Blizzard 2003 Annual Report Download - page 25

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In the normal course of business, we enter into contractual arrangements with third parties for the devel-
opment of products, as well as for the rights to intellectual property. Under these agreements, we commit
to provide specified payments to a developer or intellectual property holder, based upon contractual
arrangements. Assuming all contractual provisions are met, the total future minimum contract commit-
ment for contracts in place as of March 31, 2003 is approximately $138.1 million and is scheduled to be
paid as follows (amounts in thousands):
Year ended March 31,
2004 $ 89,175
2005 28,066
2006 12,300
2007 6,075
2008 and thereafter 2,501
Total $138,117
Inflation
Our management currently believes that inflation has not had a material impact on continuing operations.
Recently Issued Accounting Standards
In January 2003, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 148, “Accounting
for Stock-Based Compensation—Transition and Disclosure, an amendment of FASB Statement No. 123.”
SFAS No. 148 provides alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. It also requires disclosures in both
annual and interim financial statements about the method of accounting for stock-based employee com-
pensation and the effect of the method used on reported results. SFAS No. 148 is effective for annual and
interim periods beginning after December 15, 2002. We adopted SFAS 148 in the fourth quarter of fiscal
2003. As we elected not to change to the fair value based method of accounting for stock-based
employee compensation, the adoption of SFAS No. 148 did not have an impact upon our financial condi-
tion or results of operations.
In April 2003, the FASB issued SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments
and Hedging Activities.” SFAS No. 149 amends and clarifies the accounting guidance on derivative instru-
ments (including certain derivative instruments embedded in other contracts) and hedging activities that
fall within the scope of SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities.”
SFAS No. 149 is effective for all contracts entered into or modified after June 30, 2003, with certain excep-
tions, and for hedging relationships designated after June 30, 2003. The guidance is to be applied
prospectively. We are currently assessing the impact of SFAS No. 149 on our financial position and results
of operations.
In May 2003, the FASB issued SFAS No. 150, “Accounting for Certain Financial Instruments with
Characteristics of both Liabilities and Equity.” SFAS No. 150 changes the accounting guidance for certain
financial instruments that, under previous guidance, could be classified as equity or “mezzanine” equity
by now requiring those instruments to be classified as liabilities (or assets in some circumstances) in the
statement of financial position. Further, SFAS No. 150 requires disclosure regarding the terms of those
instruments and settlement alternatives. SFAS No. 150 is generally effective for all financial instruments
entered into or modified after May 31, 2003, and is otherwise effective at the beginning of the first interim
period beginning after June 15, 2003. We are currently assessing the impact of SFAS No. 150 on our finan-
cial position and results of operations.
Quantitative and Qualitative Disclosures About Market Risk
Market risk is the potential loss arising from fluctuations in market rates and prices. Our market risk expo-
sures primarily include fluctuations in interest rates, foreign currency exchange rates and market prices.
Our market risk sensitive instruments are classified as “other than trading.” Our views on market risk are
Activision 2003