Square Enix 2007 Annual Report Download - page 33

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Supplies:
Stated at the last purchase price
• FY2006 (April 1, 2006 to March 31, 2007)
A) Investment securities
Other investment securities
Securities for which fair values are available
Market value, determined by the quoted market price
(Unrealized gains and losses are reported as a separate
component of net assets, with cost of sales determined
by the moving-average method.
Securities for which fair values are unavailable
Same as in FY2005
B) Inventories
Manufactured goods, merchandise
Same as in FY2005
Content production account
Same as in FY2005
Amusement equipment
Same as in FY2005
Unfinished goods
Some consolidated subsidiaries state at cost, determined
by the moving-average method
Supplies
Same as in FY2005
(2) Method of depreciation and amortization of major assets:
• FY2005 (April 1, 2005 to March 31, 2006)
A) Property and equipment
Property and equipment of the Company and its domestic
consolidated subsidiaries are depreciated using the declin-
ing-balance method. However, the straight-line method is
applied to buildings (excluding building fixtures) acquired
on or after April 1, 1998. The estimated useful lives of
major assets are as follows:
Buildings and structures 3–65 years
Tools and fixtures 3–15 years
Amusement equipment 3–8 years
B) Intangible assets
In-house software used by the Company and its domestic
consolidated subsidiaries is amortized using the straight-line
method based on an estimated useful life of five years.
Trademarks are amortized using the straight-line method
based on an estimated useful life of 10 years. Goodwill is
amortized using the straight-line method over a period of
five years.
• FY2006 (April 1, 2006 to March 31, 2007)
A) Property and equipment
Same as in FY2005
B) Intangible assets
The Company and certain consolidated subsidiaries amor-
tize software used in-house using the straight-line method,
based on an internal estimate of its useful life (five years).
Trademarks are amortized using the straight-line method
over 10 years.
(3) Accounting for allowances and reserves:
• FY2005 (April 1, 2005 to March 31, 2006)
A) Allowance for doubtful accounts
An allowance for doubtful accounts provides for possible
losses arising from defaults on accounts receivable. The
allowance is made up of two components: the estimated
credit loss for doubtful receivables based on an individual
assessment of each account, and a general reserve calcu-
lated based on historical default rates.
B) Reserve for bonuses
A reserve for bonuses provided for payments to employees
of the Company and its consolidated subsidiaries at the
amount expected to be paid in respect of the calculation
period ended on the balance sheet date.
C) Allowance for sales returns
An allowance is provided for losses due to the return of
published materials, at an amount calculated based on
historical experience, prior to this fiscal year. In addition, an
allowance is provided for losses due to the return of game
software and other items, at an estimated amount of future
losses assessed by each game title.
D) Allowance for store closings
For store closures determined during this fiscal year, an
allowance is provided at an amount in line with reasonable
estimates of future losses arising from such closures.
E) Allowance for retirement benefits
An allowance for retirement benefits is provided at the
amount incurred during this fiscal year, which is based on the
estimated present value of the projected benefit obligation.
Unrecognized actuarial differences are fully amortized in
the year following the year in which they arise. At certain
consolidated subsidiaries, amortization for each period is
made over a certain period (five years) using the straight-
line method within the average remaining years of service
of employees when the differences are recognized, com-
mencing from the period after the period in which they are
incurred. Unrecognized prior service cost is amortized over
a certain period (one year or five years) within the average
remaining service period of the employees. In addition, at
certain of the Company’s domestic consolidated sub-
sidiaries, a reserve for retirement benefits is provided equal
to 100% of such benefits the subsidiaries would be
required to pay under the lump-sum retirement plan if all
eligible employees were to voluntarily terminate their
employment at the balance sheet date.
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