Sony 2003 Annual Report Download - page 132

Consolidated Financial Information 2003
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investment portfolio to identify other-than-temporary impairments of individual securities. Factors that are considered
by Sony in determining whether an other-than-temporary decline in value has occurred include: the length of time and
extent to which the market value of the security has been less than its original cost, the financial condition, operating
results, business plans and estimated future cash flows of the issuer of the security, other specific factors affecting
the market value, deterioration of credit condition of the issuers, sovereign risk, and ability to retain the investment for
a period of time sufficient to allow for the anticipated recovery in market value.
In evaluating the factors for available-for-sale securities whose fair values are readily determinable,
management presumes a decline in value to be other-than-temporary if the fair value of the security is 20 percent or
more below its original cost for an extended period of time (generally a period of up to six to twelve months). This
criteria is employed as a threshold to identify securities which may have a decline in value that is
other-than-temporary. The presumption of an other-than-temporary impairment in such cases may be overcome if
there is evidence to support that the decline is temporary in nature due to the existence of other factors which
overcome the duration or magnitude of the decline. On the other hand, there may be cases where impairment losses
are recognized when the decline in the fair value of the security is not more than 20 percent or such decline has not
existed for an extended period of time, as a result of considering specific factors which may indicate the decline in the
fair value is other-than-temporary.
The assessment of whether a decline in the value of an invest is other-than-temporary is often judgmental in
nature and involves certain assumptions and estimates concerning the expected operating results, business plans
and future cash flows of the issuer of the security. Accordingly, it is possible that investments in Sony’s portfolio that
have had a decline in value that the Company currently believes to be temporary may determine to be
other-than-temporary in the future based on the Company’s evaluation of additional information such as continued
poor operating results, future broad declines in value of worldwide equity markets or circumstances in worldwide
interest rate fluctuations. As a result, unrealized losses recorded for investments may be recognized into income in
future periods.
Pension benefits costs
Employee pension benefit costs and obligations are dependent on certain assumptions including discount rates,
retirement rates and mortality rates, which are based upon current statistical data, as well as expected long-term rate
of return on plan assets and other factors. Specifically, the discount rate and expected long-term rate of return on
assets are two critical assumptions in the determination of periodic pension costs and pension liabilities.
Assumptions are evaluated at least annually, and events may occur or circumstances change which may have a
significant effect on critical assumptions. In accordance with U.S. GAAP, actual results that differ from the
assumptions are accumulated and amortized over future periods. Therefore, actual results generally affect
recognized expenses and the recorded obligations for pensions in future periods. While management believes that
the assumptions used are appropriate, differences in actual experience or changes in assumptions may affect Sony’s
pension obligations and future expense.
Sony’s principal pension plans are its Japanese pension plans. Foreign pension plans are not significant