Electronic Arts 2010 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 mobile 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., FIFA Soccer, Madden NFL
Football, Harry Potter™, and Hasbro’s toy and game intellectual properties), and some of our games are based
on our own wholly-owned intellectual property (e.g., The Sims™, Need for Speed™, and Dead Space™). 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., FIFA Soccer, Madden NFL Football, and
NCAA®Football), 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., 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 the
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 year ended March 31, 2010 contained 53 weeks and ended on April 3, 2010. Our results
of operations for the fiscal years ended March 31, 2009 and 2008 contained 52 weeks and ended on March 28,
2009 and March 29, 2008, respectively. For simplicity of disclosure, all fiscal periods are referred to as ending on
a calendar month end.
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, assets acquired and liabilities assumed in business combinations, 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.
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.
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