Square Enix 2008 Annual Report Download - page 32

Securities for which fair values are unavailable:
Same as in FY2006
B) Inventories
Manufactured goods, merchandise:
Same as in FY2006
Content production account:
Same as in FY2006
Amusement equipment:
Same as in FY2006
Unfinished goods:
Same as in FY2006
Supplies:
Same as in FY2006
(2) Method of depreciation and amortization of major assets:
• FY2006 (April 1, 2006 to March 31, 2007)
A) Property and equipment
Property and equipment of the Company and its domestic
consolidated subsidiaries are depreciated using the declining-
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
The Company and certain consolidated subsidiaries amortize
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
a period of 10 years.
• FY2007 (April 1, 2007 to March 31, 2008)
A) Property and equipment
Same as in FY2006
Change in method of depreciation
Pursuant to the revision of the Corporation Tax Law, effective this
fiscal year, for tangible fixed assets acquired on or after April 1,
2007, the Company and its domestic consolidated subsidiaries
have changed their method of accounting for depreciation to that
provided under the revised Corporation Tax Law.
The impact of this change was an ¥828 million decrease in
operating income, and an ¥829 million decrease in recurring
income and income before income taxes and minority interests
from the corresponding amounts which would have been
recorded under the previous method.
The impact of this change on segment information is
presented in the applicable section of these notes.
Additional information
Pursuant to the revision of the Corporation Tax Law, effective
this fiscal year, for assets acquired on or before March 31,
2007, the Company and its domestic consolidated subsidiaries
apply the method of accounting for depreciation provided in the
Corporation Tax Law prior to the revision and depreciate the dif-
ference between 5% of an asset’s acquisition cost and its mem-
orandum value using the straight-line method over a period of
five years, from the fiscal year following the fiscal year in which
the net book value of the asset reaches 5% of its acquisition
cost. These differences are recorded in depreciation expense.
The impact of this change was a ¥149 million decrease in
operating income and recurring income, and a ¥146 million
decrease in income before income taxes and minority interests
from the corresponding amounts which would have been
recorded under the previous method.
The impact of this change on segment information is
presented in the applicable section of these notes.
B) Intangible assets
Same as in FY2006
(3) Accounting for allowances and reserves:
• FY2006 (April 1, 2006 to March 31, 2007)
A) Allowance for doubtful accounts
An allowance for doubtful accounts provides for possible losses
on defaults of accounts receivable. The allowance is made up of
two components: the estimated credit loss on doubtful receiv-
ables based on an individual assessment of each account, and a
general reserve calculated based on historical default rates.
B) Reserve for bonuses
A reserve for bonuses is 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 on the return of published
materials, at an amount calculated based on historical experi-
ence, prior to this fiscal year. In addition, an allowance is pro-
vided for losses on the return of game software and other items,
at an estimated amount of future losses assessed by game title.
D) Allowance for closing of game arcades
For closing of game arcades determined during this fiscal year,
an allowance is provided at an amount in line with reasonable
estimates of future losses on such closures.
E) Allowance for employees’ retirement benefits
An allowance for employees’ retirement benefits is provided at
the amount incurred during the 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 fiscal year is made over a
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