Electronic Arts 2009 Annual Report Download - page 172

Accrued and Other Current Liabilities
Accrued and other current liabilities as of March 31, 2009 and 2008 consisted of (in millions):
As of March 31,
2009 2008
Accrued royalties ......................................................... $237 $200
Other accrued expenses .................................................... 237 268
Accrued compensation and benefits .......................................... 142 189
Deferred net revenue (other) ................................................ 107 73
Accrued and other current liabilities ........................................ $723 $730
Deferred net revenue (other) includes the deferral of subscription revenue, deferrals related to our Switzerland
distribution business, advertising revenue, licensing arrangements and other revenue for which revenue
recognition criteria has not been met.
Deferred Net Revenue (Packaged Goods and Digital Content)
Deferred net revenue (packaged goods and digital content) was $261 million as of March 31, 2009 and $387
million as of March 31, 2008. Deferred net revenue (packaged goods and digital content) includes the deferral of
(1) the total net revenue from bundle sales of certain online-enabled packaged goods and digital content for
which either we do not have VSOE for the online service that we provide in connection with the sale of the
software or we have an obligation to provide future incremental unspecified digital content, (2) revenue from
certain packaged goods sales of massively-multiplayer online role-playing games, and (3) revenue from the sale
of certain incremental content associated with our core subscription services that can only be played online,
which are types of “micro-transactions.” We recognize revenue from sales of online-enabled packaged goods and
digital content for which we do not have VSOE for the online service that we provided in connection with the
sale and the obligation we had to deliver incremental unspecified digital content in the future without an
additional fee on a straight-line basis over an estimated six month period beginning in the month after shipment.
However, we expense the cost of goods sold related to these transactions during the period in which the product
is delivered (rather than on a deferred basis).
(10) COMMITMENTS AND CONTINGENCIES
Lease Commitments and Residual Value Guarantees
We lease certain of our current facilities, furniture and equipment under non-cancelable operating lease
agreements. We are required to pay property taxes, insurance and normal maintenance costs for certain of these
facilities and will be required to pay any increases over the base year of these expenses on the remainder of our
facilities.
In February 1995, we entered into a build-to-suit lease (“Phase One Lease”) for our headquarters facilities in
Redwood City, California (“Phase One Facilities”). The Phase One Facilities comprise a total of approximately
350,000 square feet and provide space for sales, marketing, administration and research and development
functions. The Phase One Lease expires in January 2039, subject to early termination in the event the underlying
financing between the lessor and its lenders is not extended or if we chose to exercise our option to purchase the
facility.
The lessor has extended its loan financing underlying the Phase One Lease with its lenders on several occasions.
The financing currently extends through July 2009. On February 2, 2009, the Phase One Lease was amended to
modify the Fixed Charge Coverage Ratio, the Quick Ratio and the Consolidated EBIDTA definitions used in the
covenants. Had we not entered into this amendment, which covered the quarter ended December 31, 2008, as
well as future quarters, we would have been unable to meet the Fixed Charge Coverage Ratio for such quarter.
We were in compliance with each of the other financial covenants.
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