Sony 2005 Annual Report Download - page 94

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Sony Corporation 91
accounted for its employee stock-based compensation in
accordance with the provisions prescribed by APB No. 25 and
its related interpretations and has disclosed the net effect on net
income and net income per share allocated to the common
stock if Sony had applied the fair value recognition provisions of
FAS No. 123 to stock-based compensation as described above
in (2) Significant accounting policies—Stock-based compensa-
tion. This statement shall be effective for fiscal years beginning
after June 15, 2005, with early adoption during the fiscal years
beginning after the date this statement is issued encouraged.
The options for transition methods prescribed in FAS No. 123(R)
include either the modified prospective or the modified retro-
spective methods. Sony intends to adopt the modified prospec-
tive method of transition, which requires that compensation
expense be recorded for all unvested stock acquisition rights as
the requisite service is rendered beginning with the first period of
adoption. Sony is currently evaluating the impact of adopting
this new pronouncement. However, Sony expects that the total
expenses to be recorded in the future periods will be consistent
with the pro forma information above in (2) Significant accounting
policies—Stock-based compensation.
■ Inventory costs
In November 2004, the FASB issued FAS No. 151, “Inventory
Costs, an amendment of Accounting Research Bulletin (“ARB”)
No. 43, Chapter 4.” This statement requires certain abnormal
expenditures to be recognized as expenses in the current period.
It also requires that the amount of fixed production overhead
allocated to inventory be based on the normal capacity of the
production facilities. This statement shall be effective for fiscal
years beginning after June 15, 2005, with early adoption during
the fiscal years beginning after the date this statement is issued
encouraged. The adoption of FAS No. 151 is not expected to
have a material impact on Sony’s results of operations and
financial position.
■ Exchanges of nonmonetary assets
In December 2004, the FASB issued FAS No. 153, “Exchanges
of Nonmonetary Assets, an amendment of APB Opinion No.
29.” This statement requires that exchanges of productive
assets be accounted for at fair value unless fair value cannot be
reasonably determined or the transaction lacks commercial
substance. This statement shall be effective for nonmonetary
asset exchanges occurring in the fiscal periods beginning after
June 15, 2005, with early adoption during the fiscal periods
beginning after the date this statement is issued encouraged.
Sony is currently evaluating the impact of adopting this new
pronouncement.
(4) Reclassifications:
Certain reclassifications of the financial statements for the years
ended March 31, 2003 and 2004 have been made to conform
to the presentation for the year ended March 31, 2005.
3. U.S. dollar amounts
U.S. dollar amounts presented in the financial statements are
included solely for the convenience of the reader. These transla-
tions should not be construed as representations that the yen
amounts actually represent, or have been or could be converted
into U.S. dollars. As the amounts shown in U.S. dollars are for
convenience only, the rate of ¥107=U.S.$1, the approximate
current rate at March 31, 2005, has been used for the purpose
of presentation of the U.S. dollar amounts in the accompanying
consolidated financial statements.
4. Inventories
Inventories comprise the following:
Dollars in
Yen in millions millions
March 31 2004 2005 2005
Finished products . . . . . . . .
¥427,877 ¥405,616 $3,791
Work in process . . . . . . . . . .
98,607 93,181 871
Raw materials, purchased
components and
supplies . . . . . . . . . . . . . . .
140,023 132,552 1,238
. . . . . . . . . . . . . . . . . . . .
¥666,507 ¥631,349 $5,900
5. Film costs
Film costs comprise the following:
Dollars in
Yen in millions millions
March 31 2004 2005 2005
Theatrical:
Released (including
acquired film libraries) . . .
¥136,057 ¥119,438 $1,116
Completed not released . .
7,946 11,358 106
In production and
development . . . . . . . . .
79,198 118,271 1,106
Television licensing:
Released (including
acquired film libraries) . . .
33,378 29,894 279
In production and
development . . . . . . . . .
161 00
. . . . . . . . . . . . . . . . . . . .
¥256,740 ¥278,961 $2,607
Sony estimates that approximately 88% of unamortized costs
of released films (excluding amounts allocated to acquired film
libraries) at March 31, 2005 will be amortized within the next
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