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ConcentrationofCreditRisk
Financialinstrumentswhichpotentiallysubjectustoconcentrationofcreditriskconsist
principallyofcashandcashequivalentsandaccountsreceivable.Weplaceourcashandcashequivalents
withfinancialinstitutions.Atvarioustimes,wehaddepositsinexcessofcoveragebytheFederalDeposit
InsuranceCorporation(“FDIC”),ortheequivalentagenciesinoverseasjurisdictions,atthesefinancial
institutions.
Ourcustomerbaseincludesretailoutletsanddistributors,includingmassmarketretailers,
consumerelectronicsstores,discountwarehouses,andgamespecialtystoresintheUnitedStatesand
countriesworldwide.Weperformongoingcreditevaluationsofourcustomersandmaintainallowancesfor
potentialcreditlosses.Wegenerallydonotrequirecollateralorothersecurityfromourcustomers.Wehad
twocustomers,WalMartandGameStop,whoeachaccountedforapproximately10%oftheconsolidated
revenuesfortheyearendedDecember31,2009andaccountedforapproximately18%and10%of
consolidatedgrossreceivablesatDecember31,2009,respectively.
FortheyearendedDecember31,2008,wehadtwocustomers,WalMartandGameStop,who
eachaccountedforapproximately11%oftheconsolidatednetrevenuesandaccountedforapproximately
15%and9%ofconsolidatedgrossreceivablesatDecember31,2008,respectively.
SoftwareDevelopmentCostsandIntellectualPropertyLicenses
Softwaredevelopmentcostsincludepaymentsmadetoindependentsoftwaredevelopersunder
developmentagreements,aswellasdirectcostsincurredforinternallydevelopedproducts.
WeaccountforsoftwaredevelopmentcostsinaccordancewiththeFASBguidanceforthecosts
ofcomputersoftwaretobesold,leased,orotherwisemarketed(“ASCSubtopic98520”).Software
developmentcostsarecapitalizedoncethetechnologicalfeasibilityofaproductisestablishedandsuch
costsaredeterminedtoberecoverable.Technologicalfeasibilityofaproductencompassesbothtechnical
designdocumentationandgamedesigndocumentation,orthecompletedandtestedproductdesignand
workingmodel.Significantmanagementjudgmentsandestimatesareutilizedintheassessmentofwhen
technologicalfeasibilityisestablished.Forproductswhereproventechnologyexists,thismayoccurearly
inthedevelopmentcycle.Technologicalfeasibilityisevaluatedonaproductbyproductbasis.Priortoa
product’srelease,weexpense,aspartof“costofsales—softwareroyaltiesandamortization”,capitalized
costswhenwebelievesuchamountsarenotrecoverable.Capitalizedcostsforthoseproductsthatare
cancelledorabandonedarechargedtoproductdevelopmentexpenseintheperiodofcancellation.Amounts
relatedtosoftwaredevelopmentwhicharenotcapitalizedarechargedimmediatelytoproductdevelopment
expense.
Commencinguponproductrelease,capitalizedsoftwaredevelopmentcostsareamortizedto“cost
ofsales—softwareroyaltiesandamortization”basedontheratioofcurrentrevenuestototalprojected
revenuesforthespecificproduct,generallyresultinginanamortizationperiodofsixmonthsorless.
Intellectualpropertylicensecostsrepresentlicensefeespaidtointellectualpropertyrightsholders
foruseoftheirtrademarks,copyrights,software,technology,musicorotherintellectualpropertyor
proprietaryrightsinthedevelopmentofourproducts.Dependingupontheagreementwiththerights
holder,wemayobtaintherightstouseacquiredintellectualpropertyinmultipleproductsovermultiple
years,oralternatively,forasingleproduct.Priortotherelatedproduct’srelease,weexpense,aspartof
“costofsales—intellectualpropertylicenses,”capitalizedintellectualpropertycostswhenwebelievesuch
amountsarenotrecoverable.Capitalizedintellectualpropertycostsforthoseproductsthatarecancelledor
abandonedarechargedtoproductdevelopmentexpenseintheperiodofcancellation.
Commencingupontherelatedproduct’srelease,capitalizedintellectualpropertylicensecostsare
amortizedto“costofsales—intellectualpropertylicenses”basedontheratioofcurrentrevenuesforthe
specificproducttototalprojectedrevenuesforallproductsinwhichthelicensedpropertywillbeutilized.
Asintellectualpropertylicensecontractsmayextendformultipleyears,theamortizationofcapitalized
intellectualpropertylicensecostsrelatingtosuchcontractsmayextendbeyondoneyear.