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<h4 style="font-size: 12pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">1.<font class="_mt"> Summary of Significant Accounting Policies</font></h4>
<h6 style="font-size: 9.5pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Basis of Presentation and Consolidation</h6>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Our consolidated financial statements include the accounts of International Game Technology, including all majority-owned or controlled subsidiaries and VIEs for which we are the primary beneficiary. All appropriate inter-company accounts and transactions are eliminated. We prepare our consolidated financial statements in accordance with SEC and US GAAP requirements and include all adjustments of a normal recurring nature that are necessary to fairly present our consolidated results of operations, financial position, and cash flows for all periods presented. This annual report on Form 10-K includes subsequent events evaluated for potential recognition and disclosure through the date of financial statement issuance on December 2, 2009.</p>
<p class="Paragraphbeforetable" style="font-size: 9.5pt; margin-bottom: 6pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Our fiscal year is reported on a 52/53-week period that ends on the Saturday nearest to September 30 each year. Similarly, our quarters end on the Saturday nearest to the last day of the quarter end month. For simplicity, this report presents all fiscal periods using the calendar month end as outlined in the table below. The results of operations for fiscal 2009 include 53 weeks versus 52 weeks in fiscal 2008 and 2007.</p>
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<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: center;" align="center"><b><font class="_mt" style="font-size: 10pt;">Fiscal Year End</font></b></p></td></tr>
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<td style="border-right: medium none; padding-right: 0in; border-top: 0px; padding-left: 0in; padding-bottom: 0in; border-left: medium none; width: 18%; padding-top: 0in; border-bottom: black 1.5pt solid;" valign="top" width="18%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: center;" align="center"><b><font class="_mt" style="font-size: 10pt;">Actual</font></b></p></td>
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<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"> </p></td>
<td style="border-right: medium none; padding-right: 0in; border-top: 0px; padding-left: 0in; padding-bottom: 0in; border-left: medium none; width: 18%; padding-top: 0in; border-bottom: black 1.5pt solid;" valign="top" width="18%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: center;" align="center"><b><font class="_mt" style="font-size: 10pt;">Presented as</font></b></p></td></tr>
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<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: center;" align="center"><font class="_mt" style="font-size: 10pt;">October 3, 2009</font></p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; background: #c0ffff; padding-bottom: 0in; width: 4%; padding-top: 0in;" valign="top" width="4%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"> </p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; background: #c0ffff; padding-bottom: 0in; width: 18%; padding-top: 0in;" valign="top" width="18%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: center;" align="center"><font class="_mt" style="font-size: 10pt;">September 30, 2009</font></p></td></tr>
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<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: center;" align="center"><font class="_mt" style="font-size: 10pt;">September 27, 2008</font></p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; background: white; padding-bottom: 0in; width: 4%; padding-top: 0in;" valign="top" width="4%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"> </p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; background: white; padding-bottom: 0in; width: 18%; padding-top: 0in;" valign="top" width="18%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: center;" align="center"><font class="_mt" style="font-size: 10pt;">September 30, 2008</font></p></td></tr>
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<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: center;" align="center"><font class="_mt" style="font-size: 10pt;">September 29, 2007</font></p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; background: #c0ffff; padding-bottom: 0in; width: 4%; padding-top: 0in;" valign="top" width="4%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"> </p></td>
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<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: center;" align="center"><font class="_mt" style="font-size: 10pt;">September 30, 2007</font></p></td></tr></table></div><!--EndFragment-->
<p class="Tableparagraph" style="font-size: 9.5pt; margin: 0in 0in 5pt 1.2in; font-family: 'Microsoft Sans Serif';">
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<h6 style="font-size: 9.5pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Use of Estimates</h6>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Our consolidated financial statements are prepared in conformity with US GAAP. Accordingly, we are required to make estimates, judgments, and assumptions that we believe are reasonable based on our historical experience, contract terms, observance of known trends in our company and the industry as a whole, and information available from other outside sources. Our estimates affect reported amounts of assets, liabilities, revenues, expenses, and related disclosure of contingent assets and liabilities. Our most significant estimates include revenue recognition, goodwill, other intangible assets, prepaid and deferred royalties, jackpot liabilities, inventory obsolescence, income taxes, share-based compensation, and bad debt.<font class="_mt"> We evaluate our estimates on a regular basis and actual results may differ from initial estimates.</font></p>
<h6 style="font-size: 9.5pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"><a name="OLE_LINK27"></a><a name="OLE_LINK26"><font class="_mt">Revenue Recognition</font></a></h6>
<p class="Paragraphbeforebullets" style="font-size: 9.5pt; margin-bottom: 0pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"><font class="_mt"><font class="_mt">We recognize revenues when all of the following have been satisfied:</font></font></p>
<p class="Paragraphbeforebullets" style="font-size: 9.5pt; margin-bottom: 0pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"></p>
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<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: right;" align="right"><font class="_mt" style="font-size: 10pt; font-family: Symbol;">ª <font class="_mt"> </font></font></p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; padding-bottom: 0in; padding-top: 0in;" valign="top">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"><font class="_mt" style="font-size: 9.5pt; font-family: 'Microsoft Sans Serif';">persuasive evidence of an arrangement exists</font></p></td></tr></table><font class="_mt" style="font-size: 10pt;"></font>
<p class="Paragraphbeforebullets" style="font-size: 9.5pt; margin-bottom: 0pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"></p>
<table class="MsoNormalTable" style="font-size: 10pt; margin-bottom: 0pt; margin-left: 0in; margin-right: 0in; font-family: 'Times New Roman'; border-collapse: separate;" cellspacing="0" cellpadding="0" border="0">
