Blizzard 2009 Annual Report Download - page 58
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competitor,ortechnologicalobsolescenceduetotheemergenceofnewhardwareplatforms.Material
differencesmayresultintheamountandtimingofourrevenueforanyperiodiffactorsormarket
conditionschangeorifmanagementmakesdifferentjudgmentsorutilizesdifferentestimatesin
determiningtheallowancesforreturnsandpriceprotection.Forexample,a1%changeinour
December31,2009allowanceforreturnsandpriceprotectionwouldimpactnetrevenuesbyapproximately
$3million.
Similarly,managementmustmakeestimatesoftheuncollectibilityofouraccountsreceivable.In
estimatingtheallowancefordoubtfulaccounts,weanalyzetheageofcurrentoutstandingaccount
balances,historicalbaddebts,customerconcentrations,customercreditworthiness,currenteconomic
trends,andchangesinourcustomers’paymenttermsandtheireconomiccondition,aswellaswhetherwe
canobtainsufficientcreditinsurance.Anysignificantchangesinanyofthesecriteriawouldaffect
management’sestimatesinestablishingourallowancefordoubtfulaccounts.
Weregularlyreviewinventoryquantitiesonhandandintheretailchannel.Wewritedown
inventorybasedonexcessorobsoleteinventoriesdeterminedprimarilybyfutureanticipateddemandfor
ourproducts.Inventorywritedownsaremeasuredasthedifferencebetweenthecostoftheinventoryand
netrealizablevalue,baseduponassumptionsaboutfuturedemand,whichareinherentlydifficulttoassess.
Atthepointofalossrecognition,anew,lowercostbasisforthatinventoryisestablished,andsubsequent
changesinfactsandcircumstancesdonotresultintherestorationorincreaseinthatnewlyestablished
basis.
ShippingandHandling
Shippingandhandlingcosts,whichconsistprimarilyofpackagingandtransportationcharges
incurredtomovefinishedgoodstocustomers,areincludedin“costofsales—productcosts.”
AdvertisingExpenses
Weexpenseadvertisingasincurred,exceptforproductioncostsassociatedwithmediaadvertising
whicharedeferredandchargedtoexpensethefirsttimetherelatedadisrun.Advertisingexpensesforthe
yearsendedDecember31,2009,2008,and2007were$366million,$241million,and$73million,
respectively,andareincludedinsalesandmarketingexpenseintheconsolidatedstatementsofoperations.
IncomeTaxes
WeaccountforincometaxesusingASCTopic740,IncomeTaxes.UnderASCTopic740,
incometaxesareaccountedforundertheassetandliabilitymethod.Deferredtaxassetsandliabilitiesare
recognizedforthefuturetaxconsequencesattributabletodifferencesbetweenthefinancialstatement
carryingamountsofexistingassetsandliabilitiesandtheirrespectivetaxbasesandoperatinglossandtax
creditcarryforwards.Deferredtaxassetsandliabilitiesaremeasuredusingenactedtaxratesexpectedto
applytotaxableincomeintheyearsinwhichthosetemporarydifferencesareexpectedtoberecoveredor
settled.Theeffectondeferredtaxassetsandliabilitiesofachangeintaxratesisrecognizedinincomein
theperiodthatincludestheenactmentdate.
ASCTopic740includesaccountingguidancewhichclarifiestheaccountingfortheuncertaintyin
recognizingincometaxesinanorganizationbyprovidingdetailedguidanceforfinancialstatement
recognition,measurementanddisclosureinvolvinguncertaintaxpositions.Thisguidancerequiresan
uncertaintaxpositiontomeetamorelikelythannotrecognitionthresholdattheeffectivedatetobe
recognizedbothupontheadoptionoftherelatedguidanceandinsubsequentperiods.
ForeignCurrencyTranslation
AllassetsandliabilitiesofourforeignsubsidiariesaretranslatedintoU.S.dollarsattheexchange
rateineffectatthebalancesheetdate,andrevenueandexpensesaretranslatedataverageexchangerates
duringtheperiod.Theresultingtranslationadjustmentsarereflectedasacomponentofaccumulatedother
comprehensiveincome(loss)inshareholders’equity.