Square Enix 2012 Annual Report Download - page 39

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B) Intangible assets (excluding leased assets)
Amortized using the straight-line method. Software used in-house is
amortized using the straight-line method based on an internal estimate of its
useful life (five years).
C) Leased assets
Leased assets under finance lease transactions that do not transfer
ownership.
Depreciation for leased assets is computed under the straight-line
method over the lease term with no residual value. Among finance lease
transactions that do not transfer ownership, those lease transactions that
commenced on or before March 31, 2008, are accounted for in the same
manner as operating lease transactions.
(3) Accounting for allowances and provisions:
A) Allowance for doubtful accounts
An allowance for doubtful accounts provides for possible losses on
defaults of receivables. The allowance is made up of two components:
the estimated credit loss on doubtful receivables based on an individual
assessment of each account, and a general reserve calculated based on
historical default rates.
B) Provision for bonuses
A provision for bonuses is provided for payments to employees of the
Company and certain consolidated subsidiaries at the amount expected
to be paid in respect of the calculation period ended on the balance sheet
date.
C) Provision for sales returns
At certain consolidated subsidiaries prior to the fiscal year ended March
31, 2012, provisions are provided for losses on the return of published
materials, at an amount calculated based on historical experience prior
to this fiscal year and provisions are provided for losses on the return
of game software and other, comprising an estimated amount of future
losses assessed based on the probability of the return by each game title.
D) Provision for game arcade closings
For closures of game arcades that have been determined at certain
consolidated subsidiaries, a provision is provided at an amount in line with
reasonable estimates of future losses on such closures.
E) Provision for employees’ retirement benefits
At the Company and certain consolidated subsidiaries, a provision for
employees’ and directors’ retirement benefits is provided at the amount
incurred during the fiscal year based on the estimated present value of
the projected benefit obligation and pension plan assets. Unrecognized
actuarial differences are fully amortized in the year following the year in
which they occur. At certain consolidated subsidiaries, amortization for
each fiscal year is made using the straight-line method over a certain
period (five years) within the average remaining service period of the
eligible employees when the differences are recognized, commencing
from the year after year 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 eligible employees.
F) Provision for directors’ retirement benefits
At the Company and certain consolidated subsidiaries a provision for
directors’ retirement benefits is provided to adequately cover the costs of
directors’ retirement benefits, which are accounted for on an accrual basis
in accordance with internal policy.
(4) Translation of foreign currency transactions and accounts:
All monetary assets and liabilities of the Company and its overseas
consolidated subsidiaries denominated in foreign currencies are translated
at the balance sheet date at the year end rates. The resulting translation
gains or losses are credited or charged to income. All assets and liabilities
of overseas consolidated subsidiaries are translated as of the balance
sheet date at the year end rates, and all income and expense accounts are
translated at the average rates for their respective periods. The resulting
translation adjustments are recorded in net assets as “Foreign currency
translation adjustments” and are included in minority interests in consolidated
subsidiaries.
(5) Scope of cash and cash equivalents in the consolidated statements of
cash flows:
Cash and cash equivalents in the consolidated statements of cash flows
comprises cash on hand, bank deposits which may be withdrawn on demand
and short-term investments with an original maturity of three months or less
and with minimal risk of fluctuations in value.
(6) Additional accounting policies used to prepare consolidated financial
statements:
Accounting treatment of consumption taxes and local consumption taxes
Income statement items are presented exclusive of consumption taxes and
local consumption taxes.