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32
Recently Issued Accounting Pronouncements
Revenue recognition
In May 2014, the FASB issued new accounting guidance related to revenue recognition. The new standard will replace all current
U.S. GAAP guidance on this topic and eliminate all industry-specific guidance. The new revenue recognition standard provides a
unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue upon
the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be
entitled in exchange for those goods or services. This guidance will be effective beginning January 1, 2018 and can be applied either
retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. We are evaluating the
adoption method as well as the impact of this new accounting guidance on our financial statements.
Stock-based compensation
In June 2014, the FASB issued new guidance related to stock compensation. The new standard requires that a performance target that
affects vesting, and that could be achieved after the requisite service period, be treated as a performance condition. As such, the
performance target should not be reflected in estimating the grant date fair value of the award. This update further clarifies that
compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and
should represent the compensation cost attributable to the periods for which the requisite service has already been rendered. The new
standard is effective for fiscal years beginning after December 15, 2015 and can be applied either prospectively or retrospectively to
all awards outstanding as of the beginning of the earliest annual period presented as an adjustment to opening retained earnings. Early
adoption is permitted. The adoption of this guidance will not have a material impact on the Company’s consolidated financial
statements.
Consolidations
In February 2015, the FASB issued new guidance related to consolidations. The new standard amends certain requirements for
determining whether a variable interest entity must be consolidated. The new standard is effective for fiscal years beginning after
December 15, 2015. Early adoption is permitted. We are evaluating the impact, if any, of adopting this new accounting guidance on
our financial statements.
Debt Issuance Costs
In April 2015, the FASB issued new guidance related to the presentation of debt issuance costs in financial statements. The new
standard requires an entity to present such costs in the balance sheet as a direct deduction from the related debt liability rather than as
an asset. Amortization of the costs will continue to be reported as interest expense. It is effective for annual reporting periods
beginning after December 15, 2015. The new guidance will be applied retrospectively to each prior period presented. The adoption of
this guidance will not have a material impact on our financial statements.
Internal-Use Software
In April 2015, the FASB issued new guidance related to internal-use software. The new standard relates to a customer’s accounting for
fees paid in cloud computing arrangements. The amendment provides guidance for customers to determine whether such arrangements
include software licenses. If a cloud arrangement includes a software license, then the customer should account for the software
license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does
not include a software license, the customer should account for the arrangement as a service contract. The new standard is effective for
fiscal years beginning after December 15, 2015. Early adoption is permitted. We are evaluating the impact, if any, of adopting this
new accounting guidance on our financial statements.
Inventory
In July 2015, the FASB issued new guidance related to the measurement of inventory which requires inventory within the scope of the
guidance to be measured at the lower of cost and net realizable value. Net realizable value is defined as the estimated selling prices in
the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The new standard is
effective for fiscal years beginning after December 15, 2016 and should be applied prospectively. Early adoption is permitted. We are
evaluating the impact, if any, of adopting this new accounting guidance on our financial statements.
10-K Activision_Master_032416_PrinterMarksAdded.pdf 32 3/24/16 11:00 PM