In the strictness sense, it counts as a loss of sales to hand it out for free.
Not quite if the consumers don't intend to buy another EA game.
No, the 'intent' doesunt matter form an account point of view, from the strict business point of view.
And that 'intent' is such a bull shit framing anywhere.
It's only a loss if the alternative was a gain. If your choice is "either I don't give the players a game, in which case 1% or less of them will buy it, or I give them all a game for free", then the cost of the second choice is that you've lost a number of sales equal to 1% of the people who receive the free game.
I am not familiar with FASB, but according to IASB, EA's decision constitutes a rise of contingent liability, which basically is:
1. A present obligation arising for past events (their announcement of giving away a free game to SimCity owners); and
2. Whose existence can only be confirmed by the occurrence or non-occurrence of one or more uncertain events (whether SimCity owners will claim a free game or not)
Contingent liability is only disclosed by way of notes due to the lack of reliable measurement (EA does not know how many SimCity owners will claim the free game and which game they will claim). It will only be recognised in the financial statements if its existence is confirmed to be true.
When a SimCity owner claims a free game, the accounting entry will be debiting expense and crediting revenue, both at an equal amount. This is basically zero gross profit sales. Therefore, the technical definition of "loss of sales" does not hold true here.
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Topic: Sim City 5 (Read 191786 times)