Electronic Arts 2016 Annual Report Download - page 138

ELECTRONIC ARTS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
We are a global leader in digital interactive entertainment. We develop, market, publish and distribute games,
content and services that can be played by consumers on a variety of platforms, which include consoles (such as
the PlayStation from Sony, and the Xbox from Microsoft), PCs, mobile phones and tablets. Some of our games
are based on our wholly-owned intellectual property (e.g., Battlefield, Mass Effect, Need for Speed, The Sims
and Plants vs. Zombies), and some of our games leverage content that we license from others (e.g., FIFA,
Madden NFL and Star Wars). We also publish and distribute games developed by third parties (e.g., Titanfall).
Our products and services may be purchased through multiple distribution channels, including physical and
online retailers, platform providers such as console manufacturers, providers of free-to-download PC games,
mobile carriers and directly through Origin, our own digital distribution platform.
A summary of our significant accounting policies applied in the preparation of our Consolidated Financial
Statements follows:
Consolidation
The accompanying Consolidated Financial Statements include the accounts of Electronic Arts Inc. and its
wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated in consolidation.
Fiscal Year
Our fiscal year is reported on a 52- or 53-week period that ends on the Saturday nearest March 31. Our results of
operations for the fiscal year ending March 31, 2016 contained 53 weeks and ended on April 2, 2016. Our results
of operations for the fiscal year ended March 31, 2015 and 2014 contained 52 weeks each and ended on
March 28, 2015 and March 29, 2014, respectively. For simplicity of disclosure, all fiscal periods are referred to
as ending on a calendar month end.
Use of Estimates
The preparation of consolidated financial statements in conformity with accounting principles generally accepted
in the United States (“U.S. GAAP”) requires us to make estimates and assumptions that affect the amounts
reported in our consolidated financial statements and the accompanying notes. Such estimates include sales
returns and allowances, provisions for doubtful accounts, accrued liabilities, offering periods for deferred net
revenue, multiple-element arrangements, income taxes, losses on royalty commitments, estimates regarding the
recoverability of prepaid royalties, inventories, long-lived assets, assets acquired and liabilities assumed in
business combinations, certain estimates related to the measurement and recognition of costs resulting from our
stock-based payment awards, deferred income tax assets and associated valuation allowances, as well as
estimates used in our goodwill, intangibles and short-term investment impairment tests. These estimates
generally involve complex issues and require us to make judgments, involve analysis of historical and future
trends, can require extended periods of time to resolve, and are subject to change from period to period. In all
cases, actual results could differ materially from our estimates.
Cash, Cash Equivalents, and Short-Term Investments
Cash equivalents consist of highly liquid investments with insignificant interest rate risk and original or
remaining maturities of three months or less at the time of purchase.
Short-term investments consist of securities with original or remaining maturities of greater than three months at
the time of purchase, are accounted for as available-for-sale securities and are recorded at fair value. Cash, cash
equivalents and short-term investments are available for use in current operations or other activities such as
capital expenditures, business combinations and share repurchases.
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