Blizzard 2005 Annual Report Download - page 62
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Please find page 62 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.onaquarterlybasis.Therecoverabilityofcapitalizedsoftwaredevelopmentcostsisevaluatedbasedontheexpectedperformanceofthespecificproductsforwhichthe
costsrelate.Criteriausedtoevaluateexpectedproductperformanceinclude:historicalperformanceofcomparableproductsusingcomparabletechnology;ordersfor
theproductpriortoitsrelease;andestimatedperformanceofasequelproductbasedontheperformanceoftheproductonwhichthesequelisbased.
Commencinguponproductrelease,capitalizedsoftwaredevelopmentcostsareamortizedtocostofsales—softwareroyaltiesandamortizationbasedontheratioof
currentrevenuestototalprojectedrevenues,generallyresultinginanamortizationperiodofsixmonthsorless.Forproductsthathavebeenreleasedinpriorperiods,we
evaluatethefuturerecoverabilityofcapitalizedamountsonaquarterlybasis.Theprimaryevaluationcriterionisactualtitleperformance.
Significantmanagementjudgmentsandestimatesareutilizedintheassessmentofwhentechnologicalfeasibilityisestablished,aswellasintheongoingassessmentof
therecoverabilityofcapitalizedcosts.Inevaluatingtherecoverabilityofcapitalizedcosts,theassessmentofexpectedproductperformanceutilizesforecastedsales
amountsandestimatesofadditionalcoststobeincurred.Ifrevisedforecastedoractualproductsalesarelessthanand/orrevisedforecastedoractualcostsaregreater
thantheoriginalforecastedamountsutilizedintheinitialrecoverabilityanalysis,thenetrealizablevaluemaybelowerthanoriginallyestimatedinanygivenquarter,which
couldresultinanimpairmentcharge.
Intellectual Property Licenses
Intellectualpropertylicensecostsrepresentlicensefeespaidtointellectualpropertyrightsholdersforuseoftheirtrademarks,copyrights,software,technologyorother
intellectualpropertyor proprietaryrights in thedevelopmentofour products.Depending upon theagreement withthe rightsholder,wemayobtain therightsto use
acquiredintellectualpropertyinmultipleproductsovermultipleyears,oralternatively,forasingleproduct.
Weevaluatethefuturerecoverabilityofcapitalizedintellectualpropertylicensesonaquarterlybasis.Therecoverabilityofcapitalizedintellectualpropertylicensecosts
isevaluatedbasedontheexpectedperformanceofthespecificproductsinwhichthelicensedtrademarkorcopyrightistobeused.Asmanyofourintellectualproperty
licensesextendformultipleproductsovermultipleyears,wealsoassesstherecoverabilityofcapitalizedintellectualpropertylicensecostsbasedoncertainqualitative
factorssuchasthesuccessofotherproductsand/orentertainmentvehiclesutilizingtheintellectualproperty,whetherthereareanyfutureplannedtheatricalreleasesor
televisionseriesbasedontheintellectualpropertyandtherightsholder’scontinuedpromotionandexploitationoftheintellectualproperty.Priortotherelatedproduct’s
release,weexpense,aspartofcostofsales—intellectualpropertylicenses,capitalizedintellectualpropertycostswhenwebelievesuchamountsarenotrecoverable.
Capitalizedintellectualpropertycostsforthoseproductsthatarecancelledorabandonedarechargedtoproductdevelopmentexpenseintheperiodofcancellation.
Criteriausedtoevaluateexpectedproductperformanceinclude:historicalperformanceofcomparableproductsusingcomparabletechnology;ordersfortheproduct
priortoitsrelease;andestimatedperformanceofasequelproductbasedontheperformanceoftheproductonwhichthesequelisbased.
Commencingupontherelatedproduct’srelease,capitalizedintellectualpropertylicensecostsareamortizedtocostofsales—intellectualpropertylicensesbasedon
theratioofcurrentrevenuesforthespecificproducttototalprojectedrevenuesforallproductsinwhichthelicensedpropertywillbeutilized.Asintellectualproperty
licensecontractsmayextendformultipleyears,theamortizationofcapitalizedintellectualpropertylicensecostsrelatingtosuchcontractsmayextendbeyondoneyear.
Forintellectualpropertyincludedinproductsthathavebeenreleasedandunreleasedproducts,weevaluatethefuturerecoverabilityofcapitalizedamountsonaquar-
terlybasis.Theprimaryevaluationcriterionisactualtitleperformance.
Significantmanagementjudgmentsandestimatesareutilizedintheassessmentoftherecoverabilityofcapitalizedcosts.Inevaluatingtherecoverabilityofcapitalized
costs, theassessment ofexpected product performance utilizes forecasted sales amounts and estimates of additional costs to beincurred. If revised forecastedor
actualproductsalesarelessthan,and/orrevisedforecastedoractualcostsaregreaterthan,theoriginalforecastedamountsutilizedintheinitialrecoverabilityanalysis,
thenetrealizablevaluemaybelowerthanoriginallyestimatedinanygivenquarter,whichcouldresultinanimpairmentcharge.Additionally,asnotedabove,asmanyof
ourintellectual property licenses extend for multiple products over multipleyears, we also assess therecoverability ofcapitalized intellectual property license costs
basedoncertainqualitativefactorssuchasthesuccessofotherproductsand/orentertainmentvehiclesutilizingtheintellectualproperty,whetherthereareanyfuture
plannedtheatricalreleasesortelevisionseriesbasedontheintellectualpropertyandtherightsholder’scontinuedpromotionandexploitationoftheintellectualproperty.
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Activision, Inc. — 2005 Annual Report