Atari 2010 Annual Report Download - page 71

ANNUAL FINANCIAL REPORT – REGISTRATION DOCUMENT
71
2.23. REVENUE RECOGNITION
The Group has had to revise its accounting methods to recognize the release of online games, which represent new and
significant operations for Atari. The information below complements note 2 (Accounting rules and methods) to the 2009
annual financial report.
In accordance with IAS 18, Revenue, net revenue is recognized after deducting:
• certain sales incentives such as participation in advertising and promotion;
• certain rebates granted for early payment.
Sales of entertainment software
Revenue from sales of game software is recognized on the date products are delivered to customers. A provision is
recognized against sales for estimated returns to determine net sales. Under the Group’s agreements with its customers,
it is not required to accept returns but may agree to exchange products sold to certain customers. In addition, the Group
may agree to allow returns or grant credits or other benefits for unsold products to certain customers. In such instances,
the Group estimates the amount of future credits and sets aside a provision, which is recognized in “Trade receivables”
in the consolidated balance sheet. The Group also reassesses its customers’ solvency on a regular basis and, if needed,
sets aside provisions in “Sales and marketing expenses” and in “Trade receivables”.
The Group considers that sales of games requiring a subscription to be playable online, as well as extension packs and
other related services, should be treated as single transactions. Accordingly, revenue from such products is recognized
on a deferred basis, depending on the estimated length of relationships with customers.
Subscriptions to online services
Revenue from online gaming subscriptions depends on how long consumers purchase monthly subscriptions to join an
online gaming community. In addition, this is a unique service in that consumers who purchase subscriptions prepay for
a specific item. Revenue is therefore recognized on a deferred basis and corresponds to proceeds from subscriptions
and related services accounted for as subscription sales, proceeds from sales of licenses and other revenue.
Licensing
Under various licensing agreements extended by the Group, licensees are entitled to make multiple copies of
entertainment software in return for payment of a guaranteed minimum fee. These fees are recognized as revenue when
the master software or first copy is delivered. Any additional revenue from sales of units in excess of the number covered
by the guaranteed minimum license fee is recognized as and when such sales occur.
Services
Revenue from development and publishing services performed for third parties includes fees and other payments
received. They are considered as earned and are recognized as the services are performed.
2.24. RESEARCH AND DEVELOPMENT EXPENSES
This item includes both costs incurred by the Group's own studios and external studios for projects which have not yet
reached the technical feasibility stage and any amortization and impairment of capitalized video game development
costs. It also includes the cost of adapting (localizing) and testing products sold.
2.25. MARKETING AND SELLING EXPENSES
Advertising costs are recognized as expenses as they are incurred and are included in "Marketing and selling expenses"
in the income statement.