Explain how zynga records revenue from the sale of virtual

Reference no: EM133486344

Case Study: Zynga Inc. (ZNGA) is the world's leading provider of social game services with 240 millionmonthly users in over 175 countries. Zynga's leading games include CityVille, Zynga Poker,FarmVille, CastleVille, FrontierVille, Mafia Wars, Words with Friends and Draw Something.Facebook is the primary distributor, marketer and payment platform for the company's games,although the games are available on other social networks and through mobile applications.Zynga went public in December 2011 and is headquartered in San Francisco, CA.

Question 1) Does Zynga charge its customers to play the company's games? How does Zynga earn revenue?

Question 2) In your own words, explain how Zynga records revenue from the sale of virtual goods?

Question 3a) Do you think Zynga's method for accounting for virtual goods is appropriate? Why or why not?

Question 3b) What other information would you like Zynga to provide in order to better assess whether the accounting treatment for virtual goods is appropriate

Question 4a) Zynga notes that a change in the estimated average playing period resulted in an increase inrevenue of $53.9 million in 2011 and an offsetting reduction in revenue in 2012. What musthave happened to the average playing period (i.e., did it increase or decrease)? What doesthat imply about the nature of Zynga's business?

Question 4b) What net income would Zynga have reported in 2011 had the company not made this change?

Reference no: EM133486344

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