Electronic Arts 2006 Annual Report Download - page 126

subsequent to adoption SFAS No. 123R. Accordingly, we may adopt either the method prescribed under
SFAS No. 123R or the one prescribed under FSP FAS No. 123(R)-3. We have not yet determined which
method to adopt. In February 2006, the FASB issued FSP FAS No. 123(R)-4, ""ClassiÑcation of Options
and Similar Instruments Issued As Employee Compensation That Allow for Cash Settlement upon the
Occurrence of a Contingent Event'', which amends certain paragraphs in SFAS No. 123R. FSP
FAS No. 123(R)-4 addresses situations when a company has option plans that require the company to
settle outstanding options in cash upon the occurrence of certain contingent events. Although we are
required to apply FSP FAS No. 123(R)-4 when we initially adopt SFAS No. 123R, we do not expect it
to impact our Consolidated Financial Statements.
In May 2005, the FASB issued SFAS No. 154, ""Accounting Changes and Error Corrections Ì A
Replacement of APB Opinion No. 20 and FASB Statement No. 3''. SFAS No. 154 changes the
requirements for the accounting and reporting of a change in accounting principle. Under previous
guidance, changes in accounting principle were recognized as a cumulative eÅect in the net income of the
period of the change. The new statement requires retrospective application of changes in accounting
principle, limited to the direct eÅects of the change, to prior periods' Ñnancial statements, unless it is
impracticable to determine either the period-speciÑc eÅects or the cumulative eÅect of the change.
Additionally, this Statement requires that a change in depreciation, amortization or depletion method for
long-lived, nonÑnancial assets be accounted for as a change in accounting estimate aÅected by a change in
accounting principle and that correction of errors in previously issued Ñnancial statements should be
termed a ""restatement''. SFAS No. 154 is eÅective for accounting changes and correction of errors made
in Ñscal years beginning after December 15, 2005. We do not believe that, upon adoption, SFAS No. 154
will have a material impact on our Consolidated Financial Statements, however, after adoption, if a change
in accounting principle is made, SFAS No. 154 could have a material impact on our Consolidated
Financial Statements.
In February 2006, the FASB issued SFAS No. 155, ""Accounting for Certain Hybrid Financial
Instruments Ì An Amendment of FASB Statements No. 133 and 140''. SFAS No. 155 (1) permits fair
value measurement for any hybrid Ñnancial instrument that contains an embedded derivative that
otherwise would require bifurcation, (2) clariÑes that interest-only strips and principal-only strips are not
subject to the requirements of SFAS No. 133, ""Accounting for Derivative Instruments and Hedging
Activities'', (3) establishes a requirement to evaluate interests in securitized Ñnancial assets to identify
interests that are freestanding derivatives or that are hybrid Ñnancial instruments that contain an embedded
derivative requiring bifurcation, (4) clariÑes that concentrations of credit risk in the form of subordination
are not embedded derivatives, and (5) amends SFAS No. 140, ""Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities Ì A Replacement of FASB Statement 125'' to
eliminate the prohibition on a qualifying special-purpose entity from holding a derivative Ñnancial
instrument that pertains to a beneÑcial interest other than another derivative Ñnancial instrument.
SFAS No. 155 is eÅective for all Ñnancial instruments acquired or issued for Ñscal years beginning after
September 15, 2006. We do not believe the adoption of SFAS No. 155 will have a material impact on our
Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
Year Ended
March 31, March 31, Increase/
2006 2005 (Decrease)
(In millions)
Cash and cash equivalents ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,242 $ 1,270 $ (28)
Short-term investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $1,030 $ 1,688 $ (658)
Marketable equity securities ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 160 140 20
Total ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ $2,432 $ 3,098 $ (666)
Percentage of total assets ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 55% 71%
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