point in time					528	416
Total							$	1,040 $	904
											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
Revenue contract balances
The following table sets forth the activity in the Company’s revenue contract balances for the fiscal year endedFebruary 29, 2020:
	Accounts	Deferred	Deferred
	Receivable	Revenue	Commissions
Opening balance as at February 28, 2019, as corrected	$			252 $	389 $	23
Increases due to invoicing of new or existing contracts, associated
contract acquisition costs, or other				761	585	37
Decrease due to payment, fulfillment of performance obligations, or
other				(746)	(601)	(32)
Increase (decrease), net				15	(16)	5
Closing balance as at February 29, 2020	$			267 $	373 $	28
Transaction price allocated to the remaining performance obligations
The table below discloses the aggregate amount of the transaction price allocated to performance obligations that areunsatisfied or partially unsatisfied as at February 29, 2020 and the time frame in which the Company expects to recognizethis revenue. The disclosure includes estimates of variable consideration, except when the variable consideration is asales-based or usage-based royalty promised in exchange for a license of intellectual property.
	As at February 29, 2020
							Less than 12
							Months	12 to 24 Months	Thereafter	Total
Remaining performance obligations							$	279 $	101 $	43 $	423
Revenue recognized for performance obligations satisfied in prior periods
For the fiscal year ended February 29, 2020, $1 million in revenue was recognized relating to performance obligationssatisfied in a prior period (fiscal year ended February 28, 2019 - $11 million, in revenue recognized relating to the legacyhandheld devices business).
Segment Disclosures
The Company reports segment information based on the “management” approach. The management approach designatesthe internal reporting used by the Chief Operating Decision Maker (“CODM”) for making decisions and assessingperformance as a source of the Company’s reportable operating segments. The CODM, who is the Executive Chair andCEO, reviews financial information, makes decisions and assesses the performance of the Company as a single operatingsegment.
Property, plant and equipment, intangible assets, operating lease ROU assets and goodwill, classified by geographicsegments in which the Company’s assets are located, were as follows:
	As at
									February 29, 2020	February 28, 2019
										Property, Plant and
										Equipment, Intangible
										Assets, Operating	Property, Plant and
										Lease ROU Assets and	Equipment, Intangible
										Goodwill	Total Assets	Assets and Goodwill	Total Assets
Canada										$	374 $	657 $	396 $		667
United States							2,132	3,071	2,178	3,099
Other							40	160	42				202
										$	2,546 $	3,888 $	2,616 $	3,968
							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
Information About Major Customers
There was one customer that comprised 13% of the Company’s revenue in fiscal 2020 (fiscal 2019 - one customer thatcomprised more than 10%; fiscal 2018 - no customers that comprised more than 10%).
	14. CASH FLOW AND ADDITIONAL INFORMATION
	(a)	Certain consolidated statements of cash flow information related to interest and income taxes paid is summarized asfollows:
		For the Years Ended
			February 29, 2020	February 28, 2019		February 28, 2018
Interest paid during the year			$	23 $			24 $	39
Income taxes paid during the year		8		6		6
Income tax refunds received during the year		9			15	7
	(b) Additional Information
Advertising expense, which includes media, agency and promotional expenses totaling $39 million (February 28, 2019 -$22 million; February 28, 2018 - $23 million) is included in selling, marketing and administration expenses for the fiscalyear ended February 29, 2020.
Selling, marketing and administration expenses for the fiscal year ended February 29, 2020 included nil with respect toforeign exchange gain or losses, net of foreign exchange hedging (February 28, 2019 - gain of $2 million; February 28,2018 - losses of nil).
Foreign exchange
The Company is exposed to foreign exchange risk as a result of transactions in currencies other than its functionalcurrency, the U.S. dollar. The majority of the Company’s revenue in fiscal 2020 was transacted in U.S. dollars. Portionsof the revenue were denominated in Canadian dollars, euros and British pounds. Other expenses, consisting mainly ofsalaries 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 29, 2020, approximately 12% of cash and cash equivalents, 17% ofaccounts receivable and 17% of accounts payable were denominated in foreign currencies (February 28, 2019 – 9%, 29%and 4%, respectively). These foreign currencies primarily include the Canadian dollar, euro and British pound. As part ofits risk management strategy, the Company maintains net monetary asset and/or liability balances in foreign currenciesand engages in foreign currency hedging activities using derivative financial instruments, including currency forwardcontracts 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, theCompany is exposed to interest rate risk as a result of holding investments of varying maturities. The fair value ofinvestments, as well as the investment income derived from the investment portfolio, will fluctuate with changes inprevailing interest rates. The Company has also issued the Debentures as described in Note 7 with a fixed 3.75% interestrate. The fair value of the Debentures will fluctuate with changes in prevailing interest rates. Consequently, the Companyis exposed to interest rate risk as a result of the Debentures. The Company does not currently utilize interest ratederivative instruments to hedge its investment portfolio.
Credit risk
The Company is exposed to market and credit risk on its investment portfolio. The Company reduces this risk byinvesting in liquid, investment-grade securities and by limiting exposure to any one entity or group of related entities. Asat February 29, 2020, no single issuer represented more than 8% of the total cash, cash equivalents and investments(February 28, 2019 - no single issuer represented more than 16% of the total cash, cash equivalents and investments),representing cash balances at one of the Company’s banking counterparties.
The Company maintains Credit Support Annexes (“CSAs”) with several of its counterparties. These CSAs require theoutstanding net position of all contracts be made whole by the paying or receiving of collateral to or from the
										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
counterparties on a daily basis, subject to exposure and transfer thresholds. As at February 29, 2020, the Company had$1 million in collateral posted with counterparties (February 28, 2019 - nil collateral posted or held).
Liquidity risk
Cash, cash equivalents, and investments were approximately $990 million as at February 29, 2020. The Company’smanagement remains focused on maintaining appropriate cash balances, efficiently managing working capital balancesand managing the liquidity needs of the business. Based on its current financial projections, the Company believes itsfinancial resources, together with expected future operating cash generating and operating expense reduction activities andaccess to other potential financing arrangements, should be sufficient to meet funding requirements for current financialcommitments and future operating expenditures not yet committed, and should provide the necessary financial capacityfor the foreseeable future.
				110