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In its annual report for fiscal year 2 0 2 0 , Electronic Arts, Inc., included the following disclosure in the notes accompanying the financial
In its annual report for fiscal year Electronic Arts, Inc., included the following disclosure in the notes accompanying the financial statements.
Games with Services. Our sales of Games with Services are evaluated to determine whether the software license, future update rights, and the online hosting are distinct and separable. Sales of Games with Services are generally determined to have three distinct performance obligations: software license, future update rights, and the online hosting.
Since we do not sell the performance obligations on a standalone basis, we consider market conditions and other observable inputs to estimate the standalone selling price for each perfor mance obligation. For Games with Services, generally percent of the sales price is allocated to the software license performance obligation and recognized at a point in time when control of the license has been transferred to the customer which is usually at or near the same time as the booking of the transaction The remaining percent is allocated to the future update rights and the online hosting performance obligations and recognized ratably as the service is provided over the Estimated Offering Period
In its income statement for the fiscal year ended March Electronic Arts reported Total net revenue of $ million. At the beginning of that fiscal year, the company had a liability for Deferred net revenue online enabled games of $ million. At the end of the fiscal year, that liability was $ million, a decrease of $ million.
Required
a What would cause the Deferred net revenue onlineenabled gaming liability to go down over the fiscal year?
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b What was the amount of onlineenabled games purchased by Electronic Arts customers in the fiscal year ended March $ millions
$Answer
c How might that information be useful for a financial statement reader?
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