Square Enix 2006 Annual Report Download - page 18

SQUARE ENIX CO., LTD.
Total assets as of March 31, 2006, amounted to ¥213,348 million, an
increase of ¥81,653 million compared with the previous fiscal year-
end. The major factors contributing to this change are as follows.
(Note: Taito non-current assets include goodwill of ¥27,232 million.)
Cash and Deposits
Years ended March 31 Millions of yen
Reference:
2005 2006 Change Taito
¥81,243 ¥75,257 ¥(5,986) ¥8,953
(1) Net cash provided by operating activities
Income before income taxes totaled ¥8,990 million, and net cash
provided by operating activities amounted to ¥9,174 million, a
63.1% decrease compared with the previous fiscal year. Major cash
flows included the non-cash adjustment for depreciation and
amortization amounting to ¥8,419 million, increase in accounts
receivable totaling ¥16,330 million, which are mainly attributable to
the release of a major game title near the end of the fiscal year,
and decrease in inventories amounting to ¥9,140 million.
(2) Net cash used in investing activities
Net cash used in investing activities totaled ¥60,039 million,
compared with net cash provided by investing activities totaling
¥574 million in the previous fiscal year. Major cash flows included
payments for the acquisition of Taito stock amounting to ¥53,747
million, and payments for acquiring property and equipment
totaling ¥8,258 million.
(3) Net cash provided by financing activities
Net cash provided by financing activities amounted to ¥44,153
million, compared with net cash used in financing activities totaling
¥2,907 million in the previous fiscal year. Major cash flows included
proceeds from the issuance of corporate bonds amounting to
¥50,000 million and payments for dividends totaling ¥6,617 million.
Notes and Accounts Receivable
Years ended March 31 Millions of yen
Reference:
2005 2006 Change Taito
¥7,670 ¥33,215 ¥25,544 ¥9,564
The year-end balance of notes and accounts receivable varies
greatly depending on the timing of new game title releases. In the
fiscal year ended March 31, 2005, there were no million-selling
titles released in the fourth quarter. However, in the period under
review, “FINAL FANTASY XII” was released in Japan on March 16,
2006, with shipments totaling 2.38 million units as of March 31,
2006. In North America, “KINGDOM HEARTS II” was released on
March 28, 2006, with shipments reaching 1.26 million units as of
the fiscal year-end. After adding the effect of Taito’s inclusion in
the scope of consolidation, notes and accounts receivable totaled
¥33,215 million, an increase of ¥25,544 million compared with the
previous fiscal year-end.
Content Production Account
Years ended March 31 Millions of yen
Reference:
2005 2006 Change Taito
¥15,510 ¥7,312 ¥(8,197) ¥—
As a rule, content development costs incurred after the outset of
authorized productions through release are capitalized in the
content production account. When the title is released, this amount
is then recorded as an expense.
The content production account is reevaluated based on the
current business environment. In the event that a title development
project is canceled as a result of such reevaluation, the Company
may write-off capitalized development costs for the canceled title
in the content production account as an extraordinary loss. In the
fiscal year under review, an extraordinary loss amounting to ¥460
million was posted owing to the write-off of canceled content.
Costs incurred during the pre-production phase—the phase
before development is formally approved by a decision-making
body—are posted as selling, general and administrative (SG&A)
expenses as they are incurred.
As of March 31, 2006, the content production account totaled
¥7,312 million, a decrease of ¥8,197 million compared with the
end of the previous fiscal year. This decrease was mainly owing to
the domestic release of such major titles as “FINAL FANTASY XII”
and “KINGDOM HEARTS II,” whose production costs were expensed
during the period under review.
Deferred Tax Assets (current and non-current)
Years ended March 31 Millions of yen
Reference:
2005 2006 Change Taito
Current ¥3,440 ¥7,877 ¥4,437 ¥2,897
Non-current 1,768 6,523 4,754 2
In September 2005, the Company acquired 93.7% of the common
shares of TAITO CORPORATION via a takeover bid. Subsequently,
Taito was merged with SQEX, Inc., a wholly owned subsidiary of
the Company, resulting in Taito becoming a wholly owned subsidiary
of the Company, as planned.
The temporary tax differences associated with the takeover of
Taito are recognized as a tax effect that the Company is expected
to benefit from its profitability to recover the difference in the
future, and were recorded as a deferred tax asset. Current deferred
tax assets as of March 31, 2006, increased ¥4,437 million, to
¥7,877 million, while non-current deferred tax assets increased
¥4,754 million, to ¥6,523 million.
Intangible Assets
Years ended March 31 Millions of yen
Reference:
2005 2006 Change Taito
¥6,096 ¥25,389 ¥19,293 ¥28,156
Intangible assets increased ¥19,293 million, to ¥25,389 million,
mainly owing to an increase in goodwill of ¥18,511 million. As of
March 31, 2006, goodwill amounted to ¥23,446 million, which is
comprised entirely of Taito goodwill. The goodwill of UIEVOLUTION,
INC., a U.S. subsidiary of the Company, which had been posted
until the previous fiscal year, was fully amortized in the year under
review. (Note: Taito includes goodwill totaling ¥27,232 million.)