Square Enix 2006 Annual Report Download - page 60

S Q U A R E E N IX C O . , L T D .
Rent expense is recognized on a straight-line basis over the
lease periods. Rent expense under all operating leases was
approximately ¥8,305 million for the year ended March 31, 2006.
The Company is involved in routine litigation in the ordinary
course of its business, which in management’s opinion, will not
have a material adverse effect on the Company’s financial
condition, cash flows or results of operations.
1 4 . E m p lo y e e B e n e f it P la n a n d R e t ir e -
m e n t B e n e f it t o D ir e c t o r s a n d
S t a t u t o r y A u d it o r s
Employee Benefit Plan
The Company has defined benefit plans covering their domestic
employees, which are internally funded. The benefits are in the
form of lump-sum payment and are based on current basic rate
pay applicable to former Enix employees and the highest basic
rate pay until present applicable to former Square employees.
For the new employees hired by the Company on and after
April 1, 2003, the current basic rate pay is applicable to the
basis of benefit. Effective April 1, 2005, the Company changed
its plan policy, in which the benefit is defined as the accumula-
tion of the product of base-pay and certain point earned in
each year of service until termination.
The Company adopted SFAS No. 87 “ Employers’ Accounting
for Pensions” for its domestic defined benefit plans effective
April 1, 2002. A portion of the transitional obligation was
allocated and charged directly to equity on the adoption date.
The Company took over benefit obligation in the amount
of $10,479 million from Taito as a result of its acquisition taken
place in September 2005. Taito has adopted a defined benefit
obligation plan to meet future retirement obligation for its
employees, and the plan has been externally funded. As of March
31, 2006, the plan asset has its fair value of $10,623 million.
Certain U.S. and U.K. subsidiaries have defined contribution
plans for their employees and the contributions are charged to
earnings when incurred. No pension plan is provided for the
employees of the Chinese subsidiary.
Net periodic pension cost of the Company and its domestic
subsidiaries for the year ended March 31, 2006, 2005 and 2004
consist of the following:
Thousands of
Years ended March 31 Millions of yen U.S. dollars
2006 2005 2004 2006
Service cost ¥356 ¥214 ¥227 $3,028
Interest cost 88 16 8 749
Expected return on plan assets (145) ——(1,230)
Amortization of actuarial loss (7) —— (59)
Amortization of prior
service cost (101) ——(858)
Amortization of SFAS No. 87
transition obligation 322 23
Net periodic pension cost ¥194 ¥232 ¥237 $1,653
Reconciliations of beginning and ending balances of the
pension benefit obligations and the fair value of the plan assets
are as follows:
Thousands of
As of March 31 Millions of yen U.S. dollars
2006 2005 2006
Change in benefit obligation:
Benefit obligation at beginning
of year ¥00,968 ¥(0,983 $(08,253
Service cost 356 214 3,028
Interest cost 88 16 749
Benefit obligation transferred from
acquired company 10,479 —89,203
Prior service costs —(101) —
Actuarial gain (200) (104) (1,706)
Benefits paid (219) (40) (1,868)
Benefit obligation at end of year ¥11,472 ¥(0,968 $(97,659
Change in plan assets:
Fair value of plan assets at
beginning of year ———
Plan assets transferred from
acquired company 8,253 —70,260
Actual return on plan assets 2,077 —17,677
Employer contributions 475 —4,045
Benefits paid (182) —(1,551)
Fair value of plan assets at end
of year 10,623 —90,431
Funded status (849) (968) (7,228)
Unrecognized actuarial loss (gain) (2,306) (180) (19,625)
Unrecognized prior service costs —(101) —
Unrecognized FAS87 transition obligation 19 21 161
Net amount recognized ¥ (3,136) ¥(1,228) $(26,692)
Accumulated benefit obligation at end
of year ¥10,868 ¥845 $(92,517
Actuarial assumption:
Discount rate 1.680~ 1.652% 1.680~
1.837% 1.837%
Assumed rate of increase in
compensation level 3.900~ 4.101% 3.900~
4.101% 4.101%