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95
Additionally, on April 1, 2006, Sony recognized a net charge
of 3,785 million yen (net of income taxes of 2,148 million yen)
as a cumulative-effect adjustment to beginning retained earn-
ings, which consisted of 1,754 million yen (net of income taxes
of 996 million yen) of gross gains and 5,539 million yen (net of
income taxes of 3,144 million yen) of gross losses.
■EMPLOYERS’ ACCOUNTING FOR DEFINED BENEFIT
PENSION AND OTHER POSTRETIREMENT PLANS
In September 2006, the FASB issued FAS No. 158, “Employers’
Accounting for Defined Benefit Pension and Other
Postretirement Plans,” an amendment to FASB Statements
No. 87, 88, 106 and 132(R). FAS No. 158 requires an employer
to recognize the overfunded or underfunded status of a defined
benefit pension and other postretirement benefit plan as an
asset or liability in its statement of financial position and to
recognize changes in that funded status in the year in which
the changes occur through other comprehensive income.
FAS No. 158 was adopted by Sony in the financial statements
for the fiscal year ending March 31, 2007. FAS No. 158 also
requires companies to measure the funded status of the plan as
of the date of its fiscal year-end, effective for years ending after
December 15, 2008. Sony expects to adopt the measurement
provisions of FAS No. 158 effective March 31, 2009. Refer to
Note 14, “Pension and severance plans,” for further details.
■QUANTIFYING EFFECTS OF PRIOR YEAR
MISSTATEMENTS IN CURRENT YEAR FINANCIAL
STATEMENTS
In September 2006, the U.S. Securities and Exchange
Commission (“SEC”) staff issued Staff Accounting Bulletin (“SAB”)
No. 108, “Considering the Effect of Prior Year Misstatement
when Quantifying Misstatements in Current Year Financial
Statements.” SAB No. 108 requires that registrants quantify
errors using both a balance sheet approach, generally referred
to as the “Iron Curtain” method, and a statement of operations
approach, generally referred to as the “Rollover” method, and
evaluate whether either approach results in a misstated amount
that, when all relevant quantitative and qualitative factors are
considered, is material. SAB No. 108 became effective for Sony
as of April 1, 2006. Prior to the application of SAB No. 108,
Sony used a statement of operations approach to quantify
errors. The application of SAB No. 108 did not have a material
impact on Sony’s consolidated financial statements.
RECENT PRONOUNCEMENTS
■ACCOUNTING BY INSURANCE ENTERPRISES FOR
DEFERRED ACQUISITION COSTS IN CONNECTION WITH
MODIFICATIONS OR EXCHANGES OF INSURANCE
CONTRACTS
In September 2005, the Accounting Standards Executive
Committee of the American Institute of Certified Public
Accountants (“AcSEC”) issued the Statement of Position
(“SOP”) 05-1, “Accounting by Insurance Enterprises for Deferred
Acquisition Costs in Connection with Modifications or Exchanges
of Insurance Contracts.” SOP 05-1 provides guidance on
accounting for deferred acquisition costs on internal replace-
ments of insurance and investment contracts other than those
specifically described in FAS No. 97, “Accounting and Reporting
by Insurance Enterprises for Certain Long-Duration Contracts
and for Realized Gains and Losses from the Sales of Invest-
ments.” This statement will be effective for Sony as of April 1,
2007. Although Sony is currently evaluating the impact of
adopting this new pronouncement, the adoption of SOP 05-1
is not expected to have a material impact on Sony’s results of
operations and financial position.
■ACCOUNTING FOR SERVICING OF FINANCIAL ASSETS
In March 2006, the FASB issued FAS No. 156, “Accounting
for Servicing of Financial Assets—an amendment of FASB
Statement No. 140.” This statement amends FAS No. 140,
“Accounting for Transfers and Servicing of Financial Assets
and Extinguishments of Liabilities” with respect to the account-
ing for separately recognized servicing assets and servicing
liabilities. This statement will be effective for Sony as of April 1,
2007. Sony is currently evaluating the impact of adopting this
new pronouncement.
■ACCOUNTING FOR UNCERTAINTY IN INCOME TAXES
In June 2006, the FASB issued FASB Interpretation (“FIN”) No. 48,
“Accounting for Uncertainty in Income Taxes, an interpretation of
FASB Statement No. 109.” FIN No. 48 clarifies the accounting
for uncertainty in income taxes recognized in an enterprise’s
financial statements in accordance with FAS No. 109, “Account-
ing for Income Taxes.” FIN No. 48 prescribes a recognition
threshold and measurement attribute for the financial statement
recognition and measurement of a tax position taken or expected
to be taken in a tax return. FIN No. 48 also provides guidance