Sony 2015 Annual Report Download - page 149

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Notes to Consolidated Financial Statements
Sony Corporation and Consolidated Subsidiaries
1. Nature of operations
Sony Corporation and its consolidated subsidiaries (hereinafter collectively referred to as “Sony”) are
engaged in the development, design, manufacture, and sale of various kinds of electronic equipment, instruments,
and devices for consumer, professional and industrial markets as well as game consoles and software. Sony’s
primary manufacturing facilities are located in Asia including Japan. Sony also utilizes third-party contract
manufacturers for certain products. Sony’s products are marketed throughout the world by sales subsidiaries and
unaffiliated distributors as well as direct sales via the Internet. Sony is engaged in the production, acquisition and
distribution of motion pictures and television programming and the operation of television and digital networks.
Sony is also engaged in the development, production, manufacture, and distribution of recorded music and the
management and licensing of the words and music of songs. Further, Sony is also engaged in various financial
services businesses, including life and non-life insurance operations through its Japanese insurance subsidiaries
and banking operations through a Japanese Internet-based banking subsidiary. In addition to the above, Sony is
engaged in a network services business and an advertising agency business in Japan.
2. Summary of significant accounting policies
The accompanying consolidated financial statements are presented in accordance with accounting principles
generally accepted in the United States of America (“U.S. GAAP”). Certain adjustments and reclassifications
have been incorporated in the accompanying consolidated financial statements to conform with U.S. GAAP.
These adjustments were not recorded in the statutory books and records as Sony Corporation and its subsidiaries
in Japan maintain their records and prepare their statutory financial statements in accordance with accounting
principles generally accepted in Japan, while its foreign subsidiaries maintain their records and prepare their
financial statements in conformity with accounting principles generally accepted in the countries of their
domicile.
(1) Significant accounting policies
Basis of consolidation and accounting for investments in affiliated companies -
The consolidated financial statements include the accounts of Sony Corporation and its majority-owned
subsidiary companies, general partnerships and other entities in which Sony has a controlling interest, and
variable interest entities for which Sony is the primary beneficiary. All intercompany transactions and accounts
are eliminated. Investments in business entities in which Sony does not have control, but has the ability to
exercise significant influence over operating and financial policies, generally through 20-50% ownership, are
accounted for 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 if more than
minor influence over the operation of the investee exists (generally through more than 3-5% ownership). When
the interest in the partnership is so minor that Sony has no significant influence over the operation of the
investee, the cost method is used. Under the equity method, investments are stated at cost plus/minus Sony’s
portion of equity in undistributed earnings or losses. Sony’s equity in current earnings or losses of such entities is
reported net of income taxes and is included in operating income (loss) after the elimination of unrealized
intercompany profits. If the value of an investment has declined and is judged to be other-than-temporary, the
investment is written down to its estimated fair value.
On occasion, a consolidated subsidiary or an affiliated company accounted for by the equity method may
issue its shares to third parties in either a public or private offering or upon conversion of convertible debt to
common stock at amounts per share in excess of or less than Sony’s average per share carrying value. With
respect to such transactions, the resulting gains or losses arising from the change in ownership interest are
recorded in earnings within the fiscal year in which the change in interest transactions occur.
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