Intel 2013 Annual Report Download - page 66

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Revenue from license agreements with our McAfee business generally includes service and support agreements for
which the related revenue is deferred and recognized ratably over the performance period. Revenue derived from
online subscription products is deferred and recognized ratably over the performance period. Professional services
revenue is recognized as services are performed or, if required, upon customer acceptance. For arrangements with
multiple elements, including software licenses, maintenance, and/or services, revenue is allocated across the
separately identified deliverables and may be recognized or deferred. When vendor-specific objective evidence
(VSOE) does not exist for undelivered elements such as maintenance and support, the entire arrangement fee is
recognized ratably over the performance period. Direct costs, such as costs related to revenue-sharing and royalty
arrangements associated with license arrangements, as well as component costs associated with product revenue
and sales commissions, are deferred and amortized over the same period that the related revenue is recognized.
We record deferred revenue offset by the related cost of sales on our consolidated balance sheets as deferred
income.
Advertising
Cooperative advertising programs reimburse customers for marketing activities for certain of our products, subject
to defined criteria. We accrue cooperative advertising obligations and record the costs at the same time that the
related revenue is recognized. We record cooperative advertising costs as marketing, general and administrative
(MG&A) expenses to the extent that an advertising benefit separate from the revenue transaction can be identified
and the fair value of that advertising benefit received is determinable. We record any excess in cash paid over the
fair value of the advertising benefit received as a reduction in revenue. Advertising costs, including direct marketing
costs, recorded within MG&A expenses were $1.9 billion in 2013 ($2.0 billion in 2012 and $2.1 billion in 2011).
Employee Equity Incentive Plans
We have employee equity incentive plans, which are described more fully in “Note 19: Employee Equity Incentive
Plans.” We use the straight-line attribution method to recognize share-based compensation over the service period
of the award. Upon exercise, cancellation, forfeiture, or expiration of stock options, or upon vesting or forfeiture of
restricted stock units (RSUs), we eliminate deferred tax assets for options and restricted stock units with multiple
vesting dates for each vesting period on a first-in, first-out basis as if each vesting period were a separate award.
Income Taxes
We compute the provision for income taxes using the asset and liability method, under which deferred tax assets
and liabilities are recognized for the expected future tax consequences of temporary differences between the
financial reporting and tax bases of assets and liabilities, and for operating losses and tax credit carryforwards. We
measure deferred tax assets and liabilities using the currently enacted tax rates that apply to taxable income in
effect for the years in which those tax assets are expected to be realized or settled. We record a valuation
allowance to reduce deferred tax assets to the amount that it is believed more likely than not to be realized.
We recognize tax benefits from uncertain tax positions only if that tax position is more likely than not to be sustained
on examination by the taxing authorities, based on the technical merits of the position. We then measure the tax
benefits recognized in the financial statements from such positions based on the largest benefit that has a greater
than 50% likelihood of being realized upon ultimate settlement. We recognize interest and penalties related to
unrecognized tax benefits within the provision for taxes on the consolidated statements of income. For more
information about income taxes, see “Note 24: Income Taxes.”
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INTEL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)