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<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; padding-bottom: 0in; width: 0.5in; padding-top: 0in;" valign="top" width="48">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: right;" align="right"><font class="_mt" style="font-size: 10pt; font-family: Symbol;">ª <font class="_mt"> </font></font></p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; padding-bottom: 0in; padding-top: 0in;" valign="top">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"><font class="_mt" style="font-size: 9.5pt; font-family: 'Microsoft Sans Serif';">the price to the customer is fixed and determinable</font></p></td></tr></table><font class="_mt" style="font-size: 10pt;"></font>
<p class="Paragraphbeforebullets" style="font-size: 9.5pt; margin-bottom: 0pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"></p>
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<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; padding-bottom: 0in; width: 0.5in; padding-top: 0in;" valign="top" width="48">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: right;" align="right"><font class="_mt" style="font-size: 10pt; font-family: Symbol;">ª <font class="_mt"> </font></font></p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; padding-bottom: 0in; padding-top: 0in;" valign="top">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"><font class="_mt" style="font-size: 9.5pt; font-family: 'Microsoft Sans Serif';">delivery has occurred and any acceptance terms have been fulfilled</font></p></td></tr></table><font class="_mt" style="font-size: 10pt;"></font>
<p class="Paragraphbeforebullets" style="font-size: 9.5pt; margin-bottom: 0pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"></p>
<table class="MsoNormalTable" style="font-size: 10pt; margin-bottom: 0pt; margin-left: 0in; margin-right: 0in; font-family: 'Times New Roman'; border-collapse: separate;" cellspacing="0" cellpadding="0" border="0">
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<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; padding-bottom: 0in; width: 0.5in; padding-top: 0in;" valign="top" width="48">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: right;" align="right"><font class="_mt" style="font-size: 10pt; font-family: Symbol;">ª <font class="_mt"> </font></font></p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; padding-bottom: 0in; padding-top: 0in;" valign="top">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"><font class="_mt" style="font-size: 9.5pt; font-family: 'Microsoft Sans Serif';">no significant contractual obligations remain</font></p></td></tr></table><font class="_mt" style="font-size: 10pt;"></font>
<p class="Paragraphbeforebullets" style="font-size: 9.5pt; margin-bottom: 0pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"></p>
<table class="MsoNormalTable" style="font-size: 10pt; margin-bottom: 0pt; margin-left: 0in; margin-right: 0in; font-family: 'Times New Roman'; border-collapse: separate;" cellspacing="0" cellpadding="0" border="0">
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<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: right;" align="right"><font class="_mt" style="font-size: 10pt; font-family: Symbol;">ª <font class="_mt"> </font></font></p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; padding-bottom: 0in; padding-top: 0in;" valign="top">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"><font class="_mt" style="font-size: 9.5pt; font-family: 'Microsoft Sans Serif';">collection is reasonably assured</font></p></td></tr></table><font class="_mt" style="font-size: 10pt;"></font><!--EndFragment-->
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"><font class="_mt"><font class="_mt">Revenues are reported net of incentive rebates, discounts, sales taxes, and other taxes of a similar nature. Amounts billed prior to completing the earnings process are deferred until revenue recognition criteria are met.</font></font></p>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Gaming Operations</p>
<p class="Paragraphbeforebullets" style="font-size: 9.5pt; margin-bottom: 0pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Gaming operations revenues are generated from providing customers with our proprietary electronic gaming equipment and related network systems, licensing, and services under a variety of recurring revenue arrangements, including WAP, CDS, stand-alone participation and flat fee, equipment leasing and rental, and online gaming solutions.</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">WAP systems consist of linked slot machines located in multiple casino properties, connecting to an IGT central computer system. WAP games differ from stand-alone units in that a progressive jackpot increases with every wager until a player wins the top award combination. Casinos with IGT WAP machines pay a percentage of the coin-in (amounts wagered) for IGT services related to the design, assembly, installation, operation, maintenance, and marketing of the WAP systems, as well as funding and administration of the progressive jackpot.</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Revenues from CDS, stand-alone and other equipment leasing or rentals are recognized based on a percentage of the net win or on a fixed daily/monthly fee or rental basis. Online gaming solutions encompass online casino gaming software and content licensing, as well as back office operational support services. All online gaming solutions are provided under revenue sharing arrangements based on net gaming revenues.</p>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Product Sales</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Our product sales revenues are generated from the sale of electronic gaming equipment and network systems, as well as licensing, services, and component parts. Certain of our products are deemed software-related for accounting purposes and revenue is recognized in accordance with software accounting guidance. Time-based licensing and maintenance fees are typically recognized ratably over the term of the agreement.</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Our credit sales terms are predominately 90 days or less. We also grant extended payment terms under contracts of sale secured by the related equipment sold, and these contracts are typically paid within their terms.</p>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Multiple Element Arrangements</p><!--EndFragment--><!--EndFragment-->
<p class="Paragraphbeforebullets" style="font-size: 9.5pt; margin-bottom: 0pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"></p><font class="_mt" style="font-size: 10pt;"></font>
<p class="Paragraphbeforebullets" style="font-size: 9.5pt; margin-bottom: 0pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"></p><font class="_mt" style="font-size: 10pt;"></font>
<p class="Paragraphbeforebullets" style="font-size: 9.5pt; margin-bottom: 0pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"></p><font class="_mt" style="font-size: 10pt;"></font><!--EndFragment-->
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">The majority of our multiple element contracts are for some combination of machines, network systems, license fees, maintenance, training, and other services. The contracts separately state pricing for each deliverable based on our standard price list and VSOE is determined by the price charged for each deliverable when it is sold separately. VSOE for maintenance agreements is determined based on the annual renewal rates. The terms of performance, cancellation, termination, or refunds in our multiple element contracts are similar to those for an individual stand-alone deliverable.</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Revenues for each deliverable are recognized when the revenue recognition criteria for that element has been met. If we are unable to establish VSOE for any undelivered element, revenue is generally deferred until all elements have been delivered or until VSOE can be determined. If we do not have VSOE for a delivered element, the VSOE of the undelivered elements is deferred, and the remaining portion is allocated to the delivered elements and recognized as revenue under the residual method. When machines are sold in combination with a leased system on which the machines depend for essential functionality, machine revenues are recognized ratably over the system lease contract term.</p>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Deferred Revenue</p>
<p class="Paragraphbeforetable" style="font-size: 9.5pt; margin-bottom: 0pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Deferred revenue consists of amounts received or billed after product is delivered or services are rendered, but prior to meeting all of the requirements for revenue recognition. Complex systems and/or multiple element contracts may take several months to complete and our deferred revenues may increase as our products evolve toward a more systems-centric environment. Deferred revenue balances below were primarily related to product sales and included in other liabilities.</p>
<p class="Paragraphbeforetable" style="font-size: 9.5pt; margin-bottom: 0pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"> </p>
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<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;" align="left"><b><font class="_mt" style="font-size: 10pt;">September 30,</font></b></p></td>
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<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"> </p></td>
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<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: center;" align="center"><b><font class="_mt" style="font-size: 10pt;">2009</font></b></p></td>
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<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"> </p></td>
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<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: center;" align="center"><b><font class="_mt" style="font-size: 10pt;">2008</font></b></p></td>
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<tr>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; background: #c0ffff; padding-bottom: 0in; width: 66%; padding-top: 0in;" valign="bottom" width="66%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;" align="left"><font class="_mt" style="font-size: 10pt;">Current</font></p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; background: #c0ffff; padding-bottom: 0in; width: 1%; padding-top: 0in;" valign="bottom" width="1%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: right;" align="right"> </p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; background: #c0ffff; padding-bottom: 0in; width: 1%; padding-top: 0in;" valign="bottom" width="1%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"><font class="_mt" style="font-size: 10pt;">$</font></p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; background: #c0ffff; padding-bottom: 0in; width: 14%; padding-top: 0in;" valign="bottom" width="14%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: right;" align="right"><font class="_mt" style="font-size: 10pt;">101.7</font></p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; background: #c0ffff; padding-bottom: 0in; width: 1%; padding-top: 0in;" valign="bottom" width="1%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"> </p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; background: #c0ffff; padding-bottom: 0in; width: 1%; padding-top: 0in;" valign="bottom" width="1%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: right;" align="right"> </p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; background: #c0ffff; padding-bottom: 0in; width: 1%; padding-top: 0in;" valign="bottom" width="1%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"><font class="_mt" style="font-size: 10pt;">$</font></p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; background: #c0ffff; padding-bottom: 0in; width: 14%; padding-top: 0in;" valign="bottom" width="14%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: right;" align="right"><font class="_mt" style="font-size: 10pt;">60.9</font></p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; background: #c0ffff; padding-bottom: 0in; width: 1%; padding-top: 0in;" valign="bottom" width="1%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"> </p></td></tr>
<tr>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; background: white; padding-bottom: 1.45pt; width: 66%; padding-top: 0in;" valign="bottom" width="66%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;" align="left"><font class="_mt" style="font-size: 10pt;">Non-current</font></p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; background: white; padding-bottom: 1.45pt; width: 1%; padding-top: 0in;" valign="bottom" width="1%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: right;" align="right"> </p></td>
<td style="border-right: medium none; padding-right: 0in; border-top: 0px; padding-left: 0in; background: white; padding-bottom: 0in; border-left: medium none; width: 1%; padding-top: 0in; border-bottom: black 1.5pt solid;" valign="bottom" width="1%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"> </p></td>
<td style="border-right: medium none; padding-right: 0in; border-top: 0px; padding-left: 0in; background: white; padding-bottom: 0in; border-left: medium none; width: 14%; padding-top: 0in; border-bottom: black 1.5pt solid;" valign="bottom" width="14%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: right;" align="right"><font class="_mt" style="font-size: 10pt;">20.3</font></p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; background: white; padding-bottom: 1.45pt; width: 1%; padding-top: 0in;" valign="bottom" width="1%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"> </p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; background: white; padding-bottom: 1.45pt; width: 1%; padding-top: 0in;" valign="bottom" width="1%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: right;" align="right"> </p></td>
<td style="border-right: medium none; padding-right: 0in; border-top: 0px; padding-left: 0in; background: white; padding-bottom: 0in; border-left: medium none; width: 1%; padding-top: 0in; border-bottom: black 1.5pt solid;" valign="bottom" width="1%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"> </p></td>
<td style="border-right: medium none; padding-right: 0in; border-top: 0px; padding-left: 0in; background: white; padding-bottom: 0in; border-left: medium none; width: 14%; padding-top: 0in; border-bottom: black 1.5pt solid;" valign="bottom" width="14%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: right;" align="right"><font class="_mt" style="font-size: 10pt;">1.2</font></p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; background: white; padding-bottom: 1.45pt; width: 1%; padding-top: 0in;" valign="bottom" width="1%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"> </p></td></tr>
<tr>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; background: #c0ffff; padding-bottom: 2.95pt; width: 66%; padding-top: 0in;" valign="bottom" width="66%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;" align="left"><font class="_mt" style="font-size: 10pt;">Total</font></p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; background: #c0ffff; padding-bottom: 2.95pt; width: 1%; padding-top: 0in;" valign="bottom" width="1%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: right;" align="right"> </p></td>
<td style="border-right: medium none; padding-right: 0in; border-top: 0px; padding-left: 0in; background: #c0ffff; padding-bottom: 0in; border-left: medium none; width: 1%; padding-top: 0in; border-bottom: black 2.25pt double;" valign="bottom" width="1%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"><font class="_mt" style="font-size: 10pt;">$</font></p></td>
<td style="border-right: medium none; padding-right: 0in; border-top: 0px; padding-left: 0in; background: #c0ffff; padding-bottom: 0in; border-left: medium none; width: 14%; padding-top: 0in; border-bottom: black 2.25pt double;" valign="bottom" width="14%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: right;" align="right"><font class="_mt" style="font-size: 10pt;">122.0</font></p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; background: #c0ffff; padding-bottom: 2.95pt; width: 1%; padding-top: 0in;" valign="bottom" width="1%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"> </p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; background: #c0ffff; padding-bottom: 2.95pt; width: 1%; padding-top: 0in;" valign="bottom" width="1%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: right;" align="right"> </p></td>
<td style="border-right: medium none; padding-right: 0in; border-top: 0px; padding-left: 0in; background: #c0ffff; padding-bottom: 0in; border-left: medium none; width: 1%; padding-top: 0in; border-bottom: black 2.25pt double;" valign="bottom" width="1%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"><font class="_mt" style="font-size: 10pt;">$</font></p></td>
<td style="border-right: medium none; padding-right: 0in; border-top: 0px; padding-left: 0in; background: #c0ffff; padding-bottom: 0in; border-left: medium none; width: 14%; padding-top: 0in; border-bottom: black 2.25pt double;" valign="bottom" width="14%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap; text-align: right;" align="right"><font class="_mt" style="font-size: 10pt;">62.1</font></p></td>
<td style="padding-right: 0in; border-top: 0px; padding-left: 0in; background: #c0ffff; padding-bottom: 2.95pt; width: 1%; padding-top: 0in;" valign="bottom" width="1%">
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"> </p></td></tr></table></div><!--EndFragment-->
<p class="Tableparagraph" style="font-size: 9.5pt; margin-left: 1.2in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">
</p>
<h6 style="font-size: 9.5pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Jackpot Accounting</h6>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Jackpot Liabilities and Expense</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">We incur and accrue jackpot liabilities with every wager on a device connected to an IGT WAP system. A portion of the casino fees paid to IGT is used for the funding and administration of WAP jackpot payments. Jackpot expense (included in Cost of Gaming Operations) represents the estimated cost to fund jackpots and is subject to changes in the discount or interest rates used to present value WAP jackpot liabilities due future winners.</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Our WAP jackpots are generally payable in equal annual installments over 20 to 26 years or immediately in the case of instant win systems. Winners may elect to receive a lump sum payment for the present value of the jackpot discounted at applicable interest rates in lieu of periodic annual installments. Discount rates eligible for use in the lump sum payment calculation vary by jurisdiction and are impacted by market forces and other economic conditions.</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Jackpot liabilities are comprised of payments due previous winners, as well as amounts due future winners of WAP jackpots not yet won. Previous winner liabilities for periodic payments are carried at the accreted cost of jackpot annuity investments in qualifying US government or agency securities used to fund future periodic payments. Liabilities due future winners are revalued and recorded at the present value of the amount carried on WAP meters for jackpots not yet won.</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">We estimate the present value of jackpot liabilities due future winners using current market prime, treasury, or agency rates weighted with historical lump sum payout election ratios. The most recent historical patterns indicate that approximately 85% of winners will elect the lump sum payment option. Additionally, we estimate current liabilities for jackpots not yet won based on historical experience with winner payment elections, in conjunction with the theoretical projected number of jackpots.</p>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Restricted Cash and Investments</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">We are required by gaming regulations to maintain sufficient reserves in restricted accounts to be used for the purpose of funding payments to progressive jackpot winners. Restricted amounts are based primarily on the jackpot meters displayed to slot players and vary by jurisdiction. Compliance with restricted cash and investments requirements is reported to the gaming authorities in various jurisdictions.</p>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Jackpot Annuity Investments</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">These investments represent discounted qualifying US treasury or agency securities purchased and held to maturity to fund annual jackpot payments due previous winners. We have both the intent and ability to hold these investments to maturity. Accordingly, these investments are stated at cost, plus interest accreted over the term of the security. Certain jurisdictions require regulatory approval for liquidation of these annuity investments.</p>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">WAP Systems Interest (included in Other Income/Expense)</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Interest income accretion on jackpot annuity investments used to fund periodic payments is offset by interest expense accretion on related jackpot liabilities for payments due previous winners. The interest income and expense accrete at approximately the same rate and vary depending on the amount of jackpots won and the number of winners electing periodic payments. WAP systems annuity interest accretion totaled $27.5 million in fiscal 2009, $28.6 million in 2008, and $31.3 million in 2007.</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">We also hold a significant amount of cash and short-term investments related to our WAP operations on which we earn interest income.</p>
<h6 style="font-size: 9.5pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Share-based Compensation</h6>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"><a name="OLE_LINK5">We adopted fair value recognition of all share-based compensation at the beginning of fiscal 2006, using the modified prospective transition. Prior to fiscal 2006, share-based compensation was recognized under the intrinsic value method, which resulted in compensation expense recorded only for restricted stock awards and modified or acquired unvested options. See Note 6.</a></p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"><font class="_mt">Share-based compensation is measured at fair value on the grant date reduced for estimated forfeitures. We use historical data and projections to estimate expected employee behaviors related to option exercises and forfeitures. We expense share-based compensation over the applicable vesting period using the straight-line method for service-based awards and the accelerated method for performance-based awards. Compensation for share-based awards granted prior to the beginning of fiscal 2006 was recognized under the accelerated method.</font></p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"><font class="_mt">The fair value of restricted share awards is based on the market price of IGT stock on the grant date. We estimate the fair value of each stock option award on the grant date using the Black-Scholes valuation model. Option valuation models require the input of highly subjective assumptions, and changes in assumptions used can materially affect the fair value estimate. Expected volatility and dividends are based on implied and historical IGT stock factors. Expected term represents the estimated weighted average time between grant and employee exercise. Risk free rate is based on US Treasury rates appropriate for the expected term.</font></p>
<h6 style="font-size: 9.5pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"><font class="_mt">Advertising Costs</font></h6>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"><font class="_mt">Advertising costs are expensed as incurred and totaled $16.1 million in fiscal 2009, $22.3 million in 2008, and $19.9 million in 2007.</font></p>
<h6 style="font-size: 9.5pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"><font class="_mt">Research and Development</font></h6>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"><font class="_mt">Our products reach technological feasibility shortly before the products are released and therefore R&D costs are generally expensed as incurred. Employee related costs associated with product development are included in R&D costs. Certain R&D performed for specific customers is charged to cost of product sales when the related sale is recorded.</font></p>
<h6 style="font-size: 9.5pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"><font class="_mt">Income Taxes</font></h6>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"><font class="_mt">Our provision for income taxes is based on estimated effective annual income tax rates. The provision differs from income taxes currently payable because certain items of income and expense are recognized in different periods for financial statement purposes than for tax return purposes. We reduce deferred tax assets by a valuation allowance when it is more likely than not that some or all of the deferred tax assets will not be realized. Net current and non-current deferred tax assets or liabilities are determined separately for federal, state, and foreign jurisdictions.</font></p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"><font class="_mt">Accrued income taxes are reduced by the tax benefits from employee stock options exercised. We receive an income tax benefit on the difference between the market price of the stock issued at the time of exercise and the option price. Our provision for income taxes includes interest, penalties and reserves for uncertain tax positions.</font></p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"><font class="_mt">At the beginning of fiscal 2008, we adopted new accounting guidance related to accounting for uncertainty in income taxes which required the recognition of uncertain tax positions taken or expected to be taken in a tax return, when it is “more likely than not” to be sustained upon examination. This assessment further presumes that tax authorities evaluate the technical merits of transactions individually with full knowledge of all facts and circumstances surrounding the issue.</font></p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"><font class="_mt">A recognized tax position is recorded in the financial statements at the largest amount of benefit that has a greater than 50% likelihood of being realized upon settlement. Changes in judgment resulting in subsequent recognition, de-recognition, or adjusted measurement of a tax position taken in a prior annual period, including any related interest and penalties, are recognized as discrete items during the period in which the change occurs. See Note 17.</font></p>
<h6 style="font-size: 9.5pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"><font class="_mt"><font class="_mt" style="layout-grid-mode: line;">Earnings Per Share</font></font></h6>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';"><font class="_mt"><font class="_mt" style="layout-grid-mode: line;">We compute EPS using the weighted average number of common and potential shares outstanding. See Note 18.</font></font></p>
<h6 style="font-size: 9.5pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Cash and Equivalents</h6>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Cash and equivalents consist primarily of deposits held at major banks and other marketable securities with original maturities of 90 days or less. The majority of our cash equivalents are in 100% US Treasury-backed money market funds.</p>
<h6 style="font-size: 9.5pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Investment Securities</h6>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Available-for-sale securities are reported at fair value, with unrealized gains and losses recorded in accumulated other comprehensive income (loss). Trading securities are reported at fair value, with unrealized gains or losses recognized in earnings. See Notes 8 and 20.</p>
<h6 style="font-size: 9.5pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Receivables</h6>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Equipment Financing Contracts</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">We grant extended payment terms to qualifying customers under contracts of sale. These contracts are generally for terms of one to five years, secured by the related equipment sold, with interest recognized at prevailing rates.</p>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Facility Notes</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">We provide development financing loans to select customers for new or expanding gaming facilities, generally under terms of one to seven years with interest recognized at prevailing rates. Certain agreements may also include provisions for the facility to reserve a percentage of its floor space for the placement of IGT proprietary games, which may be reduced if the machines do not meet certain performance standards. These agreements may call for IGT to receive a portion of the net win on these proprietary games as repayment for some or all of the amounts financed.</p>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Allowance for Doubtful Accounts</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">We maintain an allowance for doubtful accounts related to trade receivables, as well as notes and contracts receivable, where collection has been deemed a high risk. We analyze historical customer collection trends, concentrations, creditworthiness, and changes in terms, as well as current economic trends when evaluating the adequacy of our allowance for doubtful accounts.</p>
<h6 style="font-size: 9.5pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Inventories</h6>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Inventories are stated at the lower of cost (first-in, first-out method) or market value. We regularly assess inventory quantities for excess and obsolescence primarily based on forecasted product demand.</p>
<h6 style="font-size: 9.5pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Property, Plant and Equipment</h6>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">We depreciate property, plant and equipment down to salvage value using the straight-line method. Maintenance and repairs are expensed as incurred and improvements are capitalized. Depreciation and asset charges related to gaming operations equipment are recorded to cost of gaming operations. Proceeds from gaming operations equipment sold are reflected in investing cash flows.</p>
<h6 style="font-size: 9.5pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Goodwill and Other Intangible Assets</h6>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">We amortize our finite lived intangible assets to reflect the pattern in which the economic benefits of the assets will be consumed based on projected usage and revenues over one to 18 years. When the pattern of economic benefit is undeterminable, we amortize using the straight-line method. We consider certain factors when assigning useful lives such as legal, regulatory, and contractual provisions, as well as the effects of obsolescence, demand, competition, and other economic factors.</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">We measure and test goodwill and other intangible assets not subject to amortization for impairment at least annually or more often if there are indicators of impairment. We regularly evaluate our portfolio of finite-lived intangibles to determine if changes or circumstances indicate the carrying values may not be recoverable or a change in remaining useful life is needed. Indicators that could trigger an impairment review include changes in legal and regulatory factors, market conditions, and operational performance. Impairment is measured as the difference between the carrying amount and the fair value of the assets and recognized as a component of income from operations.</p>
