Square Enix 2005 Annual Report Download - page 31

29
Annual Report 2005
due to the merger with SQUARE and the increase in the
Company’s number of employees above 300. Reserve for
retirement benefits for the first half were calculated using
the previous method. Adjusting first-half accounts to reflect
the change in accounting method, recurring profit and
income before income taxes would increase ¥393 million.
D) Allowance for sales returns
An allowance is provided for losses due to the return of
published materials, at an amount calculated based on
historic experience, prior to this fiscal year. In addition,
allowance is provided for losses due to the return of
game software, at an estimated amount of future losses
assessed by each game title.
E) Allowance for directors’ retirement benefits
An allowance for directors’ retirement benefits is pro-
vided to adequately cover the costs of directors’ retire-
ment benefits, which are accounted for on an accrual
basis in accordance with internal policy.
• FY2004 (April 1, 2004 to March 31, 2005)
A) Allowance for doubtful accounts
Same as FY2003
B) Reserve for bonuses
Same as FY2003
C) Allowance for retirement benefits
An allowance for retirement benefits is provided at the
amount incurred during this period, which is based on
the estimated present value of the projected benefit
obligation. Unrecognized actuarial differences are fully
amortized in the next fiscal year in which they arise.
Unrecognized prior service cost is amortized over a cer-
tain year (one year) with in the average remaining ser-
vice period of the employees. In addition, the Company
and its domestic consolidated subsidiaries provide a
reserve for retirement benefits equal to 100% of such
benefits the Company and its subsidiaries would be
required to pay under the lump-sum retirement plan if
all eligible employees were to voluntarily terminate their
employment at the balance sheet date.
D) Allowance for sales returns
Same as FY2003
E) Allowance for directors’ retirement benefits
Same as FY2003
(4) Translation of foreign currency transactions and accounts
• FY2003 (April 1, 2003 to March 31, 2004)
All monetary assets and liabilities of the Company and its
domestic consolidated subsidiaries denominated in foreign
currencies are translated at the balance sheet date at the
year-end rate. The resulting translation gains or losses are
charged or credited to income. All monetary assets and
liabilities of overseas subsidiaries are translated as of the
balance sheet year-end rate, and all income and expense
accounts are translated at rates for their respective periods.
The resulting translation adjustments are recorded in minor-
ity interests in consolidated subsidiaries and shareholders’
equity as “Foreign currency translation adjustment.”
• FY2004 (April 1, 2004 to March 31, 2005)
Same as FY2003
(5) Accounting for leases
• FY2003 (April 1, 2003 to March 31, 2004)
Finance leases, other than those for which the ownership of
the leased assets are considered to be transferred to the
lessees, are accounted for as operating leases.
• FY2004 (April 1, 2004 to March 31, 2005)
Same as FY2003
(6) Accounting for deferred assets
• FY2003 (April 1, 2003 to March 31, 2004)
A) Stock issuance expenses
Costs associated with issuance of common shares are
expensed as incurred.
• FY2004 (April 1, 2004 to March 31, 2005)
A) Stock issuance expenses
Same as FY2003
(7) Additional accounting policies used to prepare consoli-
dated financial statements
• FY2003 (April 1, 2003 to March 31, 2004)
A) Accounting treatment of consumption tax
Income statement items are presented exclusive of con-
sumption tax.
B) Accounting treatment of overseas subsidiaries
The accounts and records of overseas subsidiaries are
maintained in conformity with accounting principles and
practices generally accepted in their respective countries.