Zynga 2015 Annual Report Download - page 83

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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 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 North America, 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.
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 property and equipment and 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.
Changes in our estimated average life of durable virtual goods during the three and twelve months ended December 31, 2015 for various games resulted in
an increase in revenue and income from operations of $0.5 million and $1.0 million, respectively, which is the result of adjusting the remaining recognition period
of deferred revenue generated in prior periods at the time of a change in estimate. We also recorded $9.9 million of revenue and income from operations in the
twelve months ended December 31, 2015 due to changes in our estimated average life of durable goods for games that have been discontinued as there is no further
service obligation after the closure of these games. These changes in estimates and discontinuance of games did not impact our reported earnings per share for the
three months ended December 31, 2015 and resulted in a $0.01 per share impact on our reported earnings per share for the twelve months ended December 31,
2015. For 2014, changes in our estimated average life of durable virtual goods resulted in a decrease in revenue, income from operations and net income of $1.2
million. These changes in estimates did not impact our reported earnings per share for the twelve months ended December 31, 2014.
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.
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