Sony 2003 Annual Report Download - page 169

Consolidated Financial Information 2003
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activities. Sony links all hedges that are designated as fair value or cash flow hedges to specific assets or
liabilities on the balance sheet or to the specific forecasted transaction. Sony also assesses, both at the
inception of the hedge and on an on-going basis, whether the derivatives that are designated as hedges
are highly effective in offsetting changes in fair value or cash flows of hedged items. When it is determined
that a derivative is not highly effective as a hedge, Sony discontinues hedge accounting.
Stock-based compensation -
Sony follows the disclosure-only provisions of FAS No. 148 and has elected to apply APB No. 25 in
accounting for its stock-based compensation plans. In accordance with APB No. 25, stock-based
compensation cost is recognized in income based on the excess, if any, of the quoted market price of the
common stock or subsidiary tracking stock of Sony Corporation at the grant date of the award or other
measurement date over the stated exercise price of the award. As the exercise prices for Sony’s
stock-based compensation plans are generally determined based on the prevailing market price shortly
before the date of grant, the compensation expense for these plans is not significant. For awards that
generate compensation expense as defined under APB No. 25, Sony calculates the amount of
compensation expense and recognizes the expense over the vesting period of the award.