Electronic Arts 2010 Annual Report Download - page 165

Annual Report
(6) GOODWILL AND ACQUISITION-RELATED INTANGIBLES, NET
The changes in the carrying amount of goodwill are as follows (in millions):
Label
Segment
Other
Segments Total
As of March 31, 2009
Goodwill ...................................................... $667 $ 508 $1,175
Accumulated Impairment ......................................... — (368) (368)
667 140 807
Goodwill Acquired .............................................. — 278 278
Effects of Foreign Currency Translation .............................. 5 3 8
As of March 31, 2010
Goodwill ...................................................... 672 789 1,461
Accumulated Impairment ......................................... — (368) (368)
$672 $ 421 $1,093
Purchased goodwill is not amortized, but rather subject to at least an annual assessment for impairment by
applying a fair value-based test.
We are required to perform a two-step approach to testing goodwill for impairment for each reporting unit
annually, or whenever events or changes in circumstances indicate the fair value of a reporting unit is below its
carrying amount. Our reporting units are determined by the components of our operating segments that constitute
a business for which (1) discrete financial information is available and (2) segment management regularly
reviews the operating results of that component. The first step measures for impairment by applying fair value-
based tests at the reporting unit level. The second step (if necessary) measures the amount of impairment by
applying fair value-based tests to individual assets and liabilities within each reporting unit. The fair values of
each reporting unit are estimated using a combination of the market approach, which utilizes comparable
companies’ data, and/or the income approach, which utilizes discounted cash flows.
During fiscal years ended March 31, 2010 and 2008, we completed the first step of the annual goodwill
impairment testing in the fourth quarter of each year and found no indicators of impairment of our recorded
goodwill. We did not recognize an impairment loss on goodwill in fiscal years 2010 and 2008. Adverse economic
conditions, including the decline in our market capitalization and our expected financial performance, indicated
that a potential impairment of goodwill existed during the fiscal year ended March 31, 2009. As a result, we
performed goodwill impairment tests for our reporting units and determined that the fair value of our EA Mobile
reporting unit fell below the carrying value of that reporting unit. As a result, we conducted the second step in the
impairment testing and determined that the EA Mobile reporting unit’s goodwill was impaired. The fair value of
the EA Mobile reporting unit was determined using the income approach. Substantially all of our goodwill
associated with our EA Mobile reporting unit was derived from our fiscal 2006 acquisition of JAMDAT Mobile
Inc. During the fiscal year ended March 31, 2009, we recognized a goodwill impairment charge of $368 million
related to our EA Mobile reporting unit. See Note 17 for information regarding our segment information.
Finite-lived intangible assets, net of accumulated amortization, as of March 31, 2010 and 2009, were $204
million and $221 million, respectively, and include costs for obtaining (1) developed and core technology,
(2) trade names and trademarks, (3) carrier contracts and related, and (4) registered user base and other
intangibles. Amortization of intangibles for fiscal years 2010, 2009 and 2008 was $63 million (of which $10
million was recognized in cost of goods sold), $72 million (of which $14 million was recognized in cost of goods
sold) and $60 million (of which $26 million was recognized in cost of goods sold), respectively. Finite-lived
intangible assets are amortized using the straight-line method over the lesser of their estimated useful lives or the
agreement terms, typically from two to fourteen years. As of March 31, 2010 and 2009, the weighted-average
remaining useful life for finite-lived intangible assets was approximately 5.1 years and 6.0 years, respectively.
87