Segment Information (Notes)
|9 Months Ended|
Jun. 28, 2020
|Segment Reporting [Abstract]|
|Segment Information||Segment Information
We are organized on the basis of products and services and have three reportable segments. We conduct business primarily through our QCT semiconductor business and our QTL licensing business. QCT develops and supplies integrated circuits and system software based on CDMA, OFDMA and other technologies for use in mobile devices, wireless networks, devices used in the Internet of Things (IoT), broadband gateway equipment, consumer electronic devices and automotive telematics and infotainment systems. QTL grants licenses or otherwise provides rights to use portions of our intellectual property portfolio, which includes certain patent rights essential to and/or useful in the manufacture, sale or use of certain wireless products. Our QSI (Qualcomm Strategic Initiatives) reportable segment makes strategic investments and includes revenues and related costs associated with development contracts with an investee. We also have nonreportable segments, including QGOV (Qualcomm Government Technologies) and other technology and service initiatives.
We evaluate the performance of our segments based on revenues and earnings (loss) before income taxes (EBT). Segment EBT includes the allocation of certain corporate expenses to the segments, including depreciation and amortization expense related to unallocated corporate assets. Certain income and charges are not allocated to segments in our management reports because they are not considered in evaluating the segments’ operating performance. Unallocated income and charges include certain interest expense, certain net investment income, certain share-based compensation, gains and losses on our deferred compensation plan liabilities and related assets and certain research and development expenses, selling, general and administrative expenses and other expenses or income that were deemed to be not directly related to the businesses of the segments. Additionally, unallocated charges include recognition of the step-up of inventories and property, plant and equipment to fair value, amortization of certain intangible assets and certain other acquisition-related charges, third-party acquisition and integration services costs and certain other items, which may include major restructuring and restructuring-related costs, goodwill and long-lived asset impairment charges and awards, settlements and/or damages arising from legal or regulatory matters.
The table below presents revenues, EBT and total assets for reportable segments (in millions):
Segment assets are comprised of accounts receivable and inventories for all reportable segments other than QSI. QSI segment assets include certain non-marketable equity instruments, receivables and other investments. Total segment assets differ from total assets on a consolidated basis as a result of unallocated corporate assets primarily comprised of certain cash, cash equivalents, marketable and non-marketable securities, property, plant and equipment, deferred tax assets, goodwill, intangible assets, operating lease assets, noncurrent income taxes receivables, deferred compensation plan assets and assets of nonreportable segments.
QCT accounts receivable decreased by 37% in the first nine months of fiscal 2020 from $908 million to $571 million, primarily driven by an increase in the customer incentive amounts recorded as a reduction to accounts receivable. QCT inventories increased by 67% in the first nine months of fiscal 2020 from $1.40 billion to $2.34 billion, primarily driven by the ramp in 5G and certain near-term changes in the timing of customer demand resulting from the impacts of COVID-19.
QTL accounts receivable decreased by 19% in the first nine months of fiscal 2020 from $1.54 billion to $1.25 billion, primarily driven by scheduled payments received from Guangdong OPPO Mobile Telecommunications Corp., Ltd. (Oppo) and BBK Communication Technology Co., Ltd. (vivo) under the previously disclosed agreements reached requiring payment of certain amounts due under the prior license agreements that expired on March 31, 2020 (for which certain of such amounts were previously withheld while good faith negotiations occurred), as well as a decrease in QTL revenues in the third quarter of fiscal 2020. The remaining amounts from Oppo and vivo are due in the near term in accordance with previously agreed upon payment schedules.
Reconciling items for revenues and EBT in the previous table were as follows (in millions):
Unallocated revenues in the three and nine months ended June 30, 2019 were comprised of licensing revenues resulting from the settlement with Apple and its contract manufacturers in April 2019 and were not allocated to our segments in our management reports because they were not considered in evaluating segment results.
The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef