REVENUE FROM CONTRACTS WITH CUSTOMERS

Impacts on financial statement line items

Our adoption of the New Revenue Accounting Standard had the following impact on our Condensed Consolidated Statement of Operations for the three months ended September 30, 2018:



	Amounts as reported		Amounts without adoption of New Revenue Accounting Standard			Increase (decrease) due to adoption of New Revenue Accounting Standard
Net revenue	$	492,667	$	457,441		$	35,226
Cost of goods sold	234,880		193,483			41,397
Gross profit	257,787		263,958			(6,171		)
Selling and marketing	94,165		94,165			—
General and administrative	67,320		67,320			—
Research and development	60,565		60,565			—
Depreciation and amortization	9,751		9,751			—
Total operating expenses	231,801		231,801			—
Income from operations	25,986		32,157			(6,171		)
Interest and other, net	4,975		4,935			40
Income before income taxes	30,961		37,092			(6,131		)
Provision for (benefit from) income taxes	5,594		(29,670		)	35,264
Net income	$	25,367	$	66,762		$	(41,395	)
Earnings per share:
Basic earnings per share	$	0.22	$	0.59		$	(0.37	)
Diluted earnings per share	$	0.22	$	0.58		$	(0.36	)

Our adoption of the New Revenue Accounting Standard had the following impact on our Condensed Consolidated Statement of Operations for the six months ended September 30, 2018:



	Amounts as reported			Amounts without adoption of New Revenue Accounting Standard			Increase (decrease) due to adoption of New Revenue Accounting Standard
Net revenue	$	880,649		$	859,422		$	21,227
Cost of goods sold	366,245			350,572			15,673
Gross profit	514,404			508,850			5,554
Selling and marketing	152,471			152,471			—
General and administrative	135,055			135,055			—
Research and development	111,277			111,277			—
Business reorganization	(242		)	(242		)	—
Depreciation and amortization	19,011			19,011			—
Total operating expenses	417,572			417,572			—
Income from operations	96,832			91,278			5,554
Interest and other, net	11,576			10,948			628
Income before income taxes	108,408			102,226			6,182
Provision for (benefit from) income taxes	11,348			(31,640		)	42,988
Net income	$	97,060		$	133,866		$	(36,806	)
Earnings per share:
Basic earnings per share	$	0.86		$	1.18		$	(0.32	)
Diluted earnings per share	$	0.84		$	1.16		$	(0.32	)

Our adoption of the New Revenue Accounting Standard had the following impact on our Condensed Consolidated Balance Sheet as of September 30, 2018:



	Amounts as reported			Amounts without adoption of New Revenue Accounting Standard			Increase (decrease) due to adoption of New Revenue Accounting Standard
ASSETS
Accounts receivable, net	$	534,633		$	488,622		$	46,011
Software development costs and licenses	36,912			50,027			(13,115		)
Deferred cost of goods sold	20,957			116,211			(95,254		)
Prepaid expenses and other	162,647			98,421			64,226
Deferred cost of goods sold, net of current portion	489			10,837			(10,348		)
Other assets	80,810			64,931			15,879

LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued expenses and other current liabilities	$	853,467		$	837,242		$	16,225
Deferred revenue	559,024			924,793			(365,769		)
Non-current deferred revenue	15,407			213,397			(197,990		)
Other long-term liabilities	205,554			83,459			122,095
Retained earnings	640,849			207,382			433,467
Accumulated other comprehensive loss	(37,199		)	(36,572		)	(627		)

Our adoption of the New Revenue Accounting Standard accelerated the revenue recognition of prior period game sales into retained earnings, which may result in increased cash taxes paid on our Consolidated Statement of Cash Flows for the fiscal year ending March 31, 2019.

Disaggregation of revenue

Product revenue

Product revenue is primarily comprised of the portion of revenue from software products that is recognized when the customer takes control of the product (i.e. upon delivery of the software product).

Service and other revenue

Service and other revenue is primarily comprised of revenue from game related services, virtual currency transactions, and in-game purchases which are recognized over an estimated service period.

Net revenue by product revenue and service and other was as follows:



	Three Months Ended September 30,		Six Months Ended September 30,
	2018		2018
Net revenue recognized:
Service and other	$	313,194	$	622,381
Product	179,473		258,268
Total net revenue	$	492,667	$	880,649

Full game and other revenue

Full game and other revenue primarily includes the initial sale of full game software products, which may include offline and/or significant game related services.

Recurrent consumer spending revenue

Recurrent consumer spending revenue is generated from ongoing consumer engagement and includes revenue from virtual currency, add-on content, and in-game purchases.

Net revenue by full game and other revenue and recurrent consumer spending was as follows:



	Three Months Ended September 30,		Six Months Ended September 30,
	2018		2018
Net revenue recognized:
Recurrent consumer spending	$	240,599	$	481,629
Full game and other	252,068		399,020
Total net revenue	$	492,667	$	880,649

Geography

We attribute net revenue to geographic regions based on software product destination. Net revenue by geographic region was as follows:



	Three Months Ended September 30,		Six Months Ended September 30,
	2018		2018
Net revenue recognized:
United States	$	279,306	$	500,717
International	213,361		379,932
Total net revenue	$	492,667	$	880,649

Platform

Net revenue by platform was as follows:



	Three Months Ended September 30,		Six Months Ended September 30,
	2018		2018
Net revenue recognized:
Console	$	372,240	$	666,970
PC and other	120,427		213,679
Total net revenue	$	492,667	$	880,649

Distribution channel

Our products are delivered through digital online services (digital download, online platforms, and cloud streaming) and physical retail and other. Net revenue by distribution channel was as follows:



	Three Months Ended September 30,		Six Months Ended September 30,
	2018		2018
Net revenue recognized:
Digital online	$	358,371	$	673,418
Physical retail and other	134,296		207,231
Total net revenue	$	492,667	$	880,649

Deferred Revenue

We record deferred revenue when payments are due or received in advance of the fulfillment of our associated performance obligations. The opening balance and ending balance of deferred revenue, including current and non-current balances as of April 1, 2018 and September 30, 2018 were $566,141 and $574,431, respectively. For the six months ended September 30, 2018, the additions to our deferred revenue balance were primarily due to cash payments received or due in advance of satisfying our performance obligations, while the reductions to our deferred revenue balance were primarily due to the recognition of revenue upon fulfillment of our performance obligations, both of which were in the ordinary course of business.

During the six months ended September 30, 2018, $424,129 of revenue was recognized that was included in the deferred revenue balance at the beginning of the period. As of September 30, 2018, the aggregate amount of contract revenue allocated to unsatisfied performance obligations is $574,431. We expect to recognize approximately $559,024 of this balance as revenue over the next 12 months, and the remainder thereafter.

As of September 30, 2018 and April 1, 2018, our contract asset balances were $64,226 and $69,522, respectively.