Blizzard 2005 Annual Report Download - page 60

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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business
Activision,฀Inc.฀(“Activision”฀or฀“we”)฀is฀a฀leading฀international฀publisher฀of฀interactive฀entertainment฀software฀products.฀We฀have฀built฀a฀company฀with฀a฀diverse฀portfolio฀
of฀products฀that฀spans฀a฀wide฀range฀of฀categories฀and฀target฀markets฀and฀that฀is฀used฀on฀a฀variety฀of฀game฀hardware฀platforms฀and฀operating฀systems.฀We฀have฀created,฀
licensed฀and฀acquired฀a฀group฀of฀highly฀recognizable฀brands,฀which฀we฀market฀to฀a฀variety฀of฀consumer฀demographics.฀Our฀products฀cover฀diverse฀game฀categories฀
including฀action/adventure,฀action฀sports,฀racing,฀role-playing,฀simulation,฀first-person฀action฀and฀strategy.฀Our฀target฀customer฀base฀ranges฀from฀casual฀players฀to฀game฀
enthusiasts,฀children฀to฀adults฀and฀mass-market฀consumers฀to฀“value”฀buyers.฀We฀currently฀offer฀our฀products฀primarily฀in฀versions฀that฀operate฀on฀the฀Sony฀PlayStation฀2฀
(“PS2”),฀Nintendo฀GameCube฀(“GameCube”)฀and฀Microsoft฀Xbox฀(“Xbox”)฀console฀systems,฀Nintendo฀Game฀Boy฀Advance฀(“GBA”),฀Sony฀PlayStation฀Portable฀(“PSP”)฀
and฀Nintendo฀ Dual฀Screen฀ (“NDS”)฀hand-held฀devices฀ and฀ the฀personal฀ computer฀ (“PC”).฀In฀ prior฀ years,฀ we฀ have฀also฀ offered฀ our฀ products฀ on฀ the฀Sony฀PlayStation฀
(“PS1”)฀and฀Nintendo฀64฀(“N64”)฀console฀systems฀and฀Nintendo฀Game฀Boy฀Color฀(“GBC”)฀hand-held฀device.฀We฀also฀intend฀on฀developing฀titles฀for฀the฀next-generation฀
console฀systems฀being฀developed฀by฀Sony,฀Nintendo,฀and฀Microsoft.
Our฀publishing฀business฀involves฀the฀development,฀marketing฀and฀sale฀of฀products฀directly,฀by฀license฀or฀through฀our฀affiliate฀label฀program฀with฀certain฀third-party฀publish-
ers.฀Our฀distribution฀business฀consists฀of฀operations฀in฀Europe฀that฀provide฀logistical฀and฀sales฀services฀to฀third-party฀publishers฀of฀interactive฀entertainment฀software,฀
our฀own฀publishing฀operations฀and฀manufacturers฀of฀interactive฀entertainment฀hardware.
We฀maintain฀operations฀in฀the฀United฀States,฀Canada,฀the฀United฀Kingdom฀(“UK”),฀Germany,฀France,฀Italy,฀Spain,฀Japan,฀Australia,฀Sweden฀and฀the฀Netherlands.฀In฀fiscal฀
year฀2005,฀international฀operations฀contributed฀approximately฀50%฀of฀consolidated฀net฀revenues.
Principles of Consolidation
The฀consolidated฀financial฀statements฀include฀the฀accounts฀of฀Activision,฀Inc.,฀a฀Delaware฀corporation,฀and฀its฀wholly-owned฀subsidiaries.฀All฀intercompany฀accounts฀and฀
transactions฀have฀been฀eliminated฀in฀consolidation.
Cash, Cash Equivalents and Short-term Investments
Cash฀and฀cash฀equivalents฀include฀cash,฀money฀markets฀and฀short-term฀investments฀with฀original฀maturities฀of฀not฀more฀than฀90฀days.
Short-term฀investments฀generally฀mature฀between฀three฀and฀thirty฀months.฀Investments฀with฀maturities฀beyond฀one฀year฀may฀be฀classified฀as฀short-term฀based฀on฀their฀
liquid฀nature฀and฀because฀such฀securities฀represent฀the฀investment฀of฀cash฀that฀is฀available฀for฀current฀operations.฀All฀of฀our฀short-term฀investments฀are฀classified฀as฀
available-for-sale฀and฀are฀carried฀at฀fair฀market฀value฀with฀unrealized฀appreciation฀(depreciation)฀reported฀as฀a฀component฀of฀accumulated฀other฀comprehensive฀income฀
(loss)฀in฀shareholders’฀equity.฀The฀specific฀identification฀method฀is฀used฀to฀determine฀the฀cost฀of฀securities฀disposed฀with฀realized฀gains฀and฀losses฀reflected฀in฀invest-
ment฀income,฀net.
Concentration of Credit Risk
Financial฀instruments฀which฀potentially฀subject฀us฀to฀concentration฀of฀credit฀risk฀consist฀principally฀of฀temporary฀cash฀investments฀and฀accounts฀receivable.฀We฀place฀our฀
temporary฀cash฀investments฀with฀financial฀institutions.฀At฀various฀times฀during฀the฀fiscal฀years฀ended฀March฀31,฀2005฀and฀2004,฀we฀had฀deposits฀in฀excess฀of฀the฀Federal฀
Deposit฀Insurance฀Corporation฀(“FDIC”)฀limit฀at฀these฀financial฀institutions.
Our฀customer฀base฀includes฀retail฀outlets฀and฀distributors,฀including฀mass-market฀retailers,฀consumer฀electronics฀stores,฀discount฀warehouses฀and฀game฀specialty฀stores฀
in฀the฀United฀States฀and฀countries฀worldwide.฀We฀perform฀ongoing฀credit฀evaluations฀of฀our฀customers฀and฀maintain฀allowances฀for฀potential฀credit฀losses.฀We฀generally฀
do฀not฀require฀collateral฀or฀other฀security฀from฀our฀customers.฀As฀of฀and฀for฀the฀years฀ended฀March฀31,฀2005,฀2004฀and฀2003,฀we฀had฀one฀customer฀that฀accounted฀for฀
page 59
Activision, Inc. — 2005 Annual Report
Notes to Consolidated Financial Statements