Electronic Arts 2006 Annual Report Download - page 143

ELECTRONIC ARTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
We develop, market, publish and distribute interactive software games that are playable by consumers on
home video game consoles (such as the Sony PlayStation» 2, Microsoft Xbox» and Xbox 360
TM
, and
Nintendo GameCube
TM
), personal computers, mobile platforms (including cellular handsets and hand-held
game players such as the Nintendo DS
TM
and the PlayStation» Portable ""PSP
TM
'') and online, over the
Internet and other proprietary online networks. Some of our games are based on content that we license
from others (e.g., Madden NFL Football, The Godfather and FIFA Soccer), and some of our games are
based on our own wholly-owned intellectual property (e.g., The Sims
TM
, Need for Speed
TM
and
BLACK
TM
). Our goal is to publish titles with mass-market appeal, which often means translating and
localizing them for sale in non-English speaking countries. In addition, we also attempt to create software
game ""franchises'' that allow us to publish new titles on a recurring basis that are based on the same
property. Examples of this franchise approach are the annual iterations of our sports-based products (e.g.,
Madden NFL Football, NCAA» Football and FIFA Soccer), wholly-owned properties that can be
successfully sequeled (e.g., The Sims, Need for Speed and BattleÑeld) and titles based on long-lived
literary movie properties (e.g. Lord of the Rings and Harry Potter).
A summary of our signiÑcant accounting policies applied in the preparation of our Consolidated Financial
Statements follows:
(a) Consolidation
The accompanying Consolidated Financial Statements include the accounts of Electronic Arts Inc. and its
domestic and foreign wholly-owned and majority-owned subsidiaries. All signiÑcant intercompany balances
and transactions have been eliminated in consolidation.
(b) Fiscal Year
Our Ñscal year is reported on a 52 or 53-week period that, historically, has ended on the Ñnal Saturday of
March in each year. Beginning with the Ñscal year ended March 31, 2006, our Ñscal year ends on the
Saturday nearest March 31. As a result, Ñscal 2006 contained 53 weeks with the Ñrst quarter containing
14 weeks. Our results of operations for the Ñscal years March 31, 2006, 2005 and 2004 contain the
following number of weeks:
Annual Report
Fiscal Years Ended Number of Weeks Fiscal Period End Date
March 31, 2006 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 53 weeks April 1, 2006
March 31, 2005 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 52 weeks March 26, 2005
March 31, 2004 ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 52 weeks March 27, 2004
For simplicity of presentation, all Ñscal periods are treated as ending on a calendar month end.
(c) ReclassiÑcations
Certain prior-year amounts have been reclassiÑed to conform to the Ñscal 2006 presentation.
(d) Use of Estimates
The preparation of Ñnancial statements in conformity with accounting principles generally accepted in the
United States requires us to make estimates and assumptions that aÅect the reported amounts of assets
and liabilities, contingent assets and liabilities, and revenue and expenses during the reporting period. Such
estimates include sales returns and allowances, provisions for doubtful accounts, accrued liabilities, income
taxes, estimates regarding the recoverability of prepaid royalties and royalty commitments, inventories,
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