Square Enix 2010 Annual Report Download - page 46

Finance lease transactions that do not transfer ownership and
that commenced on or before March 31, 2008, are accounted
for in a similar manner to the accounting treatment for ordinary
operating lease transactions. Detailed information for finance
lease transactions are as follows:
1. Acquisition cost, accumulated depreciation and net book value
of leased assets:
Millions of yen
Acquisition Accumulated Net book
cost depreciation value
Buildings and structures ¥ 593 ¥472 ¥120
Tools and fixtures 593 453 139
Total ¥1,186 ¥926 ¥259
Note: The total amount of future lease payments at the end of the year constituted
an insignificant portion of net property and equipment at the end of the year.
Accordingly, total acquisition cost included the interest portion thereon.
2. Ending balances of future lease payments:
Due within one year ¥165 million
Due after one year 94 million
Total ¥259 million
Note: The total future lease payments at the end of the year constituted an
insignificant portion of total property and equipment at the end of the
year. Accordingly, total future lease payments included the interest portion
thereon.
3. Lease payments and depreciation expense:
Lease payments ¥338 million
Depreciation expense ¥338 million
4. Method of calculation for depreciation
Depreciation is calculated using the straight-line method over a
useful life with no residual value.
(Impairment loss)
No impairment loss was recognized on leased assets.
Operating lease transactions
Future lease payments on noncancellable leases:
Due within one year ¥1,070 million
Due after one year —
Total ¥1,070 million
Notes Regarding Financial Instruments
Fiscal year ended March 31, 2010
1. Matters concerning financial instruments
(1) Policies regarding financial instruments
With regard to the management of funds, the Group only
utilizes financial instruments with low market risk, such as
deposits. With regard to fund procurement, the Group utilizes
the issuance of corporate bonds and borrowings from financial
institutions.
Forward-exchange transactions are carried out within the
amount of foreign currency-denominated transactions con-
ducted by the Group. It is the Group’s policy not to engage in
derivative transactions for speculative purposes.
(2) Types of financial instruments held, risks associated with those
financial instruments and risk management system
The Group is exposed to customer credit risk through notes
and accounts receivable, which are trade receivables. The
Group endeavors to reduce this risk by managing the outstanding
balance and due date for each transaction in accordance with
internal rules at each Group company for sales management.
Owing to the Group’s global business operations, a portion of
its notes and accounts receivable are denominated in foreign
currencies, which are exposed to exchange rate fluctuation
risk. Although the Group, in principle, does not engage in
derivative transactions, for the purpose of hedging against the
risk of future fluctuations in foreign-exchange rates, it enters
into forward foreign exchange contracts from time to time.
Although forward foreign exchange contracts involve exposure
to exchange rate fluctuation risk, each counterparty to these
transactions is, without exception, a highly creditworthy bank.
Hence, the Group judges that credit risk through counterparty
breach of contract (counterparty risk) is negligible. With regard
to forward foreign exchange transactions, all risk is centrally
managed by the accounting division under the approval of a
representative director and the director assigned to oversee
accounting and finance matters.
Short-term investment securities are held in the form of
negotiable certificates of deposit, and the market price fluctuation risk
associated with these instruments is extremely low. Investment
securities mainly comprise stock market listed shares, and,
hence, exposed to market price fluctuation risk. However, fair
values are monitored and regularly reported to the Board of
Directors.
Rental deposits consist of deposits required to be furnished
by the Group when it enters into real estate leases relating to
the Group’s headquarters, other offices and amusement arcade
facilities. Construction support deposits consist of deposits
furnished by the Group in relation to amusement arcade leases.
Although these deposits involve exposure to counterparty credit
risk, for the headquarters and other offices and amusement
arcades, the general affairs division and sales division with the
Group confirm the creditworthiness of the lessors through regular
contact with the respective counterparties. In addition, the
accounting division checks with each of these divisions on the
situation at the end of each fiscal year.
Notes and accounts payable are defined as those trade pay-
ables due within one year. Short-term loans are used to meet
short-term working capital requirements. The Group avoids the
settlement liquidity risk associated with short-term payables,
including notes and accounts payable, other accounts payable,
accrued expenses, accrued corporate taxes, accrued consumption
Notes to Consolidated Financial Statements (JPNGAAP)
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