Square Enix 2007 Annual Report Download - page 32

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(2) Non-consolidated subsidiaries:
SOLID CO., LTD.
SG Lab Inc.
Stylewalker, Inc.
PlayOnline Co., Ltd.
ZERO RESEARCH LTD. was liquidated during the fiscal year
ended March 31, 2007. The Company established SG Lab Inc.,
Stylewalker, Inc., and PlayOnline Co., Ltd. during the fiscal year
ended March 31, 2007.
(Rationale for the exclusion of subsidiaries from the scope of
consolidation)
Same as FY2005
2. Application of the Equity Method of
Accounting
• FY2005 (April 1, 2005 to March 31, 2006)
Number of equity-method affiliates: 3
Baltec Co., Ltd.
Kaaku LTD.
Kaasa Solution GmbH
Principal non-consolidated subsidiaries that were not accounted
for under the equity method (UIE JAPAN CO., LTD., ZERO
RESEARCH LTD., and SOLID CO., LTD.) and affiliated companies
(BMF CORPORATION and KUSANAGI INC.) were excluded from
the scope of application of the equity-method affiliates, as the
Company’s equity in net income (loss) and equity in retained
earnings (deficit) in these companies were deemed to have an
immaterial effect on the Company’s consolidated financial
statements. Baltec Co., Ltd., Kaaku LTD., and Kaasa Solution
GmbH were consolidated subsidiaries of TAITO CORPORATION
acquired during the period.
• FY2006 (April 1, 2006 to March 31, 2007)
Number of equity-method affiliates: 4
Baltec Co., Ltd.
Brave, Inc.
Kaaku Ltd.
Kaasa Solution GmbH
Non-consolidated subsidiaries that are not accounted for under
the equity method (SOLID CO., LTD., SG Lab Inc., Stylewalker,
Inc., and PlayOnline Co., Ltd.) and affiliated companies (BMF
CORPORATION and KUSANAGI INC.) were excluded from the
scope of application of the equity method because their impact
on consolidated net income and retained earnings are small.
During the fiscal year ended March 31, 2007, the Company
invested in Brave, Inc., turning this company into a subsidiary
accounted for under the equity method.
3. Fiscal Year-End of Consolidated Subsidiaries
• FY2005 (April 1, 2005 to March 31, 2006)
Among the Company’s consolidated subsidiaries, the fiscal year
of SQUARE ENIX (China) CO., LTD., HUANG LONG CO., LTD.,
COMMUNITY ENGINE NETWORK SOFTWARE (BEIJING) CO.,
LTD., BEIJING TAIXIN CULTURAL AMUSEMENT CO., LTD.,
SQUARE PICTURES, INC., and FF·FILM PARTNERS ends on
December 31.
In the preparation of consolidated financial statements,
their financial statements for the December 31 fiscal year end
are used. Significant transactions between their fiscal year end
and the consolidated balance sheet date of March 31 are
reconciled for consolidation.
For SQUARE ENIX WEBSTAR NETWORK TECHNOLOGY
(BEIJING) CO., LTD., a provisional settlement of accounts for
this fiscal year was used as the basis for the preparation of
consolidated financial statements.
• FY2006 (April 1, 2006 to March 31, 2007)
Same as FY2005
4. Summary of Significant Accounting Policies
(1) Standards and valuation methods for major assets
• FY2005 (April 1, 2005 to March 31, 2006)
A) Investment securities
Held-to-maturity securities:
Not applicable
Other investment securities
Securities for which fair values are available:
Market value, determined by the quoted market price
as of the balance sheet date, with unrealized gains and
losses reported as a separate component of sharehold-
ers’equity at a net-of-tax amount, and cost of sales
determined by the moving-average method
Securities for which fair values are unavailable:
Stated at cost determined by the average method.
B) Inventories
Manufactured goods, merchandise:
Stated at cost, determined by the monthly average
method
Certain consolidated subsidiaries, however, determine
cost by the moving-average method
Content production account:
Stated at cost, determined by the identified cost method
Amusement equipment:
Stated at cost, determined by the identified cost method
Unfinished goods:
Stated at cost, determined by the monthly average
method
Certain consolidated subsidiaries, however, determine
cost by the moving-average method
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