Ubisoft 2004 Annual Report Download - page 84

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UBISOFT > 2005 FINANCIAL REPORT
2.2.5.4 Accounting rules and methods
Intangible assets
Intangible assets include:
loffice software: amortized over 1 year via
the straight-line method;
lERP-related expenditures: amortized over 5 years via
the straight-line method;
lcommercial software: amortized over 3 years via
the straight-line method;
llogo: 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 software programs" or “External developments”
accounts (208 accounts).
Beginning on April 1, 2004, development costs
subcontracted to group subsidiaries are being recorded as
subcontracting charges and carried to assets in the form of
capitalized production costs.
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 dated November 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 restated to reflect any operating
appropriations for amortization.
Brands
Any brands acquired are entered at their acquisition cost;
for brands that are created, the cost of registering them is
immobilized.
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, amortization is
applied.
Tangible assets
Theseare shown at historical cost. The depreciation rates
appliedare as follows:
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
Participating interests are valued at their historical cost,
excluding acquisition fees.
The value of an participating interests is reviewed at the
end of each fiscal year on the basis of the net position of
the subsidiary in question on that date, the market value
on the closing date if the company is exchange-listed,
and/or its prospects for growth over the medium term.
Aprovision for depreciation is made if appropriate.
Deposits and guarantees are recorded on the basis of the
amounts paid.
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 based on 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
will be made on 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.
Conversion of accounts payable and receivable
expressed in foreign currencies
Thesewere converted at the rates applicable on March
31, 2005. Any resulting unrealizedexchange gains or
losses are shown in the balance sheet under a specific
heading. A provision for exchange risk is made in the
accounts if conversion reveals the existence of unrealized
losses.
Foreign exchange hedges
Sincehedges are managedat the global level, Ubisoft has
chosen not to apply the hedge accounting method with
regard to hedging its foreign exchange rate.
Provisions for risk and charges
Provisions for risk and charges are made when risk and
charges that relate to a clearly determined objective, but
which are not certain to arise, are mademore likelyby
events that have occurred or are in progress.
As of March 31, 2005, the provisions for risk and charges
covered only the exchange risk relating to discounting of
claims and debts denominated in foreign currencies.