<h6 style="font-size: 9.5pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Other Assets</h6>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Other assets are comprised of deferred licensing rights and other expenses, investments in unconsolidated affiliates, uncertain tax positions, and refundable deposits.</p>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Deferred Licensing Rights</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">We pay royalty and license fees for the use of third-party trade names, celebrity likenesses, content, and other IP rights. We classify licensing rights and deferred fees as current and non-current assets and amortize costs based on the estimated period of expected consumption related to forecasted distribution schedules. If a pattern cannot be reliably determined, we use the straight-line method over the contract life. We also contract with certain parties for IP rights where future payments are contingent upon revenues generated.</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Prepaid fees deemed unrealizable after the related product is released for distribution are charged to cost of product sales or gaming operations. Prepaid fees deemed unlikely to be realized before the related product is released are charged to R&D.</p>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Investments in Unconsolidated Affiliates</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">We apply the equity method of accounting for investments in unconsolidated affiliates when we exercise significant influence, but do not control the financial and operating decisions. Equity earnings of our unconsolidated affiliates are included in operating income because they are integral to our business operations. Equity method earnings not material to our financial statements are presented as a component of SG&A.</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Strategic investments in unconsolidated affiliates are presented in other non-current assets, separate from investment securities held for a return. Equity investments in unconsolidated affiliates not accounted for under the equity method and restricted for more than one year are recorded under the cost method. All other investments in unconsolidated affiliates not accounted for under the equity method are available-for-sale securities carried at fair value. Unrealized holding gains or losses are recorded in other comprehensive income, except those hedged with designated fair value foreign currency derivatives are recognized in other income (expense). See Note 3.</p>
<h6 style="font-size: 9.5pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Derivatives</h6>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">We use derivative financial instruments to manage certain foreign currency exchange and interest rate risk. We enter into derivative financial instruments with high-credit quality counterparties and diversify our positions among such counterparties to reduce our exposure to credit losses.</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">We recognize derivative financial instruments as either assets or liabilities at fair value. Accounting for changes in the fair value of derivatives depends on the intended use and resulting designation. We are not party to leveraged derivatives and do not hold or issue financial instruments for speculative purposes. We record derivative financial instruments on a net basis with counterparties for which a master netting arrangement has been executed. Derivative gains and losses are generally recognized in other income (expense). See Note 19.</p>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Foreign Currency Hedging</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">We routinely use derivative financial instruments to minimize our market risk exposure related to our monetary assets and liabilities denominated in nonfunctional foreign currencies. The primary business objective of our hedging program is to minimize the impact to earnings from changes in foreign exchange rates. These hedging instruments are subject to fluctuations in value that are generally offset by the value of the underlying exposures being hedged. Counterparties to our agreements are major commercial banks. These forward exchange contracts are not designated hedges and gains or losses are recognized in other income (expense).</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">We hedge significant investments denominated in foreign currency with forward exchange contracts to protect the US dollar value of our investment. These forward exchange contracts are designated fair value hedges. These derivative gains or losses are recorded in other income (expense) together with the offsetting gains or losses on the change in the investment’s fair value attributable to the changes in foreign currency rates. Time value is excluded from effectiveness testing.</p>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Interest Rate Management</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">We use interest rate swap derivatives to diversify our debt portfolio between fixed and variable rate instruments. The amount and term of each swap is matched with all or a portion of outstanding principal and remaining term of a specific obligation. Our swaps exchange fixed rates for variable rates without an exchange of the notional amount upon which they are based.<font class="_mt"> </font></p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">These swaps are designated fair value hedges because they protect us against changes in the fair value of a portion of our fixed rate borrowings due to interest rate movements. We recognize the gains or losses from the changes in fair value of the swaps, as well as the offsetting change in the fair value of the hedged designated portion of long-term debt, in other income (expense). Ineffectiveness, if any, is also recorded in other income (expense). Amounts receivable or payable under the swaps are net settled and recorded as a net receivable or payable with corresponding adjustments to interest expense.</p>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Negotiated Share Repurchase Transactions</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">As part of our capital deployment activities, we have used share repurchases to return capital to our shareholders and to reduce outstanding share count dilution. We may use open market and negotiated share repurchase transactions to achieve our timing, cost, and volume objectives.</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Our ASR (accelerated share repurchase) transactions allowed us to purchase a targeted number of shares immediately with the final purchase price of those shares determined by their average market price over a fixed measurement period. The ASR intends to combine the immediate share retirement benefits of a tender offer with the market impact and pricing benefits of a disciplined daily open market share repurchase program. The ASR also guaranteed repurchase of a large number of shares while limiting our price risk through the use of a floor and cap feature. The result of this transaction was reflected in the treasury stock component of shareholders equity.</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">In accordance with accounting guidance for an accelerated share repurchase program, we accounted for the ASR transactions as an immediate reduction of outstanding shares for basic and diluted earnings per share. Additionally, our ASR contracts qualified for equity classification in accordance with accounting guidance for derivative financial instruments indexed to, and potentially settled in, a company’s own stock, because settlement was based on our stock price and we were not required to deliver additional shares or pay additional cash upon settlement.</p>
