Sony 2003 Annual Report Download - page 161

Consolidated Financial Information 2003
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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 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.
Sony continues to evaluate the impact of FIN No. 46 on Sony’s results of operations and financial
position. However, Sony has identified potential VIEs created prior to February 1, 2003, which may be
consolidated upon the adoption of FIN No. 46. If these potential VIEs are consolidated, Sony would record
a charge of approximately ¥1,800 million ($15 million) as a cumulative effect of accounting change and an
increase in assets and liabilities of approximately ¥97,342 million ($811 million). See Note 23 for further
discussion on the VIEs that are used by Sony. Sony did not enter into any new arrangements with VIEs
during the period February 1, 2003 through March 31, 2003.