Sony 2005 Annual Report Download - page 113

110 Sony Corporation
Dollars in millions
Pre-tax Tax Net-of-tax
amount expense amount
For the year ended March 31, 2005:
Unrealized gains on securities—
Unrealized holding gains (losses) arising during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$(068 $(15) $(053
Less: Reclassification adjustment for gains (losses) included in net income . . . . . . . . . . . . . . . . . . . (170) 49 (121)
Unrealized losses on derivative instruments—
Unrealized holding gains (losses) arising during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(19) 17 (2)
Less: Reclassification adjustment for gains (losses) included in net income . . . . . . . . . . . . . . . . . . . (27) 11 (16)
Minimum pension liability adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16) 9 (7)
Foreign currency translation adjustments—
Translation adjustments arising during the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 716 (22) 694
Other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(552 $(49 $(601
During the years ended March 31, 2003 and 2004, ¥7,665
million and ¥1,232 million of foreign currency translation adjust-
ments were transferred respectively from other comprehensive
income and charged to income as a result of the liquidation of
certain foreign subsidiaries.
As discussed in Note 6, as of August 1, 2004, Sony and
Bertelsmann AG combined their recorded music businesses in a
joint venture. In connection with the establishment of the joint
venture, the minimum pension liability attributable to employees
who were transferred to SONY BMG totaling ¥6,053 million ($57
million) was transferred from other comprehensive income to the
carrying value of Sony’s investment in SONY BMG.
17. Stock-based compensation plans
Sony has four types of stock-based compensation plans as
incentive plans for directors, corporate executive officers and
selected employees.
(1) Warrant plan:
Upon issuance of unsecured bonds with detachable warrants
which are described in Note 12, Sony Corporation has pur-
chased all of the detachable warrants and distributed them to
the directors, corporate executive officers and selected employ-
ees of Sony. By exercising a warrant, directors, corporate ex-
ecutive officers and selected employees can purchase the
common stock or subsidiary tracking stock of Sony Corpora-
tion, the number of which is designated by each plan. The
warrants generally vest ratably over a period of three years, and
are exercisable up to six years from the date of grant.
(2) Convertible bond plan:
Sony has an equity-based compensation plan for selected
executives of Sony’s United States of America subsidiaries using
U.S. dollar-denominated non-interest bearing convertible bonds
which have characteristics similar to that of an option plan. Each
convertible bond can be converted into 100 shares of the
common stock of Sony Corporation at an exercise price based
on the prevailing market rate shortly before the date of grant.
The convertible bonds vest ratably over a three-year period and
are exercisable up to ten years from the date of grant. As the
convertible bonds were issued in exchange for a non-interest
bearing employee loan and a right of offset exists between the
convertible bonds and the employee loans, no accounting
recognition was given to either the convertible bonds or the
employee loans in Sony’s consolidated balance sheet.
(3) Stock acquisition rights:
During the year ended March 31, 2003, Sony adopted an
equity-based compensation plan that issues common stock
acquisition rights for the purpose of granting stock options to
the directors, corporate executive officers and selected employ-
ees of Sony, and subsidiary tracking stock acquisition rights for
the purpose of granting stock options to the directors and
selected employees of SCN, pursuant to the Commercial Code
of Japan. The stock acquisition rights generally vest ratably over
a period of three years and are exercisable up to ten years from
the date of grant.
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