<h6 style="font-size: 9.5pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Other Liabilities</h6>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Other liabilities are primarily comprised of uncertain tax positions, deferred revenue, customer deposits, accrued expenses, deferred compensation, and minority interest.</p>
<h6 style="font-size: 9.5pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Foreign Currency Translation</h6>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">The functional currency of certain IGT international subsidiaries is the local currency. For those subsidiaries, we translate assets and liabilities at exchange rates in effect at the balance sheet date, and income and expense accounts at average exchange rates during the year. Resulting currency translation adjustments are recorded directly to accumulated other comprehensive income within stockholders’ equity. Gains and losses resulting from transactions in non-functional currencies are recorded in income. For subsidiaries whose functional currency is the US dollar, gains and losses on non-US dollar denominated assets and liabilities are recorded in income.</p>
<h6 style="font-size: 9.5pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Fair Value Measurements</h6>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">At the beginning of fiscal 2009, we adopted new fair value accounting guidance which refined the definition of fair value, established a framework for measuring fair value, and permitted the election of fair value measurement with unrealized gains and losses on designated items recognized in earnings at each subsequent period for certain financial assets and liabilities. We elected to apply the new fair value definition and framework for non-financial assets and liabilities at the beginning of fiscal 2010.</p>
<p class="Paragraphbeforebullets" style="font-size: 9.5pt; margin-bottom: 0pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (exit price), in the principal or most advantageous market, in an orderly transaction between market participants, on the measurement date. Assets and liabilities carried at fair value are classified and disclosed in one of the following three categories:</p>
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<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"><font class="_mt" style="font-size: 9.5pt; font-family: 'Microsoft Sans Serif';">Level 2 - Quoted market prices for similar instruments, using observable market based inputs </font></p>
<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"><font class="_mt" style="font-size: 9.5pt; font-family: 'Microsoft Sans Serif';">or unobservable inputs corroborated by market data</font></p></td></tr></table><font class="_mt" style="font-size: 10pt;"></font>
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<p class="MsoNormal" style="font-size: 12pt; margin: 0in 0in 0pt; font-family: 'Times New Roman'; white-space: nowrap;"><font class="_mt" style="font-size: 9.5pt; font-family: 'Microsoft Sans Serif';">Level 3 - Unobservable inputs using our own assumptions when observable inputs are unavailable</font></p></td></tr></table><font class="_mt" style="font-size: 10pt;"></font><!--EndFragment-->
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Certain financial instruments recorded at fair value are described in more detail in Note 20, along with valuation methods and assumptions used to estimate fair value when quoted market prices are not available. Changes in assumptions or valuation methods could affect fair value estimates.</p>
<h6 style="font-size: 9.5pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Hurricane Damage Insurance Recoveries</h6>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">In March 2007, we negotiated a final insurance settlement of $18.0 million related to 2005 US Gulf Coast hurricane damages which destroyed or temporarily shut down our gaming operations machines. As a result, we received a $13.0 million final payment, net of $5.0 million previously advanced, and recorded insurance gains of $5.0 million, net of $1.0 million previously accrued, for property damages in cost of gaming operations, and $12.0 million for business interruption in SG&A.</p>
<h6 style="font-size: 9.5pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Recently Issued Accounting Standards</h6>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Revenue Arrangements With Multiple Deliverables and Software Elements</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">In October 2009, the FASB issued two ASUs providing new revenue recognition guidance with respect to revenue arrangements that include software elements and multiple deliverables. Under the new guidance, tangible products, containing both software and nonsoftware components that function together to deliver a tangible product’s essential functionality, will not be subject to software revenue accounting. This new guidance also establishes a new hierarchy for allocating revenues among multiple deliverables in a multi-element arrangement. In order of preference, revenues will be allocated based on VSOE, third-party evidence, or estimated selling price.</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Additional disclosures will be required to describe the effects of adoption, including changes in how arrangement consideration is allocated or in the pattern and timing of revenue recognition. This new guidance is effective for fiscal years beginning on or after June 15, 2010, and we have elected to early adopt prospectively for new or materially modified arrangements entered into on or after the beginning of our first quarter in fiscal 2010. We continue to evaluate the extent to which this new guidance will impact the timing of our revenues and expect many of IGT’s products, such as machines, will no longer be accounted for as software, allowing for revenue recognition earlier in certain bundled arrangements.</p>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Consolidation of Variable Interest Entities</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">In June 2009, the FASB issued new guidance which requires us to reassess our primary beneficiary position for all VIE arrangements based on qualitative factors on an on-going basis. This guidance is effective for our first quarter of fiscal 2011 and must be adopted through a cumulative-effect adjustment (with a retrospective option). We continue to evaluate the extent to which this will impact our results of operations, financial position, or cash flows.</p>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Accounting Standards Codification</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">In June 2009, new accounting guidance was issued which established the FASB Accounting Standards Codification as the single source of authoritative US GAAP. Adoption of this guidance during our quarter ended September 30, 2009 changed the way we reference accounting standards and did not have a material impact on our financial statements.