Square Enix 2012 Annual Report Download - page 38

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Notes to Consolidated Financial Statements (JPNGAAP)
SQUARE ENIX HOLDINGS CO., LTD. and Consolidated Subsidiaries
Summary of Significant Accounting Policies Used in the
Preparation of Consolidated Financial Statements
1. Scope of Consolidation
(1) Number of consolidated subsidiaries:
33 companies and one voluntary partnership
Names of principal consolidated subsidiaries
SQUARE ENIX OF AMERICA HOLDINGS, INC.
SQUARE ENIX OF EUROPE HOLDINGS LTD.
SQUARE ENIX CO., LTD.
TAITO CORPORATION
SMILE-LAB Co., Ltd.
SQUARE ENIX, INC.
SQUARE ENIX LTD.
SQUARE ENIX (China) CO., LTD.
CRYSTAL DYNAMICS INC.
EIDOS INTERACTIVE CORP.
IO INTERACTIVE A/S
During the fiscal year ended March 31, 2012, BEIJING TAIXIN CULTURAL
AMUSEMENT CO., LTD. was excluded from the scope of consolidation due
to diminished material impact on the Company’s business performance and
financial status.
(2) Names of principal non-consolidated subsidiaries:
hippos lab Co., Ltd.
SQUARE ENIX MOBILE STUDIO CO., LTD.
SQUARE ENIX Business Support, CO., LTD.
(Rationale for the exclusion of subsidiaries from the scope of consolidation)
Non-consolidated subsidiaries conduct operations that are relatively small
in scale. The total amounts of the non-consolidated subsidiaries’ assets,
sales, equity in net income (loss), and equity in retained earnings (deficit) are
deemed to have an immaterial effect on the Company’s financial performance
and consolidated financial statements.
2. Application of the Equity Method of Accounting
(1) There are no non-consolidated subsidiaries or affiliates which are
accounted for under equity method.
(2) Non-consolidated subsidiaries that were not accounted for under the
equity method, including hippos lab Co., Ltd., SQUARE ENIX MOBILE
STUDIO CO., LTD., and SQUARE ENIX Business Support, CO., LTD., as well
as affiliated companies were excluded from the scope of application of the
equity method because the impact on net income (corresponding to the
share) and retained earnings (corresponding to the share) was insignificant to
the consolidated financial statements overall.
3. Fiscal Year-End of Consolidated Subsidiaries
Among the Company’s consolidated subsidiaries, the fiscal years of SQUARE
ENIX (China) CO., LTD., HUANG LONG CO., LTD., SQUARE PICTURES, INC.
and FF FILM PARTNERS end on December 31.
In the preparation of the accompanying consolidated financial
statements, such financial statements which have a December 31 fiscal
year-end, have been used. Significant transactions between the 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., the fiscal year-end of which is December 31, a provisional settlement
of accounts as of the Company’s balance sheet date was used as the basis
for the preparation of the consolidated financial statements.
4. Summary of Significant Accounting Policies
(1) Standards and valuation methods for major assets:
A) Investment securities
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 net assets 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 moving-average method
B) Inventories
Manufactured goods, merchandise:
Mainly stated at cost, determined by the monthly average method
(book-entry devaluation method based on the decrease in profitability
is used with respect to balance sheet values) and the moving-average
method (book-entry devaluation method based on the decrease in
profitability is used with respect to balance sheet values).
However, amusement equipment is stated at cost, determined by the
identified cost method (book-entry devaluation method based on the
decrease in profitability is used with respect to balance sheet values).
Content production account:
Stated at cost, determined by the identified cost method (book-entry
devaluation method based on the decrease in profitability is used with
respect to balance sheet values).
Raw materials, unfinished goods:
Stated at cost, determined by the moving-average method (book-entry
devaluation method based on the decrease in profitability is used with
respect to balance sheet values).
Supplies:
Stated at the last purchase price
(2) Method of depreciation and amortization for major assets:
A) Property and equipment (excluding leased assets)
Property and equipment of the Company and its domestic consolidated
subsidiaries are depreciated using the declining-balance method.
However, for buildings (excluding building fixtures) acquired on or after
April 1, 1998, and overseas consolidated subsidiaries, the straight-line
method is applied. The estimated useful lives of major assets are as
follows:
Buildings and structures 3–65 years
Tools and fixtures 2–20 years
Amusement equipment 3–5 years