Sony 2003 Annual Report Download - page 167

Consolidated Financial Information 2003
- 81 -
Accounting for computer software to be sold -
Sony accounts for software development costs in accordance with FAS No. 86, “Accounting for the Costs of
Computer Software to Be Sold, Leased, or Otherwise Marketed”.
In the Electronics business, costs related to establishing the technological feasibility of a software
product are expensed as incurred as a part of research and development in cost of sales. Costs that are
incurred to produce the finished product after technological feasibility is established are capitalized and
amortized over the estimated economic life of the product, which is generally three years. Sony performs
periodic reviews to ensure that unamortized program costs remain recoverable from future revenue.
In the Game business, technological feasibility of the underlying software is reached shortly before the
products are released to manufacturing. Costs incurred after technological feasibility is established are not
material, and accordingly, Sony expenses software development costs for the Game business as incurred
as a part of research and development in cost of sales.
Deferred insurance acquisition costs -
Costs that vary with and are primarily related to acquiring new insurance policies are deferred as long as
they are recoverable. The deferred insurance acquisition costs are being amortized mainly over the
premium-paying period of the related insurance policies using assumptions consistent with those used in
computing policy reserves.
Product warranty -
Sony provides for the estimated cost of product warranties at the time revenue is recognized by either
product category group or individual product. The product warranty is calculated based upon product sales,
estimated probability of failure and estimated cost per claim. The variables used in the calculation of the
provision are reviewed on a periodic basis.
Certain subsidiaries in the Electronics business offer extended warranty programs. The consideration
received through extended warranty service is deferred and amortized on a straight-line basis over the term
of the extended warranty.
Future insurance policy benefits -
Future insurance policy benefits are computed based on actuarial assumptions.
Accounting for the impairment of long-lived assets -
Sony periodically reviews the carrying value of its long-lived assets held and used, other than goodwill and
intangible assets with indefinite lives, and assets to be disposed of, whenever events or changes in