2K Sports 2009 Annual Report Download - page 48

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entity. The guidance also now requires ongoing reassessments of whether an enterprise is the primary
beneficiary of a variable interest entity. The guidance is effective at the start of a Company’s first fiscal year
beginning after November 15, 2009 (November 1, 2010 for the Company). We are still evaluating the
impact that the adoption of this new guidance will have on our consolidated financial position, cash flows
and results of operations.
Measuring Liabilities at Fair Value
In August 2009, new guidance was issued related to the fair value measurement of liabilities. This update
provides clarification that in circumstances in which quoted prices in an active market for the identical
liability are not available, a reporting entity is required to measure fair value using a valuation technique
that uses quoted prices for the identical liability when traded as an asset, quoted prices for similar liabilities
when traded as an asset or another technique that is consistent with the Fair Value principles. The
guidance is effective for the first reporting period (including interim periods) beginning after issuance
which for the Company is November 1, 2009. We do not expect that the adoption of this new guidance will
have a material effect on our consolidated financial position, cash flows and results of operations.
Multiple-Deliverable Revenue Arrangements
In October 2009, new guidance was issued related to the accounting for multiple-deliverable revenue
arrangements. This guidance amends the existing guidance for separating consideration in multiple-
deliverable arrangements and establish a selling price hierarchy for determining the selling price of a
deliverable. This guidance will become effective, on a prospective basis, for the Company on November 1,
2011. We are still evaluating the impact that the adoption of this new guidance will have on our
consolidated financial position, cash flows and results of operations.
Certain Revenue Arrangements That Include Software Elements
In October 2009, new guidance was issued that changes the accounting model for revenue arrangements by
excluding tangible products containing both software and non-software components that function together
to deliver the product’s essential functionality and instead have these types of transactions be accounted
for under other accounting literature in order to determine whether the software and non-software
components function together to deliver the product’s essential functionality. This guidance will become
effective, on a prospective basis, for the Company on November 1, 2011. We are still evaluating the impact
that the adoption of this new guidance will have on our consolidated financial position, cash flows and
results of operations.
Fluctuations in Operating Results and Seasonality
We have experienced fluctuations in quarterly and annual operating results as a result of: the timing of the
introduction of new titles; variations in sales of titles developed for particular platforms; market
acceptance of our titles; development and promotional expenses relating to the introduction of new titles,
sequels or enhancements of existing titles; projected and actual changes in platforms; the timing and
success of title introductions by our competitors; product returns; changes in pricing policies by us and our
competitors; the size and timing of acquisitions; the timing of orders from major customers; order
cancellations; and delays in product shipment. Sales of our products are also seasonal, with peak shipments
typically occurring in the fourth calendar quarter (our fourth and first fiscal quarters) as a result of
increased demand for titles during the holiday season. Quarterly and annual comparisons of operating
results are not necessarily indicative of future operating results.
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