Electronic Arts 2014 Annual Report Download - page 152

The equity included in the consideration above consisted of privately-placed shares of our common stock, whose
fair value was determined based on the quoted market price of our common stock on the date of acquisition.
In addition, we were required to pay additional variable cash consideration that was contingent upon the
achievement of certain performance milestones through December 31, 2013 and was limited to a maximum of
$550 million based on achievement of certain non-GAAP earnings targets before interest and tax. As of
December 31, 2013, performance milestones were not met, resulting in the expiration of the earn-out. No
payments were made under this earn-out.
The final allocation of the purchase price was completed during the third quarter of fiscal year 2012. The
following table summarizes the fair values of assets acquired and liabilities assumed at the date of acquisition (in
millions):
Current assets ......................................................................... $ 62
Property and equipment, net .............................................................. 6
Goodwill ............................................................................. 563
Finite-lived intangible assets .............................................................. 302
Contingent consideration ................................................................. (95)
Deferred income taxes, net ............................................................... (51)
Other liabilities ........................................................................ (55)
Total purchase price .................................................................. $732
All of the goodwill was initially assigned to our EA Labels operating segment and subsequently assigned to our
operating segment. None of the goodwill recognized upon acquisition is deductible for tax purposes. See Note 7
for additional information related to the changes in the carrying amount of goodwill and Note 18 for segment
information.
Finite-lived intangible assets acquired in this transaction were being amortized on a straight-line basis over their
estimated lives ranging from three to nine years. The intangible assets as of the date of the acquisition include:
Gross Carrying
Amount
(in millions)
Weighted-Average
Useful Life
(in years)
Developed and core technology ...................................... $245 6
Trade names and trademarks ........................................ 40 9
In-process research and development ................................. 15 5
Other intangibles ................................................. 2 4
Total finite-lived intangibles ...................................... $302 6
In connection with our acquisition of PopCap, we acquired in-process research and development assets valued at
approximately $15 million in relation to game software that had not reached technical feasibility as of the date of
acquisition. The fair value of PopCap’s products under development was determined using the income approach,
which discounts expected future cash flows from the acquired in-process technology to present value. The
discount rates used in the present value calculations were derived from an average weighted average cost of
capital of 13 percent.
There were six in-process research and development projects acquired as of the acquisition date each with $4
million or less of assigned fair value and $15 million of aggregate fair value. Additionally, each project had less
than $2 million of estimated costs to complete, and aggregate cost to complete was $5 million. As of the
acquisition date, the weighted-average estimated percentage completion of all six projects combined was 36
percent. Certain development projects were completed beginning in the fourth quarter of fiscal year 2012 with
the remaining projects completed in fiscal year 2014.
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