Square Enix 2007 Annual Report Download - page 19

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Cash and Deposits
Years ended March 31 Millions of yen
2006 2007 Change
¥75,257 ¥99,852 ¥24,595
Cash flows in fiscal 2006, as well as the principal factors behind
these flows, are described below.
(1) Net cash provided by operating activities
Income before income taxes totaled ¥18,374 million. Due to a
decrease in accounts receivable and an increase in inventories, net
cash provided by operating activities was ¥32,809 million. The
decrease in accounts receivable is mainly attributable to differences
in the timing of game titles released during the year.
(2) Net cash used in investing activities
Net cash used in investing activities amounted to ¥5,671 million.
Major factors included ¥10,733 million in payments for acquiring
property and equipment and ¥4,514 million in proceeds from
divestiture of a business. This business transfer arose from the
sale of the commercial karaoke machine business of TAITO
CORPORATION.
(3) Net cash used in financing activities
Net cash used in financing activities was ¥2,912 million. This
decrease was due primarily to payments for dividends of ¥3,314
million.
Notes and Accounts Receivable
Years ended March 31 Millions of yen
2006 2007 Change
¥33,215 ¥21,206 ¥(12,009)
The year-end balance of notes and accounts receivable varies
greatly depending on the timing of new game title releases. Notes
and accounts receivable at year-end were ¥21,206 million, a
decrease of ¥12,009 million from the prior year. The decrease was
due primarily to stronger title releases during the previous year. In
fiscal 2005, the Company had such major releases as “FINAL FAN-
TASY XII,” released in Japan on March 16, 2006, and “KINGDOM
HEARTS II,” released in North America on March 28, 2006.
Content Production Account
Years ended March 31 Millions of yen
2006 2007 Change
¥7,312 ¥11,903 ¥4,591
As a rule, content development costs incurred after the outset of a
title’s 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. Costs
incurred during the pre-production phase—the phase before devel-
opment 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, 2007, the content production account totaled
¥11,903 million, an increase of ¥4,591 million compared with the
end of the previous fiscal year.
Deferred Tax Assets (current and non-current)
Years ended March 31 Millions of yen
Reference:
2006 2007 Change
Current ¥7,877 ¥5,634 ¥(2,243)
Non-current 6,523 4,939 (1,584)
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 sub-
sidiary 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 as a result of 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, 2007, decreased ¥2,243 million, to ¥5,634 million,
while non-current deferred tax assets decreased by ¥1,584 million,
to ¥4,939 million.
Property and Equipment
Years ended March 31 Millions of yen
2006 2007 Change
¥29,995 ¥25,664 ¥(4,330)
Total property and equipment decreased by ¥4,330 million, to
¥25,664 million, due primarily to a decrease in buildings and struc-
tures, arising from the closure of unprofitable amusement facilities,
from ¥7,148 million to ¥5,962 million, and the disposal of older
amusement equipment.
Intangible Assets
Years ended March 31 Millions of yen
2006 2007 Change
¥25,389 ¥21,657 ¥(3,731)
The amortization of goodwill was the main reason for the ¥3,731
million decrese in total intangible assets, to ¥21,657 million. In fis-
cal 2006, in addition to usual goodwill amortization, the Group
posted ¥1,381 million as an accelerated amortization of goodwill,
which was represented as extraordinary loss, owing to the disposal
of the commercial karaoke business in the Amusement segment.
As a result, the balance of goodwill remaining within intangible
assets on March 31, 2007 was ¥20,276 million.
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