Electronic Arts 2012 Annual Report Download - page 115

Annual Report
Recent Developments
Stock Repurchase Program. In February 2011, we announced that our Board of Directors authorized a program
to repurchase up to $600 million of our common stock over the next 18 months. We completed our program in
April 2012. We repurchased approximately 32 million shares in the open market since the commencement of the
program, including pursuant to pre-arranged stock trading plans. During the fiscal year 2012, we repurchased and
retired approximately 25 million shares of our common stock for approximately $471 million, net of
commissions.
International Operations and Foreign Currency Exchange Impact. International sales (revenue derived from
countries other than Canada and the United States), are a fundamental part of our business. Net revenue from
international sales accounted for approximately 52 percent of our total net revenue during fiscal year 2012 and
approximately 49 percent of our total net revenue during fiscal year 2011. Our net revenue is impacted by foreign
exchange rates during the reporting period associated with net revenue before revenue deferral, as well as the
foreign exchange rates associated with the recognition of deferred net revenue of online-enabled packaged goods
and digital content that were established at the time we recorded this deferred net revenue on our Consolidated
Balance Sheets. The foreign exchange rates during the reporting period may not always move in the same
direction as the foreign exchange rate impact associated with the recognition of deferred net revenue of online-
enabled packaged goods and digital content. During the fiscal year ended March 31, 2012, foreign exchange rates
had an overall favorable impact on our net revenue of approximately $143 million, or 3 percent. In addition, our
international investments and our cash and cash equivalents denominated in foreign currencies are subject to
fluctuations in foreign currency exchange rates. If the U.S. dollar strengthens against these currencies, then
foreign exchange rates may have an unfavorable impact on our results of operations and our financial condition.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these Consolidated Financial Statements requires management
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 periods. The policies discussed below are considered
by management to be critical because they are not only important to the portrayal of our financial condition and
results of operations, but also because application and interpretation of these policies requires both management
judgment and estimates of matters that are inherently uncertain and unknown. As a result, actual results may
differ materially from our estimates.
Revenue Recognition, Sales Returns, Allowances and Bad Debt Reserves
We derive revenue principally from sales of interactive software games (1) on video game consoles (such as the
PLAYSTATION 3, Xbox 360 and Wii) and PCs, (2) on mobile devices (such the Apple iPhone and Google
compatible Android phones), (3) on tablets and electronic readers such as the Apple iPad and Amazon Kindle,
and (4) from software and content and online game services associated with these products. We evaluate revenue
recognition based on the criteria set forth in Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (“ASC”) 985-605, Software: Revenue Recognition, and Staff Accounting Bulletin
(“SAB”) No. 101, Revenue Recognition, as revised by SAB No. 104, Revenue Recognition. We classify our
revenue as either Product revenue or Service and other revenue.
We evaluate and recognize revenue when all four of the following criteria are met:
•Evidence of an arrangement. Evidence of an agreement with the customer that reflects the terms and
conditions to deliver products must be present.
•Delivery. Delivery is considered to occur when a product is shipped and the risk of loss and rewards of
ownership have been transferred to the customer. For services, delivery is considered to occur as the
service is provided.
•Fixed or determinable fee. If a portion of the arrangement fee is not fixed or determinable, we recognize
revenue as the amount becomes fixed or determinable.
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