Sony 2003 Annual Report Download - page 108

Consolidated Financial Information 2003
22
Changes in the fair value of derivatives designated as cash flow hedges, including foreign exchange forward
contracts and foreign currency option contracts, are initially recorded in other comprehensive income and reclassified
into earnings when the hedged transaction affects earnings. Foreign exchange forward contracts, foreign currency
option contracts and other derivatives that do not qualify as hedges are marked-to-market with changes in value
recognized in Other Income and Expenses. The notional amount of foreign exchange forward contracts, currency
option contracts purchased and currency option contracts written as of March 31, 2003 are 1,139.3 billion yen, 484.5
billion yen and 238.8 billion yen, respectively.
Liquidity and Capital Resources
Liquidity Management
Sony’s financial policy is to secure adequate liquidity and financing for its operations and to maintain the
strength of its balance sheet. Sony defines liquidity sources as (a) cash, cash equivalents and time deposits, and (b)
committed lines of credit contracted with banks rated "C" or above in Moody's Bank Financial Strength ratings.
Sony’s basic policy is to keep liquidity equal to at least 100 percent of the sum of the amount of average monthly sales
and the amount of the largest expected monthly debt redemption during the fiscal year. Although its working capital
needs have a general tendency to grow in the third quarter (from October 1 to December 31), Sony believes that this
policy satisfies Sony’s working capital requirements throughout the year.
On March 31, 2003, the total amount of liquidity sources for Sony Group excluding Sony Life, Sony Assurance
and Sony Bank was 1,060.3 billion yen which was comprised of (a) 440.3 billion yen in cash, cash equivalents and
time deposits and (b) approximately 620.0 billion yen in contracts for committed lines from banks rated “C” or above.
The committed lines were entirely unused. Due to operational necessities, Sony also has approximately 286.0 billion
yen in additional committed lines with banks that have a Moody’s financial strength rating below “C”. Refer to Note 12
of Notes to Consolidated Financial Statements for the total amount of committed lines with banks regardless of
Moody’s financial strength rating for the fiscal year ended March 31, 2003.
In general, there are no restrictions on how Sony’s borrowings can be used except that, in compliance with
Federal Reserve Board regulations, some borrowings in the U.S. may not be used for hostile corporate takeovers. In
addition, there are no provisions in any of Sony’s material financing agreements that would cause an acceleration of
repayment in the event of a downgrade in Sony’s credit ratings.
Finance and Capital Resources
Sony Corporation and its finance subsidiaries around the world engage in activities to acquire funds, when
necessary, through the issuance of stocks and bonds, borrowings from financial institutions, and other financial
instruments. In order to meet funding requirements around the world, Sony maintains commercial paper (“CP”)
programs and medium-term note (“MTN”) programs.
SGTS, a Sony finance subsidiary in the U.K., maintains a CP program in both the U.S. and Euro CP markets,