Sony 2015 Annual Report Download - page 151

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES
its original cost, the financial condition, operating results, business plans and estimated future cash flows of the
issuer of the security, other specific factors affecting the market value, deterioration of the credit condition of the
issuer, sovereign risk, and whether or not Sony is able to retain the investment for a period of time sufficient to
allow for the anticipated recovery in market value.
In evaluating the factors for available-for-sale securities whose fair values are readily determinable, Sony
presumes a decline in value to be other-than-temporary if the fair value of the security is 20 percent or more
below its original cost for an extended period of time (generally for a period of up to six months). This criterion
is employed as a threshold to identify securities which may have a decline in value that is other-than-
temporary. The presumption of an other-than-temporary impairment in such cases may be overcome if there is
evidence to support that the decline is temporary in nature due to the existence of other factors which overcome
the duration or magnitude of the decline. On the other hand, there may be cases where impairment losses are
recognized when the decline in the fair value of the security is not more than 20 percent or such decline has not
existed for an extended period of time, as a result of considering specific factors which may indicate that the
decline in the fair value is other-than-temporary.
When an other-than-temporary impairment of a held-to-maturity debt security has occurred, the amount of
the other-than-temporary impairment recognized in income depends on whether Sony intends to sell the security
or more likely than not will be required to sell the security before recovery of its amortized cost. If the debt
security meets either of these two criteria, the other-than-temporary impairment is recognized in income,
measured as the entire difference between the security’s amortized cost and its fair value at the impairment
measurement date. For other-than-temporary impairments of debt securities that do not meet these two criteria,
the net amount recognized in income is a credit loss equal to the difference between the amortized cost of the
debt security and its net present value calculated by discounting Sony’s best estimate of projected future cash
flows at the effective interest rate implicit in the debt security prior to impairment. Any difference between the
fair value and the net present value of the debt security at the impairment measurement date is recorded in
accumulated other comprehensive income. Unrealized gains or losses on securities for which an other-than-
temporary impairment has been recognized in income are presented as a separate component of accumulated
other comprehensive income.
Equity securities in non-public companies -
Equity securities in non-public companies are primarily carried at cost if fair value is not readily
determinable. If the carrying value of a non-public equity investment is estimated to have declined and such
decline is judged to be other-than-temporary, Sony recognizes the impairment of the investment and the carrying
value is reduced to its fair value. Determination of impairment is based on the consideration of several factors,
including operating results, business plans and estimated future cash flows. Fair value is determined through the
use of various methodologies such as discounted cash flows, valuation of recent financings and comparable
valuations of similar companies.
Allowance for doubtful accounts -
Sony maintains an allowance for doubtful accounts to reserve for potentially uncollectible receivables. Sony
reviews accounts receivable by amounts due from customers which are past due to identify specific customers
with known disputes or collectability issues. In determining the amount of the reserve, Sony makes judgments
about the creditworthiness of customers based on past collection experience and ongoing credit risk evaluations.
Inventories -
Inventories in the Mobile Communications (“MC”), Game & Network Services (“G&NS”), Imaging
Products & Solutions (“IP&S”), Home Entertainment & Sound (“HE&S”), Devices and Music segments as well
as non-film inventories for the Pictures segment are valued at cost, not in excess of market, cost being
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