Electronic Arts 2010 Annual Report Download - page 133

Annual Report
In fiscal year 2009, we recorded a tax provision instead of a tax benefit on the pre-tax loss due primarily to the
deferred tax valuation allowance. Our effective income tax provision rate was 27.2 percent for fiscal year 2009.
Our effective income tax was a benefit of 10.3 percent for fiscal year 2008. In fiscal year 2009, our effective tax
rate differed from the U.S. statutory tax rate of 35.0 percent due primarily to the deferred tax valuation
allowance, non-deductible goodwill impairment, non-deductible stock-based compensation expenses,
non-deductible losses on strategic investments, losses in jurisdictions with tax rates lower than the U.S. rate of
35.0 percent, and a loss on facility impairment for which the future tax benefit is uncertain and not more likely
than not to be realized. In fiscal year 2008, our effective income tax rate differed from the U.S. statutory rate of
35.0 percent due primarily to non-deductible acquisition-related costs, losses on strategic investments, a loss on
facility impairment for which the future tax benefit is uncertain and not more likely than not to be realized, and
certain non-deductible stock-based compensation expenses.
Impact of Recently Issued Accounting Standards
In October 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-13, Revenue Recognition (Topic
605) —Multiple-Deliverable Revenue Arrangements. This guidance modifies the fair value requirements of
FASB ASC subtopic 605-25, Revenue Recognition-Multiple Element Arrangements, by allowing the use of the
“best estimate of selling price” in addition to vendor specific objective evidence and third-party evidence for
determining the selling price of a deliverable. This guidance establishes a selling price hierarchy for determining
the selling price of a deliverable, which is based on: (a) vendor-specific objective evidence, (b) third-party
evidence, or (c) estimated selling prices. In addition, the residual method of allocating arrangement consideration
is no longer permitted. ASU 2009-13 is effective for fiscal years beginning on or after June 15, 2010. We do not
expect the adoption of ASU 2009-13 to have a material impact on our Consolidated Financial Statements.
In October 2009, the FASB issued ASU 2009-14, Software (Topic 985) —Certain Revenue Arrangements that
Include Software Elements. This guidance modifies the scope of FASB ASC subtopic 965-605, Software-
Revenue Recognition, to exclude from its requirements non-software components of tangible products and
software components of tangible products that are sold, licensed, or leased with tangible products when the
software components and non-software components of the tangible product function together to deliver the
tangible product’s essential functionality. ASU 2009-14 is effective for fiscal years beginning on or after June 15,
2010. We do not expect the adoption of ASU 2009-14 to have a material impact on our Consolidated Financial
Statements.
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