Electronic Arts 2000 Annual Report Download - page 46

(F) INVENTORIES Inventories are stated at the lower of cost or market. Inventories at March 31, 2000 and 1999 consisted of:
2000 1999
(in thousands)
Raw materials and work in process $ 920 $ 2,983
Finished goods 22,066 19,393
$22,986 $ 22,376
(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, 2000, 1999 and 1998, advertising expenses totaled approximately
$87,377,000, $72,437,000 and $55,090,000, 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 and software 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, 2000 and 1999, of $117,236,000, and $90,682,000,
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, 2000, 1999 and 1998 was $11,989,000, $5,880,000, and
$692,000, 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 cur-
rency. 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 adjust-
ments are deferred and included as a component of accumulated other comprehensive income (loss) in stockholders’ equity.
Foreign currency transaction gains and losses are a result of the effect of exchange rate changes on transactions denomi-
nated in currencies other than the functional currency. Included in interest and other income in the statements of income are
foreign currency transaction losses of $1,781,000, $1,168,000 and $517,000, for the fiscal years ended March 31, 2000, 1999
and 1998, respectively.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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