Electronic Arts 2011 Annual Report Download - page 155

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, 2010
Goodwill ................................................. $672 $ 789 $1,461
Accumulated impairment .................................... — (368) (368)
672 421 1,093
Goodwill acquired ......................................... — 13 13
Reallocation .............................................. 16 (16) —
Effects of foreign currency translation ......................... 3 1 4
As of March 31, 2011
Goodwill ................................................. 691 787 1,478
Accumulated impairment .................................... — (368) (368)
$691 $ 419 $1,110
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 the fiscal years ended March 31, 2011 and 2010, 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 charge on goodwill in fiscal years 2011 and 2010. 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.
Acquisition-related intangible assets, net of accumulated amortization, as of March 31, 2011 and 2010, were $144
million and $204 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 2011, 2010 and 2009 was $69 million (of which $12 million was
recognized in cost of goods sold), $63 million (of which $10 million was recognized in cost of goods sold) and $72
million (of which $14 million was recognized in cost of goods sold), respectively. Acquisition-related 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, 2011 and 2010, the weighted-average remaining useful
life for acquisition-related intangible assets was approximately 5.1 years for each period.
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