Electronic Arts to Stop Reporting Adjusted Sales for GamesBy
Electronic Arts Inc., the maker of Madden NFL and FIFA video games, will stop reporting adjusted sales and profit after the U.S. Securities and Exchange Commission requested the changes in a May 17 release.
The Redwood City, California-based company said on a conference call Tuesday it would report adjusted numbers a final time with quarterly results on Aug. 2. The SEC request applies to a broad set of companies that report deferred revenue.
Electronic Arts and other game companies have reported adjusted financial results alongside those that meet generally accepted accounting principles since more consumers began playing games online in 2008. Under the SEC guidelines, game revenue must be recognized over as many as nine months, because they can be played for a long period of time and include the right to receive future updates.
Up to now, companies also reported adjusted revenue, leaving out changes in deferred revenue. They said that better matched expenses with actual sales.
“This is only a change in external financial reporting on a prospective basis,” Chief Financial Officer Blake Jorgensen said on a conference call Tuesday. “It has no effect on our business, nor how we manage our business nor the way our board of directors evaluates management and company performance.”
Colin Sebastian, an analyst with Robert W. Baird & Co., said in a June 30 research note he expects video-game companies to adopt the changes.
Activision Blizzard Inc. will report a new version of adjusted revenue, a spokeswoman said. Take-Two Interactive Software Inc. said it hasn’t announced whether it will stop reporting results both ways.
Electronic Arts investors will still be able to estimate the revenue differences based on data the company releases, officials said.
“Only more job security for me,” said Michael Pachter, an analyst with Wedbush Securities. “No impact to earnings or cash flow.”
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