Ubisoft 2004 Annual Report Download - page 58

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UBISOFT > 2005 FINANCIAL REPORT
-Own shares
On January 5, 2005, Ubisoft Entertainment SA extended
the equity swap contract with Crédit Lyonnais by one year.
This contract involved 918,137 Ubisoft Entertainment SA
shares, sold at €18.66 each (see § 2.1.9, Off-balance-sheet
commitments).
As of March 31, 2005, Ubisoft Entertainment SA held
8,473 of its own shares, acquired for an aggregate value of
€374 thousand and recorded as investment securities.
-Research tax credit
During the fiscal year, Ubisoft Entertainment SA, Ubisoft
World Studios SAS, Ubisoft Design SARL, Ubisoft
Productions France SARL and Ubisoft Divertissements Inc.
elected to apply the optional research tax credit and
reported tax income of €1,747 thousand on the income
statement.
2.1.6.2 Accounting principles
The consolidated accounts were prepared in accordance
with Rule 99-02 of France's accounting regulatory
committee, the “Comité de la Réglementation Comptable”
(CRC).
Consolidation methods
Full consolidation
Companies are fully consolidated when they are exclusively
controlled due to Ubisoft Entertainment SA's holding 50%
of their voting rights, directly or indirectly, or at least 40%
if no other shareholder holds a larger percentage.
Equity affiliates
Companies on which UbisoftEntertainment SA exerts
considerable influencebecause it holds, directly or
indirectly, 20 to 50% of the voting rights are accounted for
using the equity method.
Methods applied to the group
As of March 31, 2005, group companies are controlled
exclusively by Ubisoft Entertainment SA.
The accounts of these companies are therefore fully
consolidated; only Gameloft SA, in which Ubisoft
Entertainment SA holds a controlling percentage of
27.34%, is consolidatedby the equity method.
Intra-group transactions are eliminated for all the
companies in the group according to the applicable
consolidation rules.
Significant transactions between consolidated companies
and unrealized internal results included in the fixed assets
have been eliminated.
The results of companies falling under the scope of
consolidation are consolidated beginning with the date the
companies are taken under control or the date of their
incorporation. Companies that have been liquidated, are in
the process of liquidation, or fall below significance
thresholds are not includedin the scope of consolidation.
The following criteria were used:
l€76 thousand on the "Balance sheet total" in the case of
production companies and support companies;
l€100 thousand in sales in the case of distribution companies.
Goodwill
In accordance with the regulations on consolidated
accounts, goodwill is the difference between the acquisition
price and the fair value of the total assets and liabilities
identified on the acquisition date.
Goodwill is entered:
lwhere appropriate, to the various balance sheet items of
the companies acquired;
las "Goodwill" on the asset side of the consolidated
balance sheet for any sum remaining.
This latter sum is amortized over a period of 20 years using
the straight-line method; goodwill relating to Tiwak SAS and
Microïds Canada Inc. is amortized over a 10-year period.
Impairment tests are conducted on significant amounts of
goodwill or goodwill that may appear to have fallen in value.
The recoverable amount of goodwill is then estimated on the
basis of the change in sales for the subsidiary or business
division in question, its contribution to the group's
consolidated income and its updated cash flow. When
this value is less than the accounting value, exceptional
amortization is applied.
Badwill is spread over a 20-year period.
Intangible assets
Intangible assets break down as follows:
lOffice software: amortizedover 1 year via
the straight-line method;
lERP-related expenditures: amortized over 5 years via
the straight-line method;
lCommercial software: amortizedover 3 years via
the straight-line method;
lLogo-related expenses: amortized over 10 years via
the straight-line method;
lBrands.
Commercial software
The production costs for commercial software, whether
produced internally or outsourced, are entered in the
accounts under “Intangible assets in progress” (Account
232) as software development advances. Upon the software's
first commercial release, it is transferred to the "Released
parent software programs" or “External developments”
accounts (208 accounts).
Commercial software is amortized over three years using the
straight-line method, beginning on the date of its commercial
release.
The production costs for outsourced software are posted to
Account 232 or advances and installments in accordance
with the rules defined by France's “Conseil d'État” (CE 62547
dated February 12, 1988, and CE 65009 datedNovember 25,
1989).
However, if sales are below projections and anticipated
operating profitability, a supplementary amortization is
performed. Operating profitability is determined on the
basis of operating income restatedto reflect any operating
appropriations for amortization.
Brands
Any brands acquired are enteredat their acquisition cost; for
brands that are created, the cost of registering them is immobilized.