Sony 2003 Annual Report Download - page 191

Consolidated Financial Information 2003
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furnished, pursuant to such agreements or otherwise, will be applicable to all present or future indebtedness to
such banks.
13. Deposits from customers in the banking business
All deposits from customers in the banking business are interest bearing deposits, and are owned by a
Japanese bank subsidiary which was established as an Online Internet bank for individuals. At March 31, 2002
and 2003, the balance of time deposits issued in amounts of ¥10 million ($83 thousand) or more was ¥24,045
million and ¥39,620 million ($330 million), respectively.
At March 31, 2003, aggregate amounts of annual maturities of time deposits with a remaining term of more
than one year include ¥9,802 million ($82 million) and ¥21,010 million ($175 million) for the years ending March
31, 2005 and 2006, respectively. There are no deposits having a maturity date after March 31, 2006.
14. Financial instruments
(1) Derivative instruments and hedging activities:
Sony has certain financial instruments including financial assets and liabilities incurred in the normal course
of business. Such financial instruments are exposed to market risk arising from the changes of foreign
currency exchange rates and interest rates. In applying a consistent risk management strategy for the
purpose of reducing such risk, Sony uses derivative financial instruments, which include foreign exchange
forward contracts, foreign currency option contracts, and interest rate and currency swap agreements. Sony
does not use derivative financial instruments for trading or speculative purposes. Foreign exchange forward
contracts and foreign currency option contracts are utilized primarily to limit the exposure affected by
changes in foreign currency exchange rates on cash flows generated by anticipated intercompany
transactions and intercompany accounts receivable and payable denominated in foreign currencies. Interest
rate and currency swap agreements are utilized primarily to lower funding costs, to diversify sources of
funding and to limit Sony’s exposure associated with underlying debt instruments resulting from adverse
fluctuations in interest rates and/or foreign currency exchange rates.
These instruments are executed with creditworthy financial institutions, and virtually all foreign currency
contracts are denominated in U.S. dollars, euros and other currencies of major countries. Although Sony
may be exposed to losses in the event of nonperformance by counterparties or unfavorable interest and
currency rate movements, it does not anticipate significant losses due to the nature of Sony’s counterparties
or the hedging arrangements.
Derivative financial instruments held by Sony are classified and accounted for as described below
pursuant to FAS No. 133.