Square Enix 2005 Annual Report Download - page 55

53
Annual Report 2005
5. Equity Investment in the Affiliated
Company
The Company had an equity interest of 26.54% in DigiCube
Co., Ltd., a domestic video game whole-seller devoted to
the convenience store market, listed on the Hercules mar-
ket of Osaka Securities Exchange, and accounted for using
the equity method. DigiCube went bankrupt in November
2003, and the Company recognized an impairment loss on
its investment in DigiCube in the amount of ¥760 million.
Whereas the bankruptcy proceeding is in progress as of
March 31, 2005, the Company made settlement with the
receiver and left itself from the proceeding in February
2004. Accordingly, the management of the Company
expects that no further obligation would arise from the
DigiCube investment. Equity method of accounting is no
longer applied for the year ended March 31, 2005.
6. Inventories
As of March 31, 2005 and 2004, inventories consist of:
Thousands of
Millions of yen U.S. dollars
2005 2004 2005
Finished goods and merchandise ¥0,938 ¥668 $08,734
Work in progress 99 81 919
Other supplies 76 60 711
Total ¥1,113 ¥809 $10,364
7. Software Development Costs
The following table provides the details of capitalized soft-
ware development costs:
Thousands of
Years ended March 31 Millions of yen U.S. dollars
2005 2004 2005
Beginning balance ¥12,507 ¥ — $118,340
Acquired from SQUARE —13,004 —
Increased during the year 12,704 12,226 118,300
Amortization (6,338) (12,660) (60,898)
Written off (983) (63) (9,157)
Ending balance ¥17,890 ¥12,507 $166,585
8. Property and Equipment
As of March 31, 2005 and 2004, property and equipment
consist of:
Thousands of
Millions of yen U.S. dollars
2005 2004 2005
Buildings ¥03,668 ¥03,445 $034,155
Machinery and equipment 9,117 8,445 84,892
Land 3,814 3,813 35,513
Other 15 9151
Total 16,614 15,712 154,711
(Less accumulated depreciation) (7,696) (6,627) (71,664)
Net book value ¥08,918 ¥09,085 $083,047
Depreciation expenses for the years ended March 31,
2005, 2004 and 2003 were ¥1,433, ¥1,631 million and ¥342
million (unaudited), respectively.
9. Intangible Assets
As of March 31, 2005 and 2004, intangible assets consist of:
Thousands of
Millions of yen U.S. dollars
2005 2004 2005
Software ¥03,109 ¥02,837 $028,946
Patent and trademark 10,789 10,380 100,463
Online game 12,850 12,850 119,657
License agreement for related goods 9,953 9,710 92,682
Existing game 2,940 2,940 27,377
Existing technologies 2,854 2,853 26,573
Other intangible assets 463 1,411 4,317
(Less: accumulated amortization) (8,008) (5,462) (74,567)
Net book value ¥34,950 ¥37,519 $325,448
Goodwill ¥38,955 ¥38,955 $362,748
Total ¥73,905 ¥76,474 $688,196
Amortization expenses for the years ended March 31, 2005,
2004 and 2003 were ¥3,021 million, ¥3,775 million and ¥44
million (unaudited), respectively.
Expected annual amortization expenses for the ensuing
fiscal years are as follows:
Thousands of
Years ending March 31 Millions of yen U.S. dollars
2006 ¥02,367 $022,038
2007 1,876 17,465
2008 1,720 16,017
2009 1,618 15,068
2010 1,516 14,117
2011 and thereafter 5,919 55,117
¥15,016 $139,822
10. Investment Securities
As of March 31, 2005 and 2004, investment securities
consist of:
Millions of yen
2005
Unrealized Unrealized
Cost gain loss Fair value
Marketable equity securities ¥330 ¥741 ¥(18) ¥1,053
Other equity securities 242 — — 242
Total ¥572 ¥741 ¥(18) ¥1,295