Zynga 2013 Annual Report Download - page 85

Table of Contents
events that have been recognized in our financial statements or tax returns. The measurement of current and deferred tax assets and liabilities is
based on provisions of enacted tax laws; the effects of future changes in tax laws or rates are not anticipated. If necessary, the measurement of
deferred tax assets is reduced by the amount of any tax benefits that are not expected to be realized based on available evidence. We account for
uncertain tax positions by reporting a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken
in a tax return. We recognize interest and penalties, if any, related to unrecognized tax benefits in income tax expense.
Foreign Currency Transactions
Generally, the functional currency of our international subsidiaries is the U.S. dollar. For these subsidiaries, foreign currency denominated
monetary assets and liabilities are remeasured into U.S. dollars at current exchange rates and foreign currency denominated nonmonetary assets
and liabilities are remeasured into U.S. dollars at historical exchange rates. Gains or losses from foreign currency remeasurement are included in
other income (expense), net in the consolidated statements of operations. For foreign subsidiaries where the functional currency is the local
currency, we use the period-end exchange rates to translate assets and liabilities, and the average exchange rates to translate revenues and
expenses into U.S. dollars. We record translation gains and losses in accumulated other comprehensive income (loss) as a component of
stockholders’ equity.
Concentration of Credit Risk and Significant Customers
Financial instruments, which potentially expose us to concentrations of credit risk, consist primarily of cash and cash equivalents, short-
term and long-term marketable securities, and accounts receivable. Substantially all of our cash, cash equivalents and short-term marketable
securities are maintained with three financial institutions with high credit standings. We perform periodic evaluations of the relative credit
standing of these institutions.
Accounts receivable are unsecured and represent amounts due to us based on contractual obligations where a signed and executed contract
or click-through agreement exists. In cases where we are aware of circumstances that may impair a specific customer’s ability to meet its
financial obligations, we record a specific allowance as a reduction to the accounts receivable balance to reduce it to its net realizable value.
Facebook is a significant distribution, marketing, promotion and payment platform for our social games. A significant portion of our 2013,
2012 and 2011 revenue was generated from players who accessed our games through Facebook. As of December 31, 2013 and December 31,
2012, 41% and 58% of our accounts receivable, respectively, were amounts owed to us by Facebook.
Advertising Expense
Costs for advertising are expensed as incurred. Advertising costs, which are included in sales and marketing expense, primarily consisting
of player acquisition costs, totaled $60.6 million, $102.2 million and $102.6 million for the years ended December 31, 2013, 2012 and 2011,
respectively.
Recent Accounting Pronouncements
In June 2013, the Financial Accounting Standards Board ratified Emerging Issues Task Force (“EITF”) Issue 13-C, “Presentation of an
Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists”
which concludes
an unrecognized tax benefit should be presented as a reduction of a deferred tax asset when settlement in this manner is available under the tax
law. We will adopt this amendment in the first quarter of 2014. We do not expect our adoption of this standard to have a material impact on our
financial statements.
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