Blizzard 2005 Annual Report Download - page 61
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Please find page 61 of the 2005 Blizzard annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.23%,20%and16%,respectively,ofconsolidatednetrevenuesand41%,39%and46%,respectively,ofconsolidatedaccountsreceivable,net.Thiscustomerwasthe
samecustomerinallperiodsandwasacustomerofbothourpublishinganddistributionbusinesses.
Financial Instruments
The estimated fair values of financial instruments have been determined using available market information and valuation methodologies described below. However,
considerablejudgmentisrequiredininterpretingmarketdatatodeveloptheestimatesoffairvalue.Accordingly,theestimatespresentedhereinmaynotbeindicativeof
theamountsthatwecouldrealizeinacurrentmarketexchange.Theuseofdifferentmarketassumptionsorvaluationmethodologiesmayhaveamaterialeffectonthe
estimatedfairvalueamounts.
Thecarryingamountsofcashandcashequivalents,accountsreceivable,accountspayableandaccruedexpensesapproximatefairvalueduetotheirshort-termnature.
Short-terminvestmentsarecarriedatfairvaluewithfairvaluesbeingestimatedbasedonquotedmarketprices.
Weaccountfor derivative instruments inaccordance with Statement of Financial AccountingStandard (“SFAS”)No.133, “Accounting for DerivativeInstruments and
HedgingActivities,”SFASNo.138,“AccountingforCertainDerivativeInstrumentsandCertainHedgingActivities,anamendmentofSFAS133”andSFASNo.149,“Amendment
ofStatement133onDerivative Instruments andHedging Activities.”SFASNo.133,138and 149requirethatall derivatives,including foreign exchange contracts,be
recognizedinthebalancesheetinothercurrentassetsoraccruedexpensesattheirfairvalue.
Weutilizeforwardcontractsinordertoreducefinancialmarketrisks.Theseinstrumentsareusedtohedgeforeigncurrencyexposuresofunderlyingassets,liabilities,or
certainforecastedforeigncurrencydenominatedtransactions.Ouraccountingpoliciesfortheseinstrumentsarebasedonwhethertheymeetthecriteriafordesignation
as hedging transactions. Changes in fair value of derivatives that are designated as cash flow hedges, are highly effective, and qualify as hedging instruments, are
recordedinothercomprehensiveincomeuntiltheunderlyinghedgeditemisrecognizedinearningswithinthefinancialstatementlineitemconsistentwiththehedged
item.Anyineffectiveportionofaderivativechangeinfairvalueisimmediatelyrecognizedinearnings.Changesinfairvalueofderivativesthatdonotqualifyashedging
instrumentsarerecordedinearnings.Thefairvalueofforeigncurrencycontractsisestimatedbasedonthespotrateofthevarioushedgedcurrenciesasoftheendof
theperiod.AsofMarch31,2005and2004,wehadnooutstandingforeignexchangeforwardcontracts.
Equity Investments
Fromtimetotime,wemaymakeacapitalinvestmentandholdaminorityinterestinathird-partydeveloperinconnectionwithentertainmentsoftwareproductstobe
developedbysuchdeveloperforus.Weaccountforthosecapitalinvestmentsoverwhichwehavetheabilitytoexercisesignificantinfluenceusingtheequitymethod.
Forthoseinvestmentsoverwhichwedonothavetheabilitytoexercisesignificantinfluence,weaccountforourinvestmentusingthecostmethod.
Software Development Costs
Softwaredevelopmentcostsincludepaymentsmadetoindependentsoftwaredevelopersunderdevelopmentagreements,aswellasdirectcostsincurredforinternally
developedproducts.
WeaccountforsoftwaredevelopmentcostsinaccordancewithStatementofFinancialAccountingStandard(“SFAS”)No.86,“AccountingfortheCostsofComputer
SoftwaretoBeSold,Leased,orOtherwiseMarketed.”Softwaredevelopmentcostsarecapitalizedoncetechnologicalfeasibilityofaproductisestablishedandsuch
costsaredeterminedtoberecoverable.Technologicalfeasibilityofaproductencompassesbothtechnicaldesigndocumentationandgamedesigndocumentation.For
productswhereproventechnologyexists,thismayoccurearlyinthedevelopmentcycle.Technologicalfeasibilityisevaluatedonaproduct-by-productbasis.Priortoa
product’s release, we expense, as part of cost of sales—software royalties and amortization, capitalized costs when we believe such amounts are not recoverable.
Capitalizedcostsforthoseproductsthatarecancelledorabandonedarechargedtoproductdevelopmentexpenseintheperiodofcancellation.Amountsrelatedto
softwaredevelopmentwhicharenotcapitalizedarechargedimmediatelytoproductdevelopmentexpense.Weevaluatethefuturerecoverabilityofcapitalizedamounts
page 60
Activision, Inc. — 2005 Annual Report
Notes to Consolidated Financial Statements