Electronic Arts 2016 Annual Report Download - page 145

Annual Report
judgments. Each source of income must be evaluated based on all positive and negative evidence; this evaluation
involves assumptions about future activity. Certain taxable temporary differences that are not expected to reverse
during the carry forward periods permitted by tax law cannot be considered as a source of future taxable income
that may be available to realize the benefit of deferred tax assets.
Recently Adopted Accounting Standards
In April 2015, the FASB issued ASU 2015-03, Interest — Imputation of Interest (Topic 835-30), which requires
that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct
deduction from the carrying amount of that debt liability, consistent with debt discounts. The recognition and
measurement guidance for debt issuance costs are not affected by this ASU. In August 2015, the FASB issued
ASU 2015-15, which clarified that debt issuance costs related to line-of-credit arrangements could continue to be
presented as an asset and be subsequently amortized over the term of the line-of-credit arrangement, regardless of
whether there are any outstanding borrowings on the arrangement. We early adopted ASU 2015-03 in the fourth
quarter of fiscal year 2016 and reclassified $9 million of debt issuance costs as a contra-liability at March 31,
2016. We assessed the impact on prior periods in accordance with the retrospective application requirement and
determined that debt issuance costs were immaterial at March 31, 2015, thus no adjustments were made to
March 31, 2015 balance sheet.
In July 2015, the FASB issued ASU 2015-11, Inventory (Topic 330), which requires entities to measure
inventory at the lower of cost or net realizable value. Current guidance requires inventory to be measured at the
lower of cost or market, with market defined as replacement cost, net realizable value, or net realizable value less
a normal profit margin. This ASU simplifies the subsequent measurement of inventory by replacing the lower of
cost or market test with a lower of cost or net realizable value test. We early adopted ASU 2015-11 in the fourth
quarter of fiscal year 2016. The adoption did not have an impact on our Consolidated Financial Statements.
In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740). The amendments in this ASU
require that all deferred income tax liabilities and assets be classified as noncurrent in a classified statement of
financial position. We early adopted ASU 2015-07 in the fourth quarter of fiscal year 2016 and elected
prospective application. As a result of the adoption, we reclassified $53 million of deferred tax assets from
current to noncurrent at March 31, 2016. As this ASU only impacted presentation, it did not have an impact on
our net financial position, results of operations, or cash flows.
Impact of Recently Issued Accounting Standards
In April 2015, the FASB issued ASU 2015-05, Intangibles — Goodwill and Other — Internal-Use Software
(Topic 350-40). The amendments of this ASU will help entities evaluate the accounting for fees paid by a
customer in a cloud computing arrangement by providing guidance as to whether an arrangement includes the
sale or license of software. The requirements will be effective for annual periods (and interim periods within
those annual periods) beginning after December 15, 2015. The amendment may be adopted either prospectively
to all arrangements entered into or materially modified after the effective date or retrospectively. Early adoption
is permitted. We expect to adopt this new standard in the first quarter of fiscal year 2017. We do not expect the
adoption to have a material impact on our Consolidated Financial Statements.
In March 2016, the FASB issued ASU 2016-09, Compensation — Stock Compensation (Topic 718):
Improvements to Employee Share-Based Payment Accounting, related to simplifications of employee share-based
payment accounting. This pronouncement eliminates the APIC pool concept and requires that excess tax benefits
and tax deficiencies be recorded in the income statement when awards are settled. The pronouncement also
addresses simplifications related to statement of cash flows classification, accounting for forfeitures, and
minimum statutory tax withholding requirements. The pronouncement is effective for annual periods (and for
interim periods within those annual periods) beginning after December 15, 2016. We are currently evaluating the
timing and the impact of this new standard on our Consolidated Financial Statements and related disclosures.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments (Topic 825-10), which requires that most
equity investments be measured at fair value, with subsequent changes in fair value recognized in net income.
59