Sony 2003 Annual Report Download - page 136

Consolidated Financial Information 2003
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Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others
In November 2002, the FASB issued FASB Interpretation (“FIN”) No. 45, “Guarantor’s Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, an interpretation
of FASB Statements No. 5, 57, and 107 and rescission of FASB Interpretation No. 34”. The interpretation elaborates
on the existing disclosure requirements for most guarantees. It also clarifies that at the time a company issues a
guarantee, the company must recognize an initial liability for the fair value of the obligations it assumes under the
guarantee. The provisions related to recognizing a liability at inception of the guarantee for the fair value of the
guarantor’s obligations do not apply to product warranties or to guarantees accounted for as derivatives. The initial
recognition and initial measurement provisions of FIN No. 45 are applicable on a prospective basis to guarantees
issued or modified after December 31, 2002. The initial recognition and initial measurement provisions of FIN No. 45
did not have a material effect on Sony’s results of operations and financial position as at and for the fiscal year ended
March 31, 2003. The disclosure provisions, which increase the required disclosure related to guarantees, have been
adopted in the consolidated financial statements.
Accounting for Stock-Based Compensation - Transition and Disclosure
In December 2002, the FASB issued FAS No. 148, ‘‘Accounting for Stock-Based Compensation - Transition and
Disclosure - an Amendment of FASB Statement No. 123’’. FAS No. 148 amends FAS No. 123, ‘‘Accounting for
Stock-Based Compensation’’, to provide alternative methods of transition for a voluntary change to the fair value
based method of accounting for stock-based employee compensation. FAS No. 148 also requires that disclosures of
the pro forma effect of using the fair value method of accounting for stock-based employee compensation be
displayed more prominently and in a tabular format. For Sony, the transition and annual disclosure requirements of
FAS No. 148 are effective for the year ended March 31, 2003. Sony has accounted for its employee stock-based
compensation in accordance with APB No. 25, “Accounting for Stock Issued to Employees” and, therefore, the
adoption of the provisions of FAS No. 148 did not have an impact on Sony’s results of operations and financial
position. Sony has adopted the disclosure-only requirements in accordance with FAS No. 148.
Consolidation of Variable Interest Entities
In January 2003, the FASB issued FIN No. 46, “Consolidation of Variable Interest Entities – an Interpretation of
ARB No. 51”. This interpretation addresses consolidation by a primary beneficiary of a variable interest entity (“VIE”).
FIN No. 46 is effective immediately for all new VIEs created or acquired after January 31, 2003. For VIEs created or
acquired prior to February 1, 2003, the provisions of FIN No. 46 become effective for Sony during the second quarter
of the year ending March 31, 2004. For VIEs acquired prior to February 1, 2003, any difference between the net
amount added to the balance sheet and the amount of any previously recognized interest in the VIE will be
recognized as a cumulative effect of an accounting change.