Ubisoft 2000 Annual Report Download - page 70

UBI SOFT / REFERENCE DOCUMENT
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6.2.4. Explanatory notes on the Corporate
Accounts
The following notes and tables, in which figures are shown in
thousands of French francs, are an integral part of the annual accounts
for the year ending March 31, 2001, and form an annex to the balance
sheet (before distribution of earnings), which totaled FF 3.65 billion,
and to the income statement, which showed a loss of FF 55.16 million.
The financial year covered a period of 12 months from April 1, 2000 to
March 31, 2001.
The Board of Directors approved the Corporate Accounts on July 5, 2001.
Highlights of the financial year
Since January 2001, Ubi Soft Entertainment SA has handled the dis-
tribution of its products in France.
During the financial year, Ubi Soft Entertainment SA took over Red
Storm Entertainment and Blue Byte, purchased the assets of
Entertainment division of The Learning Company and acquired a
60% holding in 3D Planet SpA.
6.2.4.1. Accounting principles
General accounting conventions were applied in compliance with
the principle of conservatism and the following fundamental criteria:
>continuity;
>consistency of accounting methods from one financial year to the
next;
>time-period concept;
>and compliance with the general rules governing the drawing up
and the presentation of annual financial statements.
The historical cost principle was applied as the basic method for the
valuation of items shown in the accounts.
6.2.4.2. Accounting rules and methods
Business assets
The business assets acquired include all the intangible elements
(customer base, know-how) needed for the company to do business
and grow. The intangible elements are obtained from the average of
productivity, sales and a sector-based multiple.
If the business assets were to be valued at less than their book value,
a provision for amortization would be applied.
Intangible assets
These mainly consist of software design expenses, i.e.:
>commercial software programs which are in production or being
marketed;
>software tools.
These assets are amortized over the following periods:
>commercial software programs: 3 years maximum;
>software tools: 3 years.
Software production costs are determined in accordance with the
guidelines issued by the Conseil National de la Comptabilité [French
National Accountancy Council] in April 1987. These costs are entered
in the accounts under “intangible assets” (account no. 232) as software
development progresses. From the date of their first commercial release
they are transferred to the “Released software programs” or “External
developments” (account no. 208).
Parent software programs are amortized with effect from their
commercial 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 pre-tax sales of the various products until the end of their market
life are estimated at FF 4,221,256,000 (they came to FF 2,764,885,000
on 31 March 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.
Tangible fixed assets
These are shown at historical cost. The depreciation rates applied
are as follows:
>Equipment: 5 years (straight-line)
>Fixtures and fittings: 5 and 10 years (straight-line)
>Computer equipment: 3 years (diminishing balance)
>Office furniture: 10 years (straight-line)
Financial fixed assets
Equity holdings are valued at their historical cost, excluding acquisition
fees. If the book value is lower than the gross value at the end of the
year, a provision for depreciation is made to cover the difference.
The value of an equity holding is reviewed at the end of each financial
year on the basis of the net position of the subsidiary concerned on
that date and its prospects for growth over the medium term.
Inventory
Inventories are valued on the basis of cost prices based on normal
trading, using the weighted average cost method. The gross value of
goods and supplies includes purchase price and related expenses.
Financial costs are excluded from inventory valuation in all cases.
A provision for depreciation is made where the probable net realizable
value is less than the book value.