Electronic Arts 2010 Annual Report Download - page 169

Annual Report
Each quarter, we also evaluate the expected future realization of our royalty-based assets, as well as any
unrecognized minimum commitments not yet paid to determine amounts we deem unlikely to be realized through
product sales. Any impairments or losses determined before the launch of a product are charged to research and
development expense. Impairments or losses determined post-launch are charged to cost of goods sold. We
evaluate long-lived royalty-based assets for impairment using undiscounted cash flows when impairment
indicators exist. Unrecognized minimum royalty-based commitments are accounted for as executory contracts
and, therefore, any losses on these commitments are recognized when the underlying intellectual property is
abandoned (i.e., cease use) or the contractual rights to use the intellectual property are terminated. During fiscal
years 2010, 2009 and 2008, we recognized impairment charges of $10 million, loss charges of $43 million and
loss and impairment charges of $4 million, respectively. The $10 million impairment charge recognized during
the fiscal year ended March 31, 2010, was primarily related to our fiscal 2010 restructuring. This impairment is
included in restructuring charges presented in Note 7 of the Notes to Consolidated Financial Statements. The loss
charges in fiscal year 2009 primarily related to an amendment of a licensor agreement in which we terminated
certain rights we previously had to use the licensor’s intellectual property.
The current and long-term portions of prepaid royalties and minimum guaranteed royalty-related assets, included
in other current assets and other assets, consisted of (in millions):
As of March 31,
2010 2009
Other current assets ........................................................ $ 66 $ 74
Other assets .............................................................. 36 47
Royalty-related assets .................................................... $102 $121
At any given time, depending on the timing of our payments to our co-publishing and/or distribution affiliates,
content licensors and/or independent software developers, we recognize unpaid royalty amounts owed to these
parties as accrued liabilities. The current and long-term portions of accrued royalties, included in accrued and
other current liabilities and other liabilities, consisted of (in millions):
As of March 31,
2010 2009
Accrued and other current liabilities ........................................... $144 $237
Other liabilities ........................................................... — 29
Royalty-related liabilities ................................................. $144 $266
In addition, as of March 31, 2010, we were committed to pay approximately $1,280 million to content licensors,
independent software developers, and co-publishing and/or distribution affiliates, but performance remained with
the counterparty (i.e., delivery of the product or content or other factors) and such commitments were therefore
not recorded in our Consolidated Financial Statements.
(9) BALANCE SHEET DETAILS
Inventories
Inventories as of March 31, 2010 and 2009 consisted of (in millions):
As of March 31,
2010 2009
Raw materials and work in process ............................................ $ 8 $ 7
In-transit inventory ........................................................ 2 9
Finished goods ............................................................ 90 201
Inventories ............................................................. $100 $217
91