Electronic Arts 2008 Annual Report Download - page 124

Impact of Recently Issued Accounting Standards
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements”. SFAS No. 157 defines fair
value, establishes a framework for measuring fair value in generally accepted accounting principles and
expands disclosures about fair value measurements. Fair value refers to the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants in the market in
which the reporting entity transacts. SFAS No. 157 establishes a fair value hierarchy that prioritizes the
information used to develop those assumptions. Fair value measurements would be separately disclosed by
level within the fair value hierarchy. In February 2008, the FASB issued FASB Staff Position (“FSP”)
Financial Accounting Standard (“FAS”) 157-1, “Application of FASB Statement No. 157 to FASB Statement
No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease
Classification or Measurement under Statement 13” and FSP FAS 157-2, “Effective Date of FASB Statement
No. 157”. These FSPs (1) defer the effective date in SFAS No. 157 for one year for certain nonfinancial assets
and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial
statements on a recurring basis (at least annually), (2) exclude certain leasing transactions accounted for under
SFAS No. 13, “Accounting for Leases”, from the scope of Statement 157, and (3) include several specific
examples of items eligible or not eligible for the one-year deferral. The provisions of SFAS No. 157 are
effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim
periods within those fiscal years. FSP FAS 157-1 is effective upon the initial adoption of SFAS No. 157. FSP
FAS 157-2 defers the effective date of certain provisions of SFAS No. 157 to fiscal years beginning after
November 15, 2008, and interim periods within those fiscal years for items within the scope of the FSP. We
do not expect the adoption of SFAS No. 157, FSP FAS 157-1 and FSP FAS 157-2 to have a material impact
on our Consolidated Financial Statements.
In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial
Liabilities — Including an amendment of FASB Statement No. 115”. SFAS No. 159 permits entities to choose
to measure many financial instruments and certain other items at fair value that are not currently required to
be measured at fair value. It also establishes presentation and disclosure requirements designed to facilitate
comparisons between entities that choose different measurement attributes for similar types of assets and
liabilities. The provisions of SFAS No. 159 are effective for financial statements issued for fiscal years
beginning after November 15, 2007. This Statement should not be applied retrospectively to fiscal years
beginning prior to the effective date, except as permitted with early adoption. We are evaluating whether to
adopt SFAS No. 159 and what impact the adoption would have on our Consolidated Financial Statements if
we were to adopt it. If we adopt SFAS No. 159, it could have a material impact on our Consolidated Financial
Statements.
In June 2007, the FASB ratified the Emerging Issues Task Force’s (“EITF”) consensus conclusion on
EITF 07-03, “Accounting for Advance Payments for Goods or Services to Be Used in Future Research and
Development”. EITF 07-03 addresses the diversity which exists with respect to the accounting for the non-
refundable portion of a payment made by a research and development entity for future research and
development activities. Under this conclusion, an entity is required to defer and capitalize non-refundable
advance payments made for research and development activities until the related goods are delivered or the
related services are performed. EITF 07-03 is effective for interim or annual reporting periods in fiscal years
beginning after December 15, 2007 and requires prospective application for new contracts entered into after
the effective date. The adoption of EITF 07-03 will not have a material impact on our Consolidated Financial
Statements.
In December 2007, the FASB issued SFAS No. 141 (Revised 2007) (“SFAS No. 141(R)”), “Business
Combinations”, which requires the recognition of assets acquired, liabilities assumed, and any noncontrolling
interest in an acquiree at the acquisition date fair value with limited exceptions. SFAS No. 141(R) will change
the accounting treatment for certain specific items and includes a substantial number of new disclosure
requirements. SFAS No. 141(R) applies prospectively to business combinations for which the acquisition date
is on or after the beginning of the first annual reporting period beginning on or after December 15, 2008. The
adoption of SFAS No. 141(R) will have a material impact on our Consolidated Financial Statements for
material acquisitions consummated on or after March 29, 2009.
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