Activision 2011 Annual Report Download - page 72

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(b) ARS rights from UBS represented an offer from UBS providing us with the right to require UBS to purchase our
ARS held through UBS at par value. To value the ARS rights, we considered the intrinsic value, time value of
money, and our assessment of the credit worthiness of UBS. We exercised our ARS rights with UBS on June 30,
2010 and recorded a loss of $7 million included within investment and other income, net in the consolidated
statement of operations.
Foreign Currency Forward Contracts Not Designated as Hedges
We transact business in various currencies other than the U.S. dollar and have significant international sales and
expenses denominated in currencies other than the U.S. dollar, subjecting us to currency exchange rate risks. To mitigate our risk
from foreign currency fluctuations we periodically enter into currency derivative contracts, principally swaps and forward
contracts with maturities of twelve months or less, with Vivendi as our principal counterparty. We do not hold or purchase any
foreign currency contracts for trading or speculative purposes and we do not designate these forward contracts or swaps as
hedging instruments. Accordingly, we report the fair value of these contracts in the consolidated balance sheet with changes in
fair value recorded in the consolidated statement of operations. The fair value of foreign currency contracts is estimated based on
the prevailing exchange rates of the various hedged currencies as of the end of the period.
Fair Value Measurements on a Non-Recurring Basis
We measure the fair value of certain assets on a non-recurring basis, generally annually or when events or changes in
circumstances indicate that the carrying amount of the assets may not be recoverable.
During our annual impairment review of goodwill performed as of December 31, 2011, we identified and recorded an
impairment of $12 million in our Distribution segment. The decrease in fair value of the reporting unit was primarily due to the
decrease of forecasted revenue from our Distribution segment in view of the industry trend towards digital distribution. No
impairments of goodwill were recorded for the years ended December 31, 2010 and 2009.
In accordance with the provisions of the impairment of long-lived assets subsections of ASC Subtopic 360-10,
intangible assets were written down to their fair value during in the quarter ended December 31, 2010 within our Activision
operating segment. The write down resulted in impairment charges of $67 million, $9 million and $250 million to license
agreements, game engines and internally developed franchises intangible assets, respectively (see Note 11 of the notes to the
consolidated financial statements for details).
The tables below present intangible assets that were measured at fair value on a non-recurring basis at December 31,
2011 and 2010 (amounts in millions):
Fair Value Measurements at
December 31, 2011 Using
As of
December 31,
Quoted
Prices in
Active
Markets for
Identical
Financial
Instruments
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
2011 (Level 1) (Level 2) (Level 3) Total Losses
Non-financial assets:
Goodwill ............................................................................
.
$— $— $— $— $12
Total non-financial assets at fair value .............................
.
$— $— $— $— $12
Fair Value Measurements at
December 31, 2010 Using
As of
December 31,
Quoted
Prices in
Active
Markets for
Identical
Financial
Instruments
Significant
Other
Observable
Inputs
Significant
Unobservable
Inputs
2010 (Level 1) (Level 2) (Level 3) Total Losses
Non-financial assets:
Intangible assets, net .....................................................
.
$— $— $— $— $326
Total non-financial assets at fair value .........................
.
$— $— $— $— $326
56