Sony 2001 Annual Report Download - page 106

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Sony Corporation Annual Report 2001
104
(4) Reclassifications:
Simultaneous with the adoption of SAB No. 101, gains and losses on the sale and disposal, net and losses from
impairment of long-lived assets, which were previously recorded in other income and expenses, are now re-
corded in selling, general and administrative expenses. As a result of the reclassification, operating income for
the year ended March 31, 1999 and 2000 decreased by ¥10,151 million and ¥17,423 million, respectively.
As a result of the adoption of SOP 00-2, ¥112,624 million of film costs related to theatrical and television
product at March 31, 2000, which were previously recorded in inventories in accordance with FAS No. 53, have
been reclassified to film costs which is included in non-current assets.
In addition to the above, certain reclassifications of the financial statements for the years ended March 31,
1999 and 2000 have been made to conform to the presentation for the year ended March 31, 2001.
3. U.S. dollar amounts
U.S. dollar amounts presented in the financial statements are included solely for the convenience of the reader.
These translations should not be construed as representations that the yen amounts actually represent, or have
been or could be converted into U.S. dollars. As the amounts shown in U.S. dollars are for convenience only, the
rate of ¥125=U.S.$1, the approximate current rate at March 30, 2001, has been used for the purpose of presenta-
tion of the U.S. dollar amounts in the accompanying consolidated financial statements.
4. Integration of three listed subsidiaries
On January 5, 2000, Sony Corporation made three listed subsidiaries, Sony Music Entertainment (Japan) Inc.
(“SMEJ”), Sony Chemicals Corporation (“SCC”) and Sony Precision Technology Inc. (“SPT”), wholly owned subsid-
iary companies through exchange offer procedures. Prior to the exchange offer procedures, Sony Corporation
owned 71.0%, 69.6% and 69.2% of common stock of SMEJ, SCC and SPT, respectively. SMEJ operates primarily in
the recording business; SCC is engaged in manufacturing and sale of recording media, electrical parts and joint
materials; and SPT is engaged in manufacturing and sale of precise measuring and recording machines and equip-
ment. Sony Computer Entertainment Inc., which is owned by Sony Corporation and SMEJ, also became a wholly
owned subsidiary company of Sony Corporation.
The share exchange ratios were one share of SMEJ, SCC and SPT for 0.835 shares, 0.565 shares and 0.203
shares of Sony Corporation, respectively. As a result, approximately 26,156 thousand, 5,606 thousand and 1,218
thousand shares of Sony Corporation’s common stock were issued, respectively.
All of the exchanges were accounted for as purchases. The fair value of the acquired minority interests were
determined based on the quoted market price of ¥10,550 per share of Sony Corporation for a few days before and
after March 9, 1999 when the terms of the acquisition were agreed to and announced. The costs of the acquired
minority interest were ¥276,169 million, ¥59,174 million and ¥12,868 million for SMEJ, SCC and SPT, respectively.
The direct costs were included in the cost of acquisition. The excess of the purchase price of each subsidiary over
the net assets acquired has been allocated to identifiable assets such as land and intangible assets (primarily the
PlayStation trade name, PlayStation format, music distribution agreements and artist contracts), based upon the
estimated fair value of such assets, and relevant deferred tax liabilities. The excess of the acquisition costs over the
sum of the amounts assigned to identifiable assets less liabilities assumed is recognized as goodwill. Goodwill on
this transaction is being amortized on a straight-line basis over a 20-year period.
Prior to the exchange those three subsidiaries were consolidated subsidiaries, and Sony’s consolidated financial
statements include operating results of those subsidiaries for the full year. After the date of the exchange, minority
interest income or losses relating to these subsidiaries were no longer recognized in Sony’s consolidated financial
statements. The following unaudited consolidated pro forma information shows the results of Sony’s consolidated
operations for the years ended March 31, 1999 and 2000 as though the exchanges were made as of the beginning
of each year presented.