Activision 2011 Annual Report Download - page 38

Off-balance Sheet Arrangements
At December 31, 2011 and 2010, Activision Blizzard had no significant relationships with unconsolidated entities or
financial parties, such as entities often referred to as structured finance or special purpose entities, which would have been
established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes, that
have or are reasonably likely to have a material future effect on our financial condition, changes in financial condition, revenues
or expenses, results of operation, liquidity, capital expenditures, or capital resources.
Financial Disclosure
We maintain internal control over financial reporting, which generally includes those controls relating to the
preparation of our financial statements in conformity with accounting principles generally accepted in the United States of
America (“U.S. GAAP”). We also are focused on our “disclosure controls and procedures,” which as defined by the Securities
and Exchange Commission (the “SEC”) are generally those controls and procedures designed to ensure that financial and non-
financial information required to be disclosed in our reports filed with the SEC is reported within the time periods specified in
the SEC’s rules and forms, and that such information is communicated to management, including our principal executive and
financial officers, as appropriate, to allow timely decisions regarding required disclosure.
Our Disclosure Committee, which operates under the Board-approved Disclosure Committee Charter and Disclosure
Controls & Procedures Policy, includes senior management representatives and assists executive management in its oversight of
the accuracy and timeliness of our disclosures, as well as in implementing and evaluating our overall disclosure process. As part
of our disclosure process, senior finance and operational representatives from all of our corporate divisions and business units
prepare quarterly reports regarding their current quarter operational performance, future trends, subsequent events, internal
controls, changes in internal controls and other accounting and disclosure relevant information. These quarterly reports are
reviewed by certain key corporate finance executives. These corporate finance representatives also conduct quarterly interviews
on a rotating basis with the preparers of selected quarterly reports. The results of the quarterly reports and related interviews are
reviewed by the Disclosure Committee. Finance representatives also conduct reviews with our senior management team, our
legal counsel and other appropriate personnel involved in the disclosure process, as appropriate. Additionally, senior finance and
operational representatives provide internal certifications regarding the accuracy of information they provide that is utilized in
the preparation of our periodic public reports filed with the SEC. Financial results and other financial information also are
reviewed with the Audit Committee of the Board of Directors on a quarterly basis. As required by applicable regulatory
requirements, the principal executive and financial officers review and make various certifications regarding the accuracy of our
periodic public reports filed with the SEC, our disclosure controls and procedures, and our internal control over financial
reporting. With the assistance of the Disclosure Committee, we will continue to assess and monitor, and make refinements to,
our disclosure controls and procedures, and our internal control over financial reporting.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The impact and
any associated risks related to these policies on our business operations are discussed throughout Management’s Discussion and
Analysis of Financial Condition and Results of Operations where such policies affect our reported and expected financial results.
The estimates discussed below are considered by management to be critical because they are both important to the portrayal of
our financial condition and results of operations and because their application places the most significant demands on
management’s judgment, with financial reporting results relying on estimates about the effect of matters that are inherently
uncertain. Specific risks for these critical accounting estimates are described in the following paragraphs.
Revenue Recognition including Revenue Arrangements with Multiple Deliverables
On January 1, 2011, we adopted amendments to an accounting standard related to revenue recognition for
arrangements with multiple deliverables (which standard, as amended, is referred to herein as the “new accounting principles”).
The new accounting principles establish a selling price hierarchy for determining the selling price of a deliverable and require
the application of the relative selling price method to allocate the arrangement consideration to each deliverable in a multiple
deliverables revenue arrangement. Certain of our revenue arrangements have multiple deliverables and, as such, are accounted
for under the new accounting principles. These revenue arrangements include product sales consisting of both software and
hardware deliverables (such as peripherals or other ancillary collectors’ items sold together with physical “boxed” software) and
our sales of World of Warcraft boxed products, expansion packs and value-added services, each of which is considered with the
related subscription services for these purposes. Our assessment of deliverables and units of accounting does not change under
the new accounting principles.
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