Ubisoft 2000 Annual Report Download - page 48

UBI SOFT / REFERENCE DOCUMENT
6.1.4. Explanatory notes on the Consolidated
Accounts
Highlights of the financial year
During the financial year, Ubi Soft Entertainment SA took over Red
Storm Entertainment and Blue Byte, purchased the assets of The
Learning Company and acquired a 60% holding in 3D Planet SpA.
France, Germany, Belgium and the Netherlands now handle distribu-
tion of their products.
6.1.4.1. Accounting principles
The consolidated accounts were drawn up in accordance with
Accounting Standards Committee Regulation 99-02 for the financial
year commencing April 1, 2000. The implementation of this new
regulation had no significant impact on the Group’s earnings com-
pared with previous years.
The figures in the notes and tables which follow are shown in thou-
sands of French francs.
The preferred methods recommended by Accounting Standards
Committee Regulation 99-02 were applied with the exception of the
evaluation of pension commitments and similar services, due to
their insignificant character.
a) Consolidation methods
Full consolidation
Companies are fully consolidated when exclusively controlled and
when Ubi Soft Entertainment SA directly or indirectly holds 50% of
their voting rights or at least 40% if no other shareholder holds a lar-
ger percentage.
Equity affiliates
Companies on which Ubi Soft Entertainment SA exerts considerable
influence because it holds, directly or indirectly, 20 to 50% of the
voting rights, are accounted for using the equity method.
As of March 31, 2001, all the companies in the Group are exclusively
controlled by Ubi Soft Entertainment SA and are therefore fully
consolidated.
All intra-Group transactions have eliminated for all the companies in
the Group according to the applicable rules for consolidation.
All significant transactions between consolidated companies and all
unrealized internal results included in the fixed assets and the
stocks of consolidated companies have been eliminated.
b) Goodwill
In accordance with the regulations on consolidated accounts, this
represents the difference between the acquisition price and the final
assessment of the total assets and liabilities identified on the acqui-
sition date. Goodwill is entered:
>where appropriate, to the various balance sheet items of the
acquired companies;
>as “goodwill” on the balance sheet assets for any remaining
amount.
It is amortized using the straight-line method over a maximum per-
iod of 20 years.
Goodwill is reviewed for each set of Annual Accounts in the light of
changes in the net sales of the subsidiary and its contribution to the
net income of the consolidated entity as a whole. Such goodwill may
therefore be subject to exceptional amortization or write-down
where appropriate.
c) Intangible assets
Business assets
The business assets acquired include all the intangible elements
(customers, know-how) needed for the company to do business and
grow. The intangible elements are obtained from the average of pro-
ductivity, sales and a sector-based multiple.
Business assets are not amortized, but if they were to be valued at
less than their book value a provision for depreciation would be
applied.
Other intangible assets
Intangible assets include the business assets, trademarks, and offi-
ce and commercial software.
Distribution trademarks are not amortized.
Office software is amortized using the straight-line method over a
twelve-month period.
Software production costs are determined in accordance with the
guidelines issued by the Conseil National de la Comptabilite [French
National Accountancy Council] in April 1987. These costs are entered
in the accounts under “intangible assets” (account no. 232) as soft-
ware development progresses. From the date of their first commer-
cial release they are transferred to “Released software programs” or
“External developments” (account no. 208).
Parent software programs are amortized with effect from their com-
mercial release date on the basis of the expected market life of the
product concerned, as assessed at the account closing date.
The amortization period is between 12 and a maximum of 36
months. Net sales of the various products until the end of their mar-
ket life are estimated at FF 4,221,256,000 (they came to
FF 2,764,885,000 on March 31, 2000).
This sum allows the corresponding parent software programs to be
amortized. The system of amortization used is the straight-line
method. However, if sales are less than estimated, a supplementary
amortization will be carried out. Software tools, which are a set of
complex development programs that may be used for a number of
products, are amortized over a maximum of 36 months using the
straight-line method.
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