Electronic Arts 2008 Annual Report Download - page 141

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 video game software and content that can be played by consumers
on a variety of platforms, including video game consoles (such as the Sony PlayStation»2 and
PLAYSTATION»3, Microsoft Xbox 360
TM
and Nintendo Wii
TM
), personal computers, handheld game players
(such as the PlayStation»Portable (“PSP
TM
”) and the Nintendo DS
TM
) and cellular handsets. Some of our
games are based on content that we license from others (e.g., Madden NFL Football, Harry Potter 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 POGO
TM
). Our goal is to publish titles with global 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 Battlefield) and titles based on long-lived literary
and/or movie properties (e.g., Lord of the Rings and Harry Potter).
A summary of our significant 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
wholly- and majority-owned subsidiaries. Intercompany balances and transactions have been eliminated in
consolidation.
(b) Fiscal Year
Our fiscal year is reported on a 52 or 53-week period that ends on the Saturday nearest March 31. For
simplicity of disclosure, all fiscal periods are referred to as ending on a calendar month end. Our results of
operations for the fiscal years ended March 31, 2008 and 2007 contained 52 weeks and ended on March 29,
2008 and March 31, 2007, respectively. Our results of operations for the fiscal year ended March 31, 2006
contained 53 weeks and ended on April 1, 2006.
(c) Reclassifications
Certain prior-year amounts have been reclassified to conform to the fiscal 2008 presentation.
(d) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States requires us to make estimates and assumptions that affect 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, service
period for deferred net revenue, income taxes, estimates regarding the recoverability of prepaid royalties and
royalty commitments, inventories, long-lived assets, acquired in-process technology, certain estimates related
to the measurement and recognition of costs resulting from our share-based payment transactions, deferred
income tax assets as well as estimates used in our goodwill impairment test. These estimates generally involve
complex issues and require us to make judgments, involve analysis of historical and future trends, can require
extended periods of time to resolve, and are subject to change from period to period. In all cases, actual results
could differ materially from our estimates.
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