Ubisoft 2004 Annual Report Download - page 59

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UBISOFT > 2005 FINANCIAL REPORT
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FINANCIAL REPORT FOR THE FISCAL YEAR ENDING MARCH 31, 2005
Brands are not amortized. Impairment tests are conducted
on significant brands or brands that may appear to have
fallen in value. The recoverable value of the brands is then
estimated on the basis of the change in sales for the
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.
Tangible assets
Fixed assets are shown in the balance sheet at their
acquisition cost.
Depreciation, which is calculated using rates standardized
throughout the group, is determined on the basis of the
methods and periods of use set out below:
lequipment: five years (straight-line);
lfixtures and fittings: five and ten years (straight-line);
lcomputer equipment: three years (diminishing balance);
loffice furniture: 10 years (straight-line).
Financial assets
Financial assets consist of subsiduary investments, fixed
investments, and deposits and guarantees.
The gross value of participating interests corresponds to the
acquisition cost for shares of non-consolidated companies.
Aprovision for depreciation is made where the intrinsic
value of the shares is less than the net accounting value.
Deposits and guarantees are recordedon the basis of the
amounts paid.
Fixed assets acquired through leasing arrangements
Significant capital assets that are financed by leasing
agreements are restatedin the consolidatedaccounts as if the
company had acquired the assets directly using loan financing.
Inventory and work-in-progress
Inventory is valued using the FIFO method. The gross value
of goods and supplies includes purchase price and related
expenses. Financial costs are excluded from inventory
valuation in all cases.
Aprovision for depreciation is madewhere the probable
net realizable value is less than the book value.
Advances and installments paid
Advances and installments primarily involve distribution
and reproduction rights (licenses) acquired from other
publishers. The signing of licensing contracts gives rise to
the payment of guaranteed amounts. These amounts are
posted to Account 409 at their net value (under the rules
of the “Conseil d'État”: CE 62547 dated February 12,
1988, and CE 65009 dated November 25, 1989).
These advances and installments are posted to the income
statement as set forth in the contracts signed with the
publishers (either by the unit or basedon the gross margin
or sales) or, in the case of flat fees, amortized using the
straight-line method.
At year-end, the net accounting value is compared with
sales projections in light of the contract conditions. If
projected sales are insufficient, an additional amortization
is madeon the income statement.
Trade receivables
Trade receivables are entered at their face value. Where
applicable, a provision for depreciation may be entered
according to the degree of certainty, as of the account closing
date, that collection will ultimately be made.
Investment securities
Investment securities consist of directly held shares,
interests in investment funds and short-term investments,
which are booked at their purchase price or at their
market value when it is lower than the purchase price.
Cash
Cash consists of the balances of cash and bank accounts.
Deferred tax
Deferred tax is recorded pursuant to Rule 99-02 regarding
consolidated accounts. It results from any restatements
and eliminations made with regard to the accounts
and temporary differences between the accounting and
tax bases used. Deferred tax is assessed on the basis of
the corporate tax rates and tax rules in force at the
close of the fiscal year. Any deficits carried forward are
entered as soon as it seems likely that they will be
recovered.
In accordance with the liability method of tax allocation,
the effect of any changes in tax rates on deferred taxes
recordedearlier is entered in the income statement for the
fiscal year in which the changes in rates are adopted.
Conversion of items expressed in foreign currencies
Conversion into euros of items expressed in foreign
currencies for French companies
Charges and revenue for foreign currency transactions are
enteredat their equivalent value on the transaction date.
Assets and liabilities are converted at the closing rate. Any
exchange rate conversion differences that result from this
conversion are recorded in the income statement, minus
any impact from hedges.
Conversion of foreign subsidiaries' financial statements
into euros
The conversion of the accounts of foreign subsidiaries
from their operating currency to the currency of the
consolidating company is carried out in accordance with
the closing rate method. This involves converting
the assets and liabilities of foreign subsidiaries at the
exchange rate in force at the close of the fiscal year, while
the income statement is converted at the average annual
rate. Share equity is kept at the historical rate. Conversion
rate adjustments are entered in share equity.
Specific circumstances surrounding Ubisoft Srl (Romania):
As of April 2004, Romania is no longer considered a
high-inflation country based on the following criteria:
lInterest rates and wages are no longer tiedto a priceindex;
lThe cumulative three-year inflation rate no longer
exceeds 100%;
lThe central bank no longer intervenes to control the
price of the national currency.