Company: ISRG
Filing Date: 2025-01-31
Form Type: 10-K
Source: 0001035267-25-000017
Chunk: 150

Company: INTUITIVE SURGICAL INC
Filing Date: 2025-01-31
Form: 10-K
Item: Item 8
Chunk 150
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 one-year warranty. Warranty costs were not material for the periods presented.Instruments and accessories.  Revenue from sales of instruments and accessories is recognized when control is transferred to the customers, which generally occurs at the time of shipment but also could occur at the time of delivery, depending on the customer arrangement. The Company generally allows its customers in the normal course of business to return unused products for a limited period of time subsequent to the initial purchase and records an allowance against revenue for estimated returns.Service.  Service revenue is recognized over the term of the service period, as the customer benefits from the services throughout the service period. Revenue related to services performed on a time-and-materials basis is recognized when performed.

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Transactions involving system trade-insCustomers can negotiate to trade in their older systems for a credit towards the purchase of a newer generation system. Such trade-in transactions are generally not based on any pre-existing rights granted by the Company and are generally negotiated separately based on the circumstances at the time of the trade-in and based on the then-fair value of the underlying system. Accordingly, such trade-ins are generally not considered separate performance obligations.When a specified-price trade-in right is granted at the time of a system purchase, it generally provides for a trade-in credit that declines over time and requires the customer to enter into a new purchase agreement to exercise that right. The Company accounts for such rights as a guarantee and reduces the total consideration by the fair value of that guarantee. The remaining consideration is then allocated to each performance obligation based on their relative fair value. The liability recognized for these guarantees was not material for any of the years presented.Traded-in systems can generally be reconditioned and resold. The Company accounts for the fair value of the traded-in system as additional consideration. When there is no market for the traded-in system, no value is assigned. The value of the traded-in system is reported as a component of inventory until resold.Purchases of system componentsCustomers have the opportunity to add additional features to their systems at a price that is separately negotiated, for example, by adding a second surgeon console for use with the da Vinci surgical system. Revenue is recognized when the component level features have been provided and all revenue recognition criteria are met.Assets Recognized from the Cost to Obtain a Contract with a CustomerThe Company has determined that certain sales incentives provided to the Company’s sales team are required to be capitalized when the Company expects to generate future economic benefits from the related revenue-generating contracts subsequent to the initial sales transaction. When determining the economic life of the