Sony 2015 Annual Report Download - page 213

SONY CORPORATION AND CONSOLIDATED SUBSIDIARIES
Sony’s U.S.-based music publishing subsidiary is a joint venture with a third-party investor and has been
determined to be a VIE. The subsidiary owns and acquires rights to musical compositions, exploits and markets
these compositions, and receives royalties or fees for their use. Under the terms of the joint venture, Sony has the
obligation to fund any working capital deficits as well as any acquisition of music publishing rights made by the
joint venture. In addition, the third-party investor receives a guaranteed annual dividend of up to 17.3 million
U.S. dollars through December 15, 2016. Based on a qualitative assessment, it was determined that Sony has the
power to direct the activities that most significantly impact the VIE’s economic performance, as well as the
obligation to absorb the losses of the VIE due to its obligation to provide funding to the joint venture. As a result,
it has been determined that Sony is the primary beneficiary. As of March 31, 2016, the assets and liabilities of the
VIE that were included in Sony’s consolidated balance sheets were as follows:
Yen in millions
Assets:
Cash and cash equivalents 8,559
Account receivables, net 3,709
Other current assets 27,472
Property, plant and equipment, net 1,389
Intangibles, net 61,766
Goodwill 16,964
Other noncurrent assets 8,972
Total assets 128,831
Liabilities:
Accounts payable and accrued expenses 43,232
Other current liabilities 11,330
Other noncurrent liabilities 4,220
Total liabilities 58,782
Sony and the third-party investor entered into a binding Memorandum of Understanding on March 14, 2016
and a definitive agreement on April 18, 2016 (the “Music Publishing Purchase Agreements”) for Sony to obtain
full ownership of the U.S.-based music publishing subsidiary by acquiring the 50% interest in the subsidiary held
by the third-party investor. The Music Publishing Purchase Agreements call for total payments of 750 million
U.S. dollars, which includes a lump sum payment of 733 million U.S. dollars as well as distributions the
subsidiary previously committed to pay to the third-party investor. The closing of the transaction is subject to
certain closing conditions, including regulatory approval.
VIEs in which Sony holds a significant variable interest, but is not the primary beneficiary are described as
follows:
In connection with the July 2013 refinancing of the debt obligations of the third-party investor in the music
publishing subsidiary described above, Sony has issued a guarantee to a creditor of the third-party investor in
which Sony has agreed to repay the outstanding principal plus accrued interest up to a maximum of 260.5 million
U.S. dollars to the creditor should the third-party investor default on its obligation. The obligation of the third-
party investor is collateralized by its 50% interest in Sony’s music publishing subsidiary. Should Sony have to
make a payment under the terms of the guarantee, Sony would assume the creditor’s rights to the underlying
collateral. The assets of the third-party investor that are being used as collateral were placed in a separate trust
which is also a VIE in which Sony has significant variable interests. Based on a qualitative assessment, it was
determined that Sony is not the primary beneficiary as Sony does not have the power to direct the activities of the
trust. The assets held by the trust consist solely of the third-party investor’s 50% ownership interest in the music
publishing subsidiary. As of March 31, 2016, the fair value of the assets held by the trust exceeded 260.5 million
U.S. dollars.
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