Sony 2006 Annual Report Download - page 135

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The changes in product warranty liability for the fiscal years ended March 31, 2005 and 2006 are as follows:
Dollars in
Yen in millions millions
Years ended March 31 2005 2006 2006
Balance at beginning of the fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 50,670 ¥ 44,919 $ 384
Additional liabilities for warranties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,493 48,471 414
Settlements (in cash or in kind) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (40,358) (45,162) (386)
Changes in estimate for pre-existing warranty reserve . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (751) 70 1
Translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,865 1,172 10
Balance at end of the fiscal year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ¥ 44,919 ¥ 49,470 $ 423
Sony has issued loan guarantees to related parties comprised
of affiliated companies accounted for under the equity method
and unconsolidated subsidiaries. The terms of these guarantees
are mainly within 1 year. Sony would be required to perform
under these guarantees upon non-performance of the primary
borrowers. The contingent liability related to these guarantees
was ¥9,325 million ($80 million) and was not recorded on the
consolidated balance sheet as of March 31, 2006.
The European Commission (“EC”) has issued the Waste
Electrical and Electronic Equipment (“WEEE”) directive in February
2003. The WEEE directive generally requires electronics produc-
ers after August 2005 to be responsible for financing the cost for
collection, treatment, recovery and safe disposal of waste
products. In some member states of the European Union (“EU”)
the directive has been transposed into national legislation sub-
ject to which Sony recognizes the liability for obligations associ-
ated with WEEE. During the fiscal year ended March 31, 2006,
the cost that has been accrued in respect to the above mentioned
WEEE responsibilities was not material to Sony’s results of
operations and financial position. While the cost of this WEEE
directive to Sony cannot be determined before the regulation
is finally adopted in all individual member states that have to
transpose the directive into national legislation, Sony continues
to evaluate the impact of this regulation.
Sony has agreed to indemnify certain third parties against tax
losses resulting from transactions entered into in the normal
course of business. The maximum amount of potential future
payments under these guarantees cannot be estimated at this
time. These guarantees were not recorded on the consolidated
balance sheet as of March 31, 2006.
Sony Corporation and certain of its subsidiaries are defen-
dants in several pending lawsuits. However, based upon the
information currently available to both Sony and its legal coun-
sel, management of Sony believes that damages from such
lawsuits, if any, would not have a material effect on Sony’s
consolidated financial statements.
25. Business segment information
Effective for the fiscal year ended March 31, 2006, Sony has partly
changed its business segment configuration as described below.
As of August 1, 2004, Sony and Bertelsmann AG combined
their recorded music businesses in a joint venture. In connection
with the establishment of this joint venture, the non-Japan
based disc manufacturing and physical distribution businesses,
formerly included within the Music segment, have been reclassi-
fied to the “Other” category in the Electronics segment. In
addition, effective April 1, 2005, a similar change was made with
respect to the Japan based disc manufacturing businesses.
Results for the fiscal year ended March 31, 2004 and 2005 in
the Electronics segment have been restated to account for
these reclassifications. As a result of these changes in the Music
segment, Sony no longer breaks out the Music segment as a
reportable segment as it no longer meets the materiality thresh-
old. Effective April 1, 2005, results for the Music segment are
included within All Other. Accordingly, results for the fiscal year
ended March 31, 2004 and 2005 in the Electronics segment
and All Other have been restated to conform to the presentation
for the fiscal year ended March 31, 2006.
In July 2004, in order to establish a more efficient and coordi-
nated semiconductor supply structure, the Sony group has
integrated its semiconductor manufacturing business by trans-
ferring Sony Computer Entertainment’s semiconductor manu-
facturing operation from the Game segment to the Electronics
segment. As a result of this transfer, sales revenue and expendi-
tures associated with this operation are now recorded within the
“Semiconductor” category in the Electronics segment. The
results for the fiscal year ended March 31, 2004 and the three
months ended June 30, 2004 have not been restated as such
comparable figures cannot be practically obtained given that it
was not operated as a separate line business within the Game
segment. This integration of the semiconductor manufacturing
businesses is a part of Sony’s semiconductor strategy of utilizing
semiconductor technologies and manufacturing equipment
originally developed or designed for the Game businesses within
the Sony Group as a whole.