Sony 2003 Annual Report Download - page 111

Consolidated Financial Information 2003
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payments regarding these long-term contracts was 54.5 billion yen as of March 31, 2003.
A subsidiary in the Pictures segment has committed to fund a portion of the production cost of completed films
and is responsible for all distribution and marketing expenses relating to these films under a distribution agreement
with a third party. Further, certain subsidiaries in the Pictures segment have committed to acquire completed films, or
certain rights therein, from third parties. As of March 31, 2003, the total amount of the expected cost for the
production or purchase of films or certain rights under the above commitments was 128.1 billion yen.
Sony will use cash flows generated by its operating activities, and if necessary, raise funds for the commitments
from the global capital markets and from banks.
The following table summarizes Sony’s contingent liabilities.
(Yen in millions)
Total Amounts of
Contingent Liabilities
Contingent Liabilities: (Notes 23 and 24)
Loan guarantees to related parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,078
Guaranteed residual value in connection with the lease of the headquarters of Sony’s U.S. subsidiary . . . . . . . . . 25,727
Maximum exposure associated with a joint venture in the Pictures segment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,574
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,740
Total contingent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139,119
Other Financing Arrangements
In the U.S., Sony has an accounts receivable securitization program which provides for the accelerated receipt
of up to approximately 900 million U.S. dollars of cash on eligible trade accounts receivable of Sony’s U.S. electronics
subsidiary. Through this program, Sony can securitize and sell a percentage of undivided interest in that pool of
receivables to several multi-seller commercial paper conduits owned and operated by banks. These securitization
transactions are accounted for as a sale in accordance with FAS No. 140, “Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities”, because Sony has relinquished control of the receivables.
Accordingly, accounts receivable sold under these facilities are excluded from receivables in the accompanying
consolidated balance sheet. There were no amounts outstanding under this facility at March 31, 2003. Refer to Note
7 of Notes to Consolidated Financial Statements for more information.
Sony has, from time to time, entered into various other financing arrangements with variable interest entities
(“VIE”). These arrangements include facilities which provide for the leasing of certain property, the financing of film
production, the development and operation of a multi-use real estate complex and the implementation of a stock
option plan for selected Japanese employees. Although not a significant part of its financing activities, Sony employs
these arrangements because they provide a diversification of funding sources. The assets and financings associated
with these arrangements generally qualify for off-balance sheet treatment. Although Sony continues to evaluate the
impact of FASB’s FIN No. 46 on Sony’s result of operations and financial position, significant arrangements with VIEs
include the following: