Sony 2008 Annual Report Download - page 70

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OFF-BALANCE SHEET ARRANGEMENTS
Sony has certain off-balance sheet arrangements that provide
liquidity, capital resources and/or credit risk support.
Sony set up several accounts receivable sales programs that
provide for the accelerated receipt of up to 50.0 billion yen of
eligible trade accounts receivable of Sony Corporation. Through
these programs, Sony can sell receivables to qualified special
purpose entities owned and operated by banks. These transac-
tions are accounted for as a sale in accordance with Financial
Accounting Standards (“FAS”) No. 140, “Accounting for
Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities”, because Sony has relinquished control of the
receivables. Accordingly, accounts receivable sold under these
transactions are excluded from receivables in the accompanying
consolidated balance sheets. Total receivables sold for the
fiscal years ended March 31, 2007 and 2008 were 152.5 billion
yen and 181.4 billion yen, respectively. Losses from these
transactions were insignificant. Although Sony continues
servicing the sold receivables, no servicing liabilities are
recorded because costs regarding collection of the sold
receivables are insignificant.
During the fiscal year ended March 31, 2008, a subsidiary of
the Financial Services segment set up several receivable sales
programs that provide for the accelerated receipt of up to 18.0
billion yen of eligible receivables. Through these programs, Sony
can sell receivables to qualified special purpose entities owned
and operated by banks. These transactions are accounted for
as a sale in accordance with FAS No. 140, because Sony has
relinquished control of the receivables. Accordingly, receivables
sold under these transactions are excluded from receivables in
the accompanying consolidated balance sheets. Total receiv-
ables sold for the fiscal year ended March 2008 were 113.8
billion yen. Losses from these transactions were insignificant.
Although Sony continues servicing the sold receivables, no
servicing liabilities are recorded because costs regarding
collection of the sold receivables are insignificant.
Sony has, from time to time, entered into various arrange-
ments with Variable Interest Entities (“VIEs”). In several of the
arrangements in which Sony holds a significant variable interest,
Sony is the primary beneficiary and therefore consolidates these
VIEs. These arrangements include facilities which provide for
the leasing of certain property, the financing of film production
and the U.S.-based music publishing business. In addition,
Sony holds a significant variable interest in VIEs in which Sony
is not the primary beneficiary and therefore does not consoli-
date. These VIEs include the film production/co-financing
arrangements noted as follows.
On December 30, 2005, a subsidiary in the Pictures segment
entered into a production/co-financing agreement with a VIE to
co-finance 11 films that were released over the 15 months
ended March 31, 2007. The subsidiary received 376 million
U.S. dollars over the term of the agreement to fund the produc-
tion or acquisition cost of films (including fees and expenses).
The subsidiary is responsible for the marketing and distribution
of the product through its global distribution channels. The VIE
shares in the net profits, as defined, of the films after the
subsidiary recoups a distribution fee, its marketing and distribu-
tion expenses, and third party participation and residual costs,
each as defined. The subsidiary did not make any equity
investment in the VIE nor issue any guarantees with respect to
the VIE. On April 28, 2006, the subsidiary entered into a second
production/co-financing agreement with a VIE to co-finance
additional films. Eight films are anticipated to be released under
this financing arrangement. The subsidiary will receive approxi-
mately 190 million U.S. dollars over the term of the agreement
to fund the production or acquisition cost of films (including fees
and expenses). Similar to the first agreement, the subsidiary is
responsible for the marketing and distribution of the product
through its global distribution channels. The VIE shares in the
net profits, as defined, of the films after the subsidiary recoups
a distribution fee, its marketing and distribution expenses, and
third party participation and residual costs, each as defined. As
of March 31, 2008, seven co-financed films have been released
by the subsidiary and 110 million U.S. dollars has been received
from the VIE under this agreement. The subsidiary did not make
any equity investment in the VIE nor issue any guarantees with
respect to the VIE. On January 19, 2007, the subsidiary entered
into a third production/co-financing agreement with a VIE to
co-finance a majority of the films to be submitted through
March 2012. The subsidiary has received a commitment from
the VIE that the VIE will fund up to 525 million U.S. dollars on a
revolving basis to fund the production or acquisition cost of
films (including fees and expenses). As of March 31, 2008, no
films of the subsidiary have been funded by this VIE. Similar to
the first two agreements, the subsidiary is responsible for
marketing and distribution of the product through its global
distribution channels. The VIE shares in the net profits, as
defined, of the films after the subsidiary recoups a distribution
fee, its marketing and distribution expenses, and third party
participation and residual costs, each as defined. The subsid-
iary did not make any equity investment in the VIE nor issue any
guarantees with respect to the VIE.
Refer to Note 22 of Notes to Consolidated Financial
Statements for more information on VIEs.