Electronic Arts 2010 Annual Report Download - page 155

Annual Report
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.
(2) FAIR VALUE MEASUREMENTS
On April 1, 2009, we adopted FASB ASC 820, Fair Value Measurements and Disclosures, as it applies to
nonfinancial assets and nonfinancial liabilities. These nonfinancial items include assets and liabilities such as a
reporting unit measured at fair value in a goodwill impairment test and nonfinancial assets acquired and liabilities
assumed in a business combination. Fair value is the price that would be received from selling an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date. When
determining fair value, we consider the principal or most advantageous market in which we would transact, and
we consider assumptions that market participants would use when pricing the asset or liability. We measure
certain financial and nonfinancial assets and liabilities at fair value on a recurring and nonrecurring basis.
Fair Value Hierarchy
The three levels of inputs that may be used to measure fair value are as follows:
•Level 1. Quoted prices in active markets for identical assets or liabilities.
•Level 2. Observable inputs other than quoted prices included within Level 1, such as quoted prices for
similar assets or liabilities, quoted prices in markets with insufficient volume or infrequent transactions
(less active markets), or model-derived valuations in which all significant inputs are observable or can be
derived principally from or corroborated with observable market data for substantially the full term of the
assets or liabilities.
•Level 3. Unobservable inputs to the valuation methodology that are significant to the measurement of the
fair value of assets or liabilities.
Assets and Liabilities Measured at Fair Value on a Recurring Basis
Our money market funds, available-for-sale fixed income and marketable equity securities, deferred
compensation plan assets, foreign currency derivatives and contingent consideration are measured and recorded
at fair value on a recurring basis.
Our Level 1 assets are valued using quoted prices in active markets for identical instruments. Our Level 2 assets,
including foreign currency derivatives, are valued using quoted prices for identical instruments in less active
markets or using other observable market inputs for comparable instruments. Our Level 3 liability is valued using
unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the
contingent consideration.
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