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Analyzing Unearned Revenue Changes Electronic Arts Inc. (EA) is a developer, marketer, publisher and distributor of video game software and content to be played on

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Analyzing Unearned Revenue Changes Electronic Arts Inc. (EA) is a developer, marketer, publisher and distributor of video game software and content to be played on a variety of platforms. There is an increasing demand for the ability to play these games in an online environment, and EA has developed this capability in many of its products. In addition, EA maintains servers (or arranges for servers) for the online activities of its customers. When customers purchase online subscriptions, revenue is recognized ratably over the subscription period. EA treats a significant portion of its software sales as multiple-element arrangements" andthrough fiscal 2007deferred a portion of customer purchases based on the estimated value of the online services offered. Beginning in fiscal 2008, it was not possible to estimate the separate value of the software and the online services, so EA began to defer all such revenue over a six-month period. Starting July 1, 2013, based on an analysis by the company, revenue continues to be recognized over six months for games distributed online, but for physical games purchased at retailers revenue will be recognized over a nine-month period. EA's 2014 10-K states that U.S. GAAP requires the company to account for the consumer's right to receive unspecified updates or their matchmaking service for no additional fee as a "bundled" sale, or multiple-element arrangement. Information from Electronic Arts' financial statements is given below. Prior to fiscal year 2006, no revenue was deferred. All amounts are in $millions. Net Deferred net Fiscal year end Mar. 31 revenue revenue (liability) $3,251 2006 2007 3,213 2008 3,787 4,334 283 2010 3,776 843 3,711 1,082 2012 4,265 1,125 2013 3,919 1,121 2014 3,697 1,567 2005 3,073 409 2009 2011 a. Calculate the growth rates in net revenue over the years in the table. Round answers to one decimal place. (Ex. 0.2345 = 23.5%). Use negative signs with answers, when appropriate. Fiscal Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 Growth Rate 096 096 096 096 0 % 0 % 0 % 096 b. What are the purchases by customers in each of these years? What are the growth rates? Round answers to one decimal place. (Ex. 0.2345 = 23.5%). Use negative signs with answers, when appropriate. Growth Rate Fiscal Year Purchases 2005 n/a 2006 2007 2008 2009 2010 ooooooooo 2011 2012 2013 2014 Analyzing Unearned Revenue Changes Electronic Arts Inc. (EA) is a developer, marketer, publisher and distributor of video game software and content to be played on a variety of platforms. There is an increasing demand for the ability to play these games in an online environment, and EA has developed this capability in many of its products. In addition, EA maintains servers (or arranges for servers) for the online activities of its customers. When customers purchase online subscriptions, revenue is recognized ratably over the subscription period. EA treats a significant portion of its software sales as multiple-element arrangements" andthrough fiscal 2007deferred a portion of customer purchases based on the estimated value of the online services offered. Beginning in fiscal 2008, it was not possible to estimate the separate value of the software and the online services, so EA began to defer all such revenue over a six-month period. Starting July 1, 2013, based on an analysis by the company, revenue continues to be recognized over six months for games distributed online, but for physical games purchased at retailers revenue will be recognized over a nine-month period. EA's 2014 10-K states that U.S. GAAP requires the company to account for the consumer's right to receive unspecified updates or their matchmaking service for no additional fee as a "bundled" sale, or multiple-element arrangement. Information from Electronic Arts' financial statements is given below. Prior to fiscal year 2006, no revenue was deferred. All amounts are in $millions. Net Deferred net Fiscal year end Mar. 31 revenue revenue (liability) $3,251 2006 2007 3,213 2008 3,787 4,334 283 2010 3,776 843 3,711 1,082 2012 4,265 1,125 2013 3,919 1,121 2014 3,697 1,567 2005 3,073 409 2009 2011 a. Calculate the growth rates in net revenue over the years in the table. Round answers to one decimal place. (Ex. 0.2345 = 23.5%). Use negative signs with answers, when appropriate. Fiscal Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 Growth Rate 096 096 096 096 0 % 0 % 0 % 096 b. What are the purchases by customers in each of these years? What are the growth rates? Round answers to one decimal place. (Ex. 0.2345 = 23.5%). Use negative signs with answers, when appropriate. Growth Rate Fiscal Year Purchases 2005 n/a 2006 2007 2008 2009 2010 ooooooooo 2011 2012 2013 2014

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