Electronic Arts 2007 Annual Report Download - page 155

Criterion Software Group Ltd.
On October 19, 2004, we acquired all outstanding shares of Criterion Software Group Ltd. for an aggregate
purchase price of approximately $68 million, including transaction costs and the assumption of outstanding
stock options under certain Criterion stock option plans. Based in England, Criterion was a developer of video
games and a provider of middleware solutions for the game development and publishing industry. The results
of operations of Criterion and the estimated fair market values of the acquired assets and assumed liabilities
have been included in our Consolidated Financial Statements since the date of acquisition. The following table
summarizes the estimated fair values of assets acquired and liabilities assumed in connection with our
acquisition of Criterion for the fiscal year ended March 31, 2005 and the subsequent adjustment to the
purchase price allocation for the fiscal year ended March 31, 2006 (in millions):
Current assets . .................................................................. $21
Property and equipment, net ......................................................... 1
Long-term deferred tax asset ........................................................ 3
Acquired in-process technology ...................................................... 9
Stock-based employee compensation .................................................. 6
Goodwill ....................................................................... 23
Finite-lived intangibles ............................................................. 21
Liabilities ...................................................................... (16)
Total consideration .............................................................. $68
Except for acquired in-process technology which was expensed in our Consolidated Statement of Operations
upon consummation of the acquisition, the acquired finite-lived intangible assets are being amortized on a
straight-line basis over estimated lives ranging from two to four years.
Stock-based employee compensation represents the intrinsic value of certain unvested employee stock options
that were assumed as part of the transaction. The stock options were considered modified for accounting
purposes and were fully amortized over the remaining vesting period in our Consolidated Statement of
Operations for the year ended March 31, 2005.
(5) GOODWILL AND OTHER INTANGIBLE ASSETS
Goodwill information is as follows (in millions):
2007 2006
Year Ended
March 31,
Goodwill — beginning of year ................................................ $647 $153
Acquired .............................................................. 87 496
Purchase Accounting Adjustments
(1)
.......................................... (4) —
Effects of Foreign Currency Translation ........................................ 4 (2)
Goodwill — end of year ..................................................... $734 $647
(1)
During fiscal 2007, we adjusted the purchase price allocation including the allocation of goodwill related
to our acquisition of JAMDAT. As a result, we reduced goodwill and the liability balance assumed from
JAMDAT by $4 million.
SFAS No. 142, “Goodwill and Other Intangible Assets” requires that purchased goodwill and indefinite-lived
intangibles not be amortized. Rather, goodwill and indefinite-lived intangible assets are subject to at least an
annual assessment for impairment by applying a fair-value-based test.
SFAS No. 142 requires a two-step approach to testing goodwill for impairment for each reporting unit. Our
reporting units are determined by the components that constitute a business for which both (1) discreet
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