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Table of Contents
Zynga Inc.
Notes to Consolidated Financial Statements
1. Overview and Summary of Significant Accounting Policies
Organization and Description of Business
Zynga Inc. (“Zynga,” “we” or “the Company”)
develops, markets and operates online social games as live services played over the Internet
and on social networking sites and mobile platforms. We generate revenue through the in-game sale of virtual goods and through advertising.
Our operations are headquartered in San Francisco, California, and we have several operating locations in the U.S. as well as various
international office locations in Canada, Asia and Europe.
We completed our initial public offering in December 2011 and our Class A common stock is listed on the NASDAQ Global Select
Market under the symbol “ZNGA.”
Basis of Presentation and Consolidation
The accompanying consolidated financial statements are presented in accordance with United States generally accepted accounting
principles (“U.S. GAAP”). The consolidated financial statements include the operations of us and our wholly-owned subsidiaries. All significant
intercompany balances and transactions have been eliminated in the consolidation.
Initial Public Offering
On December 15, 2011, we completed our initial public offering in which we issued and sold 100 million shares of Class A common stock
at a public offering price of $10.00 per share. We raised a total of $961.4 million of net proceeds after deducting underwriter discounts and
commissions of $32.5 million and other offering expenses of $6.1 million. Upon the closing of the initial public offering, all shares of the
Company’s then-outstanding convertible preferred stock automatically converted into an aggregate of 304.9 million shares of Class B common
stock. Additionally, 15.7 million vested restricted stock units (“ZSUs”), after deducting shares withheld to satisfy minimum tax withholding
obligations, were automatically converted into Class B common shares.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect
the reported amounts in the consolidated financial statements and notes thereto. Significant estimates and assumptions reflected in the financial
statements include, but are not limited to, the estimated lives of virtual goods that we use for revenue recognition, useful lives of intangible
assets, accrued liabilities, income taxes, accounting for business combinations, stock-based expense and evaluation of goodwill, intangible
assets, and long-lived assets for impairment. Actual results could differ materially from those estimates.
Segments
We have one operating segment with one business activity, developing and monetizing social games. Our Chief Operating Decision Maker
(“CODM”), our Chief Executive Officer, manages our operations on a consolidated basis for purposes of allocating resources. When evaluating
performance and allocating resources, the CODM reviews financial information presented on a consolidated basis, accompanied by
disaggregated bookings information for our games.
Revenue Recognition
We derive revenue from the sale of virtual goods associated with our online games and the sale of advertising.
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