Zynga 2015 Annual Report Download - page 87

Table of Contents
When we determine that a decline in fair value is other than temporary, the cost basis of the individual security is written down to the fair value as a new cost basis
and the amount of the write-down is accounted for as a realized loss in other income (expense), net. The new cost basis will not be adjusted for subsequent
recoveries in fair value. Determination of whether declines in fair value are other than temporary requires judgment regarding the amount and timing of recovery.
No such impairments of marketable securities have been recorded in any of the periods presented.
For non-marketable securities in which we exercise significant influence on the equity to which these non-marketable securities relate, we apply the equity
method of accounting. Our non-marketable securities are subject to periodic impairment reviews. In the first quarter of 2015, we sold our only equity method
investment and recorded a $6.2 million gain in other income in our consolidated statement of operations. As of December 31, 2015, we did not have any other
equity method investments.
RestrictedCash
Restricted cash consists of collateral for royalty agreements and funds held in escrow in accordance with the terms of certain of our business acquisition
agreements.
AccountsReceivableandAllowanceforDoubtfulAccounts
Accounts receivable are recorded and carried at the original invoiced amount less an allowance for any potential uncollectible amounts. We review accounts
receivable regularly and make estimates for the allowance for doubtful accounts when there is doubt as to our ability to collect individual balances. In evaluating
our ability to collect outstanding receivable balances, we consider many factors, including the age of the balance, the customer’s payment history and current
creditworthiness, and current economic trends. Bad debts are written off after all collection efforts have ceased. We do not require collateral from our customers.
PropertyandEquipment
Property and equipment are stated at cost less accumulated depreciation. Depreciation is recorded using the straight-line method over the estimated useful
lives of the assets. Leasehold improvements are amortized over the shorter of the estimated useful lives of the improvements or the lease term.
BusinessCombinations
We account for acquisitions of entities that include inputs and processes and have the ability to create outputs as business combinations. We allocate the
purchase price of the acquisition, which includes the estimated acquisition date fair value of contingent consideration, to the tangible assets, liabilities, and
identifiable intangible assets acquired based on their estimated fair values. The excess of the purchase price over those fair values is recorded as goodwill.
Acquisition-related expenses and restructuring costs are expensed as incurred. During the measurement period, we record adjustments to the assets acquired and
liabilities assumed with the corresponding offset to goodwill. After the measurement period, which could be up to one year after the transaction date, subsequent
adjustments are recorded to our consolidated statements of operations. We record changes in the fair value of contingent consideration liabilities within operating
expenses in our consolidated statement of operations each reporting period.
GoodwillandIndefinite-LivedIntangibleAssets
Goodwill and indefinite-lived intangible assets are carried at cost and are evaluated annually for impairment, or more frequently if circumstances exist that
indicate that impairment may exist. When conducting our annual goodwill impairment assessment, we perform a quantitative evaluation of whether goodwill is
impaired using the two-step impairment test. The first step is comparing the fair value of our reporting unit to its
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