Square Enix 2004 Annual Report Download - page 29

SQUARE ENIX 2004 27
useful life of five years. For all other intangible fixed assets, trademarks
are amortized by the straight-line method based on an estimated useful
life of ten years, and goodwill is amortized by the straight-line method
over a period of five years.
Fiscal year under review (April 1, 2003 to March 31, 2004)
The Company
(a) Property, plant and equipment
Property, plant and equipment owned by the Company and its domestic
consolidated subsidiaries are depreciated using the declining-balance
method. Estimated useful lives of major assets is as follows:
Buildings and structures 3-50 years
Machinery and equipment 3-20 years
(Change in accounting policy)
Previously, assets with a purchase price equal to or more than ¥100,000
and less than ¥200,000 were depreciated on a straight-line basis over a
period of three years. In order to unify the accounting policy as a result
of the merger and to further strengthen the financial position, from the
fiscal year under review, assets acquired that are deemed to have an
immaterial impact on the Company’s consolidated financial position are
expensed at the time of purchase. The result of this change on the
Company’s consolidated operating income, recurring profit, and
income before income taxes for the previous fiscal year is considered
immaterial.
(b) Intangible assets
In-house software used by the Company and its domestic consolidated
subsidiaries is amortized by the straight-line method based on an esti-
mated useful life of five years. For all other intangible fixed assets,
trademarks are amortized by the straight-line method based on an esti-
mated useful life of ten years, and goodwill is amortized by the straight-
line method over a period of five years.
(3) Accounting for allowances and reserves
Previous fiscal year (April 1, 2002 to March 31, 2003)
ENIX
(a) Allowance for doubtful accounts
An allowance for doubtful accounts is provided for possible losses aris-
ing from default on accounts receivable. The allowance is made up of
two components: the estimated credit loss for doubtful receivables
based on an individual assessment of each account, and a general reserve
calculated based on historical default rates.
(b) Reserve for bonuses
A reserve for bonuses is provided for payments to employees of ENIX
and its domestic consolidated subsidiaries at the amount expected to be
paid in respect of the calculation period ended on the balance sheet
date.
(c) Allowance for retirement benefits
To cover projected employees’ retirement benefits of ENIX and its
domestic consolidated subsidiaries, an allowance is provided at an esti-
mated amount that would be required to be paid if all eligible employ-
ees voluntarily terminated their employment as of the end of the fiscal
year projected at the beginning of each fiscal year.
(d) Allowance for sales returns
An allowance is provided for losses due to the return of published mate-
rials, at an amount calculated based on historic experience.
(e) Allowance for directors’ retirement benefits
An allowance for directors’ retirement benefits is provided to adequate-
ly cover the costs of directors’ retirement benefits, which are accounted
for on an accrual basis in accordance with internal policy.
(f) —
SQUARE
(a) Allowance for doubtful accounts
An allowance for doubtful accounts provides for possible losses arising
from default on accounts and loans receivable. The allowance is made
up of two components: the estimated credit loss for doubtful receivables
based on an individual assessment of each account, and a general reserve
calculated based on historical default rates.
(b) Reserve for bonuses
A reserve for bonuses provides for payments to employees of SQUARE
and its consolidated subsidiaries at the amount expected to be paid in
respects of the calculation period ended on the balance sheet date.
(c) Allowance for retirement benefits
To cover projected employees’ retirement benefits of SQUARE and its
domestic consolidated subsidiaries, SQUARE provides an estimated
amount of benefit obligation to cover projected retirement benefit
obligations for employees at the balance sheet date.
(d) Allowance for sales returns
An allowance is provided for losses due to the return of game software,
at an estimated amount of future losses assessed by each game title and
historic experience.
(e) Allowance for directors’ retirement benefits
An allowance for directors’ retirement benefits is provided to adequate-
ly cover the costs of directors’ retirement benefits, which are accounted
for on an accrual basis in accordance with internal policy.
As of March 31, 2003, SQUARE ceased to operate as a going concern
due to merger with Enix. As a result, the amount and date payable as
retirement benefits to employees and directors of SQUARE was fixed
and recorded as other accounts payable as of the balance sheet date
(Refer 5. Accounting Procedures 1. Consolidated Financial Statements-
Subsequent Events)
(f) Reserve for relocation-related costs
A reserve is provided for costs due to the head office relocation, at an
estimated amount as of the balance sheet date.