Sony 2003 Annual Report Download - page 168

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Consolidated Financial Information 2003
- 82 -
circumstances indicated that the carrying amount may not be recoverable. Long-lived assets to be held
and used are reviewed for impairment by comparing the carrying value of the assets with their estimated
future undiscounted cash flows. If it is determined that an impairment loss has occurred, the loss would be
recognized during the period. The impairment loss would be calculated as the difference between asset
carrying value and the present value of estimated net cash flows or comparable market values, giving
consideration to recent operating performance. Long-lived assets that are to be disposed of other than by
sale are considered held and used until they are disposed of. Long-lived assets that are to be disposed of
by sale are reported at the lower of their carrying value or fair value less cost to sell. Reductions in carrying
value are recognized in the period in which the long-lived assets are classified as held for sale.
Derivative financial instruments -
All derivatives, including certain derivative financial instruments embedded in other contracts, are
recognized as either assets or liabilities in the balance sheet at fair value. Changes in the fair value of
derivative financial instruments are either recognized periodically in income or stockholders’ equity (as a
component of accumulated other comprehensive income), depending on whether the derivative financial
instrument qualifies as a hedge and the derivative is being used to hedge changes in fair value or cash
flows.
In accordance with FAS No. 133, the derivative financial instruments held by Sony are classified and
accounted as below.
Fair value hedges
Changes in the fair value of derivatives designated and effective as fair value hedges for recognized assets
or liabilities or unrecognized firm commitments are recognized in earnings as offsets to changes in the fair
value of the related hedged assets or liabilities.
Cash flow hedges
Changes in the fair value of derivatives designated and effective as cash flow hedges for forecasted
transactions or exposures associated with recognized assets or liabilities are initially recorded in other
comprehensive income and reclassified into earnings when the hedged transaction affects earnings.
Changes in the fair value of the ineffective portion are recognized in current period earnings.
Derivatives not designated as hedges
Changes in the fair value of derivatives that are not designated as hedges under FAS No. 133 are
recognized in current period earnings.
Sony formally documents all hedging relationships between the derivatives designated as hedges and
hedged items, as well as its risk management objectives and strategies for undertaking various hedging