Ubisoft 2005 Annual Report Download - page 103

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UBISOFT • 2006 ANNUAL REPORT
FINANCIER
Corporate accounts of Ubisoft Entertainment SA as of March 31, 2006
trademarks and patents reported under assets as well as
the depreciation practiced at that time were closed out.
The difference was reported under retained profits in the
amount of €593 thousand. Since the company’s taxable
income showed a deficit and it had deferrable deficits, no
corporate tax was recorded.
Reporting of advances
Advances meeting the definition of an asset are now repor-
ted under intangible assets.
Breakdown and depreciation of fixed assets
In view of the nature of the assets, no component was
identified. Furthermore, the service life previously selec-
ted for the calculation of depreciation being identical to
the useful life, the change in accounting regulations has
no effect on earnings for the fiscal year and equity at the
start of the year.
Accounting rules
and methods
Intangible assets
Intangible assets include:
- Office software: amortized over 1 year using the straight-
line method.
- ERP-related expenditures: amortized over 5 years using
the straight-line method.
- Commercial software: amortized over 3 years using the
straight-line method.
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 soft-
ware’s first commercial release, it is transferred to the
“Released software programs” or “External develop-
ments” accounts (208 accounts).
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 3 years using the
straight-line method, beginning on the date of its commer-
cial 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) when they do not meet the
definition of an asset.
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.
Brands are not amortized. Impairment tests are conducted
on brands at the close of each fiscal year, or more often if
there are indications of loss of 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 earnings and its
updated cash flow. When this value is less than the book
value, amortization is applied.
Tangible 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 (straight-line).
- Office furniture: 10 years (straight-line).
Financial assets
Equity holdings are valued at their historical cost, exclu-
ding acquisition fees. The value of an equity holding 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. A provision for depreciation is made if
appropriate. Directly held shares are valued at their pur-
chase price or at market value when it is lower. Deposits
and guarantees are posted 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’Etat: 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 pro-
jected sales are insufficient, an additional amortization will
be made on the income statement.
Trade receivables
Trade and other 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 interests in investment
funds and short-term investments, which are booked at
their purchase price or at their market value when the lat-
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