Electronic Arts 2008 Annual Report Download - page 142

(e) Cash, Cash Equivalents, Short-Term Investments, Marketable Equity Securities and Other
Investments
Cash equivalents consist of highly liquid investments with insignificant interest rate risk and original or
remaining maturities of three months or less at the time of purchase.
Short-term investments consist of securities with original or remaining maturities of greater than three months
at the time of purchase. The short-term investments are available for use in current operations or other
activities such as capital expenditures and business acquisitions.
As of March 31, 2008 and March 31, 2007, short-term investments and marketable equity securities were
classified as available-for-sale and stated at fair value based upon quoted market prices for the securities.
Unrealized gains and losses are included as a separate component of accumulated other comprehensive
income, net of any related tax effect, in stockholders’ equity. Realized gains and losses are calculated based on
the specific identification method. We recognize an impairment charge when we determine that a decline in
the fair value of a security below its cost basis is other-than-temporary.
Other investments, included in other assets on our Consolidated Balance Sheets primarily consist of
investments in equity securities accounted for under the cost method in accordance with Accounting Principles
Board Opinion (“APB”) No. 18, “The Equity Method Of Accounting For Investments In Common Stock”. The
cost method of accounting is used for investments where we are not able to exercise significant influence over
the operating and financing decisions of the investee. We evaluate other investments to determine if events or
changes in circumstances indicate an other-than-temporary impairment in value. We recognize an impairment
charge when we determine an other-than-temporary impairment in value exists.
(f) Inventories
Inventories consist of materials (including manufacturing royalties paid to console manufacturers), labor and
freight-in. Inventories are stated at the lower of cost (first-in, first-out method) or market value.
(g) Property and Equipment, Net
Property and equipment, net, are stated at cost. Depreciation is calculated using the straight-line method over
the following useful lives:
Buildings ................................. 20to25years
Computer equipment and software ............... 3to5years
Furniture and equipment ...................... 3to5years
Leasehold improvements ...................... Lesser of the lease term or the estimated useful lives
of the improvements, generally 1 to 10 years
Under the provisions of American Institute of Certified Public Accountants Statement of Position (“SOP”)
98-1, “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use”, we capitalize
costs associated with customized internal-use software systems that have reached the application development
stage and meet recoverability tests. Such capitalized costs include external direct costs utilized in developing
or obtaining the applications and payroll and payroll-related expenses for employees who are directly
associated with the development of the applications. Capitalization of such costs begins when the preliminary
project stage is complete and ceases at the point in which the project is substantially complete and ready for
its intended purpose. The net book value of capitalized costs associated with internal-use software amounted
to $24 million and $18 million as of March 31, 2008 and 2007, respectively, and are being depreciated on a
straight-line basis over each asset’s estimated useful life that ranges from three to five years.
(h) Long-Lived Assets
We evaluate long-lived assets and certain identifiable intangibles for impairment, in accordance with Statement
of Financial Accounting Standard (“SFAS”) No. 144, “Accounting for the Impairment or Disposal of Long-
Lived Assets”, whenever events or changes in circumstances indicate that the carrying amount of an asset may
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