Electronic Arts 2009 Annual Report Download - page 148

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 PLAYSTATION®3, Microsoft Xbox 360™
and Nintendo Wii™), personal computers, handheld game players (such as the PlayStation®Portable (“PSP™”)
and the Nintendo DS™) and wireless devices (such as cellular phones and smart phones including the Apple
iPhone). 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™, Need for Speed™, Dead Space™ and Pogo™). 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., The Godfather®and Harry Potter).
A summary of our significant accounting policies applied in the preparation of our Consolidated Financial
Statements follows:
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.
Fiscal Year
Our fiscal year is reported on a 52 or 53-week period that ends on the Saturday nearest March 31. Our results of
operations for the fiscal years ended March 31, 2009, 2008 and 2007 contained 52 weeks and ended on
March 28, 2009, March 29, 2008 and March 31, 2007, respectively. For simplicity of disclosure, all fiscal periods
are referred to as ending on a calendar month end.
Reclassifications
Certain reclassifications have been made to the 2007 and 2008 financial information to conform to the 2009
presentation.
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, losses on royalty commitments, estimates regarding the recoverability of prepaid
royalties, 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 and associated valuation allowance 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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