Electronic Arts 2007 Annual Report Download - page 160

(c) Accrued and Other Current Liabilities
Accrued and other current liabilities as of March 31, 2007 and 2006 consisted of (in millions):
2007 2006
As of March 31,
Accrued income taxes....................................................... $284 $234
Accrued compensation and benefits ............................................. 206 122
Other accrued expenses ..................................................... 152 202
Accrued royalties .......................................................... 91 82
Deferred net revenue — other ................................................. 67 43
Accrued value added taxes ................................................... 23 14
Accrued and other current liabilities .......................................... $823 $697
(d) Deferred Net Revenue
Deferred net revenue consisted of the following (in millions):
2007 2006
As of March 31,
Deferred net revenue — packaged goods and digital content . ......................... $ 23 $ 9
Deferred net revenue — other ................................................. 67 43
$90 $52
Deferred net revenue, packaged goods and digital content, includes the deferral of the fair value of the online
service related to sales of certain online-enabled packaged goods and PC digital downloads and revenue from
sales of certain incremental content related to our core subscription services playable only online, which are
types of “micro-transactions”.
Deferred net revenue, other, includes the deferral of subscription revenue, deferrals related to our Switzerland
distribution business, advertising revenue, revenue from licensing arrangements and other revenue for which
revenue recognition criteria has not been met. The deferred net revenue, other, balance is included in accrued
and other current liabilities in our Consolidated Balance Sheets.
(9) COMMITMENTS AND CONTINGENCIES
Lease Commitments and Residual Value Guarantees
We lease certain of our current facilities, furniture and equipment under non-cancelable operating lease
agreements. We are required to pay property taxes, insurance and normal maintenance costs for certain of
these facilities and will be required to pay any increases over the base year of these expenses on the remainder
of our facilities.
In February 1995, we entered into a build-to-suit lease (“Phase One Lease”) with a third-party lessor for our
headquarters facilities in Redwood City, California (“Phase One Facilities”). The Phase One Facilities
comprise a total of approximately 350,000 square feet and provide space for sales, marketing, administration
and research and development functions. In July 2001, the lessor refinanced the Phase One Lease with
Keybank National Association through July 2006. The Phase One Lease expires in January 2039, subject to
early termination in the event the underlying financing between the lessor and its lenders is not extended.
Subject to certain terms and conditions, we may purchase the Phase One Facilities or arrange for the sale of
the Phase One Facilities to a third party.
Pursuant to the terms of the Phase One Lease, we have an option to purchase the Phase One Facilities at any
time for a purchase price of $132 million. In the event of a sale to a third party, if the sale price is less than
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