Sony 2003 Annual Report Download - page 166

Consolidated Financial Information 2003
- 80 -
Inventories -
Inventories in electronics, game and music as well as non-film inventories for pictures are valued at cost,
not in excess of market, cost being determined on the “average cost” basis except for the cost of finished
products carried by certain subsidiary companies which is determined on the “first-in, first-out” basis.
Film costs -
Film costs related to theatrical and television product (which includes direct production costs, production
overhead and acquisition costs) are stated at the lower of unamortized cost or estimated fair value and
classified as non-current assets. Film costs are amortized, and the estimated liabilities for residuals and
participations are accrued, for an individual product based on the proportion that current period actual
revenues bear to the estimated remaining total lifetime revenues. These estimates are reviewed on a
periodic basis.
Property, plant and equipment and depreciation -
Property, plant and equipment are stated at cost. Depreciation of property, plant and equipment is primarily
computed on the declining-balance method for Sony Corporation and Japanese subsidiaries, except for
certain semiconductor manufacturing facilities whose depreciation is computed on the straight-line method,
and on the straight-line method for foreign subsidiaries at rates based on estimated useful lives of the
assets, principally, ranging from 15 years up to 50 years for buildings and from 2 years up to 10 years for
machinery and equipment. Significant renewals and additions are capitalized at cost. Maintenance and
repairs, and minor renewals and betterments are charged to income as incurred.
Goodwill and other intangible assets -
As a result of the adoption of FAS No. 142, goodwill and certain other intangible assets that are determined
to have an indefinite life are not amortized and are tested for impairment on an annual basis and between
annual tests if an event occurs or circumstances change that would more likely than not reduce the fair
value below its carrying amount. Fair value for those assets is generally determined using a discounted
cash flow analysis. Prior to the adoption of FAS No. 142, in accordance with APB No. 17, goodwill was
amortized on a straight-line basis principally over a 20 or 40 year period and indefinite-lived intangible
assets were also amortized on a straight-line basis principally over a 20 year period.
Intangible assets that are determined not to have an indefinite life mainly consist of artist contracts,
music catalogs, acquired patent rights and software to be sold, leased or otherwise marketed. Artist
contracts and music catalogs are amortized on a straight-line basis principally over a period of up to 40
years. Acquired patent rights and software to be sold, leased or otherwise marketed are amortized on a
straight-line basis over 3 to 10 years.