</p>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Subsequent Events</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">In May 2009, new accounting guidance was issued which established principles and requirements for reporting events or transactions occurring after the balance sheet date. The guidance requires us to disclose the date through which subsequent events have been evaluated and whether it is the date the financial statements were issued. It also requires an entity to consider pro forma financial information disclosures if an unrecognized subsequent event is significant and to reissue financial statements filed with the SEC or other regulatory agencies if failure to do so could make the financial statements misleading. Adoption of this new guidance for our quarter ended June 30, 2009 did not have a material impact on our financial statements.</p>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Other-Than-Temporary Impairments</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">In June 2009, we adopted new accounting guidance issued in April 2009 requiring us to determine and recognize impairment on a debt security if we intend to sell or it is more likely than not that we will be required to sell the security before recovery. If we do not expect to recover the entire amortized cost of the security, impairment related to credit loss is recognized in earnings and impairment related to other factors is recognized in other comprehensive income.</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">This guidance also requires interim and annual disclosures by major security types of the amortized cost basis, as well as methods and significant inputs used to measure credit losses, along with a tabular roll forward schedule if a portion of the impairment is recognized in earnings. Adoption of this new guidance did not have a material impact on our financial statements</p>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Participating Securities in Share-Based Payment Transactions</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">In June 2008, new guidance was issued for d<font class="_mt">etermining whether instruments granted in share-based payment transactions are participating securities, mandating that unvested share-based payment awards<font class="_mt"> containing non-forfeitable rights to dividends or dividend equivalents are participating securities and should be included in our computation of EPS using the two-class method. This change is effective for our first quarter of fiscal 2010 and requires retrospective application for all periods presented. We estimate our revised computation will incorporate unvested restricted stock awards as participating securities and reduce our annual diluted EPS up to $0.01 per share.</font></font></p>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Convertible Debt Instruments</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">In May 2008, new guidance was issued requiring the separation of liability (debt) and equity (conversion option) components for convertible debt instruments that may settle in cash upon conversion. The implied value of the debt component equals that of a similar liability reflecting a borrowing rate for nonconvertible debt. The equity component is the residual difference between the proceeds and the implied value of the debt component. <font class="_mt"> </font></p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">This change is effective for our first quarter of fiscal 2010 and requires retrospective application for all periods presented. We estimate the impact of this new accounting for fiscal years 2009 and 2010 will increase annual non-cash interest expense approximately $30.0 million, reducing diluted EPS approximately $0.07, related to our Debentures and Notes.</p><!--EndFragment-->
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<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0in; text-indent: 0in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Derivative Instruments and Hedging Activities</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">In January 2009, we adopted new accounting guidance issued in March 2008 to require additional qualitative and quantitative disclosures about how and why we use derivative instruments and hedging activities, including the accounting methods used and the impact on our financial statements. See Note 19.</p>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Business Combinations and Noncontrolling Interests</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">In December 2007, new accounting guidance was issued revising the method of accounting for a number of aspects of business combinations and noncontrolling interests (i.e. minority interests), such that more assets and liabilities will be measured at fair value as of the acquisition date. Certain contingent consideration liabilities will require remeasurement at fair value in each subsequent reporting period. Noncontrolling interests will initially be measured at fair value and classified as a separate component of equity.</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Acquisition related costs, such as fees for attorneys, accountants, and investment bankers, will be expensed as incurred and no longer be capitalized as part of the business purchase price. For all acquisitions, regardless of the consummation date, deferred tax assets and uncertain tax position adjustments occurring after the measurement period will be recorded as a component of income tax expense, rather than adjusted through goodwill. This change is effective for our first quarter in fiscal 2010 and requires retrospective application for all prior comparative financial statements presented (e.g. reclassification of noncontrolling interests to appear in equity).</p>
<p class="MsoHeading7" style="font-weight: bold; font-size: 8pt; margin-left: 0.7in; text-indent: -0.7in; margin-right: 0in; font-style: italic; font-family: 'Microsoft Sans Serif';">Fair Value Measurements</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">In September 2006, new accounting guidance was issued which refined the definition of fair value, established a framework for measuring fair value, and expanded disclosures about fair value measurements. We adopted this guidance for financial assets and liabilities effective October 1, 2008 and will apply this guidance for non-financial assets and liabilities beginning October 1, 2009.</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">In February 2007, additional accounting guidance was issued permitting the election of fair value measurement for many financial instruments and certain other items, with unrealized gains and losses on designated items recognized in earnings at each subsequent period. This guidance also established presentation and disclosure requirements for similar types of assets and liabilities measured at fair value. We adopted this new guidance effective October 1, 2008 and elected the fair value option for our ARS put rights obtained in November 2008. See Note 8.</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">In June 2009, we adopted new accounting guidance issued in April 2009 to require quarterly fair value disclosures of financial instruments (previously required only annually) and further expanded disclosures about the methods and significant assumptions used to estimate fair value.</p>
<p class="MsoNormal" style="font-size: 9.5pt; margin-left: 0in; margin-right: 0in; font-family: 'Microsoft Sans Serif';">Adoption of this new guidance did not have a material impact on our financial statements. See Note 20 for additional information regarding our fair value measurements.</p><!--EndFragment--><!-- body --></div></div><!-- body --></div></div><!-- body --></div></div><!-- body --></div></div><!-- body --></div></div><!-- body --></div></div><!-- body --></div></div><!-- body --></div></div><!-- body --></div></div><!-- body --></div></div><!-- body --></div></div><!-- body --></div></div><!-- body --></div></div><!-- body --></div></div><!-- body --></div></div><!-- body --></div></div><!-- body --></div></div>
</div>1. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
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