Electronic Arts 2008 Annual Report Download - page 152

Except for acquired in-process technology, which is discussed below, acquired finite-lived intangible assets are
being amortized on a straight-line basis over their estimated lives ranging from three to five years. The
intangible assets that make up that amount as of the date of the acquisition include:
Gross Carrying
Amount
(in millions)
Weighted-Average
Useful Life
(Years)
Developed and Core Technology ................................. $ 51 4
Trade Names and Trademarks ................................... 41 5
Other Intangibles ............................................ 22 3
Total Finite-Lived Intangibles ................................. $114 4
Approximately $47 million of the goodwill recognized upon acquisition is deductible for tax purposes.
In connection with our acquisition of VGH, we incurred acquired in-process technology charges of $138 mil-
lion in relation to game software that had not reached technical feasibility as of the date of acquisition. The
fair value of VGH’s products under development was determined using the income approach, which discounts
expected future cash flows from the acquired in-process technology to present value. The discount rates used
in the present value calculations were derived from a weighted average cost of capital of 17 percent. Should
the in-process software not be successfully completed, completed at a higher cost, or the development efforts
go beyond the timeframe estimated by management, we will not receive the full benefits anticipated from the
acquisition. Benefits from the development efforts are expected to commence in fiscal years 2009 through
2011.
The following table sets forth the estimated percent completion, the estimated cost to complete, and the value
assigned to each project we acquired that is included in in-process research and development (in millions):
Project
Estimated
Percent
Completion
Estimated
Cost to
Complete
Value
Assigned
A....................................................... 22% $103 $ 30
B ....................................................... 14% 62 10
C ....................................................... 76% 8 26
D....................................................... 51% 68 72
$138
Project D is an aggregation of projects with each less than $30 million in total costs.
The following table reflects unaudited pro forma combined results of operations of Electronic Arts and VGH
as if the acquisition had taken place at the beginning of each respective year and after giving effect to
purchase accounting adjustments (in millions, except per share data):
2008 2007
Year Ended
March 31,
(Unaudited)
Net revenue ........................................................... $3,672 $3,115
Netloss .............................................................. (592) (114)
Net loss per share:
Basic and Diluted ..................................................... (1.89) (0.37)
In management’s opinion, the unaudited pro forma combined results of operations are not indicative of the
actual results that would have occurred had the acquisition been consummated at the beginning of each
respective year or of future operations of the combined companies under the ownership and management of
Electronic Arts.
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