Square Enix 2014 Annual Report Download - page 46

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Summary of Signifi cant Accounting Policies Used in the
Preparation of Consolidated Financial Statements
1. Scope of Consolidation
(1) Number of consolidated subsidiaries:
32 companies and one voluntary partnership, 33 in total
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
(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 (defi cit) are
deemed to have an immaterial effect on the Company’s fi nancial performance
and consolidated fi nancial statements.
2. Application of the Equity Method of Accounting
There are no non-consolidated subsidiaries or affi liates which are accounted
for under the equity method.
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 affi liated 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 insignifi cant to
the consolidated fi nancial statements overall.
3. Fiscal Year-End of Consolidated Subsidiaries
Among the Company’s consolidated subsidiaries, the fi scal 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 fi nancial
statements, such fi nancial statements which have a December 31 fi scal
year-end, have been used. Signifi cant transactions between the fi scal year-
end and the consolidated balance sheet date of March 31 are reconciled for
consolidation.
For SQUARE ENIX WEBSTAR NETWORK TECHNOLOGY (BEIJING) CO.,
LTD., whose fi scal year-end 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 fi nancial statements.
4. Summary of Signifi cant 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) Derivatives
Stated at fair value
C) Inventories
Manufactured goods, merchandise:
Mainly stated at cost, determined by the monthly average method
(book-entry devaluation method based on the decrease in profi tability
is used with respect to balance sheet values) and the moving-average
method (book-entry devaluation method based on the decrease in
profi tability is used with respect to balance sheet values).
However, amusement equipment is stated at cost, determined by the
identifi ed cost method (book-entry devaluation method based on the
decrease in profi tability is used with respect to balance sheet values).
Content production account:
Stated at cost, determined by the identifi ed cost method (book-entry
devaluation method based on the decrease in profi tability is used with
respect to balance sheet values).
Raw materials, unfi nished goods:
Stated at cost, determined by the moving-average method (book-entry
devaluation method based on the decrease in profi tability 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 fi xtures) 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 fi xtures 2–20 years
Amusement equipment 3–5 years
Notes to Consolidated Financial Statements (JPNGAAP)
SQUARE ENIX HOLDINGS CO., LTD. and Consolidated Subsidiaries