Electronic Arts 2004 Annual Report Download - page 55

Interest and other income, net, in Ñscal 2003 decreased from Ñscal 2002 primarily due to an other-than-
temporary impairment of investments in aÇliates of $10.6 million in Ñscal 2003, partially oÅset by higher
interest income in Ñscal 2003 of $5.1 million, as a result of higher average cash balances during the Ñscal year.
Income Taxes
Income taxes for Ñscal years 2003 and 2002 (in thousands):
March 31, EÅective March 31, EÅective
2003 Tax Rate 2002 Tax Rate % Change
$143,049 31.0% $45,969 31.0% 211.2%
Our eÅective tax rate was 31.0 percent for Ñscal 2003 and Ñscal 2002.
Net Income
Net income for Ñscal years 2003 and 2002 (in thousands):
March 31, % of Net March 31, % of Net
2003 Revenue 2002 Revenue $ Change % Change
$317,097 12.8% $101,509 5.9% $215,588 212.4%
Reported net income increased in Ñscal 2003 compared to Ñscal 2002 primarily due to the reasons discussed
above. Although the dollar amount of expenses rose in Ñscal 2003 versus Ñscal 2002, net income as a
percentage of net revenue increased to 12.8 percent versus 5.9 percent as expenses grew at a slower rate than
did our net revenue.
Impact of Recently Issued Accounting Standards
In January 2003, the Financial Accounting Standards Board (""FASB'') issued Interpretation No. 46
(""FIN 46''), ""Consolidation of Variable Interest Entities''. This interpretation of Accounting Research
Bulletin No. 51, ""Consolidated Financial Statements,'' addresses consolidation by business enterprises of
variable interest entities (""VIEs'') that either (i) do not have suÇcient equity investment at risk to permit the
entity to Ñnance its activities without additional subordinated Ñnancial support, or (ii) are owned by equity
investors who lack an essential characteristic of a controlling Ñnancial interest. This interpretation applies
immediately to VIEs created after January 31, 2003. With regard to VIEs already in existence prior to
February 1, 2003, the implementation of FIN 46 was delayed and currently applies to the Ñrst Ñscal year or
interim period beginning after December 15, 2003. FIN 46 requires disclosure of VIEs in Ñnancial statements
issued after January 31, 2003, if it is reasonably possible that as of the transition date (i) we will be the
primary beneÑciary of an existing VIE that will require consolidation, or (ii) we will hold a signiÑcant variable
interest in, or have signiÑcant involvement with, an existing VIE. We adopted FIN 46 in the quarter ended
December 31, 2003; however, it did not have a material impact on our consolidated Ñnancial position or
results of operations.
In January 2003, the Emerging Issues Task Force reached consensus on Issue No. 00-21 (""EITF 00-21''),
""Revenue Arrangements with Multiple Deliverables''. EITF 00-21 provides guidance on how to determine
whether an arrangement involving multiple deliverables requires that such deliverables be accounted for
separately. EITF 00-21 allows for prospective adoption for arrangements entered into after June 15, 2003 or
adoption via a cumulative eÅect of a change in accounting principle. We adopted EITF 00-21 in the quarter
ended June 30, 2003; however, it did not have a material impact on our consolidated Ñnancial position or
results of operations.
In March 2004, the Emerging Issues Task Force ratiÑed the consensus reached on paragraphs 6 through 23 of
Issue No. 03-01 (""EITF 03-1''), ""The Meaning of Other-Than-Temporary Impairment and Its Application
to Certain Investments''. EITF 03-1 requires that certain quantitative and qualitative disclosures should be
required for debt and marketable equity securities classiÑed as available-for-sale or held-to-maturity under
SFAS No. 115, ""Accounting for Certain Investments in Debt and Equity Securities'' and SFAS No. 124,
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