Electronic Arts 1999 Annual Report Download - page 30

(f) Inventories
Inventories are stated at the lower of cost or market. Inventories at March 31, 1999 and 1998 consisted of:
(In thousands) 1999 1998
Raw materials and work in process $ 2,983 $ 2,392
Finished goods 19,393 17,234
$ 22,376 $ 19,626
(g) Advertising Costs
The Company generally expenses advertising costs as incurred, except for production costs associated with media
campaigns which are deferred and charged to expense at the first run of the ad. Cooperative advertising with dis-
tributors and retailers is accrued when revenue is recognized. Cooperative advertising credits are reimbursed when
qualifying claims are submitted. For the fiscal years ended March 31, 1999, 1998 and 1997, advertising expenses
totaled approximately $72,437,000, $55,090,000 and $36,159,000, respectively.
(h) Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated using the accelerated and straight-line methods over
the following useful lives:
Buildings 20 to 25 years
Computer equipment 3 to 7 years
Furniture and equipment 3 to 7 years
Leasehold improvements Lesser of the lease terms or the estimated
useful lives of the improvements
(i) Intangible Assets
Intangible assets net of amortization at March 31, 1999 and 1998, of $90,682,000, and $2,148,000, respectively, include
goodwill, costs of obtaining product technology and noncompete covenants which are amortized using the straight-
line method over the lesser of their estimated useful lives or the agreement terms, typically from two to twelve years.
Amortization expense for fiscal years ended March 31, 1999, 1998 and 1997 was $5,880,000, $692,000, and $654,000,
respectively. The Company assesses the recoverability of goodwill by determining whether the carried value of the assets
may be recovered through estimated future cash flows.
(j) Income Taxes
Income tax expense is based on reported earnings before income taxes. Deferred income taxes reflect the impact of
temporary differences between assets and liabilities recognized for financial reporting purposes and such amounts
recognized for tax purposes.
(k) Foreign Currency Translation
For each of the Company’s foreign subsidiaries the functional currency is its local currency. Assets and liabilities of
foreign operations are translated into U.S. dollars using current exchange rates, and revenues and expenses are translated
into U.S. dollars using average exchange rates. The effects of foreign currency translation adjustments are deferred and
included as a component of accumulated other comprehensive income (loss) in stockholders’ equity.