Sony 2005 Annual Report Download - page 95

92 Sony Corporation
three years. Approximately ¥94,790 million ($886 million) of
released film costs are expected to be amortized during the next
twelve months. As of March 31, 2005, unamortized acquired
film libraries of approximately ¥12,371 million ($116 million)
remained to be amortized on a straight-line basis over an aver-
age of the remaining life of 5 years. Approximately ¥108,833
million ($1,017 million) of accrued participation liabilities included
in accounts payable, other and accrued expenses are expected
to be paid during the next twelve months.
6. Related party transactions
Sony accounts for its investments in affiliated companies over
which Sony has significant influence or ownership of 20% or
more but less than or equal to 50% under the equity method.
In addition, investments in general partnerships in which Sony
does not have a controlling interest and limited partnerships are
also accounted for under the equity method. Such investments
include but are not limited to Sony’s interest in Sony Ericsson
Mobile Communications AB (50%), SONY BMG MUSIC
ENTERTAINMENT (“SONY BMG”) (50%), S-LCD Corporation
(“S-LCD”) (50% minus 1 share), ST Liquid Crystal Display Corpora-
tion (50%), bit Wallet, Inc (34.6%), STAR CHANNEL, INC. (17.8%),
and InterTrust Technologies Corporation (“InterTrust”) (49.5%).
Summarized combined financial information that is based on
information provided by equity investees is shown below:
Dollars in
Yen in millions millions
March 31 2004 2005 2005
Current assets . . . . . . . . . . . ¥433,154 ¥0,942,328 $08,807
Property, plant and
equipment . . . . . . . . . . . . .
94,130 361,406 3,377
Other assets . . . . . . . . . . . . 57,756 250,245 2,339
Total assets . . . . . . . . . . . ¥585,040 ¥1,553,979 $14,523
Current liabilities. . . . . . . . . . ¥397,242 ¥0,876,430 $08,191
Long-term liabilities . . . . . . . 27,639 115,999 1,084
Stockholders’ equity . . . . . . 160,159 561,550 5,248
Total liabilities and
stockholders’ equity . . . . ¥585,040 ¥1,553,979 $14,523
Number of companies
at end of the fiscal year . . . 66 56
Dollars in
Yen in millions millions
Years ended March 31 2003 2004 2005 2005
Sales and
revenue . . . . .
¥785,697 ¥1,009,005 ¥1,473,273 $13,769
Gross profit . . . 140,078 231,083 477,796 4,465
Net income
(loss) . . . . . . . (81,422) 11,323 63,404 593
In April 2002, Sony completed the sale of its equity interest
in the Telemundo Group which resulted in cash proceeds of
¥88,373 million and a gain of ¥66,502 million. In the year ended
March, 31 2003, Sony had deferred ¥5,939 million of the gain
related to the sale of Telemundo as a result of certain indemnifi-
cations provided by Sony to the acquirer, which was subse-
quently recognized in April 2003, as these indemnifications
expired with no amounts being refunded by Sony.
In June 2002, Sony completed the partial sale of its equity
investment in the Columbia House Company (“CHC”), a 50-50
joint venture between AOL Time Warner Inc. and Sony, to
Blackstone Capital Partners III LP (“Blackstone”), an affiliate of
The Blackstone Group, a private investment bank. The chairman
of The Blackstone Group was also a director of Sony until June
2002. Under the terms of the sale agreement, Sony received
cash proceeds of ¥17,839 million and a subordinated note
receivable from Columbia House Holdings, Inc., a majority
owned subsidiary of Blackstone, with a face amount of ¥7,827
million. The sale resulted in a gain of ¥1,324 million. As of March
31, 2005, Sony still had a 7.5% ownership interest in CHC,
which was accounted for as a cost method investment as a
result of the partial sale of this investment. In May 2005, an
agreement was reached between Blackstone and a third party
for the sale of CHC to the third party. As part of this transaction,
Sony has also agreed to sell its remaining ownership interest in
CHC and settle the outstanding subordinated note receivable.
In September 2002, Sony completed the sale of its equity inter-
est in Sony Tektronix Inc., which resulted in a gain of ¥3,090 million.
In January 2003, Sony acquired a 49.5% interest in InterTrust
for ¥23,076 million.
In May 2003, Sony acquired the remaining 50% interest in
American Video Glass Company (“AVGC”) that it did not own
from Corning Asahi Corporation. As a result, AVGC is no longer
accounted for under the equity method and is now a consoli-
dated subsidiary. The financial position and operating results of
AVGC as of and for the years ended March 31, 2004 and 2005
are not included in the above summarized combined financial
information.
Effective July 1, 2003, in accordance with FIN No. 46, Sony
consolidated BE-ST Bellevuestrasse Development GmbH & Co.
First Real Estate KG, Berlin (“BE-ST”). As a result, BE-ST is no
longer accounted for under the equity method (Note 23). The
financial position and operating results of BE-ST as of and for
the years ended March 31, 2004 and 2005 are not included in
the above summarized combined financial information.
In August 2003, Crosswave Communications Inc. (“CWC”), of
which Sony owned approximately a 23.9% interest, commenced
reorganization proceedings under the Corporate Reorganization
Law of Japan. As a result, Sony no longer has a significant influ-
ence on the decision making of CWC. Therefore, CWC is no
longer accounted for under the equity method. The financial
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