Square Enix 2006 Annual Report Download - page 58

S Q U A R E E N IX C O . , L T D .
8 . S o f t w a r e D e ve lo p m e n t C o s t s
The following table provides the details of capitalized software
development costs:
Thousands of
Years ended March 31 Millions of yen U.S. dollars
2006 2005 2006
Beginning balance ¥17,890 ¥12,507 $152,290
Increased during the year 13,338 12,704 113,550
Amortization (23,456) (6,338) (199,675)
Written off (460) (983) (3,916)
Ending balance ¥07,312 ¥17,890 $062,249
9 . P r o p e r t y a n d E q u ip m e n t
As of March 31, 2006 and 2005, property and equipment
consist of:
Thousands of
Millions of yen U.S. dollars
2006 2005 2006
Buildings ¥20,132 ¥03,668 $171,382
Machinery and equipment 14,284 9,117 121,596
Amusement machinery and equipment 58,733 —499,984
Land 5,517 3,814 46,962
Other 441 15 3,759
Total ¥99,107 ¥16,614 $843,683
(Less accumulated depreciation) (66,905) (7,696) (569,557)
Net book value ¥32,202 ¥08,918 $274,126
Depreciation expenses for the year ended March 31, 2006,
2005 and 2004 were ¥8,169 million, ¥1,433 million and
¥1,631 million, respectively.
The Company recognized impairment losses on long-lived
assets in total amount of ¥500 million, pursuant to SFAS No.
144, in the year ended March 31, 2006, which were attribut-
able to the reporting units of “ Amusement” and “ Corporate
and elimination” in the amount of ¥271 million and ¥229,
respectively. The losses were incurred principally on the acquired
business franchise in Korea with respect to “ Amusement” , due
to the difficulty of recovery of carrying amounts with expected
future cash flows. The losses attributable to “ Corporate and
elimination” were incurred on the lands and buildings not
currently in use, because their fair market values quoted by
the independent appraiser were below their carrying amounts.
The Company employed discounted cash flows method to
determine the fair value of long-lived assets.
Lease
The Company is obligated under various capital leases for cer-
tain buildings and certain machinery and equipment that expire
at various dates during the next 5 years. At March 31, 2006
and 2005 the gross amount of plant and equipment and
related accumulated amortization recorded under capital leases
were as follows:
Thousands of
Years ended March 31 Millions of yen U.S. dollars
2006 2005 2006
Buildings ¥1,278 ¥— $10,881
Machinery and equipment 1,802 74 15,341
Total 3,080 74 26,222
(Less accumulated amortization) (1,197) (49) (10,196)
Net value ¥1,883 ¥24 $16,026
Amortization of assets held under capital leases is included
with depreciation expense.
Future minimum capital lease payments as of March 31,
2006 are:
Thousands of
Years ending March 31 Millions of yen U.S. dollars
2007 ¥0,493 $04,199
2008 411 3,499
2009 372 3,166
2010 318 2,704
2011 185 1,577
2012 and thereafter 104 882
Total minimum lease payments ¥1,883 $16,027
Less estimated executory costs — —
Net minimum lease payments 1,883 16,027
Less amount representing interest — —
Present value of net minimum capital lease
payments 1,883 16,027
Less current installments of obligations under
capital leases 493 4,199
Obligations under capital leases,
excluding current installments ¥1,390 $11,828
1 0 . In t a n g ib le A s s e t s
As of March 31, 2006 and 2005, intangible assets consist of:
Thousands of
Millions of yen U.S. dollars
2006 2005 2006
Software ¥04,450 ¥03,109 $037,884
Patent and trademark 10,599 10,789 90,226
Online game 12,850 12,850 109,390
License agreement for related goods 9,710 9,953 82,659
Existing game 2,940 2,940 25,028
Existing technologies —2,854 —
Database (indefinite useful life) 1,449 —12,335
Business license (useful life of 3.5 years) 2,046 —17,417
Copyright (useful life of 1 year) 2,081 —17,715
Other intangible assets 889 463 7,564
(Less: accumulated amortization) (11,092) (8,008) (94,418)
Net book value ¥35,922 ¥34,950 $305,800
Goodwill ¥57,126 ¥38,955 $486,303
Total ¥93,048 ¥73,905 $792,103