Introduction - MOSS ADAMS LLP | 1 IE Roundtable: Virtual Currencies - Real Legal & Financial Reporting Issues for Interactive Entertainment Companies

| 2 AGENDA Introductions Accounting for Points & Virtual Currency o Operational considerations o Revenue recognition o Current trends Unclaimed Property o Priority rules o Exemptions for "gift certificates" o New Jersey zip code collection law Interactive Discussion

| 3 INTRODUCTIONS Taft Kortus Partner Moss Adams LLP Kirk Soderquist Partner Perkins Coie LLP Dax Hansen Partner Perkins Coie LLP

| 4 LOYALTY POINTS & VIRTUAL CURRENCY Purchased or earned from related transaction Earned from interactive user activity Contractual rights & terms Breakage Loyalty Points/Virtual Currency Evaluation of the origination of the points/virtual currency & other characteristics

| 5 LOYALTY POINTS o Award earned by user or through indirect revenue transaction o Accrual of associated costs at the point when revenue is recognized for the other items in the arrangement Multiple element revenue arrangement Cost allocation (generally preferred) o Used in sales based earning transaction o Deferral of revenue o Separate units of accounting Revenue or Cost recognition?

| 6 LOYALTY POINT BREAKAGE Points/awards that will never be redeemed ASC (EITF 01-9 ) for Rebate Offers o Can be analogized to loyalty points/awards Reliable estimates of the expected level of redemptions can be made Points should be recognized based on the number of points expected to be redeemed over the redemption period

| 7 VIRTUAL CURRENCY No specific guidance, economic substance of transaction drives recognition Applicable guidance for gaming & online entertainment o ASC (formerly EITF 00-3) o Generally scoped out of ASC (formerly SOP 97-2) on hosted and free-access sites Persuasive Evidence Price is fixed & determinable Collection is reasonably assured Delivery has occurred or services rendered Staff Accounting Bulletin No. 13 (SAB No. 13)

| 8 VIRTUAL CURRENCY Virtual Sale $$ Consumable in virtual ecosystem Consumable Benefits user over time Durable -Fuel/food -Ammunition -Extended time -Unlimited assets -New level/status -Personal profile Generally, the sale of the virtual currency is not the revenue event:

| 9 VIRTUAL CURRENCY REVENUE MODELS o Recognized upon consumption/purchase of virtual goods o “Consumption” measurement critical ConsumableDurable o Useful life of the durable good/services o Useful life of the game/activity o Useful life of the user/customer

| 10 VIRTUAL CURRENCY Operational information vital to recognition o User activity transparency & reporting  Customer origination dates  Last log-in date  Historical trends o Identification of type of purchases  w/ virtual currency or cash o Identification of purchase date and utilization date

| 11 CURRENT TRENDS Virtual “Rental” of both consumable and durable goods/service Defined contractual terms and rights Inactive user account expirations Some public filers: o Shanda Games (GAME) o Perfect World (PWRD) o Giant (GA) o NetEase (NTES)

| 12 UNCLAIMED PROPERTY Unclaimed property laws generally apply to both tangible and intangible property o Prepaid cards o Online or virtual credits Requires issuer to report and remit the value of the property to the state if unclaimed or abandoned for a statutory dormancy period o Abandonment period begins on date of last activity of owner o Certain activity can restart the abandonment period Scope and specific requirements of unclaimed property laws vary by state

| 13 PRIORITY RULES Jurisdictional determination is based on priority rules. First priority – state of last known address of apparent owner o Complete physical address not necessary  Zip code / tax location Second priority – state of incorporation of holder Third priority – state in which the transaction giving rise to the property occurred o Adopted by several states, but not by the U.S. Supreme Court

| 14 EXEMPTIONS FOR "GIFT CERTIFICATES" A majority of states provide a complete or partial exemption from unclaimed property laws for "gift certificates" Is virtual currency a "gift certificate"? o "An instrument evidencing a promise…that consumer goods or services will be provided to the bearer of the record to the value or credit shown in the record and includes gift cards." (Washington, emphasis added)  "Gift card" is a "record…in the form of a card, or a stored value card or other physical medium"  No definitive guidance on virtual currency purchased online (but see Barker v. Skype Inc. settlement) o "…gift certificate, gift card or electronic gift card or other medium" (Arizona, emphasis added) o "…device constructed of paper, plastic or any other material" (Maryland, emphasis added)

| 15 NEW JERSEY ZIP CODE COLLECTION LAW American Express Travel Related Services Co. v. Sidamon-Eristoff o Challenged proposed requirement that stored value card issuers must collect and maintain zip code information at the time the stored value is issued o Value of cards would escheat to NJ if issuer fails to comply (i.e. third priority rule) o "Stored value card" includes paper gift certificates, gift cards, electronic gift cards, magnetic stripe or other means for storage of information, and similar records or cards Third Circuit Court of Appeals injunction provides temporary relief from changes If requirement to record and maintain zip code information is upheld, then first priority rule would apply

| 16 INTERACTIVE DISCUSSION