thank you for asking that question.. 16 million is not nothing... it could be that possible games like Valkyrie Profile 3, New Secret of Mana, Final Fantasy Type-0 International are cancelled.. and that SE is scrapping those to fully go for Mobile games..  And now some people will be crying after reading that..

While it's true they had unrealistic expectations. They didn't make as much money off those titles which is still a problem. They need to get the costs of those games down, or the games need to sell more. Shortening dev time for say a Tomb Raider Sequal to 2 years instead of 4, with the same amount of people would greatly improve profitability of those games, and since they have the engine and gameplay template it should be easier to make those like Uncharted, Assasins Creed, ME, etc. They also spent more money on advertising which cut into their profits (Idk the solution to this, maybe smarter advertising campaigns ).

The issue is aside from The FFXIII series, SE games Eidos of otherwise is that their games got delayed and thus increasing costs, Tomb Raider Got delayed a whole Year, Versus got delayed so long it changed its name, FFXIV didn't get delayed but should have causing even more problems. Deus Ex got delayed 6 months. Thief has been in development 5 years.  Who the culprits or combination of culprits responsible for ballooning costs is unknown, but they need (and have though I'm not sure correctly) to do an internal evaluation cutting unnecessary or redundant people and getting procedures more efficient.

Canceling games in the gaming industry is not unusual or infrequent.

Well, of course it's bullshit. But as far as I know the only criteria is that the loss be non-recurring, and technically they can only cancel those games once.

That's not the definition of Extraordinary Loss in US GAAP. Dunno about JP GAAP, but your definition is probably wrong.

"non-recurring"? I'm sure that at least 1 game is canceled a year for companies.  

I'm starting to think the videogames market will indeed crash. Not because of lack of demand, but because all developers are gonna go for the easy money on mobile.

On the bad news front. Doesnt look like they intend to bring drakengard 3.

I say more like consolidation like the movie industry.

We think its cancelling games because they explained the extraordinary loss in the financial numbers last quarter before this one: 

Wada says that Square Enix’s revenue model is outdated and that the company’s selling capacity has been “far weaker than we ever imagined” in North America and Europe. As a result, Square Enix are incurring an extraordinary loss in an “effort to sort out items not achieving expected revenue levels, through scrapping those items and terminating production”.

http://www.siliconera.com/2013/04/08/square-enix-detail-where-their-losses-are-coming-from/

Well, the report says:

In response to the latest environmental changes in the game industry, the Company has implemented a change in its development policy, and conducted a comprehensive review on work-in-progress game titles for the three-month period ended June 30, 2013. As a result, the Company has decided to book a loss on evaluation of content (approximately ¥1.6 billion) as an extraordinary loss.

So my definition is probably right. Either way, they did it.

Again, an Extraordinary Loss, at least according to GAAP is a loss caused by an event that's both infrequent (i.e. aren't expected to be recurring) and unusual (not part of normal operations/business).

So that means something like a tsunami or hurricane is probably not going to be considered an extraordinary loss, depending on the region you live in. To give you some perspective on how rigid the definition is, companies weren't allowed to take losses caused by 9/11.

Again, Square Enix has been "restructuring" for years now and taking losses every year. They've been talking about mobile games over and over again. And a company restructuring/exit may be infrequent (although I don't consider it for Square Enix) it's definetly not unusual.

US GAAP:

420-10-05-1 The Exit or Disposal Cost Obligations Topic addresses financial accounting and reporting for costs associated with exit or disposal activities. An exit activity includes but is not limited to a restructuring.

420-10-05-2 Those costs include, but are not limited to, the following:

a. Involuntary employee termination benefits pursuant to a one-time benefit arrangement that, in substance, is not an ongoing benefit arrangement or an individual deferred compensation contract

b. Costs to terminate a contract that is not a capital lease

c. Other associated costs, including costs to consolidate or close facilities and relocate employees.

420-10-15-4 An exit activity includes but is not limited to a restructuring, such as the sale or termination of a line of business, the closure of business activities in a particular location, the relocation of business activities from one location to another, changes in management structure, and a fundamental reorganization that affects the nature and focus of operations.

420-10-45-3 Costs associated with an exit or disposal activity that does not involve a discontinued operation shall be included in income from continuing operations before income taxes in the income statement of a business entity and in income from continuing operations in the statement of activities of a not-for-profit entity (NFP). Separate presentation of exit and disposal costs in the income statement is not prohibited. However, because neither an exit activity nor a disposal activity is both unusual and infrequent (see paragraph 225-20-45-16), it is prohibited to present exit and disposal costs in the income statement net of income taxes or in any manner that implies they are similar to an extraordinary item, as defined in paragraphs 225-20-45-1 through 45-8. If a subtotal such as income from operations is presented, it shall include the amounts of those costs.

Again, who knows, Square Enix would have to report under JP GAAP, and they might have a looser definition of an extraordinary loss, or lump income/loss from discontinued operations with extraordinary loss.

But look at the ECONOMICS of the situation. Do you guys think that the losses Square Enix are reporting are either UNUSUAL for their business or INFREQUENT?

I say hell no. The losses they're experiencing have been experienced by other game companies, some to a lesser degree, some to a degree that forced them into bankruptcy. It's totally something I expect given Square Enix being in the gaming industry, and don't think it's extraordinary at all. It's totally, totally ordinary and expected.